Kindred remains in profit despite 30% Q1 revenue drop after Dutch exit

Kindred Group said its decision to withdraw from The Netherlands following the launch of its regulated online gambling market led to a 30.2% year-on-year drop in revenue for Q1 of 2022, but the business narrowly remained in profit.

Revenue for the three months to 31 March 2022 reached £246.7m (€293.8m/$308.5m), down from £352.6m in the corresponding period last year and in line with figures posted in an update earlier this month.

B2C activity accounted for £242.4m of total revenue for the quarter, down 31.3% year-on-year, while B2B revenue from its Relax Gaming operation, acquired in October last year, amounted to £4.3m.

Kindred said the overall decline was primarily the result of is exit from the Dutch market in October last year, with the operator having temporarily withdrawn ahead of the country’s regulated market opening on 1 October. Kindred intends to relaunch in The Netherlands when it secures the relevant licence.

Breaking down revenue by product, casino and games accounted for 49.0% of revenue in Q1, ahead of sports betting on 46.0%, poker with 3.0% and other games in 2.0%.

In terms of regional performance, 52.0% of all revenue came from Western Europe, while 31.0% was attributed to the Nordics, 11.0% Central, Eastern and Southern Europe, and the remaining 6.0% other regions.

On Q1, the operator was also faced with calls to withdraw from Norway when the country’s threatened Kindred with a daily fine of NOK1.2m if it did not stop operating in Norway. In response, Kindred argued it is not violating Norwegian law and thus would not change its actions.

Other events in Q1 included Kindred signing a new three-year agreement with sports betting supplier Kambi, while the operator secured a licence in Ontario for its Unibet brand.

Moving on to spending for the quarter, cost of sales was 20.5% lower at £113.2m, but total administrative expenses increased 15.9% to £65.7m. A further £2.4m loss was noted in other losses, while finance costs for the period amounted to £700,000.

This left a pre-tax profit of £7.6m, down 91.1% from £85.3m in the previous year. Kindred paid £1.2m in income tax, meaning it ended the quarter with a net profit of £6.4m, a year-on-year drop of 91.2% from £72.6m in 2021.

Kindred also noted that the revenue decline led to a 76.9% decline in underlying adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) from £106.0m to £24.5m.

“Our diversified product and market mix provides us with a relative degree of stability across the group,” Kindred chief executive Henrik Tjärnström said. “We have seen this on several occasions, not least during the pandemic when sports virtually disappeared for a period.

“Excluding The Netherlands, our diversified portfolio has seen solid casino performance across markets during the first quarter of 2022 with growth of 1% from the same period in the prior year despite tough comparatives. This has balanced out the slightly more volatile sportsbook, which started out strong but had a weaker second half of the quarter.

“The cessation of activity in the Dutch market continued to have a short-term impact on our gross winnings revenue. While this temporary top-line pressure reduces our profitability in the short-term, we maintain a very positive long-term view on the return from investments in our tech platform and strategic projects, such as our US expansion and the recently announced Kindred sportsbook platform.

“We have an exciting time ahead of us and I have great confidence in the direction we are taking through our long-term focus.”

Kindred also published a trading update for the period up to and including 26 April, with average daily gross winnings revenue for the group 37.0% lower than the daily average for the full second quarter of 2021. Excluding The Netherlands, average daily gross winnings revenue 15.0% down on last year.

Kindred said sports betting gross winning revenue was negatively impacted by a weak sports betting margin of 7.8% after free bets, compared to 10.7% in Q2 last year, whereas daily average gross winnings revenue for casino and other products remained at the same level as the full first quarter of 2022.

Author: Raymond Fleming