Kindred Group has published its annual report for 2019, tracking what many investors will view as a transformative year beset by challenges brought by regulatory change in the Swedish market and cost of entry to the US sports betting space.

Those difficult trading conditions were borne out by figures showing an operating profit of $92.5m versus $203.6m year-on-year, while EBITDA was down by $97.5m to $167.2m in the period.

Reflecting on the trading year, CEO Henrik Tjärnström said: “For Kindred, it has been a year when we stepped foot into the US market for the first time, and it has also been the year when the Swedish market opened for a modern gambling license model. A year ago, we entered 2019 full of enthusiasm for what was to come with continued re-regulation and an expectation for strong growth. 

“With the year’s results in hand, it is evident that the growth has not been as strong as expected. Our gross winnings revenue reached £912.8m ($1.2bn), on par with the year before, however our EBITDA reached £128.1m ($167.2m), which is not satisfactory. Increased betting duties, challenging market growth and investments into new markets are all contributing to this, and we are adjusting our operations to manage these changes.”

Despite these current headwinds, said Tjärnström, Q4 2019 saw an increase in active customers to an almost new all-time high for the group. He described it as a “…sign that we continue to offer a great experience for our customers. It is also a good platform to build on as we enter a new big sports year”. 

Focusing on US activities, the CEO told investors: “I know that we need to grow our business to absorb new regulations, which is why in 2019 we entered into the US market following the repeal of the PASPA legislation in 2018.

“The US market represents the largest opportunity for future regulated growth which is why in 2018 we decided to enter the market. In the second half of 2019 we went live in New Jersey and Pennsylvania and I am excited about the initial results we are seeing from this investment. 

“We are entering the US market through selective growth and complete focus on what we do best. We will take on this potentially huge market one state at a time and ensure we gain a stable market share in each state.

“Since establishing a presence in the US in 2019 we have grown a dedicated local team of 35 experts from our European operations and local talent, remaining at neutral headcount for the group, making use of our expertise in data to ensure we give our customers what they desire.”

US activities have, however, created significant albeit anticipated extra spend for Kindred. Tjärnström explained: “There has also been significant investment to enter the US market, with a negative EBITDA from the US market of £9.7m ($12.7m) for 2019, of which £6.3m ($8.2m) related to marketing. The negative impact from the US is as expected when launching into new markets and the group is confident that in 2020, as the US business grows, the impact will reduce.”