In its Q2 financial report Kindred posted a 29% year-on-year increase in revenue to £307.3m (€356m/$394m).
Kindred’s Q2 focus on cost controls amid an ongoing strategic review and a strong performance in the Netherlands are keeping the business on track to surpass full-year earnings expectations, according to interim CEO Nils Andén.
A total of £63.6m of sales was generated in the Netherlands. Andén said in an earnings call today that he believes Kindred is now the market leader in the country.
Sports betting growth drives revenue
Performance was positively impacted by an increase in sports betting, favourable results and lower bonus costs. Sports betting gross margin after free bets was 11.3% in Q2. This was up from 9.3% in the previous year and above the group’s long-term average of 9.6%.
However, excluding the Netherlands, active customers and gross winnings revenue remained relatively flat. The business said this was due to headwinds in Belgium and Norway offsetting growth in markets like the UK, Denmark and Romania.
Despite this, Andén said he was “very confident” of the business hitting its target of underlying earnings before interest, tax and amortisation (EBITDA) of £200m for 2023. Underlying EBITDA reached £55.7m in Q2 and £105.1m for H1 – a year-on-year uplift of 111%.
Profit before tax in Q2 was £33.1m, up from the £7m posted in the corresponding period last year.
Scalability of business model
Kindred’s “scalability” was mentioned repeatedly during its earnings call, with 82% of gross winnings revenue now derived from locally regulated markets.
“The strong start to the second quarter has remained throughout most of the period with the first two months being particularly strong,” Andén said.
“June was slightly slower due to normal seasonality creating a lack of sports events, including Wimbledon only taking place during the third quarter this year.
“As revenue increases, we see the true scalability of our business model. Together with the actions taken at the start of the year to optimise our cost base proving to be effective, underlying EBITDA reached £55.7m, representing a margin of 18 per cent, or 20 per cent excluding North America.”
Is the strategic review taking too long?
Responding to suggestions that the strategic review is taking longer than anticipated and may have been disrupted by personnel changes, Andén insisted that it is going according to plan. The review, which launched in April, could lead to a potential merger, sale or partial sale of the business.
Since then, the appointments of Andén in May and new chief financial officer Patrick Kortman in June were made on an interim basis.
“We’re not making any near-term large changes to the business as we are in the middle of strategic review,” Andén said. “We’re turning over every stone in the company and once that’s concluded we will communicate what that entails.
“The management is working very closely with the board and we’re comfortable with the pace and direction of [the review]. Yes, there have been management changes, but we’re very comfortable with our forward outlook.”
The review has cost £1.9m so far, according to the Q2 update.
No item sacred in cutting costs
In January, former CEO Henrik Tjärnström said that “no item is sacred” in terms of cutting costs, with the business having reviewed all areas of cost in order to improve spending for 2023.
Andén said that “maintaining our strict cost control” was one of two key challenges, along with improving returns in Belgium and Norway, where he expects performance to “normalise” later this year or at the start of 2024.
In Q2, marketing costs reduced to £52.6m from £54.8m in Q1, while Kortman outlined a “drive for efficiencies” in other areas.
“We have reviewed our pipeline of investment projects,” he said. “We have delayed some projects and completely scrapped others.”
Highlighting additional efforts to reduce losses in North America and freeze hires on non-essential roles, Kortman said that such approaches were “now starting to bear fruit”.
Earlier this month, Kindred launched its proprietary tech platform in the US state of Pennsylvania.
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