Kindred Group to exit North America as strategic review could end in “third-party transaction”

Kindred Group has suggested its strategic review will conclude with a “third-party transaction” as the operator announced its plans to depart North America.

In delivering a Q3 trading update, the Stockholm-listed firm said it will “immediately start an exit process” from North America, with operations to fully cease by the end of Q2 2024.

Kindred said it would reallocate financial and technology resources to its core markets to capitalise on existing potential and market share opportunities.

Kindred’s North American exit comes months after the firm launched its new proprietary tech stack in New Jersey and Pennsylvania as it looked to use a differentiation point to snare market share.

The group’s Unibet brand is also live in Arizona, Indiana and Virgina while the firm had penned a series of market-access agreements to tackle the US.

However, rising costs and fierce competition, which have already forced several operators to depart the market, have seemingly forced Kindred’s hand too.

Explaining the rationale behind the decision, Kindred noted continued losses from North America was putting pressure on group-wide targets.

Coupled with that fact, the operator said the competitive nature of the market meant “significant resource” was needed to tackle the US, which the firm said was “untenable” at its current capacity.

Additionally, the group has confirmed further cost saving measures, including streamlining its headcount with a planned reduction of more than 300 employees and consultants next year.

By exiting North America and reducing headcount, the operator said it expects to achieve annualised gross cost savings of around £40m a year.

Nils Andén, Kindred Group interim CEO, said: “The cost reduction actions announced today are both necessary and decisive. While it is never a desire to inform valued colleagues of redundancies, this puts us in a stronger position to secure long-term growth for Kindred across our locally regulated core markets.

“We can now focus our resources and tech capacity towards strategic initiatives and selected markets where we see clear potential to grow our market share,” he added.

In terms of the group’s Q3 financial performance, total revenue remained flat at £283.9m compared to Q3 2022’s £277.8m.

B2C revenue was also flat, increasing just 1% year on year to £274.7m.

Elsewhere, underlying EBITDA rose 6% from £40.3m to £42.6m while post-tax profit fell severely from £57.9m to £12.6m during the quarter.

In terms of actives, Kindred noted a 7% increase in customers across its platform to 1,563,762.

The Unibet parent company also provided a post-Q3 trading update, up to and including 26 November, in which it reported B2C revenue was 4% lower than the daily average for the full fourth quarter last year.

The firm has also been impacted by a weak sports betting margin of 8.6%, which is far below its long-term average margin of 9.7%.

Addressing the operational performance, Andén pinpointed growth in the Netherlands and the UK as highlights for the reporting period.

He said: “During the third quarter, we experienced continued growth in our casino segment and strengthening positions in the key Netherlands and UK markets. However, this growth was tempered by ongoing regulatory challenges in select core markets and an impacted sportsbook performance.

“I am pleased to see that we have regained our leading position in the Netherlands following our re-entry in July 2022. We also see positive momentum in the UK, with 7% growth compared to the same period last year. In spite of this, disappointing sports betting levels across core markets, combined with a lower sports betting margin than our long-term average, negatively impacted overall performance.”

Kindred added that it expects full-year 2024 underlying EBITDA to reach £250m following the implementation of cost-saving measures, while the firm added it still expects to hit the £200m mark for full-year 2023, should the sports betting margin normalise in Q4.