Month: July 2022

Fitzsimons will begin his new role on 1 September and assume responsibility for leading and driving the HKJC’s wagering business, overseeing horse racing and football betting, as well as the Mark 6 lottery.

The role will also include Fitzsimons leading the organisation’s international commingling business and China Sports Lottery co-operation development.

In addition, Fitzsimons will become a member of the HKJC board and report directly to chief executive Winfried Engelbrecht-Bresges.

Fitzsimons has been with the HKJC since February 2021, serving as its director of trading with responsibility for the Football Trading Department.

Prior to this, Fitzsimons spent more than six years with The Stars Group, now part of Flutter Entertainment. His roles included director of international trading and operations for the BetStars, Fox Bet and Sky Bet International businesses, as well as department head for commercials.

Fitzsimons also worked as trading director for Gambit Research for over two years, while he was a director at Sporting Hedges, trading manager for Cantor Fitzgerald and a trader at Spreadex.

“With his extensive knowledge of sports betting and the application of artificial intelligence to trading, Mr Fitzsimons will help sustain the growth and development of the Club’s wagering business,” the HKJC said.

The results follow the revelation that Kindred’s board had explored a sale of the business, following pressure from a minority shareholder.

Kindred also received a licence to operate in the Netherlands during the quarter, ending a nine-month absence in the market.

Henrik Tjärnström, CEO of Kindred, said that stricter affordability checks in the UK, combined with a seasonally low period of activity, impacted the second quarter’s results.

“The second quarter is a seasonally low period of activity as sports leagues end, with major football tournaments only taking place every other year,” said Tjärnström.

“During the last year, the UK market has been impacted by stricter affordability checks self-imposed by the industry. These measures can be expected to continue over the coming quarters. Whilst impacting revenues in the short term, this ensures a more sustainable customer base.”

This revenue consisted of B2B and B2C operations. B2C revenue accounted for £475.9m of the total, down by 33.5% from the same period in 2021, while B2B revenue made up the remaining £9.5m. There was no comparable B2B figure for half year 2021. After H1 2021 ended, Kindred acquired Relax Gaming for £275m.

Net cash from operating activities totaled at £15.3m for the half, a decline of 92.3% year-on-year.

Cost of sales reached £220.1m for the half, £65m less than in the previous half year. Betting duties incurred the highest cost, at £119.2m, while marketing and revenue share totaled at £22.2m. Other costs of sales came to £78.7m.

After considering the cost of sales, gross profit was £265.3m, down by 38.4% year-on-year.

Administrative expenses totaled at £135.7m for the half, 19.3% higher than in 2021, and marketing costs came to £107.1m, a year-on-year drop of 11.1%.

Salary expenses totalled £67.5m, while other operating expenses came out at £40.9m. The remaining expenses consisted of depreciation of property and equipment and right-of-use assets, as well as amortisation of intangible assets.

The expenses left the profit at £22.5m, a significant drop of 88% from half year 2021.

Further costs, including personnel restructuring, Germany market closure and other gains and losses amounted to £6.2m. This brought the total profit from operations to £16.3m, another significant fall of 91.3%.

After finance costs at £2.2m and finance income at £500,000, the pre-tax profit was £14.6m. Following tax at £2.4m the total profit for the six months was £12.2m, down by 92.3%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) totaled at £46.3m for the half, 78.1% lower year-on-year.

Total active customers for the year fell to 1.3 million, a decrease of 600,000. Tjärnström explained that Kindred’s cessation of activity in the Netherlands played a part in this.

“Active customers for the second quarter were 1.3 million, impacted by our decision to temporarily stop accepting bets from Dutch residents,” said Tjärnström.

However, he said Kindred has seen success in the market since receiving its Dutch licence.

“On 8 June we finally received our licence from the Dutch Gambling Authority and a process to connect all our systems and processes to the KSA began,” he said. “We opened our doors to Dutch players on 4 July and have seen strong customer intake and activity in the period between 4 and 19 July.”

For the second quarter alone, the revenue was £238.7m. This was a fall of 34.3% from Q2 2021. Cost of sales totaled £106.9m – £35.9m less yearly – and brought the gross profit to £131.8m, down by 40.3%.

Marketing incurred the highest costs, totaling at £50.1m. Salary costs and other expenses totaled at £34.5m and £21.9m respectively. The remaining operating costs – £13.6m – came from depreciation and amortisation costs.

This left the profit at £11.7m. Following £3.7m in other expenses the profit from operations was £8m, much lower than the £103.1m recorded in Q2 2021.

Finance costs at £1.4m and finance income at £400,000 meant that the profit before tax totaled at £7m. Following income tax expense at £1.2m, the total profit for the quarter was £5.8m, an alarming decline of 93.3% year-on-year.

Net cash from operations was £4.6m for the quarter, down by 95.3%.

EBITDA was £21.6m, 81.1% less year-on-year.

Gross winnings in Europe fell by half to £119.5m, which Kindred attributed in part to its inactivity in the Dutch market.

However, since going live in the Dutch market, Kindred has recorded £150,000 in gross winnings revenue, which it says is increasing gradually.

In the Nordics, gross winnings revenue was £74.2m, down by £1.2m.

Gross winnings revenue in Central Eastern and Southern Europe also declined to £26.2m. This was a decrease of £2.1m year-on-year.

Currently, Kindred’s average daily gross winnings revenue is £2.5m, or £2.3m after excluding the Netherlands.

The GGL took over responsibility for enforcement against unlicensed gambling on 1 July, ahead of it taking control of all aspects of regulation in Germany on 1 January 2023.

Last month, it revealed early details of its plans to take action, promising to use payment and IP address blocking to stop unlicensed businesses from taking bets.

In a letter to all ISPs active in Germany, the GGL has now said that while ISPs would not be obliged to block websites after the regulator made such a request, doing so would help prevent illegal sites from offering gambling in the country and offer greater protection to consumers.

Last week, the GGL issued its first blocking order against lottery betting operator Lottoland, urging ISPs to block access to the site it said has been offering illegal gambling for a number of years.

“The GGL pursues a cooperative approach with discussions at eye level,” the GGL said. “This does not mean that a provider should carry out blocking ‘on demand’, but that the GGL explains the legal basis from which the ISP’s obligation arises, as well as the previous action against the illegal gambling provider. 

“ISPs are of course free to reject this offer and only act within the framework of a formal administrative procedure. This administrative act can be subject to judicial review.

“If the ISP fails to comply with the formal request to block an illegal gambling offer from the network, GGL can impose a penalty payment, also based on the economic capacity of the addressee, and can amount to up to €500,000 (£425,201/$508,349).”

Germany’s State Treaty on Gambling (GlüNeuRStv), which came into effect in July last year, made it possible to enforce network blocking and IP blocking of illegal gambling websites, should such these operators not comply with requests to cease operating in the country.

The GGL acknowledged that these blocking requests represent an encroachment on the fundamental rights of providers, providers and users. However it also said such requests do not breach any European regulations in terms of freedom of service and establishment, and also fit in with its mission to protect consumers from gambling harm.

“The GGL’s social mission is to combat illegal gambling in order to protect gamblers and minors from gambling and betting addiction and game manipulation,” the GGL said. “Against this background, according to our examination, these interventions are justified and therefore permissible. They meet the proportionality requirements. 

“We have also taken into account the relevant European regulations, in particular freedom of service and freedom of establishment and the requirements for network neutrality. Here, too, we come to the conclusion that these are not violated by blocking the illegal offers.”

Handle for the month was 41.8% lower than $43.1m in June 2021, while the total was also down 14.0% from $29.2m in May of this year.

Revenue for the month reached $2.1m, a 34.4% drop from $3.2m in June of last year and down 47.5% from $4.0m in May 2022, marking the second straight month of decline.

Coastal casinos remained by far the venues of choice for players in the state, with bettors wagering a total of $17.3m on sports during the month, while the casinos were able to generate $1.3m in revenue.

Player spending at central casinos reached $4.5m in June, with revenue at these venues hitting $464,667, while northern casino handle was $3.3m and revenue $339,142.

Baseball was the most popular sport to bet on across all venues in the month, with coastal casino customers wagering $8.8m, central casino players $1.5m and northern casino bettors $1.3m.

The Mississippi Gaming Control Board also noted that the state’s casinos had a collective win percentage of 8.30% for the month.

The roll-out means Internet Vikings will now be able to work with licensed operators in the state and support them with their igaming offerings.

Iowa marks the latest US state in which Internet Vikings has launched its igaming hosting operations, with the business also operating data centres in Arizona, Colorado, Illinois, Indiana, Louisiana, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee and West Virginia.

Further data centre launches are planned in a number of other states including Connecticut, Mississippi and Virginia.

“Our primary goal is to provide the support which others require in order to keep moving in this often-unpredictable industry,” said Internet Vikings founder Rickard Vikström, who was this month appointed as the new chief executive of the business.

“The US is our focal point, and with many customers in other compliant states, we are proud to have taken our next step in America. Iowa is showing great promise, and we are now on the ground with all that is required to get set up with confidence and a secure partner.”

Sports betting revenue in Iowa declined 21.4% year-on-year to $6.6m in June, despite player spending in the state increasing by 10.1%. Revenue was down from $8.4m in June 2021 and also 47.6% lower than $12.6m in May of this year.

In terms of handle, consumers wagered a total of $122.4m on sports during June, up from $111.2m in the same month last year, but 17.2% down from $147.9m in May 2022. Of this total, $111.9m was spent online, while the remaining $10.5m was wagered through retail sportsbooks.

Jansen framed the fight against the illegal operators as a “less visible activity” undertaken by the regulator but said its inspectors “certainly did not sit on their hands.”

Robust enforcement powers played their part in the initial challenge posed by the operators, he explained.

“In September we announced our new enforcement and fines policy. The fines were significantly increased and from 1 October (among other things) the number of players at illegal providers will be included in the consideration of which illegal providers should be tackled first.

“The result was that many illegal providers voluntarily ensured that their offer became inaccessible from the Netherlands. Apparently the ground was getting too hot under her feet.”

Since the Dutch online market opened on 1 October 2021, the KSA has investigated over 200 websites since the opening of the market, with varying degrees of responsiveness to pressure from the organisation.

“Under the threat of a cease and desist order, many illegal providers go black. This is not visible to the outside world, but it is fast and effective.”

However, for sites that do not back down, more creative methods are required. The authority is taking what Jansen described as a ‘double strategy’ of cracking down both on affiliate marketers who traditionally help promote online gambling, and the payment providers which facilitate illegal play.

“In the new enforcement policy, a warning is first issued when the facilitation of illegal gambling providers is established,” he said. “If that does not help, you will receive a binding instruction to discontinue this service. The latter is a new power of the KSA since the Remote Gambling Act came into force.”

Jansen also admitted some frustration at the lengthy legal proceedings that went with enforcement, using a recent cease and desist order as an example.

“Unfortunately, it doesn’t work that we can shoot persistent illegal providers out of the sky overnight. For example, we recently published the cease and desist order that we imposed on Gammix Limited, an order that could amount to almost €4.5m.

“Before such a decision is published, a lengthy legal process has been completed.”

Since the launch of the Dutch regulated market in October last year, there has been much public debate within the nation about how to balance consumer care with other competing interests.

The trend has been towards stricter rules – such as the recent announcement of a ban on all broadcast ads from 1 January next year. Jansen himself has in the past questioned whether the industry was even capable of “self-regulation.”

However, for now the Dutch government has taken loss limits off the table as a future area of interest to regulators.

The corporation is registered in Delaware and will offer “electronic game development services; electronic casino game development services; casino game development services”.

It is unclear whether the entity will be spun off from the core DraftKings business, or operate as a subsidiary of the company.

While DraftKings operate a large B2C online gaming business through DraftKings Casino, they have not previously not been a B2B igaming game development provider. The business has been contacted for comment on the matter.

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He added that the business expects to see a positive contribution from the market soon, despite limited marketing efforts in the country.

Earlier today Kindred reported a 32.2% decline in revenue for the first half of the year, with the business experiencing decreases across all major divisions.

Throughout the report the business excluded revenue from the Netherlands, as it had withdrawn from the country to comply with regulation. It relaunched earlier this month, bringing an end to a nine month-long absence.

Previously, Kindred had said that the withdrawal could affect earnings by up to £144m (€170.1m/$171.1m). Indeed, it affected player numbers significantly, as they fell by 600,000 across all markets in Q2.

When asked about the return to business in the Netherlands, Tjärnström said the re-entry is going well, despite it being in the early stages.

“We expect to be contribution positive within the next few months,” he said. “It will be important to help us achieve the long term ambition of getting back to 20% online EBITDA margin in the next two to three years.

“We’re seeing a very strong intake in activity, despite not having ramped up marketing in full. We’re evaluating as we go along as well on the marketing investments and the return that we’re getting.

“We’ve exceeded our own expectations in the Netherlands so far.”

Elsewhere, in the US, Tjärnström said that development across the country has been steady, with a hope to continue an upward trajectory.

“We’ve been seeing good development across the states,” Tjärnström continued. “In New Jersey, we’re looking forward to launching our own platform there in Q3 and ramping up there, continuing [the] growth trend.”

Tjärnström also praised Kindred’s progress in the sports sector across the US.

“We’re up by 30% in turnover for sport in the US,” he said. “Clearly, sports has outperformed in that sense.”

Tjärnström also addressed the implementation of stricter affordability measures in the UK, which he said had affected its revenues in Q2.

“We’ve adapted more stringent financial measures and reduced backstops on customers as well, Some of the measures will be further implemented in the coming months as well. It’s all in the ambition to reduce spend and also bring forward the checks with the customers.”

“We have to ask for documentation and it’s not the best customer experience.”

During the 12 months through to 31 March 2022, the National Lottery reported a basic primary contribution of £1.80bn but noted that £71.6m of this was counted as amounts drawn down during the year.

A further £14.3m was discounted due to permitted VAT recovery, funding for the National Lottery Promotions Unit, interest received on primary contributions and recovery of interest charges on EuroMillions funds held in trust.

This left £1.72bn in primary contributions payable to good causes, a drop of 0.6% on 2020-21. 

However, when accounting for £111.1m in funds in unclaimed prizes, and £12.2m in other miscellaneous payments such as secondary contributions, payments for lost and stolen scratchcards, financial penalties and ancillary activities, this pushed the final figure up to £1.84bn.

Breaking this down by quarter, £420.7m was payable in the opening quarter of the 2021-22 financial year, then £418.4m in Q2, £508.5m in Q3 and £491.3m in the fourth quarter.

Funds for good causes are held in the National Lottery Distribution Fund, with the Gambling Commission ensuring payments from the Lottery operator to good causes are accurate and on time.

Since its launch in November 1994, the National Lottery has raised over £46.0bn for good causes, which include sports, arts and heritage, as well as health, education and the environment.

The news comes a week after the Court of Appeal granted permission to Camelot Group and International Game Technology (IGT) to appeal a decision to award the fourth UK National Lottery licence to Allwyn Entertainment.

The Gambling Commission in March named Allwyn as its preferred applicant for the licence, a decision that would bring to an end Camelot’s 28-year tenure as the UK’s lottery operator. Camelot, which has run the lottery since its inception in 1994, was named reserve applicant.

In April, Camelot launched a High Court challenge against the decision, regarding whether the Commission lawfully awarded the licence to Allwyn. This led to the formal issuing of the lottery licence to Allwyn being suspended. 

The High Court lifted the suspension in June, though the legal challenge continued, with Camelot and IGT, which also launched a legal challenge against the decision, going to the Court of Appeal.

The Court of Appeal last week granted permission to appeal, meaning that the automatic suspension will come back into effect, pending the outcome of appeal proceedings. The appeal hearing is likely to take place in the week of 12 September.

Wharton joins Star after more than six years with Commonwealth Bank of Australia (CBA), where he was most recently group executive for programme delivery after a spell as executive general manager.

Prior to this, he spent over six years in a number of roles with Citi, including global head of supply chair and managing director, while he is currently also co-chairman of Supply Nation.

Wharton will report directly to Star Entertainment Group’s incoming chief executive and managing director Robbie Cooke, whose appointment was announced at the end of June.

“I am looking forward to joining The Star at this critical moment in its history,” Wharton said. “The Star plays an important role in the economies of NSW and Qld as a major employer and catalyst for the states’ tourism industries.

“I look forward to working closely with the team at The Star, as well as regulators and other stakeholders.”

Interim chairman Ben Heap added: “Scott has exemplary credentials as we drive a renewal program across the group. The work he led at CBA has been recognised as one of the most comprehensive reforms of corporate culture in Australia.

“His leadership capabilities, expertise in delivering significant transformation working closely with regulators, together with his commercial skills and experience managing complex businesses, made him the ideal candidate to take on this key position within the organisation.”

Wharton will take charge of Star Sydney at a time when the casino property is the focus of an independent review. This launched in June last year after concerns were raised about interactions with junkets and money laundering prevention measures. 

The probe was then expanded in January 2022 to assess other entities within the group. The Star Sydney review was due to complete in June but was extended to the end of August, to allow for more witnesses to give evidence.

Public hearings into activities at the casino have so far heard a series of claims including that Star allowed junket operator Suncity to operate its own cage at the casino, where it then exchanged chips for cash, in contravention of the New South Wales Casino Control Act.

The case also asserts that Star’s representations about policies being in place to mitigate risks such as money laundering, corruption, bribery, insider trading and restrictions on the use of gambling products were misleading or deceptive.

Star’s long-serving chief executive and managing director Matt Bekier stepped down from both roles in response to issues raised during the ongoing review of the Star Sydney casino.

Star appointed John O’Neill as interim executive chairman but was replaced less than two months later by Geoff Hogg, who assumed the role of CEO on 1 June. However, it was then announced that Cooke would be appointed as CEO and managing director.

Star said Wharton’s appointment as group head of transformation continues the build out of its Transformation Office, which is leading the company’s renewal program as it focuses on operations in New South Wales and Queensland.

Last month, it was also announced that an independent review Star’s suitability to hold a casino licence in Queensland.

The renewal program comprises a series of initiatives focused on governance, culture, training, and risk and compliance systems and technology, while it will also consolidate and expand existing programs of work in the risk and compliance functions, and implement new programs to improve operations.

“The renewal program commenced several months ago and, while we still have a lot of work ahead of us, we are pleased with the initial progress,” Heap said. “This program is integral to redesigning the way we do things. 

“It’s about enhancing the systems and controls to help ensure our casinos operate free from criminal influence and creating an environment to work collaboratively and cooperatively with regulators.”