Kindred proves scalability with booming results

Kindred proves scalability with booming results

Tuesday, February 14, 2017 Posted by Scott Longley
Operator thrives even with 67 percent rise in gaming taxes

Kindred Group, formerly Unibet, reported “robust” results for the fourth quarter with revenue growth of 37 percent helped by organic growth, further acquisitions and sterling weakness.

Stripping out the currency tailwind, the company enjoyed a 16 percent rise in revenues year-on-year to £158.2m. Despite the well-documented industry-wide punter-friendly results in football in December, Unibet said margins at its sportsbook were in line with the prior year at 10.1 percent, down on last year’s 11.1 percent figure.

Chief executive Henrik Tjarnstrom said the results provided proof of the businesses scalability and its ability to “absorb the impact of regulatory changes.” As part of this process, the company noted that betting duties had increased 67 percent year-on-year with 35 percent of the company’s revenues being generated in locally regulated markets.

Kindred also acclaimed its mobile performance which it said accounted for just slightly under three-quarters of all gross winnings revenue.

Paul Leyland, analyst at Regulus Partners, said the fourth-quarter results were “optically impressive”. However, he cautioned that the gross win percentage from regulated markets wasn’t reflected in the total revenues percentage where the regulated market percentage was 13 percent. As he said in a note to clients, this suggests “material further duty increases as a proportion of revenues over time”. He noted that this would particularly be the case should there be further reform in the Nordics, particularly Sweden.

The results show that the region remains key to Unibet’s fortunes. Of the total gross winnings revenues in 2016 of £544.1m, the Nordics region contributed £239.9m or 44 percent. EBITDA for the year rose to £120.7m from £77m in 2015. Active customers in the fourth quarter rose to 1.15 million, up from 1.06 million in the third quarter.

Leyland suggested the BITDA margin on 22.8 percent was “attractive” but may not be sustainable. “First, a significant proportion of revenue being generated from sources with little or no local tax footprint,” he said. “Second, material economies of marketing scale in core markets which are typically pre-regulated. If Sweden opens in a liberal manner, competition is likely to increase along with taxes; if it regulates in a stricter manner, then revenues are likely to decline as well as costs increasing.”

Leyland added that to date Unibet has been able to freely market all its products into the Nordics – and other grey markets – with limited incumbent competition, but that with increased creeping regulation the days of the “Panglossian best-of-all-possible worlds” were numbered.

Totally Gaming says: The true value of scale in online gambling is clearly visible from Kindred’s results. While challenges lie ahead – notably over the shape of any potential regulated market in Sweden – the company will be looking to the year ahead from a position of strength.


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