Kindred Experiences Profit Decrease Caused by Rising Regulatory Fees
A gaming company licensed in Malta, Kindred, has declared its first-half results, but it claims that it's facing financial struggles due to expensive regulations in Sweden. The new, stringent legal market in Sweden began operating at the beginning of the year. The CEO of Kindred, Henrik Tjärnström, recently lashed out at the hefty licensing costs in Sweden and stated that they were one of the causes for a drop in earnings in the second quarter. Although Kindred saw a boost in turnover from the previous year, they also experienced a decline in profits.
The newly regulated Swedish gambling market has faced much criticism from Kindred. The company's gross profit dipped by 7% compared to the previous year, and Tjärnström pointed out that the "new regulatory costs in Sweden" were partly to blame. On top of higher betting fees, Kindred had to ramp up marketing efforts to counter the increased competition in the market.
Despite the rising costs, Kindred recorded overall growth in revenue. The company achieved an impressive 6% increase in revenue to €505.1 million during the first six months of 2019, with a significant portion coming from their sports betting segment. However, despite the growth, the company incurred higher costs as well. Their cost of sales increased by 19%, and betting fees rose by 32%. This led to EBITDA being reduced to around €68.3 million.
Operating costs also contributed to Kindred's declining profitability. Despite the growth in revenue, operating profit took a big hit, falling by more than 50% compared to the previous year, landing at about €41 million. Pre-tax profit fell by 32%, which dropped to around €36.4 million. The company's net profit dipped 50%, landing at around €31.1 million.
In Q2 of 2019, Kindred's marketing expenses were the highest since 2013. Although this may have led to losses, they intend to keep investing in modern technologies and potentially lucrative US sports betting market. As the CEO, Tjärnström, said, "the investments may impact profitability in the short term, but they will drive future growth in gross profits and profits in our locally licensed markets."
Since the beginning of the year, the reformed Swedish gaming market has attracted a plethora of European providers. Notable companies like LeoVegas, Mr Green, and Betsson have set foot in the Swedish market, alongside more than 70 other providers. However, not everyone in the market is meeting regulatory expectations.
Applications for online casino licenses cost €38,000, while putting forth both online casinos and sports betting services bids a full €74,000. There is a 18% tax rate on top of gross turnover, and an extremely strict advertising policy. Advertisements with "exaggerated profit messages" are prohibited, and all market participants must adopt a nationally recognized self-exclusion system. Global Gaming is one company that failed to meet these requirements and had their license revoked in October.
The authorities deemed that the company had not exercised enough caution when setting betting limits. Ten customers, who racked up between €50,000 and €1.1 million on the gambling platform, were not met with any checks on their spending. The Swedes strictly revolve around a betting limit of €10,000 (approximately €1,053).
Through regular media appearances, Tjärnström has expressed his disapproval of the high costs and tough conditions placed on the Swedish market. "It is our view that the Swedish gaming market - the level of taxation, combined with regulatory costs and administrative fees - is among the most expensive in the world," he said. It's no secret that the company has found regulatory costs challenging, and they plan to continue offering the same gaming experience for Swedish players while ensuring full compliance with regulations.
Kindred has been in the market since the 2019 quarter and has continued their business operations in Sweden, likely unphased by the high costs of entry and stringent market restrictions.
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Source: www.onlinecasinosdeutschland.com
