Kindred’s focus on regulated revenues could impact 2024 EBITDA target says CEO

Kindred Group CEO Nils Anden has warned its shift to only covering regulated, or soon-to-be-regulated markets could mean its 2024 underlying EBITDA takes a hit. He confirmed year-on-year revenue growth to £294.5 million (€352.9 million/$381.8 million) in Q3. The operator has also applied for de-listing from Nasdaq Stockholm in line with the FDJ acquisition.

Kindred last week published certain key figures for Q3. This included that revenue had grown by around 4% year-on-year during the three months to 30 September. The full data confirms a 3.7% rise.

The early release of revenue data came ahead of FDJ publishing is results for the quarter. Q3 is the final period before Kindred’s earnings will fall under the wider FDJ group. FDJ completed its €2.45 billion acquisition of Kindred earlier this month.

Commenting on the full results for Q3, Andén announced Kindred will now only focus on regulated markets and those that have a clear path to regulation, but he warned this could negatively impact the ability to reach its underlying EBITDA target of £250 million for 2024. Kindred’s share of gross winnings revenue from locally regulated markets hit 83% in Q3.

“Following the expected completion of Kindred’s acquisition by FDJ Kindred will exit dotcom markets, including Norway, that don’t have a clear path to local regulation in the near future,” he confirmed.

But he praised growth in Kindred’s regulated revenue as a driving force for total revenue increase during the period.

“Our strategic focus on growth in locally licensed markets continues to generate long-term, sustainable revenue,” Andén said. “Year-on-year gross winnings revenue from locally licensed markets has grown 4% versus the same period last year.”

Andén also said despite the distraction of the FDJ deal, plans are still in motion for various projects within Kindred. These include the launch of its proprietary sportsbook in a “major market” before the end of Q4.

Breaking down Q3 at Kindred

Taking a closer look at the full results for Q3, Kindred reported year-on-year growth across both its B2B and B2C divisions.

Revenue from B2C, covering online gambling operations in Europe and Australia, increased 3.1% to £283.1 million. Of this, £177.9 million came from casino, poker and other gaming, while £105.2 million was attributed to sports betting.

Kindred also noted an 8.8% year-on-year increase in the number of active customers in Q3 to 1.7 million. Sportsbook customers jumped 14%, while casino saw a more modest rise of 6%.

As for B2B, Relax Gaming’s business, which Kindred acquired in October 2021, saw revenue jump 23.9% to £11.4 million.

Considering the North America exit impact

Q3 was the first full quarter in which Kindred was not active in North America. Late last year, the group set out plans to exit the North American market by the end of Q2 this year as part of its strategic review. But the exit has quite significantly impacted Q3 revenues.

While group revenue was 3.7% higher overall, when excluding North America from the year-on-year comparison revenue would actually have been up by around 6%.

As for other regions, some £182.5 million of all B2C revenue came from Western Europe, £65.5 million from the Nordics, £29.1 million Central, Eastern and Southern Europe and £6 million other markets.

Other markets noted a 50.4% drop in revenue year-on-year, due in part to the North America exit. Meanwhile Western Europe saw the most growth with revenue up 7.5%. The Nordics were level, while Central, Eastern and Southern Europe saw 5.4% growth.

Strategic review costs hit bottom line at Kindred

In terms of expenditure, costs of sales increased 6.2% but savings in administrative spending helped to alleviate this impact. However, increased costs elsewhere had an impact on profitability.

Kindred in particular noted the costs of its strategic review, including the FDJ deal, which amounted to £30.9 million in Q3. As such, this largely offset revenue growth in the quarter, pushing operating profit down 53.1% to £14.4 million. After including finance costs, pre-tax profit hit £12.9 million, down 54.3% on Q3 2023.

The group paid £2.9 million in tax. As such, Kindred ended Q3 with a net profit of £9.6m, a drop of 23.8% from last year. In addition, underlying EBITDA jumped 48.8% to £63.4 million.

However, when accounting for losses from discontinued operations, this made for better reading. Losses from discontinued operations this year was £400,000, compared to £13.1 million last year.

Year-to-date net profit reaches £85.5 million

As for the calendar year-to-date, total revenue for the nine months to the end of September was £929.8 million, up 3.4%. Again, this was helped by growth across the B2C and B2B divisions.

Cost of sales increased although administrative expenses were slightly down. However, with Kindred also noting £34.4 million in total strategic review costs, this impacted operating profit, which was only able to rise 2.9% to £116.6 million. Pre-tax profit increased 4.4% to £111.2 million.

The exit from North America again helped bottom line in the year-to-date. Total profit from continuing operations was 5.4% lower at £88.8 million. However, when also accounting for losses from discontinued operations, bottom-line net profit hit £85.5 million, up 29.7%.

As for underlying EBITDA, this totalled £196.3 million, a year-on-year rise of 32.9%.

Kindred to press ahead with de-listing

Alongside the full Q3 figures, Kindred has confirmed it has applied for de-listing from Nasdaq Stockholm. The application was filed yesterday (24 October), with Kindred to announce the final day of trading as soon as possible.

On this note, CEO Andén issued a farewell message to Kindred investors, paying tribute to the group’s 20 years as a public listed company.

“I would like to take this opportunity to thank investors in Kindred, both past and present,” he said. “Together, we have made a significant contribution to the creation of a competitive, digital and sustainable online gambling industry.

“While there is still much work to be done, I am confident that we are on the right path to delivering a compelling experience for customers, in a safe and secure environment that ultimately delivers positive outcomes to all stakeholders.

“Finally, I would like to take this opportunity to thank the global Kindred team for their unwavering resilience and dedication. Where one chapter ends, a new one begins,” he concluded.