Kindred CEO: “No item is sacred” when it comes to cost-cutting
Although Kindred’s Q4 revenue is projected to rise 24.5% year-on-year to £305.0m (€343.1m/$372.2m), Kindred said this was not up to expectations and vowed to take “immediate action”.
Addressing this, Tjärnström said that Kindred would review all areas of cost in order to improve spending for 2023, adding that no cost-cutting is off the table.
“We are looking to review all cost items for efficiency purposes and refreshing our channels for spending in 2023,” he said. “We cannot comment on the overall number at this point.
“But we’re clearly looking across the P&L [profit and loss], and no item is sacred in that sense.”
He said this was due to how vastly the Q4 revenue is set to depart from Kindred’s, and the market’s, expectations.
“We take this very seriously, and the deviation that we see from our expectations and the market’s expectations; that’s why we’re taking actions now to improve profitability in the short and medium term,” he said.
Tjärnström said Kindred would also rethink its investment strategies as part of its cost-cutting initiative.
“We are reprioritising investment to free up capacity for those key strategic initiatives, and also to reduce short-term costs,” he said.
“We’re also looking at continued opportunities like organic M&A to complement the organic growth of the business, but that’s nothing new,” Tjärnström said.
Tjärnström outlined four main reasons for the revenue decline, one of which being the 2022 Fifa World Cup, which he said had “disrupted” the sporting calendar.
“The World Cup disrupted the sporting calendar and resulted in approximately 25% fewer top football league fixtures compared to the fourth quarter last year,” he said. “The turnover from the World Cup was not enough to offset the impact of the reduced fixtures elsewhere.”
“During the end of the tournament, there are very few matches being played.”
Tjärnström also attributed the revenue to the low betting margin after free bets, which was 8.9%, and to a £5.3m payout from the Houston Astros’ win at Major League Baseball’s World Series in November 2022.
Changes in business model
Kindred’s performance in Norway and Belgium were also listed as reasons for the lower-than-expected revenue.
In September 2022, Norway’s regulator Lotteritilsynet said it would impose a fine of NOK1.198m for each day Kindred continued to operate in Norway. In October, the fines ceased as Kindred said it would no longer operate in Norway.
In November, however, Lotteritilsynet reintroduced the daily fines. This decision was ultimately overturned in December.t
Tjärnström said that how Kindred changed its offerings in Norway during the quarter had an impact on its revenue.
Of Belgium, Tjärnström said that regulatory changes made in 2019 have had a strong impact on how Kindred has performed in the market.
“Looking back at 2019, limits were introduced for the first time in the Belgium market,” he said. “When these regulatory changes happen it’s also a question about making use of the experience as soon as possible to handle these changes.”
“It’s also important regarding a level playing field in the Belgium market, where we believe we have applied the processes in a more complied way than our competitors have done.”
Turning challenges into advantages
Tjärnström followed on from this by emphasising the importance of responding to regulatory changes quickly, to negate any negative impact in the future.
“But by adapting to these regulatory changes faster than our competitors, we can turn these changes into competitive advantage in the long term.”
As a whole, Tjärnström pointed to developments in 2019 – when Sweden introduced its regulated gambling market – as a reason the company could return to financial success in 2023.
“In 2019, it took us a couple of quarters to return to growth, but then we saw strong growth for many quarters to come.”
Tjärnström acknowledged that Kindred had experienced success in the Netherlands, France and Sweden during the quarter, adding that Kindred had plans to “regain leadership” in the country during 2023.
“The Netherlands continues to do really well,” he said. “We believe that the plan we have is solid and we’re well on our way to that.”
Kindred was absent from the Netherlands in the nine months leading up to July 2022, as the company awaited a licence from the country’s regulator in June.