Kindred to take ‘immediate steps’ to improve profitability in 2023

Kindred will take “immediate steps” to improve profitability after Q4 revenue fell short of the company’s expectations. Group revenue for the final quarter of FY 2022 for Kindred is forecast to increase by 24.5% year-on-year to £305.0m (€343.1m / $372.2m ).

However, the operator said in an unaudited trading update that this fell short of expectations. The value for 2021 had been negatively affected by the operator’s decision to withdraw from the Netherlands at the beginning of that period. When compared to the 4th quarter of 2020, revenue was down 16.4%.

World Cup impact

Kindred said the 2022 FIFA World Cup, moved to the winter from its traditional summer date due to hot weather in host country Qatar, disrupted the sporting calendar and resulted in approximately 25.0% fewer league games than top-notch football.

Contrary to expectations, Kindred said that the turnover of World Cup betting was not enough to offset the impact of the reduction in league games, while the operator saw an average sports betting margin lower than the long-term one. .

Other factors that affected performance during Q4 included a £5.3 million payout after the Houston Astros won the Major League Baseball World Series in November, which resulted in a negative revenue contribution of £4.4 million. Virtually all of that total came from extremely large bets made by American businessman Jim “Mattress Mack” McIngvale.

Kindred reported continued strong development in markets such as the Netherlands, France and Sweden, but regulatory changes and increased focus on sustainability in some key markets, including Belgium, negatively impacted revenue.

In addition, Kindred said changes to its offering in Norway hurt the group’s Q4 performance. During the period, Kindred changed its approach in Norway to stop targeting local customers following threats of daily fines from the Norwegian regulator.

Kindred Q4 Earnings

Underlying earnings before interest, tax, depreciation and amortization (EBITDA) for the quarter is expected to reach £39.0m, up 41.3% year-on-year, but when excluding North America, this would have amounted to £54.0 million.

As a result of the weaker-than-expected performance, Kindred announced that it will take immediate steps to improve short- and medium-term profitability across the business. This includes reprioritizing its investment projects to free up capacity for key strategic initiatives and reduce near-term costs, as well as decreasing marketing spend in North America prior to the launch of the Kindred platform.

Additionally, Kindred said it would further optimize its operating expenses to reduce cost growth and improve scalability.

Non-recurring earnings guidance

Looking ahead to 2023, Kindred said that as management does not believe Q4 results are indicative of its “true earning power”, it has decided to communicate non-recurring indicative guidance for fiscal 2023.

In this non-recurring guidance, Kindred has estimated underlying EBITDA for the full year to reach at least £200.0m, assuming long-term average sports betting margins and the impact of actions it will take to further improve profitability.

Kindred share price drop

The announcement led to a collapse in Kindred’s share price, which dropped from SEK116.25 yesterday to SEK96.78. This was the lowest point reached since October 2022.