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Kindred Group plc Annual Report and Accounts 2017
O V E R
O V E R
Kindred Group plc Annual Report and Accounts 2017
A scalable, resilient IT platform allows the Kindred Group toprocess over 22 million transactions a day, supporting multiple brands across different licensed jurisdictions, all with different terms and conditions.
Kindred Group undertook audit certifications across all of its licensed activities as required bythe terms of its licences. During the year ended 31December 2017, the number ofaudits was 27, with no material findings in compliance noted.
Strategic report1 Highlights2 At a glance4 Chief Executive Officers review6 Revenue model 7 One year as Kindred Group8 Kindreds customers drive
ourbusiness10 Building brands that appeal to all12 Creating a world class employee
experience14 Continuing to profit from our
in-house platform16 Key performance indicators18 Sustainability24 Risk management26 Principal risks and uncertainties28 Financial review
Governance31 Introduction to governance32 Board of Directors34 Executive Committee36 Corporate governance statement41 General legal environment43 Shares and share capital46 Remuneration Committee report48 Directors report
Financial statements50 Independent auditors report56 Consolidated income statement 57 Key ratios57 Consolidated statement
ofcomprehensive income58 Consolidated balance sheet 59 Consolidated statement of
changesin equity60 Consolidated cash flow statement 61 Notes to the consolidated
Other information87 Annual General Meeting 88 Definitions
Werefocusedon getting thenumbers
This document is the English original. In the event of any discrepancy between the original English document and the Swedish translation, the English original shall prevail.
Kindred is one of the largest online gambling operators in the European market
with over 21 million registered customers worldwide.
Strategic highlights > Launched the new brands, Storspelare
and Storspiller. > Acquired the UK leading brand 32Red. > Launched a new cutting-edge
racingplatform. > Won fourteen industry awards.
Operational highlights > A strong year with all-time highs across
all key revenue, profitability and cash generation metrics, showing how adaptable the business is.
> A 68 per cent increase in betting duties was absorbed as a result of scalability and cost control.
> Increased free cash flow has resultedina proposed increase in thecash dividend.
0.516Earnings per share
0.735Free cash flow
per share +78%
For definitions please see page 88
Kindred Group plc Annual Report and Accounts 2017 1
Casino & Games
Our marketsby region(%)
Gross winnings revenue from mobile(GBPm)
Active customers (full year)(Millions)
Kindred 26.3%Online 12.2%
Kindreds share of the European online marketCAGR 2011-2017
Market share %EURbn
At a glance
The Kindred Group offers Sports betting,
Racing, Casino & Games, Bingo and Poker through
our distinctive brands.
Source: H2 Gambling Capital December 2017
The brand Unibet has grown in the last twenty years to be one of the leading brands both by size and reputation in thedigital gambling market. Unibet willcontinue to bethe Groups leading all-product brand andtheBoard is confident that the Unibet brandand business will continue to growstrongly byliving up to its brand promise: ByPlayers, For Players.
But Kindred Group has developed inrecent years to be much more than Unibet, the brand. There are different segments in thegambling market andtomaximise shareholder value itwasessential to broaden the offer tocustomers. Through aseries of successful acquisitions, theGroup hassecured a range of complementary businesses and brands.
The Groups business is organised aroundcentralised technology, product, operations and commercial teams in support of the different consumer brands, which drives efficiency of operations. Separating the Groups corporate identity from the Groups leading individual brand, therefore, reflects the current reality of ascalable centralised model that can continue todevelop and support multiple brands inthe future.
revenue from mobile
For definitions see page 88. *based on Q4 2016 to Q4 2017
Local brandsFor some of the local markets Kindreds hyper local brands are those below.
Key international brandsFor the international markets, Kindreds keybrands are those below. On 26 February 2018, Stan James customers were migrated to Unibet and the brand closed
Read more about our brands on page 10
Kindred Group plc Annual Report and Accounts 2017 3
As a leading global operator, Kindred drives the development and regulation of the industry, while putting the customer firstineverything we do. But we remain committed to the entrepreneurial spirit, innovation and providing a great place to work. 2017 was another year of strong development for Kindred against a range ofstrategic priorities. It was also our first full year as the Kindred Group, following thechange of corporate identity in December 2016.
Our new identity provides many benefits, but there are two key aspects that we demonstrated in 2017. The Kindred corporate identity makes clear that we are a multi-brand organisation, that is much greater than the strength of our legacy Unibet brand. The Kindred brand is also focused on technology leadership, both in the continued investments we make in all aspects of our own business as well as the innovation plays that we support through Kindred Futures.
In 2017, we welcomed the 32Red team toKindred following the successful completion of the largest acquisition in our
Henrik Tjrnstrm CEO
+38%Increase in GWR
In 2017 we celebrated 20 years since Anders Strm founded the business. Kindred today
is very different from the startup of 1997.
history. 32Red is a leading brand in the keystrategic market of the UK, so the acquisition was fully in line with our strategy to be a market leader in locally regulated markets.
At Kindred we are never satisfied, which means that we are always challenging ourselves to perform better.
Odd years are supposed to be quiet years with the received wisdom being that the main opportunity for growth in this industry comes from the major international football events which fall in even years. At Kindred, we try to see opportunities that the market does not see and this drive to improve has been a key factor in our ability to grow our business faster than the market over an extended period.
In 2017, I am delighted that we were able to deliver 38 per cent overall growth in gross winnings revenue (including of course
32Red for part of the year). Even more impressive was the underlying organic growth of 23 per cent in constant currency, against very tough comparables from 2016.
Equally important to our owners is that wedo not focus only on growth in top line revenues. In everything we do, Kindred places priority on scalability and efficiency, in order to ensure that growth in top line revenues converts into growth in profits and cash flows. This not only allows us to reward our owners through increased dividend capacity, but it also provides us with the funds to continue to invest in the business.
Even more impressive than the 38 per cent growth in top line revenues, therefore, was the growth of 40 per cent in profit after tax. This successful conversion of revenue growth into profit growth is also reflected in the Boards proposed dividend of 0.551GBP per share, an increase of 78 per cent on the dividend paid during 2017.
The acquisition of 32Red of course delivered more than just additional revenues, profits and cash flows. The Kindred Group has been focused on the strategic opportunity to grow in the UK market for several years. Our market share in the UK accelerated following the successful acquisition of Stan James Online in 2015 and the acquisition of32Red in 2017 means that the UK isnow one of our top markets.
Acquisitions also bring the challenge of delivering successful integration, in order to deliver in