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Kindred Group will take “immediate actions to improve profitability” following 2022 difficulties, which saw its business witness double-digit declines across all core trading metrics.
A ‘difficult year’ had been previously outlined by Kindred leadership, as revenue declined by 15%, despite a performance bounceback in the fourth quarter, although this too fell short of group ambitions.
In its trading update for 2022 and Q4 published this morning, the Stockholm-listed betting and gaming group detailed full year revenue of £1bn (2021: £1.2bn), whilst Q4 revenue rose by 20% to £305.5m (£244.9m).
Meanwhile, underlying EBITDA for all 12 months stood at £129.2m, a decline of 61% from £332.1m the year prior, and was recorded as £39.2m in Q4, a strong return to form of 42% from £240.5m.
However, although the fourth quarter suggested a more positive outlook at year’s end, Henrik Tjärnström asserted in his CEO statement that it fell short of the group’s targets, with the firm’s World Cup sportsbook operations previously highlighted as being underachieving.
“Despite growth in our core markets and continued encouraging performance in the Netherlands, following re-entry to the market in July 2022, the fourth quarter fell significantly short of our ambitious expectations,” the CEO explained.
“Several core markets continued to perform well during the quarter, with solid activity in France, Sweden, the UK and the Netherlands contributing to total revenue of £305.5m, an increase of 25% compared to the same period last year.
“The Netherlands continued to exceed our expectations with daily average Gross winnings revenue of £0.5m, and we remain firmly on track to being the number one operator in 2023.”
As cited by Tjärnström, the re-entry of Kindred’s Unibet sportsbook to the Netherlands was a key milestone for the group last year, ending a long-running thorn in its side.
The brand was first forced to withdraw from the country and re-apply for a Dutch licence following the re-regulation of the market under the KOA Act back in October 2021.
The impact of Kindred’s return to Dutch business was seen in its Q4 figures, which showed that its total number of active customers rose by 25% to 1,827,881 (1,461,009), with this growth rate falling to 12% when the Netherlands is discounted.
This increase in customers contributed to the group’s improved revenue margins in the final quarter, although profit after tax for both Q4 and 2022 remained below target at £51.9m (£78.8m) and £120.1m (£295.3m).
Regulatory hurdles in other countries, particularly Belgium and Norway, were earmarked by Tjärnström as substantially dragging Kindred’s trading performance last year.
Specifically, as a range of new restrictions were imposed in the former and action was taken against its Trannel brand in the latter, with the Norwegian Lottstift gambling authority issuing ‘daily coercive fines’ of NOK 1.2m (€120,000) if the group does not stop ‘targeting’ consumers in the country.
Tjärnström continued: “While most core markets have performed well, Belgium has been impacted by regulatory changes with increased requirements on customer duty of care and responsible gambling limitations affecting revenue negatively.
“In Norway changes made to our offering also had a negative impact. In both markets this follows the pattern seen previously as a result of regulatory changes and we are working hard to mitigate the impact, with the expectation that revenues will stabilise in the coming quarters and return to growth over time.
“The non-satisfactory performance during the fourth quarter, attributed to these one-off items as well as the headwinds in Belgium and Norway, have led to actions being taken to further improve profitability.”
Primary actions listed by Kindred’s CEO include a targeted reduction of losses in North American, re-prioritisation of investment projects and optimisation of group operating expenses in pursuit of increased scalability.
Tjärnström expects these initiatives to ‘materially lower growth in operating expenses’, whilst pointing to continuation of a ‘fact-based dialogue and being a trusted speaking partner to regulators and policy formers’ as a ‘top priority’ for 2023, with 81% of the group’s gross winnings revenue generated by locally regulated markets.
Providing a post-close update, Kindred outlined that average daily gross winnings revenue up to 5 February 2022 was £3.6m, 36% higher than the daily average for Q1 2022 and 9% higher when the Netherlands is excluded, which would bring the figure to £2.9m.
With Q1 2023 well underway, Kindred has set out targets of £200m in EBITDA and an accompanying margin of 21-22%, alongside revenue of £1.6bn by the end of the year, as set out in its Capital Markets Day.
Tjärnström concluded: “2022 has been a difficult year in many ways, not only for Kindred. However, while the geopolitical uncertainty and cost-of-living challenges remain, the actions now taken and a large customer database from the fourth quarter will strengthen our path towards our 2025 financial targets.”
