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Cherry AB Interim Report January–September 2018

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Cherry AB Interim Report January–September 2018
Photo Source: Cherry AB
Reading Time: 7 minutes

 

All business areas strengthen positions

 

THIRD QUARTER
• Group revenue increased by 58 percent to MSEK 899 (567), with organic revenue growth amounting to 46 percentages. Acquisitions contributed 1 percentage and currency 12 percentages points.
• Profitability improved, and EBITDA increased by 130 percent to MSEK 258 (112) and the EBITDA margin was 29 percent (20).
• Profit for the period amounted to MSEK 188 (42). EBIT was affected positively by an item affecting comparability of MSEK 57, following the revaluation of the previously owned holding in Highlight Games.
• Earnings per share before and after dilution amounted to SEK 1.75 (0.22) and SEK 1.74 (0.21) respectively.
• Cherry holds 60.4 percent of the shares in the former associated company Highlight Games.
• Cherry subsidiary ComeOn applied for eight Swedish gaming licenses in September.
• On 24 August, Anna Bergius and Claes Ruthberg announced that they would be stepping down from their assignments as members of the Board of Directors of Cherry AB (publ) with immediate effect.

INTERIM PERIOD
• Group revenue increased by 42 percent to MSEK 2,332 (1,644), of which organic growth amounted to 32 percentages. Acquisitions contributed 1 percentage and currency 9 percentages.
• Profitability improved, and EBITDA increased by 114 percent to MSEK 615 (288) and the EBITDA margin was 26 percent (18).
• Profit for the period amounted to MSEK 367 (93). EBIT was affected positively by an item affecting comparability of MSEK 57, following the revaluation of the previously owned holding in Highlight Games.
• Following new share issues, the number of shares has increased. As of September 30 2018, the number of shares is 4,988,000 Class A shares and 100,680,026 Class B shares, totalling 105,668,026 shares.
• Earnings per share before and after dilution amounted to SEK 3.31 (0.49) and SEK 3.30 (0.49) respectively.

EVENTS AFTER THE END OF THE PERIOD
• In July, Cherry Online Polska was granted a sports betting license for the Polish market. A new brand, PZBuk, was launched in October
• On 17 October, Cherry agreed to acquire the remaining 5 percent of the shares in the subsidiary Game Lounge.
• In September and October, Yggdrasil signed agreements with the largest gaming operators in Finland (Paf and Veikkaus) and in Sweden (Svenska Spel and ATG).

Comments by the CEO

Investments in marketing generate profitability

The second quarter of the year ended well and the positive trend in sales and gaming volumes continued throughout the third quarter. This is mainly explained by our high level of quality and innovation, which is appreciated by our customers and by all players.

As noted in our previous interim report, investments in marketing and operations strengthen the Group’s development both short and long term. Cherry’s strategy of maintaining proximity to all parts of the gaming market and end customers is crucial to our continued growth. This allows us to act quickly and invest resources where we see that such measures will provide the best return.

Consolidated net revenues rose from MSEK 567 to MSEK 899 compared with the corresponding period in 2017 – an increase of 58 percent. Organic growth was 46 percentages Corporate acquisitions contributed 1 percentage and currency by 12 percentages. EBITDA rose by 130 percent, from MSEK 112 to MSEK 258. Accordingly, the EBITDA margin for the third quarter increased to 29 percent (20).

There are several bright points in development in the third quarter, and I particularly want to highlight the favourable development in Online Gaming. ComeOn has succeeded very well with the broad plan of action that was brought into effect just over a year ago. All employees are making a tremendous effort and the company is now able to use more of its time and energy to establish even stronger positions in existing and new markets like in Poland, as well as with new brands such as Blitzino and PZBuk. ComeOn has shown itself able to launch innovations that are quickly appreciated by the market and brands that win over loyal customers. In our assessment, ComeOn has good opportunities to strengthen its position in the Swedish market following the re-regulation to be introduced next year. In line with our multi-brand strategy, ComeOn has applied for licenses for each of its brands in the Swedish market. A total of eight licence applications have been submitted to the Swedish Gambling Authority. The terms of a regulated market should be an advantage for our entire industry, and especially for ComeOn, which has several strong brands, established practices for responsible gaming, and a wide range of high-quality games offering good opportunities to win.

Game Development, with Yggdrasil and Highlight Games, also had a good quarter. The companies are run by strong entrepreneurs and skilled employees who understand what works in the market. Yggdrasil has progressed some way on its journey of growth, while Highlight recently launched its game product in test markets in Africa, and both companies are reporting success.

Yggdrasil’s games are now ranked among those that gaming operators must include on their platforms and, in many cases, Yggdrasil’s games are market leaders in terms of quality, resulting in agreements with several major gaming companies, including 888 Holdings and Tipsport and, in October, national operators Svenska Spel, ATG and Veikkaus. In September, Yggdrasil presented an agreement with XSG, a Taiwanese gaming operator. Through Cherry’s established relationships, we see good opportunities to continue developing Yggdrasil with strategic partnerships in new geographic markets, and the company continues to strengthen its organization with additional employees and a presence in the UK.

Highlight Games’ test launches in several African countries have gone well and the company reported initial revenues at the end of the reporting period. The focus is now on introducing the in-house developed game Soccerbet™ in Italy and the coming months will be characterized by intensive efforts to launch the game together with major Italian game operator Eurobet.

Online Marketing continues its favourable development. Game Lounge has an exciting strategy and perceives good opportunities to grow in several geographic areas, including the US and Latin America, and in new verticals. In our assessment, growth will also continue in Sweden. The regulations open up for new channels, allowing marketing to be broadened and updated, both of which are Game Lounge’s strengths. The company is recruiting new employees in Sweden and other countries to meet anticipated increased activity among various market players.

Gaming Technology offers programs important to gaming operators in being able to run online casinos. Most sales are made to customers within the Group and operations are developing according to plan. XCaliber has renegotiated certain agreements with Cherry Group companies, negatively affecting the business area’s earnings in the third quarter. Since July, XCaliber has allocated significant resources to assignments for the Cherry Group’s gaming operators, and the assessment is that demand from these operators will maintain a high level.

In the early part of the fourth quarter, Restaurant Casino gained the permits necessary for operations at Swedish gaming venues. This is a gratifying development as the operations have been greatly affected by the delay in processing by the Swedish Gambling Authority. This means we are able to resume essential parts of our business and develop Cherry Spelglädje’s offering. Another positive factor is that the maximum stake is being raised to SEK 232.50 effective from 2019. Both factors mean we now envisage more positive development in our oldest business area compared with the current year.

Our land-based gaming operations have extensive experience of compliance with gaming regulations in Sweden and we intend to build on Cherry Spelglädje’s experience in the upcoming regulation of the remaining parts of the Swedish gaming market.

In many ways, Sweden is the most important market for us and for several European gaming companies, many of which have Swedish roots in the form of founders and entrepreneurs with abundant initiative. There is also an ecosystem here with competent employees and access to financing at different phases. The Swedish market remains highly important for Cherry, while we are also seeing significant growth in other markets and our strategy continues to be to expand into markets where we see opportunities for good returns.

Cherry has a long history and is one of the largest and most profitable companies with a broad presence in gaming, entertainment and media. This affords us an overview and understanding of events in our sector, enabling us to quickly optimize our resources in areas where we see opportunities for development. We will continue to strengthen our positions in markets approaching regulation, including Sweden and other major markets, such as states in the US. The clear regulations that such markets offer are of interest to Cherry and its subsidiaries as they provide opportunities for long-term commitment and stability. Unfortunately, we are noting that legislators, most recently in the UK, sometimes alter gaming rules at short notice, in our view this is counteracting the basic purpose of the regulations.

On 17 October 2018, Cherry decided to complete the acquisition of Game Lounge by purchasing the remaining 5 percent of the shares in Game Lounge Ltd for a purchase consideration equivalent to at most MSEK 260. The initial purchase price of MSEK 100 is fixed, while the remaining two items are conditional on Game Lounge’s earnings reaching certain levels for the remaining payment in cash or shares to occur. Game Lounge’s operations have developed well, and Cherry’s Board of Directors assesses that the company’s market conditions will remain favourable. The sellers will continue in their senior positions, are shareholders in Cherry and participate in the Group’s incentive programmes. The sellers are Game Lounge employees. Against this background, the acquisition constitutes a related party transaction and must therefore be approved by an extraordinary general meeting in Cherry AB, on 21 November 2018.

As we indicated in the report for the second quarter of 2018, Cherry continued to strengthen its operations on several fronts in the third quarter. The favourable performance generates the conditions we consider necessary to intensify efforts with the Group’s long-term financing and, accordingly, with the flexibility that can strengthen Cherry and its profitability. We are conducting ongoing evaluations of various alternatives for replacing existing bond loan.

As Acting CEO, I am proud of all of the efforts being made within the Group and I look forward to summarizing Cherry’s operations over 2018 as a whole.

Gunnar Lind
Acting CEO

MARKET OUTLOOK

The gaming market is currently growing strongly and Cherry estimates that demand in the Group’s largest geographic markets will continue to develop favourably. The Group continuously studies conditions for new business within the related business areas and geographic markets in and outside Europe.

The Group’s focus is on generating shareholder value by being an active participant in the development of new and existing companies in the gaming, media and entertainment sector. The objective is for the companies to become market leaders in their respective areas by building their core values of entrepreneurship, responsibility and commitment. These are important prerequisites for the Group to be able to achieve its financial targets and to continue its successful profitable growth, through both organic growth and acquisitions, in existing and new verticals and geographic markets.

PRESENTATION OF THE INTERIM REPORT

The company’s Executive Chairman, Morten Klein, Acting President and CEO, Gunnar Lind, and CFO Christine Rankin, will present and comment on the report at a telephone conference at 10:00 a.m. CET on 31 October 2018. The presentation materials will be available approximately one hour earlier at www.cherry.se. The presentation can be followed via www.cherry.se and/or www.financialhearings.com. To participate by phone, call +46 8 566 426 97 (SE) or +44 203 008 9807 (UK).

For further information, please contact:

Christine Rankin, CFO, Telephone: +46 76 539 94 92, [email protected]
Anders Antonsson,  IR & Communications, Telephone: +46 709 994 970, [email protected]

CHERRY IN BRIEF

Cherry is an innovative and fast-growing gaming company with operations in gaming, entertainment and media. The company was founded in 1963 and today, Cherry operates through five diversified business areas: Online Gaming, Game Development, Online Marketing, Gaming Technology and Restaurant Casino. The objective is to grow organically in combination with strategic acquisitions of fast-growing companies. Cherry employs some 1,300 people and has about 9,325 shareholders. The company’s class B-share has been listed on the Nasdaq Stockholm exchange, Mid Cap segment since 18 October 2017.

 

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The Nomination Committee’s Proposal of Catena Media’s Board of Directors at the Annual General Meeting 2024

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The Nomination Committee’s Proposal of Catena Media’s Board of Directors at the Annual General Meeting 2024
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The Nomination Committee of Catena Media proposed re-election of the following members of the Board of Directors:

Øystein Engebretsen

Theodore Bergquist

Adam Krejcik

Sean Hurley

The Nomination Committee proposed that Erik Flinck and Dan Castillo be elected as new members of the Board of Directors.

Göran Blomberg, Esther Teixeira-Boucher and Austin Malcomb have declined re-election as board members.

The Nomination Committee proposed that there will be six (6) members of the Board of Directors, changed from seven (7).

The Nomination Committee also proposed Erik Flinck to be elected as Chairman of the Board of Directors.

Erik Flinck, born in 1980, currently provides high end business consulting combined with serving as Chairman for the digital health startup, dr HUD. Mr Flinck previously served as Head of BCG Sweden and has extensive experience from corporate management, growth and turnarounds from nearly 20 years of Management Consulting and serving as Head of Group Strategy and M&A at Sandvik AB. He has a Masters Degree in Engineering (Software development and Financial Mathematics) from the Royal Institute of Technology in Stockholm and a Masters Degree in Business and Administration from Stockholm University and Stockholm School of Business.

Born in 1980, Dan Castillo has accumulated over 20 years of experience across startups, growth companies and turnarounds. Since 2015, Castillo has invested in Catena Media, maintaining a close watch on its progression, especially after its IPO in 2016. He has previous experience of listed board work in Kotipizza which Orkla acquired in 2018. He currently serves on the boards of five companies in different sectors, including Quartr.com in Fintech and Hope Studios in movie production. His academic background includes studies in Finance and Economics at Linköping University.

The Nomination Committee of Catena Media consists of:

Nicklas Paulson, representing Investment AB Öresund (chair of the nomination committee)

Marianne Stenberg, representing Second Swedish National Pension Fund

Martin Zetterlund, representing Niklas Karlsson

Göran Blomberg, chairman of the board of Catena Media.

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IGT Announces Executive and Board Leadership Changes

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IGT Announces Executive and Board Leadership Changes
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International Game Technology PLC (IGT) announced that on March 21, 2024, its Board of Directors implemented changes to the Company’s Board and executive team.

Marco Drago announced that he will step down from his role as a non-executive director of the IGT Board of Directors. He will carry out his remaining term and depart from the Board at the conclusion of the Company’s Annual General Meeting (AGM) on May 14, 2024.

Enrico Drago has been appointed by the IGT Board of Directors as a non-executive director of the IGT Board. In addition, Enrico Drago will resign from his current role of CEO of IGT PlayDigital, and Gil Rotem, who is currently IGT PlayDigital President of iGaming, will expand his role to become IGT PlayDigital President and report directly to Vince Sadusky, CEO of IGT. These changes will be effective April 1, 2024. Enrico Drago will continue in his role as vice chairman of De Agostini S.p.A.

“As Marco Drago prepares to step down from his position on the IGT Board of Directors, I’d like to thank him for his many years of service and his unwavering commitment to driving results and creating value for all IGT stakeholders. Enrico Drago joining the Board and leaving his executive leadership position at IGT is a natural evolution that supports the Company’s vision for its next era of growth and transformation. Enrico’s value-creation mindset and understanding of global growth opportunities will enhance the Board and align with IGT’s strategic priorities,” said Marco Sala, IGT Executive Chair of the Board.

“Watching and guiding IGT through its evolution from a collection of companies that started with Lottomatica and GTECH grow into a unified global gaming leader has been very gratifying. We have been fortunate to have a great group of board members and business unit leaders that have helped drive IGT’s growth during this time. I thank them for their contributions and am certain that IGT is positioned for continued growth as we go forward with the bold initiatives we have undertaken,” said Marco Drago, IGT Non-Executive Director.

“Over the last five-plus years, IGT PlayDigital has established leadership positions in the global iGaming and North American sports betting sectors that will be foundational to the Company’s future successes. I thank the entire IGT PlayDigital team for all that we have accomplished in this time, and I look forward to supporting IGT in a new capacity and further helping the Company define its vision and strategy,” said Enrico Drago, CEO of IGT PlayDigital.

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Bidstack Executive Team Acquires Bidstack Limited and all its Subsidiaries

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Bidstack Executive Team Acquires Bidstack Limited and all its Subsidiaries
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The executive team of Bidstack has acquired Bidstack Limited and all the operating entities of the Group, from the administrators of Bidstack Group PLC. The deal sees James Draper, Founder & CEO, and the executive team of Bidstack Ltd become significant majority shareholders.

All contracts and client relationships will continue within the new ownership structure – safeguarding jobs for the UK and European-based staff.

Bidstack, the multi award-winning in-game middleware technology provider that initially set about bringing programmatic advertising revenue to the most renowned sports gaming franchises in the world, has diversified into a broader offering, taking advantage of the most advanced off-engine content management system in gaming.

Following the announcement of a partnership with the Washington Commanders, where the NFL franchise became the first-ever sports team to utilise a platform to control advertising within their virtual stadium, across official NFL games, from multiple studios and developers, the management team has been focusing on sports rights holders as a key customer type.

The executive team has the support of the world’s leading rights-holder professionals in the sports industry. It will continue to execute from its position as the leading technology for the sports industry, for fan engagement and brand activations, in video games.

The executive management consists of James Draper continuing as Chief Executive Officer, with Lisa Hau stepping up to Chief Financial Officer, Dave Garvey continuing as Chief Legal Officer, Will Stewart moving to Chief Product Officer and Daniel Barrigas to Chief Technology Officer.

James Draper, Bidstack’s Founder & CEO, said: “The acquisition is a pivotal moment for the next phase of growth for the business. Our technology is at the forefront of sports technology, and I couldn’t be more excited. I am proud that we are able to reward our ambitious and industry-pioneering team and have them as shareholders alongside myself.”

“I want to thank the staff and customers for standing by us during this strategic review, which has obviously been an uncertain period. For all of our customers to have stood strong alongside us is testament to the relationships we’ve built over the years, as well as the incredible staff we have here who have fostered those connections.

“The company can now focus on the enormous potential we have, to enable sports teams to get closer to their fans and improve the player experience by bringing their virtual IP to life, with real-time messaging, rewards and engagements.

“Thank you to the management team who have invested to protect the incredible work our talented group has produced. It’s extremely motivating to see the unwavering belief we collectively have in our vision and product. Sadly, the public market is an uncertain place currently, and it’s a challenging environment for growth businesses such as ours.

“The interest and support we’ve had from some of the leading players in the sports industry has given our team great confidence and motivation as we work with some of the world’s largest sporting franchises and leagues.

“Thank you to everyone’s support and to our Board of Directors, who have assisted myself and management throughout.”

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