Month: November 2023

The group experienced continued growth in its casino segment, strengthening its positions in the Netherlands and UK. However, Kindred said this growth was tempered by ongoing regulatory challenges in select core markets. It was also impacted by its Q3 sportsbook performance.

Kindred said that Unibet regained its position as the leading operator in the Netherlands. In addition, active customers were up 7.0% across the business. However, Kindred said this was partially offset by lower-than expected sportsbook activity due to a lighter sports calendar.

Interim CEO Nils Andén referenced sports betting struggles in his analysis of Q3. However, he focused on success in the casino and games segment, saying this will help growth in the long run.

“Despite positive development in casino and overall growth in active customers, weaker sports betting activity combined with regulatory measures in select core markets impacted total Q3 revenue,” Andén said.

“However, I am pleased to see that we have regained our leading position in the Netherlands following our re-entry in July 2022. We also see positive momentum in the UK, with 7.0% growth compared to the same period last year.

“In spite of this, disappointing sports betting levels across core markets, combined with a lower sports betting margin than our long-term average, negatively impacted overall performance.”

B2C revenue edged up in Q3

Breaking down performance in the three months to 30 September, Kindred said both B2B and B2C revenue increased year-on-year.

Gross winnings revenue from B2C climbed 10% to £274.7m. This was supported by growth in the Dutch market since re-entry in July 2022 and certain other core markets, as well as strong growth in the casino segment. However, weaker sports betting activity combined with regulatory measures, including in Belgium and Norway, restricted growth.

Going into further detail, Kindred said casino and games B2C revenue was up 11.0% from last year. This segment accounted for 61% of all revenue in Q3, with active customers up 14.0%.

In contrast, sports betting revenue was down 13.0%, representing 34% of total revenue. The start of Q3 saw a strong Women’s World Cup but, it was overall a quiet summer period. In the latter part of Q3, football seasonality was again weaker with the number of top league fixtures reducing by 16.0% year-on-year.

Additional revenue in Q3 came from poker and other products, with this rising 5.0% from last year. Poker and other products active customers also increased by 13.0%.

Western Europe remains key for Kindred

Looking at B2C geographical performance, 62% of all revenue here came from activities in Western Europe. The £169.7m generated in Q3 was 12.0% higher than in the previous year.

However, Nordics revenue slipped 17.0% to £65.3m, accounting for 24.0% of all revenue in the quarter. Kindred said this was impacted by a changing Norway offering. Incidentally, the group in September announced it is pulling out of Norway.

Central, Europe and Southern revenue was flat at £27.6m, representing 10.0% of overall Q3 revenue. A decline in sports betting revenue here was offset by growth in the casino and games segment.

Revenue from other regions, including North America and Australia, fell 16.0% to £12.1m. This accounted for just 4.0% of all revenue during the quarter.

Kindred notes 55.9% rise in B2B revenue

B2B revenue from Relax Gaming, acquired in October 2021, also increased 55.9% to £9.2m in Q3. Kindred put this down to broader distribution of content and new game launches. A total of seven new titles were launched in Q3. 

Revenue here is generated through the aggregator business and by offering Relax Gaming’s content to a range of operators

Kindred added that there is optimism for stronger revenues within the B2B segment in Q4.

Higher costs hit bottom line

Turning to spending, costs of sales reached £125.1m and administrative expenses £79.1m, both of which were up year-on-year. Other spending was reported for market closures and contract termination and personnel restructuring, while net finance costs hit £2.5m.

This left Kindred with a Q3 pre-tax profit of £15.1m, down 75.6%. Kindred paid £2.5m in tax, meaning a net profit of £12.6m, a drop of 78.2%. 

However, underlying EBITDA was 5.7% up at £42.6m.

High hopes for full-year earnings

Looking at the year-to-date, revenue in the nine months to 30 September was £897.6m. This was 17.6% higher than in the previous year.

Spending was also higher across the business with cost of sales and administrative expenses rising. However, even after including all other costs, pre-tax profit was 4.9% higher at £78.6m.

Kindred paid £12.7m in income tax, leaving a net profit of £65.9m, down 6.0%. However, there was good news in terms of underlying EBITDA, which jumped 63.9% to £147.7m.

In relation to this, Kindred reiterated its full-year underlying EBITDA guidance. The group expects this to reach at least £200.0m, assuming a normalised sports betting margin during the fourth quarter.

“Looking ahead to a seasonally busy fourth quarter with a strong active customer base,” Andén said. “I am encouraged by our growing active customer base during this seasonally busy fourth quarter and I expect to see a return to normalised levels of sports betting activity and further positive development in our casino and games segment.”

Kindred to exit North America and cut staff

Andén also spoke of major announcements made by Kindred regarding its strategic review. Today (29 November), Kindred confirmed it will exit North America by the end of Q2 2024 and will also cut over 300 jobs.

With this in mind, Kindred published initial expectations for full-year underlying EBITDA in 2024. This, it said, is expected to reach £250.0m.

In terms of wider plans for the review, Andén hinted that Kindred could seek to sell part or all of the business. This would be in line with what was set out when the review launched earlier this year.

“The strategic review initiated by the board remains ongoing and we continue to advance a number of options to deliver shareholder value,” Andén said. “The board currently believes that shareholder value will be maximised through a third-party transaction.

“Following the actions announced today, I am confident that Kindred will return to above-market growth across its core market portfolio during 2024.”

The petition passed the threshold on Tuesday evening after being registered earlier this month by Jockey Club CEO Nevin Truesdale. Parliament’s petitions committee will now schedule a debate on the issue in Westminster Hall.

The petition calls on the government to abandon the planned implementation of affordability checks on bettors. It claims there is a risk of “inappropriate and discriminatory” checks based on the consumer’s postcode or job title.

The petition claims bettors may have to prove they can afford their hobby if they lose £1.37 per day. It suggests it could lead to a negative impact on British horse racing’s finances due to a fall in levy yield.

“We accept the need to help those with problem gambling but more intrusive checks… risks bettors moving to the black market,” the petition reads.

Financial risk checks were one of the many terms put forward in the Gambling Act review white paper. The Gambling Commission concluded a public consultation in October 2023 after receiving over 2,000 responses.

However, the recent Right to Bet survey found that almost half of respondents were prepared to switch to the black market if faced with stringent affordability checks. One in four had already faced affordability checks.

Racing welcomes success of petition

Martin Stevenson, CEO at Racecourse Media Group, welcomed the success of the petition.

“It is fantastic to see the industry come together on this campaign – and reach the 100,000 threshold within a month,” Stevenson said.

“It shows the deep strength of feeling against financial risk checks, as proposed in their current form, and ensures the subject remains very much on the agenda with the government and Gambling Commission.

“We now ask the petitions committee to table this debate… as a matter of urgency – hopefully in January – given the significance of the petition and the widespread concerns the racing industry holds over the proposed financial risk checks.”

Government: We want to protect those at risk

The government has already issued a response to the petition, defending its position. It was compelled to do so when the petition reached 10,000 signatories.

“We are committed to a proportionate, frictionless system of financial risk checks, to protect those at risk of harm without over regulating. The Gambling Commission will set out plans in due course,” a spokesperson said.

Earlier this month, Gambling Commission CEO Andrew Rhodes dismissed arguments that the changes would drive customers towards the black market. Rhodes told a meeting with industry leaders he believes that the risk is overstated.

He added: “That does not mean there is no risk, as I have said many times. It does not mean there are no problems.

“I hear quite a lot of anecdotal examples from you, but we need to turn that into something actionable. I am genuinely grateful to those who have provided confidential information to us, which has helped us in this area.”

In countering the horse racing sector’s pushback towards affordability checks, Rhodes highlighted the Patterns of Play research. The report states that the most profitable one per cent accounts for 70.4 per cent of gross gambling yield (GGY).

His conclusion is that “horse racing not only has a critical dependency on money lost to operators through gambling… but relies on 70% of that money coming from a proportion of bettors five times smaller”.

The meeting focused on the impact of harmful gambling on Londoners.

He was quizzed by assembly member Emma Best on why the mayor of London, Sadiq Kahn, has “not yet implemented his commitment to restrict gambling ads” on Transport for London (TFL) services.

Kahn pledged to ban gambling ads on the London Underground in April 2021, as part of his re-election campaign.

The mayoral health advisor said the absence of a definition for harmful gambling is an outstanding factor in the decision.

Coffey compared this to Kahn’s ban on junk food ads on TFL, which was implemented in February 2019: “That is the thing which we had with the high fat, high sugar, high salt [ban]… a nationally accepted consensus of what are foods that are high fat, high sugar, high salt,” he explained. He added that, when preparing for the junk food ban, “we built into our advertising ban and evaluation at the same time to use that ban to collect the evidence”.

Coffey said the mayoral office had kicked off the process of defining harmful gambling.

“We have asked the government now to develop that definition. We’ve asked public health partners to develop that definition, because I don’t think it would stand up to legal challenge if we said, this is our definition of the GLA,” he said. “Because my sense is, that will fall at the first hurdle.”

Evidence-based decision

Coffey outlined that the move would undoubtedly be subject to legal challenges. For this reason, he said the mayoral office wants to ensure its decision is airtight by having an evidence basis where possible.

“What we’re trying to make sure is that we do it in a way that is evidence-based,” said Coffey. “We know we’ll be subject to legal challenge and we want to make sure we do it in a way where we can  resist any legal challenge accordingly and delay it.”

Also during the meeting, Coffey – who is also a GP – said he is seeing more issues related to gambling harm. However, he stressed that he is “more often” speaking to affected others, rather than the person experiencing harm.

“I am seeing more problems related to gambling,” he said. “More often, it will be the family affected that will come to see me. Very rarely will I get a person coming to see me talking directly about, ‘I’m a gambling addict, I need some support, I need some help.’”

“It’s often family members who are facing the fallout from the impact of gambling on that person’s mental health, on that person’s financial situation, on that person’s housing situation.”

Protecting young people

Sian Griffiths, deputy chair at UK gambling harm prevention charity GambleAware, also emphasised “the harm on affected others, particularly children”. On the topic of restricting advertising, she added that there is a clear positive effect on children in particular.

“I would say that it’s obvious that the more you’re exposed to messages, the more likely you are to pick them up and that’s particularly due to children,” she said. “That’s why there has been an agreement not to advertise during a football match – just around a football match.”

Looking at London as a whole, Marguerite Regan, head of gambling at the Office for Health Improvement and Disparities, said that there is a disparity between the number of Londoners participating in gambling and the number seeking harmful gambling support.

“The statistics that are going to be coming out in the next few weeks are going to be looking at the number of adults in London who would benefit from some sort of support and treatment,” she explained. “Per hundred thousand, London has the highest rate.

“So even though you have lower, low average participation, you have a higher average who are requiring support and treatment.”

Revenue was 22.5% higher year-on-year during Q3. Rivalry reported growth across both its sportsbook and gaming sectors in the three months to 30 September.

However, increased operating costs and foreign exchange loss offset the revenue hike in Q3. This meant comprehensive loss for the quarter widened to $6.0m, compared to $5.6m in 2022.

Reflecting on Q3, co-founder and CEO Steven Salz praised Rivalry for revenue growth amid a “challenging” capital markets environment. He said this will stand the business in good stead for further growth in Q4 and beyond.

“We are proud to have delivered a record third quarter while exercising discipline on costs amid a challenging capital markets environment for growth companies,” Salz said. “Now, with our recently announced capital infusion, we will be able to go back on the offensive, while still maintaining our path to profitability.”

Betting handle rise accompanies revenue growth

Taking a closer look at the three months to 30 September, sportsbook was the main revenue source for Rivalry. Revenue from this segment was 42.6% higher at $8.7m in Q3.

Rivalry also reported growth in its casino business, with revenue rising by 50.0% to $1.5m.

Elsewhere, Rivalry said total betting handle across its offering jumped 50.4% to $105.7m. Of this total, $50.4m came from casino gaming, with Rivalry saying this was helped by recent launches, including the roll-out of its Casino.exe brand in Ontario in Canada.

Year-on-year cost increases hit bottom line

As for expenses, cost of revenue was 5.9% lower at $4.8m for Q3. However, operating costs increased by 14.8% to $9.3m. This left an operating loss of $5.3m, shorter than the $6.0m loss posted in 2022.

Rivalry also noted $367,457 in foreign exchange loss at $4,872 of interest expense. Based on this, the operator was left with a net loss of $5.6m, an improvement on $6.0m last year.

However, after also accounting for $363,133 in negative foreign exchange translation difference, this pushed comprehensive loss to $6.0m. Last year, Rivalry posted a shorter comprehensive loss of $5.6m after benefiting from $401,071 in positive foreign exchange translation difference.

Brighter picture in the full year

Looking to how Q3 impacted year-to-date performance, this, on the whole, made for positive reading. Rivalry posted $29.2m in revenue for the nine months to 30 September, an increase of 69.8%.

Sportsbook operations accounted for $24.3m of this total, up 50.0% from last year. Gaming revenue reached $4.9m, rocketing 345.5% from $1.1m in 2022.

Cost of revenue climbed 29.0% to $16.0m and operating expenses were 19.5% higher for the period at $28.2m. However, such was the impact of its revenue growth that operating loss shortened from $18.8m to $15.0m.

Rivalry reported $190,423 in foreign exchange loss at $12,435 in interest expenses. This left it with a net loss of $15.2m, an improvement on last year’s $18.8m loss.

After including $1.4m in negative foreign exchange translation difference, comprehensive loss hit $16.7m, but this was still shorter than $19.1m in 2022.

“Years of consistent performance, flattened opex multiple quarters in a row, demonstrated triple-digit growth year-over-year across core metrics year-to-date with all-time high average handle per customer, average revenue per user and record low cost of customer acquisition over that same period gives me high conviction in Rivalry’s future,” Salz said. 

“It is this proven operating leverage, supported by an improving sportsbook margin profile resulting in more revenue per dollar wagered, now fuelled by growth capital, that is creating a significant opportunity set for Rivalry. 

“It is that combination which gives us confidence to reaffirm our first half 2024 profitability guidance.”

Under the arrangement, ESPN Bet becomes an NHL partner in the US. Penn also agreed for theScore Bet to partner with the NHL in Ontario, Canada. 

Penn said the deal comes into effect immediately. It covers the NHL regular season, Stanley Cup Playoffs, 2024 NHL Winter Classic, 2024 NHL Stadium Series, and 2024 NHL All-Star Weekend. 

The agreement will grant ESPN Bet and theScore Bet access to a host of entitlements. These include IP rights, and media and marketing integrations across the NHL’s programming and premium NHL experiences. In addition, the partnership includes collaboration for game integrity procedures.

Major partnership for newcomer ESPN Bet

ESPN Bet, a product of Penn’s partnership with Disney-owned ESPN, is among the latest brands to launch in the US. It went live across 17 states on 14 November. 

In essence, it is a rebranding of existing sports betting app, Barstool Sportsbook. In August, Penn said it sold Barstool Sports back to its founder Dave Portnoy for $1.

“There’s definite excitement in being one of the first leagues to partner with ESPN Bet and Penn,” NHL vice president of business development, Jason Jazayeri, said. “From day one we’ve said our media rights deal with ESPN and The Walt Disney Company has been a big win for our fans and our League, and this new collaboration is further testament to the value of our partnership.

“The NHL is younger, faster and more exciting than ever.. It delivers tremendous opportunity for fan engagement and responsible gaming experiences. We’re looking forward to working with ESPN Bet and theScore Bet to engage our passionate fan base.”

Broader engagement among NHL fans

Penn Interactive’s senior vice president for marketing and content, Aubrey Levy, also spoke highly of the new deal.

“The recent launch of ESPN Bet in the US is extremely exciting,” Levy said. “We’re thrilled to collaborate with the NHL to help market our new sports betting experience. 

“Becoming an official partner allows us to more broadly engage hockey fans, develop compelling integrations and uniquely leverage NHL programming. This is also a key partnership for theScore Bet in Ontario, where the popularity of hockey is unmatched.”

Heavy support for ESPN Bet launch

The partnership adds further fuel to the ESPN Bet fire that is already burning strong. 

Upon launching the brand, an initial wave of integrations targeting an estimated audience of 200 million was announced. The ESPN Bet launch also saw an advertising campaign headlined by SportsCenter anchors Scott van Pelt and Elle Duncan.

ESPN is the largest sports media brand in the US, with over 105 million monthly unique digital visitors. It also has a strong social media presence with 370 million fans while 25 millions subscribe to its ESPN+ streaming service.

Penn and ESPN have also developed a set of content guidelines for ESPN Bet. These will apply to marketing across social media.

In becoming ESPN’s exclusive sportsbook, this effectively ends ESPN’s existing partnerships with the likes of DraftKings and Caesars. Both brands were previously mooted as potential sportsbook partners for the broadcaster. 

The round was led by investment firm Discerning Capital. DraftKings’ multi-stage venture capital firm Drive by DraftKings took part in the round, along with media investors Manifest Investment Partners.

Follow-on investment was secured by betting and media investor Jeff Sagansky. Picklebet is currently licensed to operate in Australia, and is set to expand in 2024.

Last year, Picklebet entered into a two-year deal with Racing and Sports (RAS). The deal saw RAS provide its risk managed trading service to Picklebet’s racing offering. This followed an esports betting solution deal with Oddin.gg in 2021.

“… this investment validates our innovative in-house betting product and organic media strategy, and the value it delivers to the next generation of betting customers,” said Picklebet CEO Nick Heaney.

“We look forward to utilising the funds raised to accelerate customer acquisition in Australia, continued innovation of our proprietary in-house technology platform and media capabilities, and fund our initial international expansion.”

Strategic partners

Heaney said Discerning Capital will continue to support the operator as its growth continues.

“We have the ideal strategic partners in Discerning Capital, the leading growth stage online sports betting and gaming investors in the market, to support us as we scale the next phase of our growth and product development,” he continued.

“We will be leaning on their industry insights and expertise as we expand beyond Australia’s shores, and deliver on our mission to reimagine betting and entertainment for the next generation.”

Davis Catlin, managing partner at Discerning Capital added that Picklebet held a “highly compelling” opportunity for investment.

“We have evaluated online sportsbook deals all around the world and we felt that Picklebet’s unique blend of in-house technology, in-house content arm, fast growth, and efficient user acquisition made it a highly compelling opportunity,” said Catlin.

“We have been working closely with the team and have the utmost confidence in their ability to execute on their vision.”

The second set of consultations will run for 12 weeks, implying a deadline of 21 February 2024.

This second round will focus on five topics. Earlier this month, Tim Miller, executive director of research and policy at the Commission wrote that seven topics will be up for consultation “in the coming weeks”.

Today (29 November) the Commission has confirmed that five of these topics will be included in the second round of consultations. These are:

Socially responsible incentives, specifically bonuses and free betsCustomer-specific tools, which would give customers greater control of their gambling habits, including setting deposit limitsIncreasing the transparency of customer funds, if the funds are held by companies that do not have protection against insolvencyThe requirement to make annual contributions to Research, Prevention and Treatment (RET)Regulatory data

“The white paper set out that a top government priority is ensuring that gambling happens safely,” said Miller today. “We share this commitment and today’s consultations propose how we can deliver on it. We need as many people as possible to have their say on any potential changes to the rules operators must follow.”

“These views will ultimately help shape gambling regulation across the country.”

The Commission confirmed that a further consultation will take place to discuss calculating financial penalties and financial event key reporting. The Commission classified these as “business as usual” matters.

The first set of consultations opened in July and closed in October. That round focused on financial risk and vulnerability, online games design, enhancing customer choice on direct marketing and improving age-verification in land-based premises.

Mandy Gill, director of compliance at the Commission said that more than 3,000 submissions were made for the for the first consultation round.

More to follow.

During last week’s autumn statement, Hunt proposed bringing remote gambling under one tax. This would replace the current three-tax structure, but the BGC has blasted the plans.

At present, remote gaming duty is 21% of remote gaming profit. General betting duty is 15% of net stake receipts, comparable to gross profit from bookmaking. Pool betting duty is set at 15% of receipts.

Hunt said the government will consult soon over the proposals. He added that remote gambling would be defined as gambling offered over the internet, telephone, TV and radio.

However, the BGC has warned the mooted changes could have a negative impact on sports. The standards body said horse racing would be hit particularly hard, with higher taxes likely leading to lower margins. This may also mean fewer offers for punters and less funding to sponsor and promote the sport.

BGC chief: proposals a “hammer blow” to racing’s finances

As such, BGC chief executive Michael Dugher called for a rethink over the proposal. 

“Any further new tax rises could be a hammer blow for horse racing’s finances,” Dugher said. “These are already threatened thanks to measures proposed by the government in the recent white paper. 

“This is a sport which relies heavily on betting operators for its success, yet the government appears determined to draft in measures which shrink the industry with huge ramifications for other sectors, like horse racing.”

Jobs may be lost if new tax structure is implemented

Dugher also criticised the treasury for not consulting the department for digital, culture, media and sport (DCMS) over the proposals. The DCMS is the governmental body with responsibility for betting and racing.

“It seems they are high on tax but low on joined up government,” Dugher said. “There are genuine fears that any so-called simplification of the current tax structure will be nothing more than a Trojan horse to further raise taxes on businesses. 

“This has the potential to risk jobs and investment and undermine the competitiveness of British horse racing on the global stage, placing its rich history and heritage in peril.

“We were promised an autumn statement that would deliver growth – the only thing growing is the list of worries for the betting and horse racing industries.”

Land-based taxes remain untouched

The changes would only impact remote gambling, with land-based operators and their tax structure safe. The BGC has separately criticised what it claims is a stealth tax raid on casinos that will cost the sector £5m per year. The claim relates to the freezing of gaming duty bands.

Hunt’s proposals come as the industry continues to feel the impact of the Gambling Act review white paper fallout. Published in April, the document outlines how gambling will be regulated in the UK in the digital age.

Several proposals set out in the white paper are currently being considered by the Gambling Commission, with a consultation launched in July.

Round one, which closed in October, looked at financial risk and vulnerability, online games design, enhancing consumer choice on direct marketing and improving age verification at land-based venues. More than 3,000 submissions were made in total.

The next round of consultations considers seven topics including opting in for online bonuses and other offers, as well as penalties. It is set to close in February or March, according to Tim Miller, executive director of policy at the Commission.

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