Kindred Group posts strong Q1 as it mulls sale or merger

Kindred Group has informed investors that it is initiating a review of strategic alternatives that may include the sale of business or a merger with another company. The news comes as part of a company update that presented the Group’s interim first-quarter results for 2023.

In the update, the Group confirmed that the Board of Directors is currently in the process of exploring different options with the main objective being maximizing the shareholder value. To help assist with exploring these alternatives, the company has already retained Morgan Stanley & Co, International plc, Canaccord Genuity and PJT Partners that will serve as financial advisors.

No official timetable for the completion of the process has been set just yet. Kindred Group has said that it would not undertake any obligation to make further announcements regarding this process until a final decision has been reached. Meanwhile, the company’s operational results have been improving.

Both Unibet and 32Red, two of the company’s flagship brands, did well and generated a substantial increase in revenue, despite a hefty financial penalty against them. Profit before tax stood at £30m ($37.4m), the company said in its financial catch-up. The first-quarter results were a significant improvement in the first quarter in 2022 when EBITDA crashed by 61% despite revenue growth in that period.

The results were welcomed by Group CEO Henrik Tjärnström who said that the past months of cost-optimization had paid off. He offered insight into both the B2C and B2B sectors, and said:

"Within the B2C business improved activity across core markets, especially the Netherlands, helped contribute to this strong start to the year. The B2B business further supported through exceptionally strong growth, with Relax Gaming revenue increasing by 90% compared to the same period last year."

B2B and B2C operations together generated a total of £306m ($381m), a 24% increase on the £247m ($307.66m) generated in Q1 2022. Kindred has shown significant resilience in regulated gambling markets and touted them as the Group’s most important asset. Operational results in the Netherlands, a tightly-regulated market, saw gross winnings revenue hit £57.3m ($71.4m).

Overall, Kindred continued to perform well in the majority of its markets, but there were associated costs that required the company to perform stricter AML checks and improved responsible gambling processes. The company did note that it had felt the pinch of the financial penalty issued against the Unibet and 32Red brands in the United Kingdom which were hit with a combined financial penalty of £7.1m ($8.85m).

Meanwhile, across the Atlantic, the Group has been doubling down on its presence and reach in new markets in the United States. The company cleared a licensing process with the New Jersey Division of Gaming Enforcement and is expected to launch in May.

"This is great news and will provide Unibet customers in New Jersey with an enhanced experience and give us better control of performance and the customer offering," Tjärnström said. Overall, Kindred is showing strength, but it is also seeing reasons for concern as mounting costs tied to tighter regulation may be adding too much pressure. Kindred is also fully committed to bringing its revenue from harmful gambling to a net zero, as part of its Journey to Zero.