Playing catch-up: How soon can Kindred Group regain its position in the Netherlands?

276. That’s precisely how many days Kindred Group was forced into exile from the Netherlands as punishment for accepting Dutch players without a licence. So when the regulated market went live on 1 October 2021 with 10 licensed operators, Kindred, like many other international names, was left watching from afar as it was forced to endure a ‘cooling-off’ period. That all changed on 4 July 2022 when its flagship brand finally opened for business at Unibet.nl and the Netherlands became Kindred’s 20^th locally licensed market – and arguably the most important launch in the company’s 25-year history. Indeed, Kindred’s much-needed re-entry into the market – this time as a licensed operator after more than two decades operating in the grey market – would have been a huge relief to management, the board and shareholders. The absence of the country, which used to provide around a third of the firm’s EBITDA, has been a drag on the financial results and the share price, which is down almost 40% since 1 October 2021. At the time of the exit, the Stockholm-listed operator forecast a hit to EBITDA of £12m a month. And it’s been a rough ride ever since, with the Netherlands withdrawal largely to blame for Q2 2022 underlying EBITDA plunging 78% to £25.3m. Active customers were down 30% to 1.34 million (a fall of 19% excluding the Dutch market).

Kindred might be back, but it hasn’t been able to dust off its old customer database from the grey days due to the laws there now, so it’s effectively starting from scratch. Yet management is upbeat about progress thus far, even if it is very early days. Despite limited marketing efforts and July seeing a lull in the sporting calendar, an average of £150,000 in gross winnings revenue per day was achieved between 4 July and 19 July. This suggests a run rate of £13.5m in revenue per quarter, although the company insists this £150,000 per day was an average and had been increasing gradually throughout the period in question. Furthermore, Unibet attracted approximately 30,000 active players (representing just 2% of groupwide actives in Q2) over the course of those first 16 days, while 92% of customers had expectations exceeded or met, according to Kindred’s own survey with its Dutch user base. CEO Henrik Tjärnström also proudly stated during the Q2 earnings presentation on Friday that Kindred is the only licensed Dutch operator with individual apps in the App Store across three verticals: sports betting, casino and poker. Speaking exclusively to EGR, Tjärnström said: “We have a long-term view in the Netherlands, like we have in every other market. “We had a gradual rollout from 4 July when we were able to switch on our services to Dutch residents […] there was some teething issues, but they were rectified very fast and since then we’ve been gradually opening up and we’ve seen a very positive development – above our own expectations even. “And that’s in a period where it’s quite relatively quiet from a sports perspective as well,” he commented. While the launch was described as a “really strong start” that was “executed to perfection”, Tjärnström was tight-lipped on how it compares to pre-Covid in 2019 as the company doesn’t divulge that information. The expectation, though, is that the EBITDA contribution will be positive in the next few months. The goal is to secure a podium position by the end of 2022. The ultimate aim is to climb to the top of the rostrum and take the number one position in the market. When Kindred received its licence from the Netherlands Gambling Authority (KSA) on 8 June, sending its shares up 10%, it became the 19^th operator to be waved through. Of these, 17 are currently live. As well as international companies like bet365, LiveScore Bet and GGpoker, there is also competition from local players including Holland Casino, Toto and BetCity. Entain – another of the major international firms still awaiting licences (bwin and Party brands) – snapped up BetCity in June, a deal that could eventually be worth up €850m. Regulus Partners estimates Kambi-powered BetCity to have a market share of 20%, such has been the disruption to market dynamics caused by the cooling off period. And the company, with five arcades in Amsterdam, achieved this impressive position all from a standing start. Meanwhile, Betsson anticipates a Q3 entry with up to three online casinos (possibly Oranje and Kroon to go along with Betsson itself). Flutter, which is already in the market after its acquisition of tombola, will be looking to launch PokerStars sooner rather than later. Then there is the competition from unlicensed operators still targeting the market and not paying the particularly high tax of 29% on GGR. Compare that with Kindred’s home market of Sweden and the far more palatable 18% on GGR. What Unibet has in its favour is that it’s  a well-known and trusted brand. The advert running on Dutch TV plays Thin Lizzy’s The Boys Are Back In Town as the camera sweeps through a sports bar with people watching a match and snacking on bitterballen (Dutch meatballs). Plus, deals have been inked between Unibet and football clubs Ajax, Heracles Almelo, SC Telstar and De Graafschap. During the Q2 results presentation, Kindred referenced H2 Gambling Capital’s projections that the Netherlands – home to 17 million people – will see online gambling GGR double from €1bn in 2020 to €2bn by the end of 2026, representing a compound annual growth rate of roughly 12%. GGR of €2bn would roughly put it on a par with New Jersey in 2021 despite New Jersey having half the population. Yet with online gambling penetration in the Netherlands lower than your average European market, Kindred sees plenty of headroom for growth in a market with “high entry barriers”. H2 Gambling Capital forecasts online penetration to rise from 35% in 2022 to 43% in 2026. More immediately, the Dutch market is set to become a lot more crowded in the next few months, but Kindred has managed to steal a march on many of its international rivals who weren’t able to launch in the first wave last October. How far off the operator is to planting a foot on that podium will hopefully become more clear at Kindred’s Capital Markets Day in London on 14 September where Tjärnström has pledged to offer more details on progress to date.