Taking the opportunities offered by accelerated structural changes in Kindred’s markets, while building a winning strategy for the future.
Kindred delivered an exceptional team performance in the most extraordinary year that any of us has lived through.
Teamwork – the foundation of our success
Any reflection on 2020 must start with appreciation of the fantastic work that has been delivered by Kindred’s teams in Europe, Australia and the USA. As the COVID-19 pandemic unfolded in the first weeks of the year, our people had to manage massive changes to their personal and professional lives, at a time when the world’s economies were in turmoil. As financial markets crashed and the sports calendar was almost wiped out between March and June, Kindred’s teams kept focus on our customers and our business, adapting our way of working and our cost base in a way that would have seemed impossible in “normal” times.
"Our teams around the world have worked incredibly well in the new environment, both in dealing with the challenges of the pandemic and in driving efficiency."
Continued market share gains
The challenge for digital specialists like Kindred is to ensure that we take this opportunity and continue to expand our market share across all our regions. Our results in the second half of 2020 indicate that we are on track to do this, but we always keep focus on the challenges of the future, so we are highly motivated to continue to deliver market share gains in 2021. It is very encouraging to see that over the course of 2020, locally regulated markets have grown at a faster pace than “dot com” markets. I am equally pleased that in the Swedish market, we adapted our business and delivered significantly improved results in the second year after the new regulations were introduced. In Australia, our performance has gone from strength to strength throughout 2020. This has been driven by a continued increase in activity and improvements in our own proprietary racing product.
Accelerating structural changes in a new market reality
As business and society adapted to the effects of the pandemic, a common theme across many industry sectors was increased structural change in consumer behaviour. For the last 20 years, there has been a gradual transition from the “bricks and mortar” world of betting shops, arcades and casinos towards the digital alternative. This has motivated rapid growth in the digital sector, even though the overall amount spent on gambling, in line with general economic development, has grown at a much slower rate.
A digital marketplace
One of the key drivers in our sector is the shift from offline gambling to online gambling, a shift that virtually every industry has gone through as the world adapts to the digital dynamic of today. In 2020, when physical gambling locations were either closed or restricted and when consumers’ concern for their safety was paramount, we saw a quantum leap in migration towards the digital sector. Some may have considered that this was a temporary change, but evidence from the second half of 2020, when social restrictions were relaxed a little, suggests that this change is more permanent.
The transformation to locally regulated markets continues
An increasing share of Kindred’s revenue and profit will, over time, be derived from locally regulated markets. In addition to our current locally regulated markets, the coming months are expected to see the launch of new regulations in the Netherlands. As we have seen in similar local regulatory launches, there is often a short-term negative impact, but in the longer term as the market stabilises and grows, the opportunities for market leaders are substantial. It normally takes 18-36 months for a market to re-establish to pre-regulation levels, following initial margin pressure due to betting duties, compliance costs and marketing investments. There still remain various uncertainties as to how the regulation will unfold. Subject to the relevant licence approval and complying with Dutch requirements, Kindred is committed to become a more sustainable partner in the Dutch society.
Strong development in the US market
While regulation in some territories in Europe has been challenging, the state-by-state opening of the US market is a reminder that regulation is also the biggest opportunity in this sector.
Kindred launched in New Jersey and Pennsylvania in late 2019, so 2020 was the first full year of operations, albeit disrupted by the impact of COVID-19. In Pennsylvania, we have grown rapidly and secured 4.2 per cent market share in a fast-growing online market. We expected our development in New Jersey to be slower because this was a long-established market with more competition, but we have made steady progress. In late 2020, we launched in Indiana and in February 2021 we announced a partnership to secure market access to California and Arizona. In each state, our focus is on building a loyal and stable customer base in the first instance, as it is through acquiring scale that the opportunity comes to grow profits in the medium term.
Our strategy for the US market remains to focus on specific states where we believe that the combination of market dynamics and Kindred’s offer will allow us to be successful. For 2021, we plan to launch in Illinois under the terms of our market access agreement with Penn National Gaming and in Iowa in partnership with Caesars Entertainment. The rate of organic revenue growth in the USA that we have delivered from a standing start is extremely rapid (much faster in one year than we achieved in the first three years of targeting the UK market, for example). I am very confident that we are building a winning team in the USA through a combination of European expertise and local talent. I consider the USA to be the most exciting opportunity Kindred has had in my ten years as CEO and believe that our strategy to focus on states will be key to long-term success.
Review of the strategic direction
During the second half of 2020, we performed our annual review of the Group’s strategy. We will continue to focus on locally regulated markets with the USA, Europe and Australia as key areas. We will continue building Kindred into a scalable and efficient organisation throughout. Through thrilling and engaging experiences built around our products, we can differentiate ourselves. In this way, we can continue to deliver sustainable growth for our shareholders.
Our journey towards zero
Last year I announced that we had set up an ambition to reach zero revenue from harmful gambling by 2023. We are now the first gambling operator to report the share of revenue that is derived from high-risk customers. These figures will be updated quarterly and published on the Kindred Group’s website together with a measurement of the effectiveness of the sustainability work. The aim is to increase the understanding of our long-term sustainability work and contribute to a safer gambling experience.
At this point, I would especially like to pay tribute to my good friend and colleague Anders Ström, who announced in December that he will not seek re-election to the Board in 2021. Anders founded the original Unibet business in 1997 and has been both the figurehead and the passionate heart of this business ever since. His vision of “By players, for players” lives on throughout Kindred in our commitment to provide the best experience to our customers, both for Unibet and the other brands in our portfolio.
And of course, I want to thank all the Kindred people for their incredible efforts in 2020. Our people are spread over multiple locations and it has been very difficult to meet in person for most of the year, yet everyone showed, and continues to show, fantastic teamwork in managing our response to the pandemic.
And now we can look forward to almost two years of exciting sports events!
Henrik Tjärnström
CEO
Malta, 12 March 2021
