Cherry posts solid H1-2018 results

Cherry posted a positive set of results Thursday,  highlighting:

Q2-2018:

• Group revenue increased by 41 percent to SEK 753 (536) million, with organic revenue growth amounting to 39 percent (37);
• Profitability improved, and EBITDA increased by 78 percent to SEK 165 (93) million on margin of 22 percent (17);
• Profit for the period amounted to SEK 91 (15) million;
• The Board of Directors appointed Gunnar Lind as Acting CEO;
• Cherry has completed the acquisition of 44 percent of the shares in the affiliate company, Game Lounge, with Cherry now holding 95 percent of shares outstanding. The purchase consideration amounted to Euro 9.8 million and 1,554,017 newly issued shares in Cherry AB;
• A further 7.5 percent of the shares in the online gaming company Almor Holding were acquired, with Cherry now holding 90 percent of the shares outstanding. The purchase consideration amounted to Euro 2.2 million and 299,504 newly issued shares in Cherry AB.

H1-2018

• Group revenue increased by 33 percent to SEK 1,434 (1,077) million, with organic revenue growth amounting to 32 percent (40);
• Profitability improved, and EBITDA increased by 103 percent to SEK 357 (176) million on margin of 25 percent (16);
• Profit for the period amounted to SEK 180 (51) million;
• Following new share issues, the number of shares has increased to 4,988,000 Class A shares and 100,680,026 Class B shares, as of 30 June 2018, totalling 105,668,026 shares.

Post reporting period events:

• On 3 July, Cherry was granted a sports betting licence in Poland;
• On 7 August Cherry exercised its option to acquire an additional 7.8 percent of the shares in the gaming specialist Highlight Games. Cherry also acquired shares corresponding to 15.1 percent in the company and now holds of 60.4 percent of the shares outstanding in Highlight Games;
• On 9 August Game Lounge acquired two premium domains in North America, BetNJ.com for sports betting and casino in New Jersey, and the Mexican domain OnlineCasino.mx.

Acting President and CEO Gunnar Lind reported that the second quarter was characterised by expansion, focus on growth and investment. Investments during the quarter were made primarily in the marketing of existing and new brands, and of games developed in-house by Yggdrasil and Highlight Games.

“Online Gaming is expanding and strengthening its position in key markets, while the business area’s new brands are also rapidly building awareness and establishing a good customer base. Game Development and Online Marketing have also acted proactively through increased investment in game development, acquisitions and a clearer presence in Sweden. To me, as acting CEO, this is a secure situation providing opportunities to continue strengthening Cherry in its core markets and, in parallel, to assess complementary growth alternatives,” Lind said.

Cherry’s subsidiary Almor, including the German brands Sunmaker and Sunnyplayer Casino, experienced one of its strongest quarters, thereby strengthening Cherry’s market position in the regulated Schleswig-Holstein market, Lind noted, adding that games developer Yggdrasil had an active quarter that included the launch of five new games, including “Sonya Blackjack”, the first game in the new “Table Games” product vertical.

Yggdrasil also signed distribution agreements with 13 operators and boosted head count to 243 (134). Following the end of the period, a global distribution agreement was reached with 888 Holdings, one of the world’s most popular gaming operators. An agreement was also reached with Intralot, which has a strong position in Italy, complementing Yggdrasil’s existing collaboration with Lottomatica. In April, Northern Lights became the first independent game studio to use Yggdrasil’s partner program, YGS Masters, and we make the assessment that this will be an excellent way to collaborate with companies in early phases of development. Following the end of the quarter, Yggdrasil was also certified for the fast-growing Spanish market – an important milestone in Yggdrasil’s strategy to grow in regulated markets.

At the beginning of the year, Highlight Games launched its virtual soccer game, SOCCERBET, in selected African markets, while the company also prepared for its introduction in Italy. During the third quarter, Highlight Games, alongside Eurobet and other leading Italian operators, will launch the game in Italy, where the virtual gaming market is expected to generate sales of some EUR 2 billion in 2018, as assessed by the independent data specialist H2 Gambling Capital. Highlight Games has favourable prospects of capturing significant market share, thus Cherry has acquired additional shares in the company and Cherry’s holdings in August totalled 60.4 percent and, accordingly, consolidated as a subsidiary effective from August 2018.

The Group’s affiliate company, Game Lounge, is developing according to plan. The company has established a new office in Stockholm and has a total of 60 employees. During the quarter, Game Lounge acquired assets, including some 1,500 websites, various search engine optimization (SEO) tools and services, and a team of ten employees with unique SEO expertise to aid the expansion of the company into new verticals. In August, Game Lounge acquired two premium domains in North America, which will be important bridgeheads in New Jersey and Mexico.

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