The head honcho of Kindreds, Henrik Tjärnström, declared during a recent earnings call that all options are on the table when it comes to trimming expenses. This statement came as part of a trading update for Kindreds’ final quarter of the year.
While Kindreds’ revenue for the fourth quarter is projected to increase by 24.5% year-over-year, reaching £305 million (€343.1 million/$372.2 million), the company acknowledged that this figure falls short of expectations. Consequently, they have pledged to take immediate action.
In response to this situation, Tjärnström stated that Kindreds will thoroughly examine all cost areas to enhance spending efficiency in the upcoming year. He emphasized that no cost-cutting measures are being ruled out.
“We are meticulously scrutinizing every cost item to optimize efficiency and are revising our spending plan for 2023,” he explained. “At this juncture, we are unable to disclose the overall figures.
“However, we are undeniably reviewing the entire income statement, and in that regard, no possibilities are being excluded.”
He attributed this decision to the fact that fourth-quarter revenue fell significantly below both Kindreds’ and the market’s projections.
“We are taking this matter very seriously, and we recognize the discrepancy between our expectations and those of the market. This is why we are taking proactive steps now to enhance profitability in the short and medium term,” he stated.
Tjärnström further indicated that Kindreds will be re-evaluating its investment strategy as part of its cost-reduction efforts.
The company is shifting its focus to key strategic projects and cutting short-term expenses, according to the CEO.
They are also exploring opportunities, like organic acquisitions, to support natural business expansion, but this is not a new strategy.
**Financial Performance**
The CEO identified four key factors contributing to the revenue decrease, including the 2022 FIFA World Cup, which he described as a disruption to the sports schedule.
“The World Cup disrupted the sports calendar, resulting in a decrease of approximately 25% in top football league matches compared to the last quarter of the previous year,” he stated. “World Cup revenue was insufficient to compensate for the impact of fewer matches elsewhere.”
“There were very few matches during the tournament.”
The CEO also attributed the revenue decline to lower betting margins after free bets, at 8.9%, and a £5.3 million payout for the Houston Astros winning the Major League Baseball World Series in November 2022.
**Operational Adjustments**
Kindred’s performance in Norway and Belgium was also cited as a reason for lower-than-expected revenue.
In September 2022, the Norwegian regulator Lotteritilsynet announced it would impose a daily fine of 11.98 million Norwegian kroner on Kindred if it continued to operate in Norway. In October, the fines ceased as Kindred indicated it would no longer operate in Norway.
However, in November, Lotteritilsynet reinstated the daily fines.
The final verdict on this matter was reversed in December.
Tjärnström explained that Kindred’s business alterations in Norway affected the quarter’s earnings.
Regarding Belgium, Tjärnström highlighted that regulatory modifications enacted in 2019 had a substantial impact on Kindred’s performance in the market.
“Looking back at 2019, the Belgian market introduced limitations for the first time,” he stated. “The implementation of these regulatory changes also sparked discussions about how to rapidly utilize experience to address these alterations.”
“This is essential for establishing a fair playing field in the Belgian market, and we believe we have implemented processes more in line with regulations than our rivals.”
Transforming Challenges into Opportunities
Tjärnström further emphasized the significance of quickly adapting to regulatory changes to eliminate any potential negative effects in the future.
“By adapting to these regulatory changes faster than our competitors, we can transform these changes into a competitive edge in the long run.”
Overall, Tjärnström noted that the developments of 2019 – Sweden launching its regulated gambling market – were key factors in the company’s ability to regain financial prosperity in 2023.
“In 2019, it took us several quarters to regain growth, but then we witnessed strong growth for several quarters.”
Looking Forward
The chief executive of Kindred Group, Tjärnström, verified the company’s positive performance in the Netherlands, France, and Sweden during the present quarter. He highlighted their aspiration to “regain their top position” in the upcoming year.
“The Dutch market continues to demonstrate robust results,” he declared. “We are assured in our strategic blueprints and are making headway towards our goals.”
Kindred was absent from the Dutch market for nine months prior to July 2022, while awaiting a permit from the Dutch regulatory body, which was issued in June.