Kindred warns of Q4 earnings hit from weak betting margins
Unibet operator Kindred has issued a trading update revealing that weak sports betting margins could see the group’s earnings before interest, tax, depreciation and amortisation for the fourth quarter of 2019 fall by as much as 50% to £27m-£32m. (€31.5m-€37.3m/$35.0m-$41.5m).
The operator said that its revenue also took a hit, and has revised its projections downward by 4.0% to £235m, despite turnover increasing by 3%. Active customers for the quarter also increased, by 2% to 1.6 million.
Kindred’s betting margin after taking free bets into account was 8.1%, down from 9.4% in 2018. The group said that this decline led to particularly adverse effects in France, where the country’s turnover-based gambling taxes compounded the impact of unfavourable results.
In December, France’s Senate passed a bill that would allow gambling taxes to be based on revenue starting from 1 January, 2020. The senate said that this would allow operators and the government to “share the luck” from volatile betting results.
The group added that tight regulation, particularly in Sweden and the Netherlands, has also hurt performance.
In Sweden, the first year of re-regulated gaming included many clashes between operators and gaming authority Spelinspektionen, with operator association Branscheforenigen för Onlinespel (BOS) saying that more clarity was required in its approach to regulation. Struggles in Sweden have hurt Kindred's bottom line, in the third quarter of 2019, when post-tax profits were almost cut in half.
In the Netherlands, gambling regulator Kansspelautoriteit (KSA) imposed fines worth a combined €3.5m (£3.0m/$3.9m) in 2019, a 105.8% increase from 2018. This included a €470,000 fine against Kindred's Trannel International subsidiary for offering online gambling services to consumers in the country without a licence.
As a result of its struggles, the oeprator plans to implement “operational efficiency initiatives” to ensure that it can deliver year-on-year growth in revenue and earnings for 2020.
The operator will release its Q4 2019 report on 12 February.