Kindred Group Plc remains optimistic of its long-term prospects, as short-term European market headwinds have ‘applied temporary pressure to its headline revenue and profits’.
Publishing its Q1 trading statement (unaudited period ending 31 March), Kindred registered corporate revenues of £247 million, down 31% on corresponding 2021 results of £352 million.
A tough opening to 2022 trading saw Stockholm-listed online gambling group declare a 77% decline in EBITDA to £24.5 million (Q1 2021: £106 million).
As previously communicated to markets, Kindred’s financial performance continues to drag from the close of 2021, primarily as a result of the group’s decision to cease activity in the Dutch market as of 30 September – obeying the ‘cooling-off command’ applied by Dutch market regulator Kansspelautoriteit as Kindred properties wait to be granted its KOA licences
Kindred cited that excluding the Netherlands, corporate revenues would have ‘declined by 7% and 3% on a constant currency basis’. Yet a further breakdown of Western European results saw the group face trading challenges in France and the UK – markets matched against peak 2021 comparatives.
Period trading saw Kindred register a 48% revenue decline in Western European markets to £127 million (Q1 2021: £241m). European drags were attributed to the UK (GGR -22%) imposing tougher customer KYC/ player affordability checks and an overall market slowdown in France (GGR -13%) due to ‘COVID normalisation’ impacting player activity.
Compounding Western European headwinds, Kindred registered a higher than anticipated fall in Q1 active B2C customers to 1.3 million down 24% on Q1 2021 comparatives of 1.8 million customers across its brand portfolio.
Group CEO Henrik Tjärnström commented on Q1 performance: “While the start of 2022 has seen societies returning to normal after two years of COVID-19 impacting our lives, we are today witnessing worrying geopolitical development in Europe, bringing both uncertainty and tragedy that will leave its mark for the foreseeable future.
“Whilst these developments have had a limited impact on Kindred’s performance for the first quarter of 2022, we continue to notice an impact from post-COVID-19 normalisation across markets, as well as the decision to cease activity in the Dutch market in Q3 2021.”
Softening Western European headwinds, Kindred continues to grow within Nordic markets that saw period revenues increase by 9% to £74 million (Q1 2021: £67 million).
Continued Nordic gains were attributed to a strong home market performance in Sweden (+23%) following strong take-up of its casino offering irrespective of ‘continued temporary’ deposit limits applied by local authorities.
Within non-European geographies, Kindred cited mixed results as North American gross winnings declined to £5.6 million (Q1 2021: £7.4 million) – attributed to tough competition driven by the ‘unsustainable marketing and customer incentives’ offered by US competitors.
Despite countering negative factors, Kindred maintains a positive outlook for North American trading in which it will establish its presence in the Canadian province of Ontario.
“We are not satisfied with the current performance in North America, which has been partly impacted by our conscious decisions to optimise marketing investments and focus on our platform in order to drive longer-term benefit,” Tjärnström explained.
“Even though competition remains tough, due to unsustainable marketing and customer incentives at the initial market entry phase, the North American market remains an important long-term growth opportunity for Kindred.
“The Canadian province is one of the largest markets for online gambling in North America and our Unibet brand is already known in the market.”
Operationally, during Q1 trading Kindred registered higher administrative expenses totalling £66 million (Q1 2021: £56 million) – due to incorporating the new staff of Relax Gaming, as the group’s new in-house product development unit
Moving forward, the expansion of Relax Gaming alongside further proprietary units was outlined as a key objective for the remainder of 2022 trading, in light of continued market challenges.
Tjärnström concluded: “In the near term we will continue to experience some headwinds until we have been awarded a licence in the Netherlands and the effects of COVID-19 normalisation begin to tail off. We expect these headwinds to gradually ease over the year once we can launch our operations in the Netherlands.
“Looking ahead, we continue to focus on our strategic investments in both our platform and products, as well as the FIFA World Cup towards the end of the year.
“We embarked on our transformation journey more than ten years ago and it is very satisfying that we are nearing, in the coming months, one of the final major milestones.
“We have an exciting time ahead of us and I have great confidence in the direction we are taking through our long-term focus.”