NA: It’s of course never fun to do that. When you enter markets, you always want to win. There were a few elements that contributed to [the market exit]. One was our ability to be able to reallocate resources – both in terms of tech and also in terms of marketing investments in our core European markets.
And then I think it’s also fair to say that the North American market is very challenging. The underlying cost structure is substantially higher than the majority of our European markets. North America has very high marketing costs, but also the associated costs of just operating in North America are much higher, for example payment costs. You also need to have these market access deals that are fairly costly.
When you look, even the larger operators are operating at breakeven at best in North America, which also indicates the challenges of being truly profitable in North America is tough, and it’s going to take a long time. For us as an organisation, in the midterm it was more important to be able to free up resources to be really able to focus on our core markets here in Europe.
NEXT: Turning to your in-house sportsbook. The venture has seen criticism from Anders Ström, among others. How would you respond to this criticism and in general, how would you lay out your vision for the product?
NA: Anders is of course completely free to have his views on this. I think for us it is an integral part of the future of Kindred for a number of reasons. It’s about being able to create the best product experience for our customers, ultimately, which comes through everything from reward strategies and being able to integrate rewards into the product better.
But it’s also about product differentiation – to ensure that we can have the right pricing strategies in all our markets and develop the features that our customers really like. And then at the end of the day having it in-house gives us a greater control of the delivery pipeline for that product, so we believe that this is an integral part of Kindred’s future.
NEXT: What will Kindred’s strategy be in European markets where it does not have a local licence, for example in Norway?
NA: We had a lot of conversations with the Norwegian regulator, and we have an agreement. Our perspective on the Norwegian market is that we are passively accepting Norwegian customers today. There’s nothing illegal for a Norwegian customer to bet with a European based operator.
We don’t have a Norwegian website. We don’t do any local marketing. However, we are passively accepting Norwegian customers. We’re very comfortable and our board is comfortable with the position we have in the markets we operate today.
NEXT: The FDJ acquisition was probably quite long in the works – what was the process like from your perspective?NA: We initiated a strategic review already in April last year, and we’ve looked at everything around the company inside and outside. I think the FDJ bid is something that’s very positive for us as a company. We have a strong overlap with FDJ and how we see the market – and they are one of the few companies that like us have a committed target in terms of revenues from harmful gambling, which is a very strong unifier.
They are ultimately a stable owner with a very long-term view on the market. So, we’re very pleased with the bid and I think it’s good not only for Kindred shareholders, but also for Kindred as a company.
NEXT: What will Kindred’s strategy be going forward?
NA: We set out some of our strategic decisions in our Q3 report last year, in November. For us, it’s really about a focus on our core markets, taking market shares and growing above market rates in our core markets here in Europe.
We also communicated that we will exit North America during this year, so we’ll be operationally out of North America by mid-summer roughly. We also continue to develop our in-house sportsbook KSP, which is well underway and hitting milestones. We aim to also reap the benefits of the really good job Relax Gaming is doing as well.
You can see in [Kindred’s full year report] that they are performing really well and keeping costs under control. Ultimately, it’s fairly straightforward. We know what we need to do, and I think it’s also nice to see these strategic decisions were called out by FDJ – that is something very positive.
NEXT: In your full-year results released yesterday (7 Feb) you reported a 58% year-on-year increase in underlying EBITDA. What would you say is responsible for this?
NA: 2022 was a tough year for us as we had to exit the Netherlands and then come back in the middle of the year. That was a big driver for the improvement in EBITDA and revenue in 2023 over 2022 – but also, we see a number of our markets performing really well: UK, Romania, Denmark, we have a range of markets that are ticking over very nicely and are growing above market rate.
NEXT: In your full-year 2023 results you saw an increase in revenue and recorded a profit while seeing a small loss in the Q4 totals. What was responsible for this?
NA: In Q4, we see a fair amount of the costs associated with closing our North American business. I think it’s fair to say that we had to take some of those costs.
I think it’s important to call out that the majority of those costs are basically us just recognising some of the prepayments we’ve done in terms of market access agreements, in terms of sponsorship agreements, etc.
So, the actual cash impact is just around £15m for us as a company, so that is the majority of the effect that we’ve seen in Q4.