Cherry forecasts tripling of revenues

Cherry forecasts tripling of revenues

Tuesday, February 21, 2017 Posted by Scott Longley
Operator to see full benefit of ComeOn buyout

Cherry showed the benefit of the move to take complete control of the ComeOn business late in 2016 and expects its revenues to more than triple in the year ahead as a result.

In May last year, Cherry bought a 49 percent stake in ComeOn, the Swedish-facing online gaming business, for €80m and took up the option to acquire the remaining 51 percent in December in a cash and shares deal that values the whole business at a maximum of €280m.

Cherry said in its results this week that it expected the acquired business to drive group revenues for 2017 to between SEK2.6-2.7bn €270-285m. This compares with total revenues for 2016 of SEK1.1bn, which itself represented a tripling from the previous year.

New chief executive Anders Holmgren, previously a founder at Betsson, said the combination of Cherry and ComeOn had forged a market leader in the Nordic market. “The acquisition of ComeOn and the merger has resulted in a good mix of experienced entrepreneurs and strong individuals with a common vision of how the company will reach new levels,” he said.

Cherry also runs an affiliate marketing arm Game Lounge (of which it owns 51 percent), a land-based Cherry Spelgadje business which runs casino table games in restaurants and nightclubs, and gaming technology and supply businesses Yggdrasil Gaming (where Cherry controls 84 percent of the company) and Xcalibur.

Holmgren hailed the performance of Yggdrasil, saying it had delivered its best performance in its history. In the fourth quarter, revenue rose over 200 percent to SEK31.8m of which SEK9.6m came from Cherry’s own B2C operations. At the end of the quarter, Yggdrasil had launched their games with 30 operators, including bet365, Betsson, Unibet, LeoVegas and Vera & John. During the fourth quarter 10 new agreements were signed, including Gaming Innovation Group, SuprNation, Tain and Lottoland.

Group EBITDA quadrupled in the fourth quarter to SEK106m while the yearly figure came in at SEK178m. For the year ahead, the company is forecasting EBITDA of between SEK550-600m.

Paul Leyland, partner at gambling consultancy Regulus Partners, queried whether Cherry would manage the projected EBITDA margin of 22 percent. “Very strong organic growth needs to be maintained to offset risk,” he said.

Totally Gaming says: The transformation of the Cherry business is impressive given the competitive nature of the Nordic markets. Similarly to others in the same market – notably Gaming Innovation Group – it is taking the full-service approach with its supplier businesses and an in-house affiliate operation. Also similarly with its competition in the Nordics, a key dependency remains the ‘just right’ nature of the unregulated Swedish market; any moves to regulate in that country will presumably put pressure on margins across the Nordic market, not least in terms of new gaming taxes.


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