Kindred profit plummets after difficult Q2

The results follow the revelation that Kindred’s board had explored a sale of the business, following pressure from a minority shareholder.

Kindred also received a licence to operate in the Netherlands during the quarter, ending a nine-month absence in the market.

Henrik Tjärnström, CEO of Kindred, said that stricter affordability checks in the UK, combined with a seasonally low period of activity, impacted the second quarter’s results.

“The second quarter is a seasonally low period of activity as sports leagues end, with major football tournaments only taking place every other year,” said Tjärnström.

“During the last year, the UK market has been impacted by stricter affordability checks self-imposed by the industry. These measures can be expected to continue over the coming quarters. While impacting revenues in the short term, this ensures a more sustainable customer base.”

This revenue consisted of B2B and B2C operations. B2C revenue accounted for £475.9m of the total, down by 33.5% from the same period in 2021, while B2B revenue made up the remaining £9.5m. There was no comparable B2B figure for half year 2021. After H1 2021 ended, Kindred acquired Relax Gaming for £275m.

Net cash from operating activities totaled at £15.3m for the half, a decline of 92.3% year-on-year.

Cost of sales reached £220.1m for the half, £65m less than in the previous half year. Betting duties incurred the highest cost, at £119.2m, while marketing and revenue share totaled at £22.2m. Other costs of sales came to £78.7m.

After considering the cost of sales, gross profit was £265.3m, down by 38.4% year-on-year.

Administrative expenses totaled at £135.7m for the half, 19.3% higher than in 2021, and marketing costs came to £107.1m, a year-on-year drop of 11.1%.

Salary expenses totalled £67.5m, while other operating expenses came out at £40.9m. The remaining expenses consisted of depreciation of property and equipment and right-of-use assets, as well as amortisation of intangible assets.

The expenses left the profit at £22.5m, a significant drop of 88% from half-year 2021.

Further costs, including personnel restructuring, Germany market closure and other gains and losses amounted to £6.2m. This brought the total profit from operations to £16.3m, another significant fall of 91.3%.

After finance costs at £2.2m and finance income at £500,000, the pre-tax profit was £14.6m. Following tax at £2.4m the total profit for the six months was £12.2m, down by 92.3%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) totalled at £46.3m for the half, 78.1% lower year-on-year.

Total active customers for the year fell to 1.3 million, a decrease of 600,000. Tjärnström explained that Kindred’s cessation of activity in the Netherlands played a part in this.

“Active customers for the second quarter were 1.3 million, impacted by our decision to temporarily stop accepting bets from Dutch residents,” said Tjärnström.

However, he said Kindred has seen success in the market since receiving its Dutch licence.

“On 8 June we finally received our licence from the Dutch Gambling Authority and a process to connect all our systems and processes to the KSA began,” he said. “We opened our doors to Dutch players on 4 July and have seen strong customer intake and activity in the period between 4 and 19 July.”

For the second quarter alone, the revenue was £238.7m. This was a fall of 34.3% from Q2 2021. Cost of sales totalled £106.9m – £35.9m less yearly – and brought the gross profit to £131.8m, down by 40.3%.

Marketing incurred the highest costs, totaling at £50.1m. Salary costs and other expenses totalled at £34.5m and £21.9m respectively. The remaining operating costs – £13.6m – came from depreciation and amortisation costs.

This left the profit at £11.7m. Following £3.7m in other expenses the profit from operations was £8m, much lower than the £103.1m recorded in Q2 2021.

Finance costs at £1.4m and finance income at £400,000 meant that the profit before tax totalled at £7m. Following income tax expense at £1.2m, the total profit for the quarter was £5.8m, an alarming decline of 93.3% year-on-year.

Net cash from operations was £4.6m for the quarter, down by 95.3%.

EBITDA was £21.6m – 81.1% less year-on-year.

Gross winnings in Europe fell by half to £119.5m, which Kindred attributed in part to its inactivity in the Dutch market.

However, since going live in the Dutch market, Kindred has recorded £150,000 in gross winnings revenue, which it says is increasing gradually.

In the Nordic countries, gross winnings revenue was £74.2m, down by £1.2m.

Gross winnings revenue in Central, Eastern and Southern Europe also declined to £26.2m. This was a decrease of £2.1m year-on-year.

Currently, Kindred’s average daily gross winnings revenue is £2.5m, or £2.3m after excluding the Netherlands.