Month: April 2023

Pre-emptive steps already taken by Flutter had removed £150m in annual revenue from its UK business over the past three years.

Flutter has already implemented a £10 per spin stake limit for slots, as well as enhanced controls for under-25s. It also contributes 1% of annual revenue to research, education and treatment. The operator previously suggested these efforts, as well as the scale of the business, would help it navigate regulatory change in Great Britain.

The additional measures outlined in the UK government’s white paper for reforming the 2005 Gambling Act would have an additional impact of between £50m to £100m, the operator said. 

It does not expect any reduction in revenue for 2023, with changes implemented from 2024. 

“A significant positive moment for the UK gambling sector”

Chief executive Peter Jackson said the white paper marked “a significant positive moment for the UK gambling sector, raising standards and bringing the regulatory framework into the digital age”.

“We believe proactive change will lead to a better future for our industry and have introduced industry-leading safer gambling controls via our ‘Play Well’ strategy over the last few years, including setting mandatory deposit limits for customers under 25, reducing online slots staking limits and making material investments in our safer gambling operational capabilities.”

Flutter, which today named John Bryant as chair designate, will engage with the government and Gambling Commission as part of the consultation process around a number of elements set out in the white paper. 

Jackson pledged to support the minority at risk of gambling harms, without interfering with the experience for the majority of its customers. 

Tackling the offshore market

“We encourage the regulator to look at what more it can do to tackle the problem of the growing number of unlicensed and unregulated gambling companies targeting at-risk gamblers across the country,” Jackson added. 

“It is important to get new regulation right from the start, as it will ultimately provide the certainty our industry needs to continue investing in jobs and in further growing the UK’s lead in digital innovation in our rapidly evolving market.”

Shares in Flutter Entertainment are trading up 0.55% at 181.65 per share, on the day shareholders will vote on a pursuing a dual listing in the US. 

Andrew explained the more technical aspects of the white paper would be put to consultation to ensure the ministry is “following due process” and to prevent further delays.

Since the proposals are at risk of challenge, he said it is important that the government “get the design of these things absolutely right.”

“Our intention is that everything will be introduced and in place by the summer of next year, so in time for the next general election,” he said.

According to Andrew, the responsibility for conducting the consultations will be split between the ministry and the Gambling Commission.

The minister said he had “no concerns” about the resources the Commission be granted in order to effectively do this work.

Andrew also suggested provisions outlined in the white paper will not be the last word on reform. The introduction of the levy was a measure that would show where further work was required.

“We’re going to constantly review all of this,” he said. “The fact that we’re introducing the levy means that we will be able to commission research into areas to see if further work is needed.

In addition, the department would also take evidence from what is happening in other countries around the globe. This “more targeted approach” would ultimately prove to be more effective, Andrew argued.  

Implementation of affordability checks

The precise implementation of affordability checks has long been considered one of the most pressing concerns among operators regarding the review. Bodies such as the BGC have warned more stringent interpretations could push punters to the black market.

By introducing standardised affordability checks, DCMS aims to ensure a uniform approach across the whole gambling industry, Andrew said. The majority of users would not be subject to these checks. However, for those subject to additional assessment, the process would be conducted in a way “without them almost knowing about it”.

The Gambling Commission will work alongside the Financial Conduct Authority and the Information Commissioners Office to ensure the checks are technically feasible.

In the consultations, affordability checks will tested through the calculation process to ensure it is as frictionless as possible.

Plans for a statutory levy

Prior to the release of the white paper, there were rumours that the government were intending to impose a 1% tax on gambling company’s profits to fund research education and treatment (RET), as opposed to current voluntary model.

While the document did include a levy, DCMS did not commit to any precise number.

Andrew said this measure that would be examined during the consultation to pick the precise figure.

“We’ve listened to a lot of the recommendations and suggestions that have come to us from the various groups that we’ve been meeting with,” he said. “Those will formulate our thinking as we develop that further.”

According to the minister, the levy may not be set at a flat rate but in fact be dependent on the risk profile of the particular gambling operator.

“The secondary powers that we have give us the power to create the levy in whatever way we think is right, which is why we’re consulting on it,” said Andrew.

“One of those, for example, is a formula and we’ve said in the white paper that we will take into account kind of the risk elements of the individual operators and the cost that operators have.”

Under the two-year deal, Sportradar will monitor more than 450 events. This will include both the men’s and women’s Water Polo Tournaments at the World Aquatics Championships, Under-20 Championships and Water Polo World Cups.

Sportradar will use its Universal Fraud Detection System (UFDS) AI-driven bet monitoring system to monitor each of the matches. The system has helped identify more than 8,000 suspicious matches across other sports during the last 18 years.  

“We are firmly dedicated to protecting our competitions from integrity threats, particularly as we move closer to the Paris 2024 Olympic Games,” World Aquatics executive director Brent Nowicki said.

“The depth of knowledge that Sportradar Integrity Services provides through its UFDS platform and expert team puts us in a great position to mitigate any betting-related issues that may arise across our competitions.”

Sportradar Integrity Services managing director Andreas Krannich added: “In recent years we have seen match fixers infiltrate an ever-increasing range of global sports at various levels of competition, including youth events. 

“Aquatic sports are not immune to such integrity threats, and we are committed to providing the strongest integrity provisions using our technology to protect World Aquatics water polo competitions over the next two years.”  

Sportradar Integrity Services counts the International Tennis Federation, World Rugby, Uefa, International Motorsport Federation and the European Handball Federation among its roster of other clients.

Announced today (26 April), the review will focus on delivering and maximising value for its shareholders, with PJT Partners, Morgan Stanley & Co. International plc and Canaccord Genuity to serve as financial advisors and assist in the review.

Kindred did not set a timetable for completion and noted that there could be no assurance regarding the results or outcome of the review. The group added it is under no obligation to make any further announcements unless and until final decisions are made by its board.

The review launched as Kindred also published its financial results for the first quarter of the 2023 financial year. The group experienced growth across revenue and net profit, with chief executive Henrik Tjärnström praising the impact of cost optimisation initiatives previously communicated.

In January, Tjärnström said “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. While Tjärnström said there would be a lag before it sees the full impact, the review began to have an effect in Q1.

“As we have mentioned in earlier reports and presentations, 2023 is an investment year as we continue to recruit key talent to build our proprietary sportsbook platform,” Tjärnström said. “This investment in our in-house sportsbook, a key value creation driver, continues to drive growth in operating expenditure. 

“Successful recruitment and strong retention of staff in the second half of 2022, combined with the annual salary review process, have also resulted in higher year on year growth in salary costs for the quarter. 

“Growth in operating expenditure has also been impacted by approximately £3m of non-recurring items. We remain fully focused on cost optimisation across our operations and expect our operating expenses to remain stable in the coming quarters.”

Q1 results

Breaking down the first quarter, revenue for the three months to 31 March amounted to £306.4m (€346.3m/$381.5m), up 24.2% from £246.7m in the previous year.

Of this total, £297.3m was attributed to B2C gross winning revenue (GWR), a 22.7% year-on-year increase helped by Kindred’s re-entrance into the Dutch market. Casino and games was responsible for 55% of all B2B GWR in Q1, with sports betting’s share at 40%, poker 3% and other games 2%. 

In terms of geographical performance, 58% of GWR was generated in the Western Europe region, while 26% came from the Nordics, 11% Central and Easter Europe, and 5% from other markets.

Turning to B2B revenue, solely from the Relax Gaming business acquired in October 2021, this amounted to £9.1m, an increase of 111.6% on the previous year. Kindred said this was driven by broader distribution of Relax Gaming’s own content and new game launches, as well as the release of the Dream Drop jackpot feature across all Relax Gaming operators. 

Turning to spending and cost of sales was 18.7% higher at £134.4m, while administrative expenses also increased 26.2% to £82.9m. After also including £1.5m worth of personnel restructuring costs and £1.4m in spend related to market closure, operating profit was 288.0% higher at £32.2m.

Kindred also noted £1.8m in net financial costs, meaning pre-tax profit for the quarter hit £30.4m, a year-on-year rise of 300.0%. Kindred paid £4.8m in income tax, leaving it with a net profit of £25.6m, up also up 300.0% on the previous year.

In addition, the group noted that earnings before interest, tax, depreciation and amortisation (EBITDA) in Q1 was 115.0% higher at £47.3m.

“I previously communicated that the cost optimisation actions would strengthen our path towards our 2025 financial targets,” Tjärnström said. “The first quarter of 2023 has shown encouraging performance and I see positive signs across our business. 

“As our industry transitions to local licences, we will continue to experience temporary challenges across individual markets. This is part of being a global business, however in a locally regulated environment market leaders like Kindred will benefit from a more stable business model.”

Regulatory fines

Kindred was also the subject of a £7.1m fine from the Great Britain Gambling Commission in Q1 after two of its brands, 23Red and Platinum Gaming, were flagged for series of social responsibility and anti-money laundering failures.

32Red, which runs 32Red.com, will pay £4.2m, while Platinum Gaming, operator of Unibet in Britain, was ordered to pay £2.9m. Both brands also received an official warning following a Commission investigation.

Kindred emphasised the historic nature of the failings that led the Commission to fine the business and accepted that certain systems and processes that were in place in 2020 and 2021 were not “in line with the Commission’s expectations around affordability”.

Parliamentary Under-Secretary of State for Justice Mike Freer was responding to a question from MP Andrew Bridgen, a former Conservative MP who has since moved to being an independent after being expelled from the party, over what circumstances a death certificate would describe a suicide as being related to gambling.

Freer said information recorded on death certificates is dependent on the circumstances of each individual case and is at the coroner’s discretion as an independent judicial office holder in the exercise of their statutory functions.

He added that the government recognises that quality information on the circumstances leading to self-harm and suicide, including issues relating to gambling addiction, can support better interventions. 

However, he also said that while coroners may be made aware of information about the motivation or contributory factors in a suicide, it cannot be guaranteed that “consistent and comprehensive” information on a deceased person’s background would be made available to the coroner in each case.

Freer also said that asking coroners to undertake further assessment of all cases could take them beyond their legal obligations. 

“Expecting coroners to routinely assess the motivation for individual suicides would take the coronial role fundamentally beyond its legal parameters, which are to determine who died, and how, when and where they died,” Freer said.

Prevention

However, Freer said any information related to how gambling could have been a factor in a suicide should be included in Prevention of Future Deaths (PFD) reports to support future prevention work.

“In addition to the inquest conclusion, coroners have a statutory duty to make PFD report to a person where an investigation gives rise to a concern that future deaths will occur, and the coroner considers that action should be taken to reduce that risk,” Freer said.

“PFD reports are about learning and improvements to public health, welfare and safety and could, for example, raise concerns relating to gambling addiction where the circumstances of an individual case give rise to a concern. 

“To promote learning, all PFD reports and the responses to them must be provided to the Chief Coroner, and most are published on the judiciary website.”

Consultation

The response comes amid an ongoing Gambling Commission consultation into a number of proposed licence changes, including a clause related to suicide.

The Commission proposed adding a new requirement to Licence Condition 15.2.2 ‘Other reportable events’ that would require all licensees to inform the regulator when they become aware that a person who has gambled with them has died by suicide.

The consultation launched on 28 February and will conclude on 23 May. All stakeholders, including consumers, gambling operators and members of the public, are invited to share their views on the proposals.

Jon Knapman joins Tote Group as chief commercial officer of the group’s international B2B business. With its recent expansion into US, South African and Hong Kong markets, the international business has seen substantial growth. 

Dave Hammond becomes the chief commercial officer (UK) of the operator’s domestic operation. Hammond brings 25 years of experience in the industry from numerous senior operational roles. Inspired Gaming, Paddy Power, Betfair and DraftKings are among some.  

“As we continue to execute our growth strategy for the business and following three years of significant expansion within international markets with many more opportunities on the horizon, we now have two extremely strong leaders focussed on driving the commercial performance of our International and UK businesses,” UK Tote Group chief executive Alex Frost said.  

Hammond added: “I am excited to be joining the Tote and working alongside Alex, Jon and the wider team as we continue to grow the Tote within the UK market.  

“I have watched with interest as the team has revitalised the Tote over the last few years and hope my experience from a number of different roles across the industry will positively support the next phase of the Tote’s growth cycle.”  

Kambi’s chief executive officer Kristian Nylén said that the quarter benefitted from Kambi launching in North and South America, as well as a return to a complete sports calendar following the Covid-19 pandemic. Kambi completed 20 partner launches during the quarter, all of which occurred in the Americas.

“The first quarter was another busy period for Kambi including new market launches in the Americas, the expansion of Kambi’s partner network and a full sporting calendar,” said Nylén. “These events helped drive a 12% year-on-year increase in operator turnover and a 19% rise in revenue to €44m.”

Nylén was particularly positive about Kambi’s progress in Latin America. During the quarter, the operator agreed to extend its partnership with Corredor Empresarial SA, which operates BetPlay in Colombia.

“Latin America is a region of significant long-term potential for Kambi and will become increasingly
integral as we look to extend our lead as the number one supplier across the Americas,” he continued.

“Kambi already has a strong foothold in some of the region’s most established sports betting markets such as Colombia and Argentina, and recent public announcements from the Brazilian government show positive signs that regulation of sports betting in Brazil is edging nearer in what is projected to become one of the world’s largest regulated markets.”

First quarter results

Turning to costs, the highest during the quarter related to staff expenses, which totaled at €16.9m. This was 22.1% higher than Q1 2022.

Data supplier costs rose by 19.5% to €4.8m, while exchange expenses fell from €736,000 to a loss of €524,000 for the quarter.

Other operating expenses hit €8.9m for the year, a rise of 51.3%. In total, the operating expenses came to €31.2m, up by 35.2%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter totaled at €12.8m, down from €13.7m year-on-year.

Amortisation on capitalised development costs came to €5.4m, while depreciation costs totaled at €1.6m. Meanwhile, amortisation on acquired intangibles hit €1.2m.

Following these additional costs, the operating profit was €4.5m, a dip of 38.3% yearly. Following investment income at €36,000, along with finance costs at €190,000, the pre-tax profit hit €4.3m – a year-on-year loss of 38%.

After considering income tax at €1m, the total profit for the quarter was €3.2m. This was down by 39.6% from Q1 2022.

In January, Kambi announced that it had projected its earnings target to hit €150m by 2027.

Gaming consultant Regulus Partners published a critique of the OHID’s work, examining a series of methodological errors within the original published paper.

Many of the problem’s identified by the paper’s author Dan Waugh related to the speculative nature of the estimates, the failure to consider any benefits from engaging in gambling activity and the motives to publishing the report at all.

“The most important question to be asked about this report, however, is why it – or the 2021 report by the OHID’s predecessor, Public Health England (PHE) – were undertaken in the first place,” Waugh said.

Waugh characterised the purpose of the OHID report’s publication as being to promote “advocacy and action”, not provide methodologically sound research into the effects of gambling-related harms.

“Predetermined agenda”

According to Waugh, while the report estimates that the annual economic burden of harmful gambling in England is either £1bn or £1.8bn, the bases for calculation of each cost component is “highly speculative” as well as being undermined by factual errors, mathematical mistakes, opaque calculations and questionable methods.

Waugh also emphasised that the costs identified cannot be put with “any degree of confidence” to either gambling or harmful gambling, and that the majority of costs, are not costs to the state but “intangible costs to ‘society’.”

“In short, the OHID and PHE reports provide an array of unreliable estimates of costs of unknown origin, to – in most cases – unknown entities,” said Waugh. “The policy relevance of such calculations ought therefore be of limited value; something that has been recognised by the Gambling Commission.”

Waugh stipulated that the Gambling Commission has suggested in its previous remarks that PHE has published costs estimates of questionable accuracy “in in order to support a predetermined agenda”.

“Erroneous calculations“

The OHID report came under particular fire for its failure to disclose previous mistakes by PHE relayed to “erroneous calculations” of suicide mortality. Waugh argued that both the OHID and PHE went to some lengths to prevent examination of PHE’s claims as they were “methodologically and mathematically inaccurate”.

“It is in the interests of sound public policy that Government research is subjected to scrutiny, particularly where it has a bearing on the health, wellbeing and freedom of citizens,” said Waugh.

“Both the OHID and PHE reports have been cited uncritically by the Department for Culture, Media and Sport in policy debates; and referred to by one government minister as “an important input” to the forthcoming white paper on gambling market reform.

“The Gambling Commission meanwhile, has adopted a policy of not commenting on research produced by government departments, even when its own internal analysis has revealed the research to be misleading.”

During the quarter, the operator changed its segments to separately report financial results from online and other activities. The online segment includes its sports betting partnership with FanDuel, online market access agreements with other third parties and the Boyd Interactive online casino business.

Online revenue more than doubled over prior year, which Boyd said reflected gains from the recently launched sports betting operations in Ohio and Kansas, as well as continued growth in existing markets and contributions from Boyd Interactive.

Read the full story on iGB North America.

Total market revenue in March reached $1.31bn, down from $1.35bn in the same month in 2022 but 5.7% higher than $1.24bn in February of this year.

Slots remained the primary source of revenue by some margin, generating $906.5m worth of revenue during the month, up 0.4% on last year. Multi-denomination slots led the way with $510.5m in revenue, followed by penny slots on $287.6m.

Read the full story on iGB North America.