In an industry where the ebb and flow of regulations and consumer sentiment can dramatically affect performance, Kindred Group’s third-quarter report reveals a corporation navigating through choppy waters with a steady hand. Experiencing substantial growth in its casino segment, Kindred has fortified its market presence in both the Netherlands and the UK. Nevertheless, this success story has been somewhat dampened by ongoing regulatory challenges in key markets and a somewhat tepid third-quarter sportsbook performance.
Kindred’s Unibet brand has triumphantly regained its top spot as the leading operator in the Netherlands. Adding further to this positive outcome, the business has reported a 7.0% increase in active customers. However, this achievement has been somewhat counterbalanced by a lower-than-anticipated sportsbook activity, attributed to a less eventful sports calendar in the period.
Kindred’s Interim CEO, Nils Andén, acknowledged the challenges faced by the sports betting segment in his third-quarter analysis but chose to emphasize successes in the casino and games segment, which he forecasts will support sustained growth moving forward.
“While casino progress and the uptick in active customers are encouraging, weakened sports betting activity, alongside regulatory restraints in some core markets, have left an imprint on total Q3 revenue,” reported Andén.
Despite the setbacks, Andén remains positive about recent developments, particularly noting the recovery of market leadership in the Netherlands since the re-entry in July 2022. He also draws attention to the UK market’s upward trajectory, showcasing a 7.0% growth year-over-year.
Detailing the Q3 performances further, Kindred reports an uptick in both B2B and B2C revenues relative to last year. B2C gross winnings revenue saw a 10% increase to £274.7 million, spurred by growth in the Dutch market post-re-entry and improvements in other core markets, as well as significant gains within the casino segment. However, the lackluster sports betting activities, compounded by regulatory obstacles such as those experienced in Belgium and Norway, have curtailed further growth.
The casino and games segment of B2C revenue jumped by 11.0% from the previous year, accounting for a substantial 61% of total Q3 revenue, aligned with a 14.0% rise in active customers. Conversely, the sports betting revenue saw a downturn of 13.0%, standing at 34% of overall revenue. A largely quiet summer period for sports, including a decline in top league football fixtures, contributed to these figures.
Additional revenue streams in Q3 included poker and other products, witnessing a 5.0% rise year-over-year, with active customers participating in these products also climbing by 13.0%. Geographically speaking, Western Europe remained dominant in B2C revenue streams, while the Nordics faced a decline, partly due to a modified offering in Norway, which led to Kindred’s September announcement of withdrawing from the Norwegian market.
On the B2B front, Relax Gaming, acquired by Kindred in October 2021, enjoyed a robust 55.9% increase in revenue to £9.2 million in Q3. Expansion in content distribution and the launch of seven new titles are attributed to the growth.
Regarding expenditures, costs of sales and administrative expenses have increased, resulting in a steep 75.6% decline in Q3 pre-tax profit and a 78.2% drop in net profit. Although, there is a silver lining thanks to a 5.7% increase in underlying EBITDA clocking in at £42.6 million.
Reflecting on the year so far, Kindred’s revenue for the nine months leading to 30 September amounted to £897.6 million, marking a 17.6% rise from the previous year. Even after accounting for higher spending across the company, pre-tax profit showed a 4.9% increase, reaching £78.6 million.
In line with this, Kindred reiterated its full-year underlying EBITDA outlook, projecting at least £200.0 million, assuming sports betting margins return to normative ranges in Q4. Andén anticipates robust activity in the forthcoming fourth quarter, bolstered by growing customer engagement and presumed normalization in sports betting activities, alongside further gains in the casino and gaming sphere.
Amid this optimism, Kindred announced significant decisions as part of its strategic review, including plans to exit North America by the end of Q2 2024 and a workforce reduction exceeding 300 positions—a move that sets the initial forecast for 2024’s full-year underlying EBITDA at £250.0 million. As part of the ongoing review initiated earlier this year, the potential sale of the company remains a consideration actively pursued by Kindred’s board to maximize shareholder value.
“The strategic review is progressing, and our board believes that a transaction with a third party will optimize shareholder value,” stated Andén. With the adjustments announced, he affirms confidence in Kindred’s ability to achieve above-market growth across its core markets in 2024.
