Report
Press release
Quarterly Report Q4, 2005 Full Year Report January 1 - December 31, 2005
All figures in this report are in SEK. Figures inside brackets relate to the same period of last year’s figures.
Quarter 4
- Cherry’s online gaming continued to develop very strongly during Q4
- Betsson's active poker customers increased by 47 per cent compared to Q3
- Betsson’s customers increased from 189.000 to 242.000
- Net Entertainment's success continues, profit increased with 64 per cent to SEK 9.2 (5.6) million
- Group net sales increased by 66 per cent to SEK 136.6 (82.3) million
- Operating increased to SEK 13.9 (2.8) million
Full Year 2005
- Group net sales increased by 45 per cent to SEK 452.4 (311.1) million
- Operating profit increased to SEK 45.8 (16.6) million
- Profit after financial items amounted to SEK 187.1 (16.5) million
- Introduction of IFRS affected net financial income for the year by SEK 135 million
- Profit after tax amounted to SEK 178.1 (12.1) million, SEK 4.91 (0.37) per share
”We ended 2005 with a very strong growth in the poker”
”Within Net Entertainment we see our newer games generating higher incomes, which in turn
increases our revenue further.”
”During this period Betsson has dedicated a large amount of resources on the development of a
new platform that launched in the beginning of February 2006. This platform gives us a stabile
foundation for continued growth in existing and new markets” says Pontus Lindwall, President of
Cherry.
Group
Quarter
Cherry's net sales increased by 46 per cent to SEK 136.6 (82.3) million during the quarter. Cherry Online reported
substantially increased revenue. SEK 42.5 million of the increase in net sales compared with the previous year relates to
the effects of the Betsson acquisition.
The Group's operating profit amounted to SEK 13.9 (2.9) million. Net Entertainment reports an increase in profit of more
than 60 per cent and Cherry Online has turned a loss of SEK –2.8 million last year to a profit of SEK 7.9 million during
the quarter. During the period, substantial funds were dedicated to the development and preparation for continued
growth under 2006.
Profit/loss after financial items amounted to SEK 16.7 (0.7) million and profit after tax to SEK 17.0 (0.3) million, which
represents SEK 0.43 (0.01) per share. Net financial income included a capital gain from the sales of Cherry’s
stockholdings in Establish of SEK 3.8 million as well as a SEK -2.0 million for the writedown of stockholdings in Aciago.
Full Year
Group net sales increased by 45 per cent to SEK 452.4 (311.1) million during the year. Both Cherry Online and Net
Entertainment reported significantly increased net sales. SEK 121.5 million of the increase in net sales compared with
the previous year relates to acquisition effects (Betsson SEK 111.1 million and traditional casino operations SEK 10.4
million).
Operating profit during the year amounted to SEK 45.8 (16.6) million. Both Net Entertainment and Cherry Online
reported significantly increased profit compared with previous year, while Cherry Casino’s traditional operations reported
a somewhat lower result than the previous year. The Group's operating margin increased to 10.1 (5.3) per cent. For the
group’s Internet-related activities, the operating margin increased 24.9 per cent.
Profit after financial items increased to SEK 187.1 (16.5) million. Net financial income includes the valuation of financial
instruments at fair market value, which was reported in the income statement from Q1 at SEK 135.0 million. The
transaction related to the valuation of subscription rights/call options in Betsson at fair market value based on the
external valuation of the company carried out prior to its acquisition. The valuation of Betsson was set at this time at
SEK 590 million.
Profit after tax amounted to SEK 178.1 (12.1) million, which represents SEK 4.91 (0.37) per share
Return on equity was 44 (13) per cent and return on total capital 40 (12) per cent. Equity per share amounted to SEK
12.38 (3.19) at the closing date.
Business areas
Cherry's operations are divided into three business areas as of 1 January, 2005:
* Cherry Online - globql online gaming via Betsson.com and CasinoEuro.com
* Net Entertainment - development and sales/licensing of games and gaming systems, Casino Module
* Cherry Casino - traditional casino games and gaming machines, primarily in Sweden, Denmark and on ships
All comparison figures for 2004 have been restated in accordance with the new business area organization.
Cherry Online
Net sales for the business area increased during the fourh quarter to SEK 57.7 (6.2) million and operating profit increased
to SEK 7.9 (-2.8) million. The now wholly-owned Betsson operation contributed to the period’s revenues with SEK 42.5
million and to operating profit with SEK 8.8 million. In addition, operating profit was affected by the Group’s amortisation of
acquired intangible assets, which arose in conjunction with the acquisition of Betsson, by SEK -1.6 (0.0) million.
For the entire year, the business area reported an increase in net sales to SEK 159.1 (25.0) million and a profit increase to
SEK 16.7 (-5.4) million. Betsson has been consolidated into Cherry since 17 February, 2005, which affected revenues for the year by SEK 111.1 million and operating profit by SEK 22.9 million. In addition, amortisation on acquired intangible
assets, which arose in conjunction with the acquisition of Betsson, impacted operating profit by SEK -5.3 (0.0) million.
Betsson's development during Q4
Betsson has continued its strong growth during the quarter. The annual objective to achieve 200 000 registered customers
was reached in the early part of the fourth quarter. The amount of registered players as of 31st Dec., amounted to 242 000,
which is an increase of 28 per cent since Q3.
The amount of active players increased sharply during the quarter and amounted to 36 000 by the turn of the year, which
is an increase of 42 per cent compared to Q3.
Betsson continues to show growth for all its products. This indicates that Betsson is developing its services in the right
direction.
Betsson’s poker again showed strong growth with 186 800 registered poker players by the end of 2005 compared to
145 500 at the end of Q3. This is an increase of 28 per cent. Under the period the amount of active poker players grew by
47 per cent to a total 30 900.
The launch of mobile poker has been a success with over 2 100 customers now playing poker for real money through their
mobile phones, an increase of 61 per cent compared to the previous quarter.
For the betting exchange the amount of players increased by 32 per cent from Q3 to a total of 4 300 by the end of the year.
”Betsson Sport”, which launched in May, 2005 increased by 71 per cent, from 3 100 in Q3 to 5 300 active players.
The amount of active casino players was 7 600 by the end of December compared to 6 200 in September, which equals a
growth 23 per cent. The high activity in poker as well as a stronger product range for the casino are reasons for this
success.
Cherry's Online Casinos
Cherry also operates gaming via online casinos in the Cherry Online business area. The focus is on CasinoEuro.com
which is operated from Malta, with Europe as the main market.
The number of registered customers in Cherry online casinos has increased to 203 700, which represents an increase of
10 per cent over the previous quarter. The number of active customers during the quarter amounted to 8 300 which
represents a 9 per cent increase from the previous quarter.
Gaming profit (revenue) from Cherry’s online casinos during the fourth quarter was SEK 15.3 (4.3) million and over the
whole year 48.0 (23.0).
Net Entertainment
Net Entertainment is a leading provider within B2B for online gaming. The company’s brand is associated with innovation
and quality. Net Entertainment develops gaming software that is licensed to an international customer base which today is
comprised of over 30 different gaming companies. The revenue consists of royalties and other sales revenue.
The company is undergoing a large commitment within product development to further strengthen the company’s
competitive position, and the new games launched under 2005 show very high revenue. This, together with the market
growth, bodes well for further growth in relation to phasing out of older games.
Under the fourth quarter Net Entertainment signed a deal with an Internet casino for delivery of a Casino Module. Net
Entertainment’s games will compliment the customer’s existing range and the product will be delivered at the end of Q1
2006.
Revenue for the business area increased during the forth quarter by 42 per cent to SEK 15.7 (11.0) million and
operating profit increased to SEK 9.2 (5.6) million.
During the entire year, revenues increased by 37 percent to SEK 51.9 (37.9) million and operating profit rose 60 per
cent to SEK 35.8 (21.6) million
Net Entertainment also licences it's software and sells it’s services internally within the group to Cherry Online. These
revenues are not included in the figures shown above. For 2005, internal revenues from Cherry Online was SEK 20.6
(3.2) million.
Cherry Casino
The Cherry Casino business area is a merger of the former business areas Restaurant Casino, Maritime Gaming and
New Markets.
The business area operates gaming activities including table games (blackjack and roulette) at 250 restaurants in
Sweden; gaming machines and table games on 37 cruise ships in the Nordic market and on 5 vessels in the
Mediterranean via a partly-owned company; gaming machines at 10 petrol stations in Denmark in a joint venture with
Danish Shell. Cherry’s part-ownership of the gaming operation in Chile has been sold with a marginal profit during Q4.
Cherry is the market leader in restaurant casinos in Sweden with a market share of 37 per cent of active gaming tables.
Cherry's share of the maritime gaming market in the Nordic Region is estimated at 34 per cent of the number of vessels
with gaming activities.
Fourth quarter revenues declined to SEK 63.0 (64.6) million and operating profit amounted to SEK 1.8 (2.7) million.
Maritime gaming operations reported increased revenue and profit, while the other gaming operations reported reduced
revenues and operating profits during the quarter.
For the entire year, revenues decreased to SEK 240.7 (247.4) million and operating profit amounted to SEK 7.0 (9.1)
million. The acquired casino operations, Knutsson Casino and Engdahl Casino, added SEK 10.4 million to net sales
during the year.
Personnel and organisation
The average number of Group employees during the period was 262 (254). The increase primarily relates to personnel
in Net Entertainment and Cherry Online, whilst the amount of personnel in the traditional sectors decreased. The one-off
cost for personnel reduction amounted to SEK 1 million for Q4. By the turn of the year there were a total of 814 (843)
employees in the Cherry Group.
Events after the release of the report
Betsson launched a new site in the beginning of February. The new site lays the foundation of a continued strong
growth. In connection to the new launch, Betsson also opened their own developed sports book.
Cherry Casino has signed gaming deals with four additional ships in the Mediterranean with traffic estimated to
commence during Q2.
Cherry has appointed Handelsanken Capital Market as an exclusive financial advisor for the planned split of the Cherry
group into three independent parts.
Outlook 2006
The board has suggested that Cherry’s three business areas should split up into three independent listed companies. The
board assesses that the three separate operations will be able to develop faster and stronger on their own. A split up also
gives a clearer insight into the different operations and gives shareholders the opportunity to choose their level of risk and
operational direction.
The proposal will be made so that Betsson continues its operation under the stock listed holdings company
Cherryföretagen AB (publ). It is also proposed that Cherry changes its name to Betsson.
Betsson (currently Cherry Online) is estimate to at least double their revenue under 2006.
EU’s openings in the gaming market will sooner or later entail increased opportunities for all Cherry’s business sectors.
Cherry will not give a forecast for 2006.
Dividend
The Board suggests that the annual general meeting decides that no cash dividend should be paid.
Annual General Meeting 2006
Cherry’s annual meeting is planned to be held on Monday, 15th of May, 2006, at 3 PM in Stockholm. A venue will be
mediated at a later time.
Shareholders wishing discuss a certain topic at the annual meeting should send a written propsal to: Director of the
Board, Cherryföretagen AB (publ), Birger Jarlsgatan 57 B, 113 56 Stockholm, Sweden, seven weeks prior to the start of
the meeting (27 March) at the latest to ensure that the topics can be included in the agenda.
Additional information about how and when to register will be made public before the annual meeting.
Financial Reports
The Yearly Report for 2005 is estimated to be released during week 17 and will be made available for the public at the
company’s head quarter as well as the company’s website.
- Quarterly Report Q1, 2006 May 15, 2006
- Quarterly Report Q2, 2006 August 18, 2006
- Quarterly Report Q3, 2006 November 13, 2006
For further information, please refer to the summaries included in the quarterly and full year report of the Group’s
income statement, balance sheet, equity summary, cash flow statement as well as notes and key ratios for the period
and comparison period, and the parent company’s yearly report (Note 7).
Stockholm den 16 februari 2006
Pontus Lindwall
CEO and President
Auditor's Report
I have reviewed the interim report for the twelve-month period ended December 31, 2005, for Cherryföretagen AB (publ). I
conducted my review in accordance with the recommendation issued by FAR. A review is limited primarily to enquiries of
company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. I
have not performed an audit and, accordingly, I do not express an audit opinion.
Based on my review, nothing has come to my attention that causes me to believe that the interim report does not comply
with the requirements for interim reports in the Annual Accounts Act and IAS 34.
Umeå, February 16, 2006
Gunnar Liljedahl
Authorized Public Accountant
Ernst & Young AB
For further information, contact:
Pontus Lindwall, President and CEO, telephone: +46 8-556 967 10, mobile: +46 708-27 51 55,
[email protected]