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Kindred Q3: reiterates full-year earnings guidance amid North American exit

| By Robert Fletcher
Kindred Group said it remains on track to perform in line with its full-year underlying EBITDA guidance after reporting a 2.2% rise in revenue to £283.9m (€245.7m/€283.9m) during Q3.
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The group experienced continued growth in its casino segment, strengthening its positions in the Netherlands and UK. However, Kindred said this growth was tempered by ongoing regulatory challenges in select core markets. It was also impacted by its Q3 sportsbook performance.

Kindred said that Unibet regained its position as the leading operator in the Netherlands. In addition, active customers were up 7.0% across the business. However, Kindred said this was partially offset by lower-than expected sportsbook activity due to a lighter sports calendar.

Interim CEO Nils Andén referenced sports betting struggles in his analysis of Q3. However, he focused on success in the casino and games segment, saying this will help growth in the long run.

“Despite positive development in casino and overall growth in active customers, weaker sports betting activity combined with regulatory measures in select core markets impacted total Q3 revenue,” Andén said.

“However, I am pleased to see that we have regained our leading position in the Netherlands following our re-entry in July 2022. We also see positive momentum in the UK, with 7.0% growth compared to the same period last year.

“In spite of this, disappointing sports betting levels across core markets, combined with a lower sports betting margin than our long-term average, negatively impacted overall performance.”

B2C revenue edged up in Q3

Breaking down performance in the three months to 30 September, Kindred said both B2B and B2C revenue increased year-on-year.

Gross winnings revenue from B2C climbed 10% to £274.7m. This was supported by growth in the Dutch market since re-entry in July 2022 and certain other core markets, as well as strong growth in the casino segment. However, weaker sports betting activity combined with regulatory measures, including in Belgium and Norway, restricted growth.

Going into further detail, Kindred said casino and games B2C revenue was up 11.0% from last year. This segment accounted for 61% of all revenue in Q3, with active customers up 14.0%.

In contrast, sports betting revenue was down 13.0%, representing 34% of total revenue. The start of Q3 saw a strong Women’s World Cup but, it was overall a quiet summer period. In the latter part of Q3, football seasonality was again weaker with the number of top league fixtures reducing by 16.0% year-on-year.

Additional revenue in Q3 came from poker and other products, with this rising 5.0% from last year. Poker and other products active customers also increased by 13.0%.

Western Europe remains key for Kindred

Looking at B2C geographical performance, 62% of all revenue here came from activities in Western Europe. The £169.7m generated in Q3 was 12.0% higher than in the previous year.

However, Nordics revenue slipped 17.0% to £65.3m, accounting for 24.0% of all revenue in the quarter. Kindred said this was impacted by a changing Norway offering. Incidentally, the group in September announced it is pulling out of Norway.

Central, Europe and Southern revenue was flat at £27.6m, representing 10.0% of overall Q3 revenue. A decline in sports betting revenue here was offset by growth in the casino and games segment.

Revenue from other regions, including North America and Australia, fell 16.0% to £12.1m. This accounted for just 4.0% of all revenue during the quarter.

Kindred notes 55.9% rise in B2B revenue

B2B revenue from Relax Gaming, acquired in October 2021, also increased 55.9% to £9.2m in Q3. Kindred put this down to broader distribution of content and new game launches. A total of seven new titles were launched in Q3. 

Revenue here is generated through the aggregator business and by offering Relax Gaming’s content to a range of operators

Kindred added that there is optimism for stronger revenues within the B2B segment in Q4.

Higher costs hit bottom line

Turning to spending, costs of sales reached £125.1m and administrative expenses £79.1m, both of which were up year-on-year. Other spending was reported for market closures and contract termination and personnel restructuring, while net finance costs hit £2.5m.

This left Kindred with a Q3 pre-tax profit of £15.1m, down 75.6%. Kindred paid £2.5m in tax, meaning a net profit of £12.6m, a drop of 78.2%. 

However, underlying EBITDA was 5.7% up at £42.6m.

High hopes for full-year earnings

Looking at the year-to-date, revenue in the nine months to 30 September was £897.6m. This was 17.6% higher than in the previous year.

Spending was also higher across the business with cost of sales and administrative expenses rising. However, even after including all other costs, pre-tax profit was 4.9% higher at £78.6m.

Kindred paid £12.7m in income tax, leaving a net profit of £65.9m, down 6.0%. However, there was good news in terms of underlying EBITDA, which jumped 63.9% to £147.7m.

In relation to this, Kindred reiterated its full-year underlying EBITDA guidance. The group expects this to reach at least £200.0m, assuming a normalised sports betting margin during the fourth quarter.

“Looking ahead to a seasonally busy fourth quarter with a strong active customer base,” Andén said. “I am encouraged by our growing active customer base during this seasonally busy fourth quarter and I expect to see a return to normalised levels of sports betting activity and further positive development in our casino and games segment.”

Kindred to exit North America and cut staff

Andén also spoke of major announcements made by Kindred regarding its strategic review. Today (29 November), Kindred confirmed it will exit North America by the end of Q2 2024 and will also cut over 300 jobs.

With this in mind, Kindred published initial expectations for full-year underlying EBITDA in 2024. This, it said, is expected to reach £250.0m.

In terms of wider plans for the review, Andén hinted that Kindred could seek to sell part or all of the business. This would be in line with what was set out when the review launched earlier this year.

“The strategic review initiated by the board remains ongoing and we continue to advance a number of options to deliver shareholder value,” Andén said. “The board currently believes that shareholder value will be maximised through a third-party transaction.

“Following the actions announced today, I am confident that Kindred will return to above-market growth across its core market portfolio during 2024.”

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