Online gambling operator Kindred Group said it will be taking “immediate actions” to improve profit in the short- and medium-term after missing its Q4 financial targets. Group revenue for the final quarter of the 2022 financial year was up by 24.5% year-on-year at £305 million ($372 million). However, the company said the revenue development “did not meet expectations.”
In a trading update, Kindred noted that the World Cup 2022, which was moved from its traditional dates due to hot weather in host nation Qatar, “disrupted the sporting calendar,” resulting in approximately 25% fewer top football league fixtures compared to the fourth quarter last year. Moreover, contrary to expectations, turnover from the event was “not enough” to offset the impact of reduced fixtures elsewhere.
Combined with a lower-than-long-term average sports betting margin and “a few isolated events” during Q4, the WC had a negative impact on the financial performance, resulting in revenue of about £305 million. Increased sustainability focus in some key markets, notably Belgium; and changes to offering in Norway, where Kindred had to stop targeting local customers following threats of fines from the regulator, also affected revenue negatively.
Additionally, lower revenue than expected, combined with a historically low gross profit margin and considerable marketing investments, also had a negative impact on the profitability for the fourth quarter with underlying EBITDA estimated to reach approximately £39 million ($47.6 million). Underlying EBITDA excluding North America reached about £54 million ($65.9 million).
While group revenue improved by almost 25% from Q4 2021, which had been adversely affected by a Dutch market exit, the figure was down by 16% from the quarter in 2020. And although the “weaker-than-anticipated” performance can largely be attributed to “a few one-off events” and the headwinds in Belgium and Norway, the business promised it will take a number of actions to improve profitability in the short- and medium-term.
The plan includes reducing losses in North America by decreasing marketing spend prior to the Kindred platform being launched. In this region, a settled play-out of £5.3 million ($6.5 million) following the Houston Astros winning the World Series in November resulted in a negative revenue contribution of £4.4 million ($5.4 million). Excluding this, North America delivered “a solid underlying growth” during the quarter, according to the company.
Kindred also said it plans to re-prioritize investment projects “to free up capacity for key strategic initiatives and reduce short-term costs,” in addition to further optimizing the group’s operating expenses to reduce cost growth and improve scalability.
“Management does not believe that the fourth quarter 2022 results are indicative of the true earnings power of the business and Kindred has therefore decided to communicate a non-recurring indicative guidance for the fiscal year 2023,” said the operator in a statement.
Kindred estimates Underlying EBITDA for the full-year to reach at least £200 million ($243.9 million), “assuming long-term average sports betting margins.” This estimation also includes the actions mentioned above to further improve profitability.
As for other Q4 highlights, the quarter saw 1.83 million active customers for the group, supported by marketing investments in the run-up and during the World Cup. This marks the second-highest recorded number for the business, and an increase of 25% compared to the fourth quarter last year.
