Strong growth at Cherry group but losses continue

Swedish gambling group Cherry AB has released its interim report covering the period January to end June 2015, showcasing the following highlights:

* Second quarter growth of 61 percent in online gaming operations;

* 119 percent growth for Yggdrasil – but EBITDA lower at SEK -1.2 million (SEK -600,000);

* Group revenue increased by 40 percent to SEK 106.7 million (76.4), with Online delivering 63 percent (54) of group revenue;

* EBITDA improved to SEK – 400,000 (-4.1m). EBIT at SEK -5.2 million (-7.7);

* Profit after tax of SEK -6.8 million (-7.1m);

* Online gaming deposits up by 82 percent;

* Restaurant Casino increased turnover by 13 percent and EBITDA increased by 32 percent to SEK 5.3 million (4.0);

* In April, only two months after Cherry acquired Game Lounge, the joint white label brand SveaCasino.com was launched;

* Second quarter launch of a sportsbook on Norgesspill.com

For the six months H1-2015, Cherry reported:

* Group turnover increased by 35 percent year-on-year to SEK 202 million (149.4), with online operations contributing 63 percent (54) of the group revenue;

* EBITDA at SEK -4.9 million (-8.4). EBIT amounted to SEK -14.1 million (-15.3);

* Profit after tax amounted to SEK -18.6 million (-15.2);

* Online gaming operations grew by 55 percent and deposits increased by 68 percent;

* Restaurant Casino increased turnover by 10 percent and EBITDA increased by 29 percent to SEK 9.2 million (7.1);

* Yggdrasil Gaming grew by 136 percent and EBITDA amounted to SEK -1.6 million (-1.8);

* In January 2015, a controlling interest in the affiliate company Game Lounge Ltd was acquired by Cherry. This is expected to enable Cherry to rapidly increase its volumes at a significantly lower cost per customer than before;

Events post the reporting period include:

* In July, Cherry acquired 71 percent of the shares in the Malta-based company Almor Holding Limited, an online casino in German speaking markets. The business will be consolidated by Cherry from July 1. Cherry already has the right to the profits from May 1, and the business has developed positively during May and June. This will strengthen the cash position of Cherry with about Euro 700,000, Management estimates;

* Also in July, Game Lounge acquired a prominent Finnish affiliate’s domains and affiliate agreements, a move expected to increase EBITDA figures by more than Euro 600,000 annually, bring in more than 10,000 new depositing customers to Cherry and other operators over three years and quickly increase volumes on current Cherry brands.

* Current trading is going well, especially in the online vertical, and the group anticipates a positive EBITDA for the third quarter.

Chief executive officer Fredrik Burvall reported that in the half-year growth had been a feature of operations, with group turnover up by 40 percent and improvements in earnings…primarily achieved through strong growth in online gaming activities.

“A new order is required on the Swedish gaming market,” Burvall says. “Sweden has quite rightly been taken to the European Court, after having too long delayed a re-regulation. The latest development is a new Swedish gaming legislation that will be in place by July 1, 2018.

“Cherry welcomes a gaming market that is open for everyone with transparent and responsible stakeholders. We want to eliminate the anachronistic and failed gaming monopoly. We want to create more jobs and compete on fair conditions.

“Cherry’s goal is to grow faster than the market both through acquisitions and organically, focusing on rapidly increasing profitability.”