Record customer numbers boost Kindred in 2018

13 February 2019

London-listed Kindred Group has reported a 20.8% rise in revenue for 2018, driven in part by record fourth quarter and an all-time high number of active customers in that period.

Revenue for the 12 months ended December 31, 2018 grew to £907.6m (€1.0bn/$1.2bn), with sports betting contributing £435.6m of the total, up 25.7% year-on-year. The majority of sports betting revenue (£280.7m) came from Western European markets, followed by the Nordic region, which accounted for a further £111.9m.

Central, Eastern and Southern European markets contributed £34.1m, while revenue from other markets fell 20.5% to £8.9m.

The casino and games vertical generated revenue of £431.8m, with the revenue mix very similar to sports betting. Western Europe accounted for the majority, followed by the Nordics, then Central, Eastern and Southern European.

Poker made a £17.9m contribution to full-year revenue, up 17.8% from 2017, with the final £22.3m coming from other sources.

In 2018 Kindred, which owns the Unibet brand, paid £158.7m in betting duties, up 39.7% from the prior year, with £50.0m paid out though marketing revenue share deals. This left a gross profit for the year of £552.2m, up 17.2% year-on-year.

Full-year operating costs amounted to £378.1m, of which £189.0m was spent on marketing, with £84.0m spent on employee salaries. Earnings before interest, tax, depreciation and amortisation (EBITDA) for 2018 grew to £202.8m, with operating profit up 13.3% at £156.0m.

Once net finance costs of £4.2m and taxes were taken out, Kindred posted a post-tax profit of £131.6m, representing a 12.1% improvement from 2017.

For the fourth quarter of 2018, ended December 31, revenue was up 5.1%. Customer numbers grew strongly over 2018, with 24.9m registered by the end of the year, up from 23.9m at the end of Q3 (September 30, 2018). For the fourth quarter active players - those that have placed a bet in the past three months - amounted to 1,568,574, up 18.0% year-on-year.

“In the fourth quarter of 2018 we have seen strong levels of activity, together with an all-time high in active customers,” Kindred Group chief executive Henrik Tjarnström said. “This has resulted in record gross winnings revenue, proving that our long-term strategy, to maintain a sustainable business by increasing the number of active customers rather than the ARPU, is paying off.

“Despite the exceptional sportsbook margin in the fourth quarter of 2017 making the comparatives for this quarter very tough, we have still managed to grow the business by 5 per cent.”

Sports betting accounted for £124.9m of Q4 revenue, of which in-play wagering accounted for 44.4%. Sports betting gross margin, before free bets, amounted to 11.0%, down 0.7 percentage points from the prior year, though this fell to 9.4% after free bets.

Casino revenue in the fourth quarter rose 7.9% year-on-year to £114.7m, with a further £4.9m coming from poker, and £5.6m coming from other sources.

Looking at the revenue mix in terms of markets, Western Europe accounted for 59% of the Q4 total, followed by a 32% contribution from the Nordics. Central, Eastern and Southern Europe generated 7% of Kindred’s revenue for the period, with a further 2% coming from other territories.

Increased costs incurred in Q4 drove down quarterly profits. Cost of sales for the period was up 16.2% at £97.6m, leaving a gross profit of £152.5m, which dipped slightly from the £154.0m reported for the final quarter of 2017. Once marketing costs of £51.2m and administrative expenses of £51.8m were stripped out, underlying EBITDA was down 21.1% at £58.8m.

After finance costs of £1.2m, pre-tax profit fell to £45.0m, which declined to £39.3m once income tax of £5.7m was stripped out. This represented a year-on-year decline of 22.6% from Q4 2017.

Following the end of the reporting period, Kindred went live in the Swedish market, with Tjarnström revealing that the operator had been working towards the roll-out since summer 2018.

“Always planning ahead, the group prepared for the opening of the Swedish market and enlarged the customer base through bonus offers and marketing investments already from the start of the World Cup last summer,” he explained.

“During the first six weeks of 2019, we awarded our Swedish customers with one additional bonus under the terms of the new licensing system, which resulted in new depositing customers up by 166 per cent and active customers up by 97 per cent over the last 90 days. As expected, we can now see the bonus expenditure tail off.”

The operator is also preparing to enter the regulated US market, working towards launching a sportsbook in New Jersey as a skin under Hard Rock Hotel and Casino Atlantic City’s licence. This will be followed by a roll-out in Pennsylvania, where Kindred has partnered the Mohegan Sun Pocono tribal venue.

Tjarnström also revealed that for the period from January 1 to February 10, 2019, daily average gross winning revenue was up 17% than the full first quarter of 2018.