Board of Director’s Annual Report

The company is regulated by the Act on Gaming of the 28.8.1992 no. 103 (Gaming Act) (in Norwegian), with subsequent amendments. The introduction of new games and establishment of gaming rules are contingent on the permission of the Ministry of Culture and Equality. The ministry also decides how large a proportion of the total stakes must be paid out as prizes.

The new Gaming Act came into force on 1.1.2023. It will govern the company’s activities in the coming periods.

Norsk Tipping has a threefold social mission in which the main purpose is to prevent problem gambling and other adverse consequences of gaming. The company will also contribute to ensuring that gaming is conducted in a responsible and safe manner, at the same time as ensuring that the surplus funds from activities go to non-profit purposes. Maximising the amount of surplus funds will never be Norsk Tipping’s primary purpose or the reason behind the State’s ownership of the company. The government’s stated hope is that Norsk Tipping will primarily be an actor that helps to move the gaming market in a responsible sociopolitical direction. There is a broad political consensus that gaming should be regulated in order to prevent negative gaming behaviours.

The company’s terms of reference are set out in guidelines for the corporate governance of companies, etc. that report to the Ministry of Culture. In line with the Ministry of Culture and Equality’s requirements, the company complies with those parts of the Norwegian Code of Practice for Corporate Governance issued by the Norwegian Corporate Governance Board (NCGB) that are relevant to the company.

Norsk Tipping’s annual and sustainability report has been prepared in line with the GRI Standards (GRI 1: Foundation 2021). The company’s reporting on sustainable value creation has been incorporated throughout this annual and sustainability report rather than published as a standalone document.

Norsk Tipping achieved positive results within the company’s key performance indicators in 2022. For the third year in a row, the company set a new record for the number of players. No fewer than 2.14 million unique customers played a Norsk Tipping game in 2022, and 29.5 per cent of these were under 40. This shows that the company’s offering is attractive enough to channel the desire to gamble in all age groups 18+ to a regulated offering within a responsible framework. Almost 50 per cent of the population aged 18+ played Norsk Tipping’s games.

It is important to the company that most people have a relationship with Norsk Tipping, and the development in this area is therefore positive.

The company’s reputation is also of major importance in ensuring that it is trusted by the public. Norsk Tipping primarily uses Kantar’s syndicated reputation survey to measure the company’s reputation. The company achieved a score of 71 points in 2022. This is an improvement from 70 points in 2021 and is a sign that the company has a good reputation. It was among the top five of the 70 companies that took part in the survey.

The population-based survey on gaming in 2020 showed modest growth in the extent of problem gambling in Norway. As the largest regulated provider of gaming, Norsk Tipping has an opportunity to influence this trend going forward. Norsk Tipping measures the scope of its customers’ risky gaming behaviour via its own index. This index showed a positive development for the second year in a row, where the customer base as a whole moved towards ‘greener gaming behaviour’.

The overarching goal of the responsibility work in the company is to protect vulnerable players, and our ambition is to be a world leader in this area. The company is constantly working on modifications, large and small, aimed at strengthening the protection for these groups. The ‘Spillepuls’ concept was launched in 2022. This is a solution involving real-time player interactions where the goals are to make them aware of their gaming and to get them to take steps to reduce the adverse consequences of gaming. One example of this is lowering their personal gaming limits.

In 2022, the authorities succeeded in getting the unregulated providers to reduce their TV marketing targeting Norwegian players. Both NENT Group and Discovery have now stopped broadcasting commercials for unregulated gaming companies. The Norwegian Gaming Authority is also following up unregulated providers who contact Norwegian players. The company Trannel, which is behind a number of websites that target Norwegian players, is subject to a coercive fine of around NOK 1.2 million per day until it stops offering gaming in Norway. This is an example of the authorities making an important effort to protect the Norwegian gaming model.

Norsk Tipping’s total operating revenue increased from NOK 44 billion in 2021 to NOK 47 billion in 2022. Because of the high prize shares and high degree to which prizes are reused as stakes in some of the company’s games, the development of net gaming revenue (gaming revenue less prizes) is considered a better measure of the scale of activity. Net gaming revenue amounted to NOK 8.99 billion. This represents growth of NOK 321 million (3.7 per cent) from 2021.

The operating expenses (without prizes) grew by NOK 92 million compared with the year before. Sales commissions were lower, while other operating expenses grew slightly. The total growth was 3.9 per cent, which was lower than price inflation in the same period. Overall, the surplus funds grew from NOK 6.286 billion to NOK 6.582 billion, which represents year-on-year growth of 4.7 per cent.

Lotteries are the company’s biggest category. The category accounted for 64 per cent of net gaming revenue in 2022, on a par with the year before. Lotteries represent a lower risk of problem gambling than the other categories and are widely supported by the playing segment of the public. A strong lottery portfolio is therefore important for channelling the desire to gamble to a responsibly regulated offering.

Casino games account for 14 per cent of net gaming revenue. This category is more prone to problem gambling than lotteries. The company is constantly working on adjustments to balance responsibility and attractiveness in this category. It is important in relation to the monopoly model that Norsk Tipping is able to channel customers in this category to a regulated and responsible offering with a view to mitigating the negative consequences of the gaming. The authorities’ restrictions on unregulated providers’ activities are helping to ensure that Norsk Tipping’s market shares in this area are increasing.

Sports games saw a decrease of 6 per cent in net gaming revenue from 2021, and this represents the first normal year after major fluctuations due to the pandemic. The regulation is working well and Norsk Tipping’s market shares in the area are increasing. This category also entails a higher risk of problem gambling than lotteries and measures such as Spillepuls will help to reduce adverse consequences.

In general, the ban on marketing games without a licence in Norway has worked well for a long time. Together with the payment prohibition, it helps to make it difficult for unregulated gaming providers to offer games targeted at the Norwegian market, which strongly supports Norsk Tipping’s channelling.

Enforcement of the monopoly model results in Norsk Tipping gaining a larger share of total gaming revenue and an ever more important role in helping to reduce problem gambling in Norway.

The most important part of Norsk Tipping’s social mission is to prevent negative consequences from gaming by offering attractive and responsible gaming, and its ambition is to be a world leader in responsible gaming. The company is, therefore, working with several research institutions to increase knowledge in this area and the results from the research are used as a basis for refining the company’s responsibility measures.

The company’s activities are generally subject to a strict regime of responsibility and casino games have been subject to further regulations ever since they were introduced. Mandatory limit setting, the absence of marketing and the prohibition against a series of ongoing means that encourage more gaming are elements of this. The customers have found their way to Norsk Tipping’s offering even without marketing. This is pleasing since the point of the company offering these games is precisely to have an offering for those looking for casino games and who previously had to turn to unregulated gaming providers.

The responsibility tool Spillepuls was further enhanced during the year, and the solution won first place in the European Lotteries Innovation Awards 2022. This is tangible proof of the company’s successful efforts within responsible gaming.

The focus on proactive calls was strengthened, and the company increased its staffing from two to three people in this area. The company constantly contacts players with gaming patterns that may indicate problematic gaming behaviour. During the call, the customer is informed about how much they have spent on gaming in the last year and possible measures for curtailing their gaming. Specific measures are agreed if the customer wants to reduce their gaming. If it becomes clear from the call that the customer has a gambling problem, he or she will be given information about services offering help and treatment.

Norsk Tipping’s ambition is to be a leader within social responsibility and sustainability in relevant areas, and it wants to take responsibility for how its operations impact people, society, and the environment.

The ownership report to the national parliament (Report to the Storting no. 6 (White Paper) 2022-2023) ‘A greener and more active state ownership – The State’s direct ownership of companies’ defines Norsk Tipping as a category 2 company where the State’s objectives as the owner are sustainability and the most effective possible achievement of sectoral policy objectives. It also states that the State expects the company to be a leader in the work on responsible activities and to conduct due diligence in line with recognised methods.

In line with the owner’s expectations, Norsk Tipping reports on important matters related to the company’s activities.

In 2022, the company’s sustainability work focus on integrating the Transparency Act in line with the provisions of the Act, including by updating governing documents and developing processes and procedures for conducting due diligence. The company also worked on further developing and expanding its climate reporting, including by adding more emission categories. This work will continue in 2023. The company’s climate report for 2022 is available here (in the Norwegian version of the report).

An internal audit of the area of social responsibility and sustainability was also carried out in 2022. The overall conclusion of the internal auditor, PwC, was that the company’s work on social responsibility and sustainability is generally good and that this is reflected in its good sustainability reporting. At the same time, PwC pointed out some areas requiring improvement and made recommendations concerning the future work. The recommendations will be addressed in the plans for sustainability work in 2023.

Norsk Tipping’s work is constantly being developed further to ensure a comprehensive approach to value creation across the company and thus that it delivers in line with the owner’s expectations.

The work on the different areas is described in ‘Social responsibility and sustainability’.

The Board is heavily focused on achieving sectoral policy objectives as cost effectively as possible. The surplus funds for good causes are a consequence of the regulation, but not the main objective. Assessments concerning responsible gaming weigh heavily in all decisions concerning the company’s development even if the potential entails losses of revenue or higher expenses. Given this framework, the company must nonetheless operate as cost effectively as possible.

The surplus funds for good causes, measured as a percentage of net gaming revenue, are an important key figure for the company’s cost performance. In 2022, the figure was 73 per cent of net gaming revenue. This is higher than the year before and the trend over time has been that a steadily increasing share of net gaming revenue is being distributed to good causes. The main reason for the improved cost-efficiency is that the company has, thanks to systematic efforts over many years, succeeded in developing good digital solutions for products and services, which has reduced sales commissions.

To free up capacity for new priorities in the coming period, the company has agreed severance packages and/or additional pensions for a total of 41 employees.

In 2021, Norsk Tipping awarded a contract for ID and payment services to Buypass AS. EveryMatrix Software Ltd’s tender was rejected. As a result of this rejection, EveryMatrix has sued Norsk Tipping in court and is claiming damages. Norsk Tipping won the case in district court, but EveryMatrix has appealed. NOK 15 million was set aside in the accounts for 2021 in relation to this matter and the provision will be maintained until the case has been decided with final effect.

At the end of 2022, the company’s total balance sheet was NOK 7 billion and its equity ratio 6.9 per cent. The corresponding figures for 2021 were NOK 6.7 billion and 7 per cent. The company’s distributable equity amounted to NOK 335 million as at 31.12.2022.

The low equity ratio must be seen in the context of the company’s special situation in which the year’s activities accumulate surplus funds that are distributed the following year. On the date the surplus funds are distributed to recipients, equity is strengthened as a result of the activity that took place in the year after those funds were generated.

In the short term, there is relatively little uncertainty linked to the company’s future financial situation. Norsk Tipping’s status as a ‘state-owned company established by special law’ with a predictable regulatory framework means that it has adequate equity and a satisfactory financial position in spite of its low equity ratio figure.

Gaming revenue is the company’s most important source of cash flow. The gaming revenue after deductions for prizes was NOK 320 million higher than in 2021. In 2022, net cash flow from operating activities amounted to NOK 6.7 billion, compared with NOK 6.2 billion in 2020. The company’s cash holdings were NOK 288 million higher year-on-year.

Norsk Tipping is by far Norway’s largest gaming company, with an estimated share of 67 per cent of the entire gaming market measured in terms of turnover.

The company’s strategy is based on the sectoral policy objectives in the gaming market in Norway, where the main goal is to reduce problematic gambling behaviour among the public. Norsk Tipping’s overall strategic direction should show that the Norwegian gaming model is the best for Norwegian society and through this reduce the adverse consequences of gaming.

Finding the right balance between offering a responsible and an attractive gaming offering is key for the company and a fundamental premiss for the strategy. Norsk Tipping has over time been a pioneer in the work on responsibility and has deliberately sought to become a world leader in this area. As a monopoly company, Norsk Tipping is supposed to play a key, proactive role in preventing problem gambling in society.

Further developing the company’s products and solutions is an important means of complying with our social mission of providing an attractive and responsible gaming environment in which the surplus funds go to good causes.

The main risk associated with the company’s future goal attainment relates to whether the current regulations help to reduce problem gambling in society. Norsk Tipping has implemented measures designed to contribute to this, and the company is constantly working on new measures in this area.

A number of factors that impact the public’s personal finances changed in 2022. Interest rates climbed and inflation rose sharply. Norsk Tipping is closely monitoring how developments in the economy are impacting sales of the company’s games, and measures resulting from this are assessed on an ongoing basis.

Norsk Tipping does not carry out its own research and development activities as defined in the Norwegian Accounting Act. However, the company continues to involve itself in development activities in several areas linked to innovation and development in connection with its products, systems, and services, and this represents an important part of the company’s activities. More than 25 per cent of the company’s full-time equivalents work in this area.

The development of digital sales solutions and services represents an important element of the company’s renewal and there is always a need to improve and modify the company’s solutions. The further development and integration of responsibility measures in order to help reduce problematic gaming behaviour is an important component of this work. A new tool for personalised dialogue with players was launched with the name Spillepuls in 2022. The solution won the European Lotteries Innovation Awards 2022.

Norsk Tipping conducts some transactions, and holds some reserves, in foreign currencies and is therefore exposed to a certain degree of financial risk. The largest transactions are linked to prizes in games operated in partnership with publicly owned gaming companies in other countries. The company is also exposed to credit risk related to settlements with its sales agents. Settlements for the preceding week’s sales are paid during the succeeding week by means of automatic deductions. Guarantee and deposit arrangements have been established that considerably reduce this credit risk. The company incurred no significant losses linked to receivables from sales agents in 2022.

The liquidity situation is satisfactory since the company generates significant distributable funds by means of its day-to-day operations. At the end of the year, the company had a positive balance of cash and cash equivalents amounting to NOK 6.4 billion, most of which was deposited as sight deposits with the Treasury in Norges Bank. The company believes that the level of uncertainty linked to its financial status next year is relatively low.

In the opinion of the Board, the annual accounts and annual report provide a true and fair picture of the company’s financial position and activities at the end of the year.

The annual accounts were prepared on the basis of an assumption that the company is a going concern. The Board is not aware of any significant factors that have emerged or events that have occurred during the accounting year, or subsequent to the end of the accounting year, that impact the going concern assumption or the annual accounts.

Directors’ and officers’ liability insurance has been taken out for board members, the CEO and other employees who have had independent management responsibility. The insurance covers their potential liability, up to NOK 25 million per year, in relation to the company and third parties in the event of damage to assets as a result of actions or omissions for which they are liable due to their leading role.

Norsk Tipping is an inclusive workplace company and has an explicit ambition of ensuring equal opportunities in the company. The company is constantly working on measures aimed at improving the gender balance among the company’s employees and managers. The senior management team consists of one woman and five men. The overall proportion of women in management positions is 35 per cent, while 38 per cent of the 413 permanent employees are women.

The company has produced a report on the gender equality situation and the activities that have been initiated to fulfil its activity duty, see the employee chapter in the annual report and report to the Ministry of Culture and Equality (in the Norwegian version of the report).

Total sickness absence for 2022 was 3.9 per cent. This represents an increase of 0.3 per cent from 2021. Norsk Tipping’s overarching goal is to keep sickness absence below 4 per cent.

No injuries resulting in absence were registered in 2022.

Norsk Tipping is Eco-Lighthouse certified. The overarching goal for the climate and environmental work is to reduce the company’s climate footprint. In line with the expectations of the owner, Norsk Tipping measures its greenhouse gas emissions based on the international GHG Protocol and has committed to cutting its emissions in line with the Paris Agreement. The company has set a goal of reducing its total greenhouse gas emissions by 55 per cent by the end of 2030.

Norsk Tipping has started work on producing more a comprehensive climate report. Calculations of the company’s climate footprint for 2022 will therefore not be finalised before the annual report is revised.

Energy consumption and transport were two of the emission sources that had the greatest climate and environmental impact in 2021, and the company assumes that this will also be the case for 2022.

The company’s distributable equity is held in an investment fund and other equity. Total distributable equity amounted to NOK 335 million as at 31.12.2022.

The Board’s proposal regarding the distribution of the annual surplus funds is as follows: