Kindred Group flags £8m negative Q4 impact from France

Half of Kindred Group’s £15m negative fourth quarter impact is from headwinds in the French market, according to CEO Henrik Tjärnström.

Tjärnström confirmed the operator has stacked up costs of approximately £8m in France in Q4 to date, due to a combination of low sports betting margins and a tax rate based on turnover.

Kindred’s share price dropped by 20% last week after the firm issued a Q4 profit warning, with EBITDA likely to come in at between £27m and £32m – a figure halved from 2018 levels.

“The customers are winning which is good for them, but it creates more turnover and indirectly more betting duties,” said Tjärnström during a post-Q4 trading update webcast.

“This has double the effect when we have a low sports betting margin, and this was heavily the case in the fourth quarter.”

Henrik Tjärnström

French market regulations mean that online gambling operators are required to meet a margin of at least 15%. Betting duties before January were set at 9% of turnover, which equates to a 60% tax rate on gross gaming revenues (GGR), according to Tjärnström.

From January 2020, France switched to a GGR tax model and Kindred expects the like-for-like tax rate to drop to 54.9% as a result of the changes.

“The good news in France is that taxation changed as of 1 January 2020 and taxes are now based on GGR, so this volatility and double effect will be reduced from now on,” said Tjärnström.

“This had been the case throughout the year when we had pockets of low margin in France, but it was offset by other periods during those quarters.

“Now in the fourth quarter, it has had a bigger impact, but it is good that this disappears now.”

Kindred estimates that half of the £8m hit was due to increased betting duties while the other half was a result of lower sportsbook margins. The operator’s French sportsbook is not powered by Kambi.

The operator’s Q4 financial report will be published on 12 February 2020.