Impacts of the Swedish market comes under the microscope for Kindred Group in its unaudited first quarter financial report, with all-time high in active customers seeing profits significantly impacted due to a number of contributing factors.
On the first of the year the country went live with its new re-regulated market, which subsequently saw the operator launch its Unibet, Maria Casino, iGame, Storspelare and bingo.com brands.
In its interim findings the group emphasises an“all-time high in active customers but, as expected, profits for the quarter significantly impacted by the new local licence in Sweden,” with a significant uptake on customer bonuses, betting duties and marketing investments all affecting the Q1 numbers.
“As anticipated for several years, the re-regulation of the Swedish market resulted in significant short term margin pressure”
In its 2018 full-year report issued two months ago, Kindred commented on positive initial headway and praised the market possibilities, with a deeper look now seeing gross winnings revenue from the first quarter amounting to SEK 207.4m (£171.1m), after the deduction of bonuses of SEK 137.9m (£113.7m).
Group gross winnings revenue saw an eight per cent climb to £224.4m (2018: £207.8m), underlying EBITDA came in at £30.6m (£47.5m), the number of active customers climbed to 1.63m (2018: 1.38m) and profits before and after tax saw declines to £17.7m (2018: 33.6m) and £15.1m (2018: £29.9).
Henrik Tjärnström, CEO of Kindred Group, explained: “During the quarter we have had strong levels of activity across all markets and all-time highs in active customers and sports betting turnover. This is the result of our continued investment in marketing, where the focus has been in relation to responsible gambling in Sweden and football sponsorships in the UK.
“As anticipated for several years, the re-regulation of the Swedish market resulted in significant short term margin pressure, particularly in the first quarter. The single biggest impact came from all legacy and new Swedish customers being awarded with one additional bonus, under the terms of the new licensing system.
“The significant uptake on customer bonuses, especially in January and February, resulted in bonus expenditure increasing with £6.6m for the first quarter compared with the same period last year.
“Bonus costs stabilised later in the quarter and by March were lower than last year”
“Bonus costs stabilised later in the quarter and by March were lower than last year, with full year costs expected to be lower than for 2018.
“Other significant items affecting the quarter was the Swedish betting duties paid of £5.2m but also marketing investments increasing with £3.8m. This has significantly influenced the gross winnings revenue in the quarter, but also EBITDA. The total effect on group EBITDA from the Swedish market opening in the first quarter was a reduction of £18.9m compared to the first quarter last year.
“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.
“During the first quarter of 2019, gross winnings revenue from mobile grew by 17 per cent compared to the first quarter of last year and amounted to 77 per cent of our total gross winnings revenue. Of the group’s gross winnings revenue, 57 per cent came from locally-regulated markets.
“For the period 1 April to 21 April 2019, the daily average gross winnings revenue in GBP was 10 per cent higher (12 per cent in constant currency) than for the same period last year.”