Kindred Group primed for double-digit Q4 drop-off as French Q3 revenue slides 22%

Kindred Group has reported a 6% year-on-year revenue rise to £298.4m for Q3 2021.

The growth was led by a 16% uptick in Q3 casino revenue – where active customers were also 7% higher – which was achieved despite a tough comparative period due to the Covid-19 pandemic and the fact that retail gaming venues have now reopened in several of Kindred’s key operating markets.

The Stockholm-listed operator launched 132 casino games during the quarter, 23 of which were exclusive. Online casino amounted to 57% of overall gross winnings revenue for the firm in Q3.

Sports betting revenue, which accounts for 39% of total, decreased 4% annually due to a quieter sporting calendar compared to last year and the lull between the end of Euro 2020 and the beginning of the domestic football season.

The Q3 gross margin for sports betting before free bets was 10.1%, dropping to 8.7% after free bets. This was lower than the operator’s long-term average betting margin of 9.1% after free bets.

Poker and other products also dropped by 4% year-on-year, contributing £14.2m of Q3 revenue.

On a geographic basis, Q3 revenue from Western Europe rose by 9% to £189.6m. Belgium was the standout performer in the region with annual growth of 50%.

Neighbouring France, however, has proved a major drag for Kindred during the reporting period following a 22% decline in revenue.

“The main reason for the decline is the fact that the comparative period in 2020 was so strong,” said Kindred Group.

“Q3 of 2020 saw a peak in activity against a busy sporting schedule following a period of significant disruption, including the recommencement of domestic football leagues and the conclusion of international football competitions, which saw Unibet-sponsored PSG reach the 2020 Champions League final.”

Comparatively in Q3 2021, Kindred said the number of new players acquired during Euro 2020 was lower than expected, partly due to the underperformance of the French national team, which led to a negative knock-on impact on the number of active customers during recent months.

The operator also revealed it was forced to increase marketing spend in France during the quarter to fight off growing competition, while newly announced marketing restrictions have lowered customer acquisition rates through traditional channels.

Elsewhere, Nordics revenue climbed by 6% to £69.8m while Central, Eastern and Southern Europe revenue came in flat at 1% growth to £25.6m.

Other regions, which includes Kindred Group’s US-facing business, decreased by 16% as the firm continues to invest in marketing and bonuses to entice consumers.

EBITDA for Q3 rose by 13% to £84.1m, up from £74.2m in the same period of last year.

“After a relentless sporting calendar and subsequent low sports seasonality, sportsbook activity slowed as options for other sources of entertainment improved,” said Kindred Group CEO Henrik Tjärnström.

“However, it was pleasing to see continued strong casino activity, which is testament to our strong multi-product offering,” he added.

The forecast for Kindred is bleak looking ahead to Q4, with average gross winnings revenue 61% lower for the first 24 days of October than in the prior corresponding period of 2020.

Q4 revenue will be negatively impacted by the closure of Kindred services to Dutch consumers and an exceptionally weak sports betting margin, which has come in at under 2% after free bets, compared to 13% last year.

Tjärnström revealed he couldn’t recall a lower betting margin during more than a decade in charge of the business.

Casino revenue has also decreased by 24% in early Q4 trading, and the operator has guided to Q4 revenue in the range of £220m-£260m depending on changes to activity levels and betting margin.

Regulus Partners analyst Paul Leyland said Kindred’s Q3 results were “solid rather than exciting”, although the stock market disagreed as the firm’s share price plunged by more than 12% in early trading on Nasdaq Stockholm.