Kindred reveals revenue and net profit declines in “difficult” FY22

Last month, Kindred said that it would take “immediate action” to improve profitability after revenue failed to meet expectations during Q4.

Specifically, Kindred said it would work to reduce losses in North America, re-prioritise investment projects and further optimise operating expenses to improve scalability, with these actions expected to materially lower an increase in operating expenses.

While the full details of these actions are yet to be set out by the operator, Kindred chief executive Henrik Tjärnström last month warned “no item is sacred” in terms of cutting costs, with the business to review all areas of cost in order to improve spending for 2023.

Tjärnström expanded on this when reflecting on Kindred’s FY performance, again saying that while Q4 did “not reflect the true earnings potential of the business” and 2022 was challenging for the operator, he was hopeful the actions taken would improve its future performance.

“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,” Tjärnström said.

“The first-ever World Cup held in winter did not manage to offset the decline in sports activity both before and during the event, and regulatory changes in Belgium and Norway also negatively impacted revenues.

“As the fourth quarter of 2022 does not reflect the true earnings potential of the business, we have communicated non-recurring indicative guidance for the full year 2023 that underlying EBITDA will reach at least £200.0m (€224.7m/$241.2m).”

Analysing the fourth quarter, revenue was up 35.8% year-on-year at £305.5m, comprising £295.1m in B2C revenue and £10.4m in B2B revenue from Relax Gaming, which Kindred acquired in October 2021.

Breaking down this performance, 60% of revenue came from Western Europe, with 26% in the Nordics, 10% from Central, Eastern and Southern Europe (SEC), and 4% other regions including North America.

Casino and games accounted for 54% of all revenue in Q4, with revenue for this area of the business up 25% year-on-year. Kindred noted growth in all core markets with the exception of Belgium, where new regulations harmed its performance. 

Sports betting drew 41% of all revenue, with revenue for this sector rising 20%, helped by the World Cup being moved to the winter. However, headwinds in the UK, Belgium and Norway prevented further growth.

Kindred also noted that poker was responsible for 3% of total revenue and other activities 2%.

Looking at costs for Q4, cost of sales jumped 31.2% to £141.0m, administrative expenses were up 11.7% at £72.8m and net finance costs stood at £1.2m. However, even after accounting for £28.5m in net other gains, pre-tax profit was down 34.0% to £51.9m.

Kindred paid £1.9m in tax, leaving a net profit of £50.0m for the quarter, down 33.3% year-on-year and below expectations for the quarter.

“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,” Tjärnström said.

“The Netherlands continued to exceed our expectations with daily average gross winnings revenue of £600,000, and we remain firmly on track to being the number one operator in 2023.”

In terms of the full year, revenue was 15.2% lower at £1.07bn, with B2C revenue falling by 16.7% to £1.04bn, although B2B revenue jumped 486.4% to £25.8m due to the acquisition of Relax Gaming in the previous year.

Although Kindred did not publish a full breakdown of revenue performance for the year, it did go into detail on spending. Cost of sales was 4.2% lower at £484.9m, but total administrative expenses increased 20.3% to £283.6m and net financial costs were £4.5m.

Even after including £58.3m in net other gains, Kindred posted a pre-tax profit of £126.8m, down 62.6% year-on-year. The group paid £6.7m in tax, leaving a net profit of £120.1m, a 59.2% drop from £295.3m in the previous year. 

“2022 has been a difficult year in many ways, not only for Kindred,” Tjärnström said. “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.”