Casino drives Kindred to revenue growth in first half

Kindred Group has reported a year-on-year rise in revenue during the first half of the year, despite its business being impacted by the novel coronavirus (Covid-19) pandemic.

Gross winnings revenue for the six months through to 30 June totalled £484.8m (€531.9m/$617.7m), an increase of 7.6% from £450.6m in the same period last year.

Kindred, which earlier this month forecast revenue growth for the period, said that this rise was down positive performances across a number of markets, as well as its ongoing focus on product differentiation.

Gross winnings revenue on sports betting amounted to £190.0m in the first half, down 11.8% from £215.4m in the first six months of 2019, with Kindred putting this down to the cancellation or postponement of many major sports events due to Covid-19.

However, Kindred said this area of the business began to improve towards the end of the period, following the return of certain sports, including a number of major European football leagues and horse racing in various markets.

Gross winnings revenue from other products – including casino, poker and bingo – came in at £294.8m, up 25.3% from £235.2m last year. Casino revenue totalled £263.3m, while poker revenue hit £17.2m and bingo £14.3m.

Kindred noted that the reduced sports betting market during H1 saw more of its players switch to other products, which in turn led to the overall rise in revenue.

Looking at geographical performance, Western Europe remained Kindred’s most active market by some margin, with revenue amounting to £293.8m, up 6.7% from £275.3m.

Nordics revenue in the first half came in at £126.9m, while revenue from Central, Eastern and Southern Europe amounted to £43.1m. Revenue from other markets totalled £21.0m during the six-month period.

Kindred added that it expects revenue in its ‘other market’ sector to increase in the second half, given that it is due to launch in Indiana – its third US state – via a partnership with Caesars Entertainment at the end of this month. After this, the operator is seeking to launch in at least two more states in 2021.

“Our US business continues to develop very strongly, despite the loss of offline revenues and the disruption to sports,” Kindred chief executive Henrik Tjärnström said.

“After less than a year of operations, the US already accounted for more than 2.5% of the group’s gross winnings revenue and this share is expected to accelerate in coming quarters, especially as further states go live.”

In terms of spending for the period, cost of sales amounted to £204.2m, up 1.6% from £201.0m last year. Betting duties spend was slightly down to £98.1m, while marketing revenue share was relatively level at £25.3m and other costs edged up to £80.8.

Operating costs in H1 were up slightly to £212.2m, with salaries costs jumping 20.3% to £56.2m, despite Kindred reducing its workforce in the period in response to the Covid-19 pandemic. Marketing costs were cut from £106.8m to £96.6m. Other operating costs fell slightly to £33.6m in H1.

Despite costs edging up in the first half, revenue growth meant that Kindred was able to end the period with $68.4m in underlying profit, compared to £38.1m at the same point last year.

After taking into account other spending, including £10.8m worth of accelerated amortisation of acquired intangible assets and £8.6m in foreign currency loss, the operator posted £33.7m in profit before, up 4.0% on last year.

Kindred paid £5.9m in income tax during the first half, which meant it ended the six-month period with £27.8m in profit after tax, slightly up from £27.6m in 2019.

In addition, Kindred noted that the actions it took to mitigate the impact of Covid-19 on the business led to earnings before interest, tax, depreciation and amortisation of £94.2m, up 51.9% from last year.

The interim report also included details of Kindred’s performance in the second quarter, during which some major sports events returned and thus boosted the operator’s sports betting arm.

Revenue for the three-month period totalled £235.1m, up 4.0% on the previous year, while profit after tax rocketed 114.4% to £26.8m. Underlying EBITDA was also up 67.3% to £51.7m in the quarter.

“Our teams around the world have worked incredibly well in the new environment, both in dealing with the challenges from the pandemic and in driving efficiency as our cost reduction programme continues,” Tjärnström said.

“Kindred remains conscious of the risk of further disruption both to sports and the wider economy, so we will continue to manage the overall cost base carefully.”

The operator also offered an insight into its current performance, saying that in the period to 19 July, sportsbook margins were 20% higher than average, while gross winnings revenue was 40% above average.

In the US, average daily gross winnings revenue for the period increased by 32% compared to the daily average for the second quarter 2020.

Analysts at Regulus Partners also offered their view on the first half performance, saying that the results show Kindred “demonstrated the value of geographic and product diversity”. However, Regulus also warned that Kindred could face challenges following the return of sports.

Regulus said: “During the acute period of Covid-19 disruption it has helped enormously to have a high gaming mix. However, as mainstream sports and mass market engagement returns, increasing sports-led global and local competition is likely to re-exert pressure on Kindred’s waterfront .com – regulated business model, in our view.”