1on1 with Anders Holmgren at Cherry
1on1 with Anders Holmgren at Cherry
After a strong 2016 in which the company began to see the benefit from its acquisition of ComeOn – where the company gained full control at the very end of the year – Cherry is talking about revenues for 2017 more than doubling. Here TotallyGaming.com speaks to new chief executive Anders Holmgren about the challenges ahead for the company which alongside its B2C online gaming operations also owns a controlling stake in Yggdrasil and still runs land-based gaming operation in Sweden.
Totally Gaming: Can you go through how you hope the multi-product strategy for Cherry will develop in the year ahead?
Anders Holmgren: We now have five separate business areas which span the entire gaming industry. We made the decision to become a 360-degree gaming company and I believe that puts us in a strong position to continue our strong growth trajectory. Effectively the business areas are separate companies under the Cherry umbrella and are all run by its own chief executive and a dedicated board. We have an entrepreneurial spirit within Cherry which allows these talented leaders to help drive their businesses forward. We had a very strong 2016 and are expecting an even stronger 2017. Cherry has guided the market that 2017 revenues will reach SEK2.6bn-SEK2.7bn with EBITDA of between SEK550m-SEK600m.
Totally Gaming: What are your thoughts on the current spate of consolidation in and among the Nordic-facing operators and suppliers at present? What are the specific drivers here?
AH: Consolidation is natural for a maturing industry that is growing quickly. Companies need to achieve greater scale in such a competitive environment, so I expect to see plenty more M&A activity as more markets are re-regulated. However, doing the right kind of deals is imperative. At Cherry we always say that we only buy companies that don’t want to be sold. I know that might sound a little strange, but it is very important. We are not interested in acquiring companies and their people who just see the dollar signs. We want to work closely with them to help grow the business together. That is a key part of our strategy and I think it has worked pretty well up to now.
Totally Gaming: Everyone says about operators in the Nordic region that they are in a sweet spot at present, with little grey market interference and little by way of gaming taxes - do you agree? And do you think it will last?
AH: A number of Nordic operators are performing well which I think is down to an innovative approach and strong focus on technology. At present Cherry is number three in the market in terms of business size and it’s our aim to become number one which I think is achievable. Of course, we’ll have to pay more tax when regulation comes in, but we’ll be in a position to market ourselves in a much more competitive and efficient way. I certainly don’t feel the Nordic companies have been lucky in any way because taxes are low. The Nordic market is open to everyone. I strongly believe that it’s the innovation that makes the difference and that’s what wins in the end.
Totally Gaming: Specially with Sweden, where do you think we stand with regulation right now? What would paying taxes on Swedish revenues do to the Cherry bottom line?
AH: We are all eagerly awaiting the report that will be out at the end of next month. We hope that the tax rate will be set somewhere between 17-18 percent. The key point is to avoid the same mistakes as the French; that certainly wasn’t the way to do it. The Danish model has been very good and is one to look up to. Look, there are always positives and negatives when it comes to regulation. On the one hand it will take a bite out of the margin, but on the other the market will value the revenue stream that much higher, while we will be able to market ourselves more freely, with less risk for sudden changes. Ultimately, the Swedish people will be the benefactors. There will be many more jobs and the industry as a whole will be more organised. Regulation is good for everyone in Sweden I believe.
Totally Gaming: What are your hopes for Yggdrasil? Would it be looking for further independence?
AH: We are thrilled with the progress of Yggdrasil, it has just delivered its strongest quarter in the company’s history, signing a number of new deals with major operators and introducing some really exciting industry-first innovations. Yggdrasil has grown to a level where it is a genuine competitor to the biggest casino suppliers out there, although it still follows the mantra of being the best rather than the biggest. Cherry always does what is best for the shareholders and that means what is best for the company. We can never rule anything out but this is a question for the board.
Totally Gaming: What about the affiliate business - Cherry has been involved in consolidation here - do you think this space is particularly ripe for M&A right now? Are the expectations of vendors going to rise too far?
AH: I think the industry sat up and took notice when we acquired Game Lounge in 2015. The affiliate market is a very important element of the gaming industry and the deal made perfect sense for both parties. We have created white-label brands together which have performed really well. The deal allowed Cherry to increase volumes at a significantly lower cost while Game Lounge gained access to our platform which is one of the best in the industry. Game Lounge is one of the fastest-growing companies in our industry in performance-based online marketing and it has made giant strides over the past year, moving into new markets including Japan, UK and Germany. There are plenty of M&A possibilities in this space and I’m sure the market will mature.