Fortuna CEO Per Widerström on the operator's 'glocal' growth strategy

Fortuna Entertainment Group (FEG) can consider itself unlucky not to have climbed the EGR Power 50 rankings ladder last year. A cursory glance at the operator’s 2017 financial results reflect a business that is going from strength to strength, with total gross win soaring 87.4% year-on-year to €305.4m and adjusted EBITDA up 169% during the 12-month period. And this momentum has continued into the new year as gross win in the first quarter increased 157.6% to €110m.

According to CEO Per Widerström, Fortuna’s value creation strategy is based on three main pillars. Firstly, increasing market share gain in existing markets driven by regulation and operational excellence. Secondly, product vertical extension into gaming, for example, driven by regulation and internationalisation. And lastly, expansion into Central and Eastern European (CEE)-regulated markets through M&A.

The latter part of this strategy included the consolidation of Hattrick Sports Group and Fortbet’s Romanian entities, which were rolled into the business last year. This, in combination with a strong brand and multi-channel opportunities, has helped Fortuna meet its main objective: to be the number one licensed sports betting and gaming operator in the CEE region.

However, FEG clearly faces a number of new challenges down the line, not least major changes to the regulatory framework across its core markets and the emergence of rivals like Superbet as formidable competitors. EGR Intel spoke to Widerström to find out how the operator plans to turn these new changes to its advantage.

EGR Intel: What accounts for the solid growth you’ve been reporting in recent months?

Per Widerström (PW): We did indeed report some solid numbers for Q1 2018 with gross win of €110m and EBITDA of €22.7m, a 158% and 666% year-on-year rise respectively. This growth is a result of the value creation strategy with the corresponding transformation programme that we initiated back in the beginning of 2015. The growth is driven by a combination of robust organic as well as M&A-led growth.

Our organic growth, in particular, has been driven by introducing a clearer focus on the key drivers of growth. This means not just looking at amount stake and gross win margin but ‘why’ is amount stake growing, for example. In other words, we focus on the key levers to drive growth such as new customers, conversion rates, retaining existing customers, increasing frequency and so on. It’s simple stuff, but you have to really drive the focus towards the things that matter.

Our strategy implementation has also been divided into two phases: phase one (2015-2017) focused on building ‘the foundation’ for future profitable growth through investments into core competencies, competitive advantages and scalability; and phase two (2018 onwards) is going for the vision of becoming the uncontested number one licensed multi-channel and multi-product operator in CEE markets.

EGR Intel: How have the acquisitions you’ve made recently been incorporated into the business? Has this been a successful process?

PW: During 2017, we acquired the Fortbet (a Penta-owned entity) Romanian entities which were licensing the Fortuna brand for their customer offering, as well as the Hattrick Sports Group (Croatia, Romania and B2B operations). This enabled Fortuna to further strengthen its CEE leadership position. In addition, we launched a dedicated integration programme with the aim of driving value creation through some distinct synergy initiatives while mitigating any business disruption along the integration process. So far, we are very encouraged by the results, and the synergy capture is ahead of our expectations.

We also started to incorporate the Fortuna ways of working into the new businesses. This includes, for example, integrating our standard marketing and bookmaking tools, as well as processes, into the new businesses, with the same focus on key value drivers as we have introduced in the original Fortuna markets. We are also delighted to have enlarged our Fortuna family with our fantastic employees in Romania and Croatia. All in all, Fortuna Entertainment Group today has 6,000 employees across five markets.

EGR Intel: Are you looking to complete more acquisitions this year? Where are you looking to strengthen the business?

PW: M&A is part of Fortuna’s strategy to further strengthen our market position. We are constantly looking for new opportunities to consolidate or expand into new markets.

EGR Intel: Do you think the main opportunities are by pursuing a single brand strategy (like William Hill) or a multi-brand strategy (like Kindred)?

PW: As mentioned, FEG believes in a multi-brand strategy (Fortuna, PSK, Casa Pariurilor and Hattrick), and we will continue to invest behind this.

“We do see CEE as our home territory, but for the right target we would consider expanding our ambition outside of the CEE market” – Per Widerström, Fortuna Entertainment Group

EGR Intel: Do you have any plans to expand beyond your core CEE markets, such as the US and UK?

PW: We do see CEE as our home territory, but for the right target we would consider expanding our ambition outside of the CEE markets. However, the US and UK are not currently on our list of targeted markets.

EGR Intel: What is your view on the regulatory outlook of the CEE region?

PW: Last year presented some significant changes in the CEE regulatory landscape. Some countries have launched entirely new legislative frameworks, such as Czech Republic, where we were the first to take advantage of the new casino and gaming legislation and had a more than six-month lead in the market before our competitors could respond. Other markets, we believe, are contemplating similar changes, such as Slovakia. And some markets, including Poland, have adopted changes to their various legal and regulatory frameworks, mainly focusing on new enforcement measures and fresh identification requirements.

In addition, there have been some compliance-related developments such as amendments of local AML legislations and the introduction of GDPR.

EGR Intel: Why was the decision taken for FEG to delist?

PW: FEG is delisted from both the Prague and the Warsaw stock exchanges since 10 June with our majority shareholder Penta Investment currently holding a 96% ownership. The delisting will relieve FEG from the administrative and reporting burden connected with being a listed company.

EGR Intel: In a recent presentation, you said you would be the number one licensed betting and gaming operator in CEE by end of 2019. Are you on your way to achieving this?

PW: We believe Fortuna has actually already reached this position. We are present in five markets – Czech Republic, Croatia, Poland, Romania and Croatia – with a top-two position in all these markets. We truly believe we are well positioned in the CEE market and, when we look at our licensed multi-channel competitors, none of them are currently present in more than two CEE markets.

EGR Intel: How is Fortuna trying to innovate to stay ahead of the curve?

PW: Innovation is key for Fortuna and is one of our core company values. Some of the key examples of innovation stem from us substantially investing into our one common multi-channel, multi-product and multi-jurisdiction platform, which is the basis for our innovation efforts across our products and channels. In addition, we are very focused to ensure a truly insights-driven and dynamic customer lifecycle management process, offering our customers an outstanding experience.

EGR Intel: How is Fortuna tapping into the multi-channel/omni-channel opportunities in your respective markets?

PW: Across all our markets, multi-channel is absolutely core to FEG’s go-to-market strategy. Indeed, we see this as one of our competitive advantages. Our CEE retail network of 3,200 betting shops provides us with a robust foundation to tap into the CEE cash-centric markets with corresponding conversion into the online channel.

Our customer proposition is constantly being designed and executed in light of a multi-channel context. For example, unlike some of our competitors, we allow customers to use the same single account to bet both online and in our shops, leading to a true multi-channel experience for our customers.

EGR Intel: Are you worried by the rise of competitor operators such as Superbet? What differentiates Fortuna from such companies?

PW: We very much welcome and respect the competition. Superbet is doing well in Romania and we are following with interest their, and other operators’, efforts to successfully launch and become multi-jurisdiction, locally-licensed operators. While we acknowledge we still have several improvement opportunities, Fortuna has already proven that we can operate in a multi-jurisdiction context, as well as successfully expanding into new territories. We firmly believe in continuous improvement and will continue to invest behind this.

As part of the Fortuna transformation programme, we have established a scalable ‘glocal’ operating model – combining global centres of excellence with local market capability and capacity – which we truly believe differentiates us from our competitors. In addition to this, we have been investing substantially into football sponsorships across our markets, which we see as an important positioning and differentiation element.

EGR Intel: How is Fortuna trying to position itself around the World Cup?

PW: The World Cup is indeed the biggest sporting event during 2018. With our multi-brand strategy, which includes Fortuna, PSK (Prva Sportska Kladionica), Casa Pariurilor and Hattrick, we are very focused on ensuring each local brand is offering a distinct and unique customer proposition. This means having the widest range of special markets and very attractive value-focused promotions such as ‘Happy Hours’ and daily special promotions. Leading up to the World Cup, we also leveraged our local football sponsorships to further communicate that FEG’s brands are closely connected to the number one sports in our markets, namely football.

EGR Intel: How will you be looking to retain the customers you acquire during the World Cup?

PW: The World Cup is a great opportunity to acquire new customers and we are very focused to ensure they will have a great betting and gaming experience during the competition. After the World Cup, these new players will be incorporated into our insights-driven customer lifecycle management process with the aim to deliver to the customer the right offer, right message, right content at the right time and place.