Summary of financial results for 2018
Norsk Tipping is delivering on its role in society by offering its customers attractive games in a responsible setting, and has achieved an even better result than in 2017, which was also a record year. The company offers attractive games to more than two million customers and distributes its profits, amounting to NOK 5.5 billion, back into the community.
The conclusions of the Norwegian parliament following its consideration of the parliamentary report “Alt å vinne - ein ansvarleg og aktiv pengespelpolitikk” (Everything to gain – a responsible and proactive gaming policy), provide clear guidelines in support of the company’s future focus. The parliamentary debate provided greater clarification of the objectives of Norway’s gaming policy, in which a focus on responsible gaming is assigned the greatest weight. The report is based on the principle that the regulation of gaming activities involving Norsk Tipping as a monopoly company provides for a greater degree of responsible gaming than a licence-based model, and that this consideration supports the continuation of the state monopoly model.
The fact that profits from gaming are as far as possible used to fund charitable causes remains a secondary consideration. This acknowledges Norsk Tipping’s role in society and provides key guidelines going forward.
In 2018 Norsk Tipping modified its visual identity by changing the company logo and introducing other design elements to its profile as presented on both physical and digital media. The new company logo is a descendant of the former version, but is perceived as being more contemporary. It increases Norsk Tipping’s scope for visual communication, both for individual products and the company as a whole.
In the second half of the year the company implemented a comprehensive restructuring of its organisation. The change was the result of the company’s need for improved interaction and greater process agility, with the aim of placing it in the best position to achieve its strategic objectives. Prior to these changes, company employees were deeply involved in the process of assessing the current situation and future needs.
In order to meet our objective that gambling should be carried out in safe and secure settings under state supervision, it is crucial that the regulated market remains the gambler’s preferred choice. In 2018 the company achieved a milestone in that for the first time more than two million customers played at least one of Norsk Tipping’s games. Twenty-eight per cent of our customers are under 40 years of age. This demonstrates that the company is delivering on its ambition to inspire a new generation, and boosts the positive trend by which the majority of gamblers in Norway play on Norsk Tipping’s games.
The company's total operational revenues increased from NOK 35 billion in 2017 to NOK 38 billion in 2018. As a result of different prize distributions and high levels of reinvested winnings for some of the company's games, financial results are assessed in terms of gross gaming revenues (gaming revenues minus winnings), which is a better measure of the scale of gaming activities. Gross gaming revenues increased from NOK 7.8 billion in 2017 to NOK 8.1 billion in 2018, representing an increase of 3.9 per cent. Together with the effect of reduced costs, this resulted in a growth in profits from NOK 5.25 billion to NOK 5.52 billion, an increase of 5.2 per cent on the previous year.
In 2018, the lottery games accounted for the greatest increase in terms of gross gaming revenues, exhibiting growth of NOK 230 million on the previous year. There is no doubt that players are attracted to big prize pots. We also continued to experience growth in online games, which is an area where we are facing strong competition from the unregulated market. Norsk Tipping’s products are distinct from those offered by the unregulated market which uses what we call the “no thanks list” – a series of aggressive measures that the company deliberately elects not to use. Such measures are incompatible with our aim of preventing the negative consequences of gambling. Norsk Tipping is also distinct from the unregulated market in that it operates with mandatory stake and loss restrictions, designed to promote responsible gaming, that limit the losses that an individual player can incur.
Lottery games account for the largest proportion of sales and represent 64% of the company's gross gaming revenues for 2018. The lottery games are regarded as carrying a lower risk of gambling problems than other games categories. A broad portfolio of lottery games is thus an important means of promoting the highest possible levels of responsible gaming. Lotteries are also attractive among players younger than 40. In 2018, more than 90 per cent of these players took part in lotteries.
Percentage growth in 2018 for online games was also significant, although the rate of growth is slowing somewhat. In 2018, revenues from this category increased by 16 per cent, compared with 37 per cent in 2017. The unregulated market engages in extensive marketing activity linked to online games whereas, in contrast, Norsk Tipping restricts its marketing in this category in order to protect vulnerable groups. Norsk Tipping’s growth in sales in this area indicates that the company is succeeding in diverting gambling activity from this segment into the regulated market, although the company does not enjoy a dominant share of total sales in this category. The authorities have signalled the introduction of additional measures with the aim of restricting the opportunities that the unregulated market has to offer its gaming products in Norway. This will contribute towards reinforcing the aforementioned channelling effect.
In recent years, a steadily increasing share of revenues from the company’s games has migrated from our sales agents and onto digital media. This trend has continued during 2018 and indicates that the systems that enable gaming via digital channels are becoming increasingly important in maintaining customer contact and promoting sales.
In 2018, sales linked to traditional gaming products on digital media amounted to NOK 8.4 billion, compared with NOK 6.9 billion in 2017. This constitutes growth of 21 per cent, compared with 11 per cent in the previous year. The growth in sales from digital media contributes towards greater cost efficiencies for the company in the form of reduced sales commissions, but also places increasing demands on the capacity and functionality of the digital systems. Advancing developments in digital media technology will thus continue to be an important area of focus for the company.
The Grasrotandelen (Grassroots Share) provides players with an opportunity to influence how some of Norsk Tipping's profits are distributed. Changes to the workings of the Grassroots Share system came into force from 1 January 2018. The biggest change is that the pay-out share was increased from 5 to 7 per cent, which resulted in a major increase in pay-outs. In 2018, players distributed NOK 648 million to clubs and associations via the Grassroots Share, compared with NOK 455 million in 2017.
The company relies on predictable and stable operations in order to remain accessible to its customers. For this reason, it gives us great pleasure to report that the company experienced no major system downtime in 2018. The volumes of traffic linked to the company’s distribution channels in connection with stake submission deadlines and draws are very significant, and this places great demands on system functionality and stability. Stable operations provide security both for the company and its customers, and are important for maintaining confidence in Norsk Tipping and in our good name.