Cherry CFO talks US expansion and Swedish costs
Christine Rankin speaks to EGR Intel about the company’s stellar 2018 and how expansion in Sweden and opportunities in the US might continue this upward surge
Releasing its last financial report before the business goes into private ownership following its takeover by Swedish-based EE Intressenter, Cherry AB detailed double-digit rises in all its key verticals for the final quarter of 2018.
Indeed, the positive revenues generated throughout the year prompted Cherry’s acting-CEO Gunnar Lind to call 2018 an “excellent” year for the business, saying that it had delivered on all its expectations.
Cherry crowned the year by being awarded eight licences to operate brands in the new Swedish market, which commenced operations in January.
EGR Intel caught up with Christine Rankin, Cherry AB’s chief financial officer, to discuss the company’s financial performance and its objectives for Sweden, the US and beyond.
EGR Intel: Cherry’s spend on online marketing during Q4 2018 grew by 59%, where was the focus of this increased spending concentrated?
Christine Rankin (CR): We are an event-driven marketing company and when it comes to Q4 we had a lot of marketing activity around Christmas – that is a time when we put in a lot of funds when it comes to marketing. If you look at Q2, we had a high level of marketing compared to prior quarters [due to the World Cup] so Q2 and Q4 are comparable because of these events. This Christmas period was also unique because of the forthcoming Swedish regulation, so there was a lot of interest in the Swedish market at that time.
EGR Intel: Where do you see the group’s biggest growth areas going forward?
CR: Because of the takeover proceedings, we can’t speak too much about the future, but in general our online gaming business has a good foundation for continued growth. We have Yggdrasil who are one of the big players in game development industry and they will continue their growth strategy as they have done previously. The part of the business that we believe has a lot of potential to grow exponentially is online marketing – they have less people but with investments in SEO and different products and markets, they can continue to grow revenues. Then we have Highlight Games, they have now launched in the Italian market and we have high hopes for Highlight’s virtual sports offering in this market. So they are another one to look out for.
EGR Intel: How are the group’s plans to expand into the US going?
CR: Outside of Sweden, all our other business areas are looking at the US in different ways and at different lengths. The one that has come farthest in this process is our online marketing arm who are filing an application with regulators in New Jersey. They haven’t got that yet, but they are the ones who have come furthest into our US plans. There is a lot of attention on the US market now, but no definite commitments have been made other than from our online marketing arm. Highlight Games have a distribution agreement with a company called Spin and the company believes that it can actively market its games in the US as well.
EGR Intel: Has the company made plans to deal with the effect of point of consumption tax in Sweden?
CR: Of course, the commencement of regulated operations in Sweden and subsequent taxation will hit our profit and loss because the tax is based on our gross gaming revenues. But we want to grow and believe our entry into the Swedish regulated market will enable us to do that and get a bigger market share. Our online gaming team are adamant that the taxation of Swedish operations will not affect our profit and loss in the long term. It’s hard to say what this will do to us in the short term as there’s a lot of land grabbing going on here at the moment in the market, so we want to really evaluate it from a longer-term basis.
EGR Intel: What are your eventual expectations for this market? Will it form the bulk of your revenues?
CR: We already have a big share in the Swedish market. We don’t report Sweden as a separate entity in our business financials but if you look at Nordics, that’s a big share of our operations already. Sweden will be a big market for our company going forward, but I think we are expanding in all the other main regulated markets.