32Red suffers from new sustainability measures
Kindred-owned casino brand has seen a slowdown in growth in Q2 following new measures to protect players
32Red has seen a significant slowdown in growth following its recent £2m fine for social responsibility and AML failings as Kindred has implemented a variety of new sustainability measures.
Speaking after Kindred’s Q2 financial report this morning, group CEO Henrik Tjärnström said: “Increased enforcement by the UK Gambling Commission is affecting 32Red.
“It was a smaller brand that was operating in a different way when on a standalone basis. Tools that have been put in place with a focus on sustainability have had a cooling off effect on top-line growth but the team is doing a fantastic job with the brand.
“It is not growing as fast as it used to but it is much more sustainable,” he added, pledging to spend £1.3m more in marketing for the brand in H2.
The figures could be concerning for the industry which has been told to increase sustainability measures across the board, especially in the UK, with operators like LeoVegas and William Hill undertaking major reorganisations to that effect in recent weeks.
The story of a slowdown in gaming was replicated across the wider Kindred, with gaming revenue (casino, poker and other games) up by 22%, but only 9% when excluding the impact of the 32Red acquisition.
Tjärnström said the level of gaming growth was negatively impacted by the World Cup and searing temperatures across Kindred’s key Nordic and European regulated markets.
Casino revenues increased by just 2% in Nordic markets, with May the weakest month overall.
Kindred CEO Henrik Tjärnström
Tjärnström also attributed the slowdown in Nordic casino stakes (+10%) to an influx of competitors, an increase in sportsbook activity and the ongoing supplier shift.
“The competitive situation is fierce,” he said. “More pay-and-play casinos are popping up in Sweden and jostling for position ahead of re-regulation, but we have done well in that market.
“Sportsbook has been strong with activity but as a result, users are relatively less likely to spend in casino as well.
“Supplier mix in the Nordic region has caused a shift too because some are growing really well while others are not growing as much so that is reflected in the 10%,” he added.
Overall group revenues climbed 31% to £219m, thanks largely to a 43% rise in sports betting revenues to £105m, on the back of the World Cup.
The operator said unexpected results during the tournament led to a sportsbook margin of 8.2% after free bets, with number of active customers during the quarter at 1,550,508.
Tjärnström said: “The World Cup provided a significant all-time high in customer activity and continued strong organic growth.”
Mobile activity also rose 29% on Q2 2017 and amounted to 72% of total revenue, while group EBITDA grew by 25% to £42m.
Kindred’s share price was down 11% in early trading.