In the face of global market volatility, Kindred Group has emerged with a notable increase in revenue across its various business sectors throughout 2023. The company has experienced significant growth in both its Business-to-Consumer (B2C) and Business-to-Business (B2B) operations, but the successes have not shielded it from facing a series of hurdles.
November marked a strategic shift for Kindred as the company announced its departure from the competitive North American market, a move that is expected to be finalized by the end of the second quarter. This decision is part of a strategic overhaul that commenced in April of the previous year. As a result, approximately 300 positions will be eliminated across the company, with roles in North America being directly affected.
This strategic review initially left open the possibility of a full or partial sale of the group. Recently, developments have surfaced with a considerable bid from La Française des Jeux (FDJ), the French lottery behemoth. FDJ has placed an offer on the table to acquire all shares of Kindred at a valuation of SEK27.96 billion. Kindred’s board has unanimously advised its shareholders to accept this proposal, setting the acceptance window from approximately February 20 to November 19.
The announcement of this offer coincides with the promotion of interim CEO Erik Andén to the position of permanent CEO. Andén, who stepped in following Henrik Tjärnström’s resignation in May the previous year, expressed gratitude for the trust placed in him by the board. Andén assumes his responsibilities with a focus on capitalizing on Kindred’s status in regulated markets and steering the company through its strategic roadmap.
Their 2023 comprehensive fiscal results, which Andén is shepherding into the public eye, reflect their optimistic outlook despite the significant changes. Revenue growth has been reported, carrying the figure to £1.21 billion, with B2B operations contributing £1.17 billion—a 12.4% increase. Meanwhile, B2C revenue from Relax Gaming jumped by 49.6% to £38.6 million. The re-entry into the Dutch market in July 2022, strong performance in the UK, and bright spots in the casino segment have been significant drivers of this growth. Nevertheless, regulatory pressures, particularly in Belgium and Norway, have impacted the potential for even greater gains.
Though the details on segment performance have been saved for the fourth-quarter report, Kindred has shared insight regarding its expenditure. Cost of sales was up by 9.5% to £530.7 million and administrative costs by 12.2% to £318.2 million. Despite the higher spending, the underlying profit before items affecting comparability saw an impressive jump by 93.0% to reach £1409 million.
Costs extending beyond conventional operational expenses, however, painted a complex fiscal picture. Market closure and contract termination charges, for example, tallied up to £33.8 million, with impairment losses standing at £20.8 million. Coupled with net finance expenses, these led to a reduced pre-tax profit of £59.5 million, a 53.1% decrease.
Tax payments further reduced the net profit to £47.2 million, a 60.7% fall from the prior year. Moreover, 2023’s EBITDA was less by 18.6% at £152.6 million. Yet the underlying EBITDA defied this trend, rising by 58.3% to £204.5 million.
Analyzing 2023’s final quarter, revenues climbed by 2.4% to £312.9 million, with B2C seeing a slight 2.2% rise, and B2B segment recording an 8.7% boost. The Kindred Group experienced robust performance in its B2C sector, led by casino and games, holding 57.0% of all Q4 revenue, with sports betting, poker, and other products following suit. Geographically, the Western European market was the strongest contributor. On the B2B front, the success was attributed to Relax Gaming’s broader content distribution and the popularity of its Dream Drop jackpot feature.
Despite revenue increases, Q4 was not without its financial burdens. Significant market closure and contract termination costs, along with impairment expenses, factored into a pre-tax loss of £19.1 million. However, a tax benefit helped the group close the quarter with a net profit of £18.7 million, albeit at a lower mark compared to the previous year.
Optimism persists for Kindred’s future. CEO Erik Andén assured that despite a challenging 2023, savings initiatives and strategic exits are paving the way for a more stable and potent presence in the European markets. With eyes set on 2024, Andén’s confidence remains unwavering, as he predicts Kindred can sustain above-market growth across its diverse portfolio and continue gaining momentum in its established markets.
