Cherry lowers full-year forecast on ComeOn integration woes


cherry-comeon-integration-online-gamblingNordic online gambling operator Cherry AB said its Q3 profitability was negatively impacted by the difficult integration of its new ComeOn acquisition.

An interim report released Wednesday show the Nasdaq Stockholm-listed Cherry reporting revenue of SEK 567m (US $67.6m) in the three months ending September 30, a 165% rise over Q3 2016.

The triple-digit gain reflects last year’s acquisition of ComeOn Malta Ltd and its multiple online gambling brands. Stripping aside those contributions, organic growth was a more modest but still respectable 30%. Cherry’s Q3 earnings improved 263% to SEK 112m while profit rose more than one-third to SEK 42m.

For the year-to-date, Cherry’s revenue is up 182% (or 36% organically) to SEK 1.64b, while earnings soared 304% to SEK 288m and profit jumped nearly two-thirds to SEK 93m.

Cherry’s mainstay online gambling division reported revenue growing 214% to SEK 448m in Q3, with earnings margins up two points to 15%. The Yggdrasil B2B software division enjoyed another quarter of record revenue and earnings, while the online marketing division grew “at a rapid pace and with good profitability” thanks to improvements in both visitor numbers and new deposit customers in all markets.

Highlight Games, the virtual sports developer in which Cherry holds a 25% stake, is prepping new products for both land-based and online segments, including league football game Soccerbet. Cherry hopes to debut the product in Italy soon and has faith that the investment will start generating revenue in 2018.

Cherry CEO Anders Holmgren said the integration of ComeOn’s operations into Cherry’s main online gambling unit “continued to affect growth and profitability negatively” in Q3. While the “lion’s share” of the integration is now complete, Cherry has shaken up ComeOn’s management to help achieve its goals for the business.

ComeOn Malta’s former managing director has since left the company, with chairman Tomas Johansson agreeing to serve as acting MD until a permanent replacement can be identified. Along with new company management appointed in late October, the focus is now on improving ComeOn’s earnings capacity and efficiency.

The integration challenges led Cherry to announce that it was revising its FY17 outlook, lowering its revenue forecast from SEK 2.5b to 2.2b, while projected earnings have been cut from SEK 480m to 400m.