Cost cutting helps push net profit up 22.7% at Kindred in Q1

Revenue at Kindred for the three months to 31 March was only marginally higher year-on-year. The £307.7m reported for Q1 was 0.4% ahead of £306.4m in 2023.

However, lower spending allowed net profit to increase during the period. At the end of last year, Kindred announced it will fully exit North America by the end of Q2 2024 as part of a strategic review. It is also cutting 300 jobs across the business.

At the time, Kindred said such a move will allow for the re-allocation of financial and tech resources to existing core markets. It added that this will improve ability to capitalise on core market potential and gain market share.

The impact of this cost cutting has already been felt in Q1, with spending down across areas such as marketing and salaries. This, coupled with level revenue year-on-year, allowed net profit to rise.

“We have had a solid start to 2024 with the underlying business operations performing well and operational initiatives moving forward according to plan,” Kindred CEO Nils Andén said. “The headcount reduction plans announced at the end of last year are progressing as intended. Our North America exit is set to conclude towards the end of the second quarter this year.”

Kindred set for “transformational” year

Andén, who took over as permanent CEO in February, also praised the overall performance in Q1, saying 2024 will be a “transformational” year for the group.

“Our growth plan that we launched during the fourth quarter last year, focusing on Europe and Australia, continues at pace with dedicated strategic growth projects across locally regulated markets.

“The stable performance across locally regulated markets continues, with growth of 5%, excluding North America, primarily driven by the Netherlands, the UK and Romania.

“During the quarter, we launched the Kindred Sportsbook Platform (KSP) in a test market. We are very pleased with the progress to date. KSP remains one of our most important strategic projects and will give us the flexibility and differentiation needed to improve growth in locally regulated markets.

“Following a solid start to the year we now have our eyes firmly set on a much sought after summer of sports with the UEFA Euros, the Copa America and the Paris Olympics.”

Marginal B2C revenue increase

Breaking down Q1 revenue performance, B2C remains by far the primary source of income for Kindred. 

Revenue from B2C amounted to £297.6m, just 0.1% higher than last year. Of this, 56.0% came from casino and games, 39.0% sports betting, 3.0% poker and 2.0% other products.

Factors improving performance include continued strong development in the Netherlands and the UK. Kindred also noted growth in the casino segment across other core markets, with casino active customers improving 6.0%.

However, the result is negatively influenced by weak performance in non-locally regulated markets. Kindred said gross winnings revenue fell 16.0% compared to the first quarter of 2023.

In total, Western Europe operations accounted for 64.0% of all revenue in Q1, or £191.5m. Growth in the UK and the Netherlands more than offset declines in France and Belgium.

Elsewhere, the Nordics drew 22.0% of revenue, although the £65.2m generated was down 14.9% on last year. This, Kindred said, was primarily due to a disappointing performance within Sweden. 

Meanwhile, revenue from Central, Eastern and South Europe revenue hit £29.8m, or 10.0% of the quarterly total. Romania continues to demonstrate positive development but there was also weaker casino activity and product margins in Estonia and Italy.

A further £11.1m was attributed to other markets, including Australia and North America.

B2B revenue rises 11.0% in Q1

Turning to B2B operations, revenue here increased 11.0% to £10.1m in Q1. This area of the business includes solely revenue from Relax Gaming.

Kindred said that Relax Gaming continues to grow from strength to strength. This is despite revenue falling 11.0% on a quarter-on-quarter basis. 

Sequential development, Kindred said, is negatively impacted by the timing of the Dream Drop jackpot and game launches. This, it adds, is on top of the typical seasonality between quarters.

Spending down 7.8% at Kindred

Turning to expenses and analysing the impact of the cost-cutting initiatives, total spending was 7.8% lower at £76.4m. Marketing, salaries and other external expenses were all lower year-on-year.

Kindred also noted only a marginal rise in cost of sales for Q1, while finance expenses were only slightly higher than in 2023. This, coupled with steady revenue, left a pre-tax profit of £39.8m, up 30.9% year-on-year.

The group paid £8.4m in tax, meaning it was able to post £31.4m in net profit for Q1, up from $25.6m in 2023. In addition, EBITDA climbed 22.3% to £58.3m.

Deadline set for FDJ deal

Q1 also saw a major development in French lottery and gaming giant La Française des Jeux (FDJ) submitting an offer worth SEK27.96bn to acquire all outstanding share capital of Kindred.

FDJ said the deal would create the second largest operator in Europe, billing the combined business as a “European gaming champion” with stronger revenue and earnings growth.

Work continues on the proposed deal, with FDJ in February publishing the public tender offer document for the acquisition. This effectively kicked off an acceptance period, which will run through to 19 November. 

Kindred has “unanimously” recommended shareholders accept the offer.