Kindred earnings hit by Swedish regulation in Q1

Unibet operator Kindred Group has reported an 8.0% year-on-year rise in revenue for the first quarter of 2019, though has seen earnings impacted by costs associated with its launch in Sweden’s newly regulated igaming market.

Revenue for the three months ended March 31, 2019 amounted to £224.4m (€258.6m/$290.2m), with Kindred’s mobile offering accounting for 77% of the total.

Growth was mainly driven by the sports and casino verticals. The casino and games vertical was Kindred’s largest following a 3.4% year-on-year increase to £106.7m. This was slightly higher than sports betting’s quarterly total, which rose 12.5% to £106.5m, with amounts wagered up 16.7% to £1.34bn.

Live betting accounted for 57.8% of sports betting turnover, and 49.7% of revenue, down slightly from the prior year.

Poker, meanwhile, posted a 23.9% increase to £5.7m, with other revenue amounting to £5.5m in the quarter.

Looking at revenue by region, Western Europe remained by far the largest source, accounting for £139.4m (62.1%) of the group total. The Nordic region remains second, though reported a 16.4% year-on-year decline in revenue to £61.9m to 27.6% of the total, following the launch of Sweden’s regulated igaming market and efforts by the Norwegian authorities to force private operators from the market.

The re-regulated Swedish market contributed SEK207.4m (£17.1m) in revenue, once bonuses of SEK137.9m (£11.4m) were deducted.

Central, Eastern and Southern Europe saw revenue increase 18.1% to £18.3m, with a further £4.8m coming from other territories.

As of March 31, 2019, Kindred Group had 25.6m registered customers, up 13.8% year-on-year, and 2.8% from the quarter ended December 31, 2018.

The quarter saw Kindred’s cost of sales rise 25.9% to £104.1m, with betting duties up 41.8% to £52.2m, including £5.2m paid in relation to its newly-regulated Swedish activities. Marketing revenue share spend climbed to £13.3m, while other cost of sales rose to £38.6m. This resulted in gross profit for the period declining 3.8% to £120.3m.

Marketing costs were up 29.2% to £53.6m, due in part to significant expenditure on bonuses, and strong uptake in Sweden throughout January and February. However, Kindred noted that bonus spend stabilised later in the quarter, and was lower than 2018 by March.

Earnings before interest, tax, depreciation and amortisation amounted to £30.6m, down 35.3% from Q1 2018, with Kindred noting that it had taken an £18.9m hit from its Swedish launch.

Administrative costs grew to £50.0m, and though Kindred benefitted from a £3.2m foreign exchange gain, it was also hit by a £1.5m amortisation loss, leaving an operating profit of £18.4m. This represented a 48.5% year-on-year decline.

Once finance-related costs and income were stripped out, the operator posted a pre-tax profit of £17.7m, down 47.3%. Post-tax profit for the quarter came in at £15.1m once income tax of £2.6m was paid, a 49.5% decline from the first quarter of 2018.

“During the quarter we have had strong levels of activity across all markets and all-time highs in active customers and sports betting turnover,” Kindred chief executive Henrik Tjärnström (pictured) said. “This is the result of our continued investment in marketing, where focus has been in relation to responsible gambling in Sweden and football sponsorships in the UK.

“As anticipated for several years, the re-regulation of the Swedish market resulted in significant short term margin pressure, particularly in the first quarter.”

“For the period 1 April to 21 April 2019, the daily average gross winnings revenue in GBP was 10% higher (12% in constant currency) than for the same period last year,” Tjärnström added.