Kindred profits down by a third as Swedish market piles on margin pressure
Q1 EBITDA and profit stoop far below 2018 levels as the operator cites bonus payments and increased marketing costs for the drop-off
Kindred Group today reported a 36% fall in Q1 EBITDA due to “significant short-term margin pressure” in Sweden’s re-regulated market.
Underlying EBITDA dropped to £30.6m, down from £47.5m in the same period last year, while profit after tax was cut almost in half to £15.1m from £29.9m in Q1 2018.
Kindred Group CEO Henrik Tjärnström said the operator had anticipated the sharp fall for several years, with profit impacted as soon as the Swedish market went live on 1 January this year.
The drop-off was driven by giving Kindred’s legacy and new Swedish customers one additional bonus under the terms of the new licensing system.
The Stockholm-listed operator said that a significant uptake on customer bonuses, especially in January and February, resulted in bonus expenditure increasing by £6.6m from 2018.
Kindred Group also forked out for Swedish betting duties to the tune of £5.2m in Q1, while an increase in marketing activity cost the operator £3.8m.
Kindred CEO Henrik Tjärnström
Tjärnström said: “Whilst these are significant numbers, we always expected the opening of the market to result in an initial margin pressure, but we are confident that we have a solid base to build from and are expecting continuous improvements from here.”
Operator revenues across the Swedish market were expected to drop by around a third following reregulation.
Kindred group gross winnings revenue for the period did rise however, hitting £222.4m following an increase of 8% as the number of active customers during Q1 reached an all-time high of 1.6 million.
Significant events for the first quarter included Kindred going live in Sweden’s re-regulated market with its Unibet, Maria Casino, iGame, Storspelare and bingo.com brands.
The firm also signed a strategic five-year partnership with Mohegan Sun Pocono in Pennsylvania.
Kindred’s share price was down more than 7% in early trading but Regulus Partners said Swedish numbers should “rapidly normalise” to provide relatively clean data by H2 2019.