Kindred Group suffers 32% H1 EBITDA fall
Shares in the Stockholm-listed operator drop 19% as tough comps and higher betting duties hurt profits
Kindred Group today reported a 32% drop in H1 EBITDA to £61.1m, down from £89.2m from the same period last year despite a 6% revenue rise to £450.6m.
The operator blamed the EBITDA dip on a tough comparative period against the 2018 World Cup in Russia, as well as higher betting duties in core markets including Sweden and increased investment in the nascent US betting market.
Gross winnings revenue for the second quarter of 2019 hit £226m following a 4% constant currency increase, but EBITDA once more fell 27% to £30.4m, down from £41.7m in Q2 2018.
Kindred also suffered a 5% decrease in active customers for Q2 to 1,478,437. Betting duties for H1 2019 reached £100.5m, up from £76m for the first half of last year, while Q2 betting duties amounted to £48.3m, up from £39.2m last year.
Kindred Group CEO Henrik Tjärnström
Kindred Group CEO Henrik Tjärnström said: “As we have highlighted for a long time and as we saw in the first quarter of 2019, the new licensing regulation in Sweden has resulted in significant short-term margin pressure driven by higher betting duties, but also higher marketing as we are investing for the longer term.
“Other significant items affecting the quarter were the planned investments in the USA, both in marketing and operating expenses, that contributed GBP 1.6 million of negative EBITDA in the quarter.
“Of course you can’t be pleased when the numbers are down as much as they are and we had higher expectations internally,” he added.
Total marketing spend for the group as a percentage of revenue came in at 29%, the highest level since 2013 when compared to other Q2 periods without a major football tournament.
Mobile revenue in Q2 increased by 11% to 173.5m and accounted for 77% of total revenues.
Struggles in Sweden’s new-look market have been well documented and Kindred’s EBITDA contribution from the country fell by £9.2m from the same period last year.
Nordics revenue growth in general was down by 9% in Q2, but revenue was up by 10% in Western Europe and by 20% in Central and Eastern Europe.
Kindred’s share price was down by 19% at the time of writing.
Regulus Partners analyst Paul Leyland said of the results: “Domestically-regulated markets excluding Sweden were up 19%, suggesting continued momentum in the UK from 32Red and a strong performance from France.
“However, with a critical mass of Kindred’s revenue now domestically regulated and more headaches coming – Norway, Germany, Netherlands – even if the latter is likely less problematic for Kindred than some competitors, achieving top-line momentum and sustainable margin improvements could be extremely challenging,” he added.