EGR Power 50 2021: 6. Kindred Group
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6. Kindred Group (4)
FINANCIALS: A particularly strong H1, including record active customers in Q2 (1.9 million), was followed up with revenue of £298.4m in Q3. The forecast for the final quarter of 2021 is pretty gloomy, though
STRATEGY & IMPACT: A shift from a dotcom approach means locally regulated revenue is now ~60% (20% in 2013). Organic growth has replaced an M&A mindset of late
GEOGRAPHIC REACH: Western Europe accounts for almost two-thirds of revenue, followed by the Nordics on 23%. Losing access to the Dutch market, for now at least, is a hammer blow
INFLUENCE & LEADERSHIP: Led by CEO Henrik Tjärnström since 2010, Kindred is one of the most respected Swedish firms and has become a standard-bearer for reducing gambling-related harm
After achieving its highest ever finish last year, Kindred Group slides two places to sixth. The inescapable truth is the Stockholm-listed operator’s exposure to grey, namely the Netherlands, has come at a cost after the firm was shut out of the newly regulated market. Kindred expects a monthly EBITDA hit of £12m from losing the Netherlands, which equates to a wince-inducing 40%+ plunge in EBITDA per quarter based on its Q3 financial performance.
The company is currently enduring a ‘cooling-off’ period but hopes to be granted a licence in Q2 2022, and that moment really can’t come soon enough for Kindred and its investors who have seen the company’s share price tumble 42% since mid-September. Kindred’s woes emphasise the risks of unregulated markets and, as Regulus Partners observed when commenting on its Q3 results, “the world of online gambling is becoming a lot more local and a lot less forgiving”.
There were positives, though; gross winnings revenue (GWR) in Belgium jumped 50% YoY in Q3, while a 20% rise in Denmark spearheaded a 6% uptick in the Nordics, illustrating that domestically licensed operators can overcome the country’s 28% GGR tax rate. In the US, Kindred is live in six states after rolling out its Unibet sportsbook in Arizona and Iowa in September, yet the brand, much like many other European entrants, struggles to achieve cut-through across the pond.
At a group level, a stellar H1 was followed by Q3 GWR climbing 6% (11% in cc) YoY to £298.4m, while EBITDA rose 13% to £84.1m. France proved to be a drag as GWR slumped 22%, with France’s premature exit from Euro 2020 being one explanation. As for the final quarter of the year, Kindred has entered choppy waters as GWR dived 61% in the first 24 days of Q4, while “exceptionally weak” sports margin after free bets was under 2% compared with 13% last year. Fourth-quarter guidance is now GWR of £220m-£260m. Quite the drop from £364.7m in Q4 2020.
Despite its appetite for M&A waning in the past few years, Kindred took full control of Relax Gaming after increasing its share in the 11-year-old supplier from 33.4% to 100%. Meanwhile, RG remains a core objective – 3.4% of Q3 GWR was from harmful play (the goal is 0% by the end of 2023) – as Kindred continues to lay the groundwork for a sustainable future.