Kindred Group posts 24% revenue rise but share price plummets as targets missed

Kindred Group has reversed its year-on-year (YoY) revenue slips after posting a 24% increase in Q4 2022 revenue. The Stockholm-listed firm, which had a difficult 2022, ended the year with revenue of £305m, an increase on the £244.9m posted in Q4 2021. However, the firm’s share price has slumped by 16.3% in early trading down to SEK97.32 after the operator revealed it had missed its full-year targets. Kindred revealed several factors during the reporting period that had hampered its performance. Despite the World Cup in November and December, the loss of major football leagues in the quarter, around 200 according to the operator, had a major impact on revenue. Additionally, sports betting margin after free bets amounted to 8.9%, below Kindred’s long-term average. Kindred also pointed to regulatory headwinds in the Netherlands, France, Belgium and Sweden as having had a negative impact on operations. The ongoing battle to provide its services in Norway, which has seen Kindred remove all of its Norwegian language advertising, has affected revenue too. Kindred was also one of the firms to be impacted by Jim ‘Mattress Mack’ McIngvale’s bullish bets on a Houston Astros World Series win last year, which saw the firm pay out £5.3m. Kindred noted that excluding this pay out, North America delivered a solid underlying growth during the quarter. However, there were positives for the group, with the return to the Netherlands finally paying off and a 25% YoY increase in active customers during the quarter amounting to 1.83 million people. Underlying EBITDA is estimated to be approximately £39m for the quarter, up from £27.6m in 2021. Kindred said its EBITDA had been negatively impacted due to weaker revenue, low gross profit margin of 53.9% and large marketing investments, amounting to £67m during the quarter. Referencing Mattress Mack’s win again, Kindred said the Texan’s bet resulted in a £3.9m EBITDA loss. Looking ahead, Kindred has pinpointed three core strategic pillars to improve profitability in both the short and medium term. The operator plans to reduce losses in North America by decreasing marketing spend prior to the Kindred platform being launched and re-prioritise investment projects to free up capital for other initiatives. The firm will also look to further optimise its operating expenses to reduce cost growth and improve scalability. Kindred said: “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. “Kindred estimates underlying EBITDA for the full-year to reach at least £200m assuming long-term average sports betting margins. This includes the actions mentioned above to further improve the profitability.” Kindred’s full Q4 report will be released on 8 February.