Kindred Group Plc, the renowned online gaming operator, has reported a commendable financial performance for the full year of 2023. The company's Q4 revenues saw a modest yet significant increase, reaching £313 million, up from £306 million in the previous year. This 2% rise is attributed to the company's strategic growth in key markets including the UK, Netherlands, and Romania.
Strategic Acquisitions Paying Off
The acquisition of Relax Gaming has proven to be a strategic boon for Kindred Group, contributing positively to the company's robust financial results. The partnership has enhanced Kindred's product offering, thereby attracting more customers and retaining existing ones.
Regulatory Challenges
Despite these gains, the company faced regulatory headwinds in Belgium and Norway, which have hindered its overall growth trajectory. Regulations in these countries have been stringent, but Kindred has remained resilient, with 82% of its Q4 gross winnings revenue being generated from regulated markets—a testament to the company's commitment to responsible gaming and compliance.
Sports Betting and Casino Performance
In the sports betting arena, the margin after free bets stood at 9.9%, which is considered low. Nonetheless, this segment brought in gross win revenue of £115 million. On the brighter side, casino and games segments showed a healthier performance, registering a 5% revenue growth. This indicates a diversifying revenue stream within Kindred's portfolio, which could help buffer against fluctuations in sports betting margins.
US Market Withdrawal and EBITDA Growth
A strategic retreat from certain US states resulted in a £6 million EBITDA impact for Kindred. However, this decision did not dampen the company's overall earnings before interest, taxes, depreciation, and amortization (EBITDA), which grew by an impressive 45% to £57 million in Q4. The annual gross-win revenues also climbed to a noteworthy £1.17 billion, while the underlying EBITDA for the fiscal year 2023 was reported at £205 million.
Setting Sights on 2024
Looking forward, Kindred has set an ambitious EBITDA target of £250 million for 2024. The company's financial health is further underscored by its substantial cash reserves, with cash and cash equivalents totaling £240 million at the end of the year.
Groupe FDJ's Takeover Bid
In a significant development, Groupe FDJ has extended an offer to acquire Kindred Group for €11.40 per share, valuing the latter at €2.6 billion. This offer represents a 24% premium over Kindred's current enterprise value, signaling a strong vote of confidence in the company's future prospects. The Kindred board has expressed its favor towards the takeover, and key investors have also shown their support.
Notably, influential shareholders such as Corvex Management LP, Premier Investissement SAS, Eminence Capital, Veralda Investment, and Nordea, which collectively represent approximately 27.9% of Kindred's outstanding shares, have given irrevocable undertakings to accept the offer. They have also agreed to vote in favor of amending the articles of association in line with one of the conditions of the offer.
Aiming for European Dominance
The proposed merger between Kindred and Groupe FDJ is poised to commence with a tender offer starting on February 19, 2024. The union aims to create Europe’s second-largest gaming operator, a move that could reshape the gaming landscape on the continent. With both entities bringing their strengths to the table, the merged entity will likely benefit from increased scale, diverse offerings, and a broadened geographical footprint.
In conclusion, despite facing regulatory challenges and making tactical exits from certain markets, Kindred Group's financial results for 2023 reflect a company that is adept at navigating the complexities of the global gaming industry. With strong revenue growth, solid cash reserves, and a potentially game-changing merger on the horizon, Kindred Group is well-positioned to continue its trajectory of success into 2024 and beyond.