Annual Report 2012.pdf - Cherry

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Annual Report 2012.pdf - Cherry

annUal report 2012

CHerry


Cherry turns 50 – and is reborn!

This year Cherry celebrates 50 years of successful gaming. For over half a century we have

responsibly been supplying our players with fun and exciting games. In recent years Cherry has

undergone important changes and taken a big step towards securing further profitable growth.

RESTAURANT CASINO

Part 1

About Cherry

Report from the CEO 4

Cherry – 50 year anniversary 6

Cherry’s vision 11

Online Gaming 12

Resturant Casino 14

Development Project 16

The share 18

Executives and management 20

50 years in the

services of players

As we know, Cherry is 50 this year.

Follow us on an exciting journey

that started in 1963 and still

continues today.

PAGE 6

Cherry’s lead is increasing

Thanks to working with procedures

and strategic acquisitions, Cherry

has increased the number of venues

and turnover per table.

PAGE 14

But we are far from satisfied.

– Emil Sunvisson, CEO

HISTORY ONLINE GAMING

Part 2

Annual Report

Introduction 21

Administration report 22

Group 28

Parent Company 32

Notes 36

Signatures 60

Auditor’s Report 61

Definitions 62

DEVELOPMENT PROJECTS

Cherry is playing to win

The foundation for further profitable

growth has been laid with the launch

of our own gaming platform.

PAGE 12

New gaming company with

innovative number games

Yggdrasil supplies innovative and exciting

number games on the internet,

which are sold to different operators.

PAGE 16


PART 1 REPORT FROM THE CEO

Report from the CEO:

Cherry turns 50

– and is reborn!

This year Cherry celebrates 50 years of

successful gaming. For over half a century

we have responsibly been supplying our

players with fun and exciting games.

In the recent year Cherry has undergone

important changes and taken a big step

towards securing further profitable growth.

But we are far from satisfied.

– Emil Sunvisson, CEO

4 | cherry 50 years

The traditional gaming operations onboard

ships have been sold, the cooperation regarding

the Automaten sites has been discontinued

and the trademarks have been sold. Cherry

now has Sweden’s best Restaurant Casino, a

completely new and modern platform that

we have developed for Online Gaming and

solid financial base. It is no overstatement to

say that after 50 years, Cherry is now facing

yet another new chapter.

With the right technology, competence and

resources, we are now focusing on creating

growth with exciting products and an growth

oriented marketing strategy.

NEW BUSINESS MODEL IN ONLINE GAMING

In November 2012 we launched Euro-

Slots.com, the platform we have developed for

Online Gaming, with our own gaming licence

in both Malta and Schleswig-Holstein. This

platform means that in addition to appear-

ance and functionality, we have full control

over our customers and product offerings.

The switching of our business model from

white label to our own platform means that

we can radically reduce variable costs, which

gives us the opportunity to achieve higher

margins with greater volumes.


The sale of the Automaten sites (Sverige-, Norges- and

DanmarksAutomaten) was completed earlier this year. It

has created a lot of value for Cherry’s shareholders and has

given us the financial strength we need to be successful as a

leading and independent operator. We are also very pleased

about the acquisition of one of the oldest online casinos –

CherryCasino.com – which obviously belongs at home with

us at Cherry.

Through the investment in Yggdrasil Gaming (read more

on page 16), Cherry has taken a further step in the development

of the exciting number games on the net. During the

year we will be launching several new exciting ventures to

create additional growth in Online Gaming.

Many of our competitors would

like to be in our place right now,

with a new platform based on the

latest technology combined with

significant market resources.

RAISING THE STAKES

Cherry continues to take market shares in the business

area Restaurant Casino. In 2012 we acquired an additional

three operators and once again succeeded to achieve growth

in a shrinking market.

Cherry has been campaigning for several years for a

review of gaming legislation and to increase the maximum

stake at tables. It now seems as if we have gained some

attention. Jan R Andersson (Conservative) who is a member

of the Swedish Parliament has submitted a motion to

increase the stakes, which will be considered by the Ministry

of Culture this spring. We estimate that an increase in the

stakes to SEK 200 at Blackjack will create 1 000 new jobs in

the industry, primarily in the 18–25 age group.

SOCIAL RESPONSIBILITY IS PART OF CHERRY’S BUSINESS CONCEPT

Social responsibility is extra important for Cherry as a

private gaming operator. We want to act responsibly, both

in relation to society by sponsoring teams, associations

and Swedish culture, and also towards our customers by

allowing players to easily set limitations to their playing.

Social responsibility is an integral part of our corporate

culture.

NARROWER AND STRONGER FOCUS

In October 2012 we completed the sale of the business

area Maritime Gaming. Our assessment was that the

opportunities for growth and satisfactory profitability in

Maritime Gaming are limited in the near future. Maritime

Gaming has been one of Cherry’s core business operations

for a long time, with many experienced and competent

employees. For Cherry this disposal means a strong

improvement in liquidity and increased focus on the growth

area Online Gaming.

LEGAL ACTION AGAINST NORWEGIAN GOVERNMENT

EuroLotto has been a much appreciated alternative to the

government lotteries, but not equally popular with the

old school monopolists. During the year we have issued a

lawsuit against the Norwegian government, which demands

that Cherry should close its offer of gaming for money at

EuroLotto.com.

We consider that the injunction is invalid, partly because it

is directed against Cherry AB in Sweden, which is the wrong

addressee, and also because it lacks legal grounds and conflicts

with the regulations in the EEA agreement concerning

free movement of products and services.

The Norwegian government is attempting with unjust

means to protect its monopoly and make it more difficult

for Norwegian players to turn to private providers. The

government is acting outside of its jurisdiction and

attempting to prohibit foreign companies from offering

Norwegians services that are lawful in Norway.

Cherry’s subsidiary intends to continue to offer the

opportunity to play EuroLotto for players in Europe – including

Norway.

A LIVELY FIFTY YEAR OLD

Cherry celebrated the jubilee year in grand style by gathering

nearly 500 capable, committed and party-hungry colleagues

to celebrate the lively fifty year old. It was a party we will

certainly not forget for a long time. We also congratulated

all the great colleagues who won prizes, especially the Best

Croupier in the Universe.

2013 HIGHLIGHTS THE START OF THE NEW CHERRY

The sale of the Automaten sites and the major investments

in the launch of new products in new markets means that

2013 will be different from previous years. I believe that the

investments will result in increased growth, but that the

business area Online Gaming will show poorer margins for

some time.

We are laying the foundation in 2013 for many years of

further profitable growth. Many of our competitors would

like to be in our place right now, with a new platform based

on the latest technology combined with significant market

resources.

We have made a lot of progress in just a couple of years.

A few years ago Cherry was running Restaurant Casino

and Maritime Gaming without particularly large funds.

Today we are one of the fastest growing companies in

Europe in Online Casino, with powerful resources to say

the least.

Newly

painted

Emil inspects the rooms at

Cherry’s new head office at

Blekholmstorget in Stockholm.

cherry 50 years |

5


PART 1 CHERRY – 50 YEAR ANNIVERSARY

6 | cherry 50 years

50 YEARS IN

THE SERVICES

OF PLAYERS

As we know, Cherry is 50 this year. It’s been 50 years

lined with great success, some misfortune – but above all –

fun & excitement. Follow us on an exciting journey that

started in 1963 and still continues today.

T

he year is 1963. A year that held many important

events. The Beatles released their first

album, the first James Bond film opened at

the cinema, John F Kennedy was assassinated in

Dallas and the Swedish Parliament introduced a

new law on four weeks holiday.

AB Restaurang Rouletter was founded on the

Saint Lucia Day, December 13, that very year by Bill

Lindwall and Rolf Lundström. It was the beginning

of the company that today, 50 years later, is called

Cherry and has experienced both impressive

success and tough setbacks.

The name clearly shows that the company was

engaged in roulette at restaurants. They mainly

had customers in central and southern Sweden,

and there were lots of students who wanted parttime

jobs as croupiers at their tables.

Two of these students, Per Hamberg and Lars

Kling, were keen on starting a company and trying

their own luck, with their main focus on northern

Sweden. The two companies were competitors for

some years, but in 1968 they decided it was better

to join together and work under the same flag.

Cherry was launched in 1972 as the name for

the joint company and the now famous cherries

began to be used as the logotype. The company

was ready to face new challenges and opportunities

– with a business concept based on fun & excitement

and responsibility.

The slot machine era

In 1972 Cherry began to understand what was

coming. So when a law came out the next year

that allowed slot machines at restaurants that has

licences to serve alcohol, Cherry was considerably

better equipped than its competitors.

Which soon proved to be the case – in a short

time Cherry took over half of the slot machine

market in Sweden. It became a nationwide company,

with offices in Solna, Gothenburg, Umeå

and Malmö. With the help of many young, newly

recruited, ambitious persons who received a lot of

freedom to take action.

from top left

roulette in the 60s

online gaming on a tablet 2012

entertainment in the 70s

branded slot machine

hi-tech anno 1978

cherry’s chips 2013

80s at casino orbis in poland


cherry 50 years |

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PART 1 CHERRY – 50 YEAR ANNIVERSARY

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63

8 | cherry 50 years

The 70s were a period of fantastic success for

Cherry – and at the same time a lot of hard work

to keep competitors at bay. Good service and competent

staff have been important components in

Cherry’s business concept from the very beginning.

Something that has been significant in maintaining

the lead in relation to competitors.

This was matched with curiosity and the thrill of

discovery – what was round the corner? What new

forms of gaming could be interesting and successful

in the time ahead?

The driving force to keep on thinking ahead led

Cherry to initiate cooperation in 1974 with a small,

newly started electronics company in California.

This company was Atari, a partner who undeniably

proved to be focused on future gaming experiences.

The successful era of slot machines came, however,

to an abrupt end. A decision was taken in 1978

to prohibit slot machines in Sweden. The decision

came into force on 1 January 1979 and Cherry had

to spend a lot of energy, time and money to change

the organisation and operations to the new gaming

regulations on the market.

Gaming on boats – and outside Sweden

A slimmer organisation began to look for new

business opportunities after the prohibition of

slot machines came into force. About 5 000 slot

machines stood along the walls in a warehouse in

the south of Stockholm.

Soon enough they came to the conclusion

that there ought to be possibilities of using the

machines in other places. Cherry had already begun

to widen operations outside the borders of Sweden,

AB Restaurang Rouletter was

founded by Bill Lindwall and Rolf

Lundström. It operates mainly in

southern and central Sweden.

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Cooperation is established with AB Roulett

konsult & Spelautomater founded by Per

Hamberg and Lars Kling. The business

operation is now nationwide.

New legislation enables licensed

restaurants to provide slot machines

with winnings in Swedish kronor.

The Cherry name and the

cherry symbol are registered.

19

78

with organised branches in England, Norway and

Denmark. Moreover, Cherry was involved in casino

operations in Cadiz in Spain and in Majorca, with

agreements for slot machines with more than a

thousand bars and public places.

It also became clear that several Eastern European

countries were in a phase that was suitable for

the launch of slot machines on a broad front. For

several years successful operations were developed

in what were Yugoslavia, Czechoslovakia, the Soviet

Union and Poland. The expansion in the east was

complicated, however, by such things as soaring

inflation and, even here, governments who put

obstacles in the way.

In parallel with foreign expansion, Cherry also

found business opportunities in another inter-

national arena, namely the boats sailing on

international waters. Most of these permitted slot

machines, just because they were on international

waters. The Maritime part grew quickly in Sweden

and also spread to the Mediterranean.

The Internet emerges

In 1997 hardly as many as two million Swedes aged

between 15–74 used the Internet more than once

a month. Today around six million Swedes use the

Internet daily.

But in 1997 the combination of curiosity and

vision made itself felt in Cherry once again. It was

then Pontus Lindwall (son of one of the founders,

Bill Lindwall) set up guidelines for gaming experiences

via the Internet. It was subsequently revealed

that others were on the same track, but Cherry was

once again an early starter in this venture. They took

19

84

Cherry is acquiring several former profit generating

Swedish gaming companies and is financing these

acquisitions with the issue of new shares. The foundation

for a new group is being created.

1986 –

1991

The Swedish Parliament takes a decision

to prohibit slot machines. The platform

for Cherry’s operations disappears during

the course of one month. An extensive

reorganisation is begun.

Cherry operates slot

machines and casinos in

several Eastern European

countries.

19

92

Developments in Eastern

Europe causes Cherry

extensive losses. The

board decides to focus

on core markets and

to trim or discontinue

investments in Eastern

Europe.


19

93

slot machines on the move in eastern europe in the 80s cherry on the road (1977)

the risk of investing in a business operation that

would experience a few difficult years before it bore

fruit and became profitable – especially because of

all the air that went out of the Swedish IT bubble

with such incredible force around the year 2000,

just as Cherry’s first Internet casino Cherry-

Casino.com was launched. The company Net

Entertainment started as a development project in

Cherry to meet the demand for slot machines on

the Internet.

The online business began quickly expanding

on its own and through fruitful cooperations. In

2003 Cherry invested in a small but promising

company called Betsson, which with Cherry’s help

Cherry is once

again profitable.

19

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19

96

Cherry acquires Casino

Invest in Umeå and

thereby reinforces its

position in Norrland and

Gothenburg.

Cherry’s B-share was listed on the SBI list

(NGM Equity) on 26 March. A business

venture with the so-called wheel of fortune

starts in February. The Swedish Parliament

takes a decision to prohibit the wheel of

fortune from 1 January 1997. Cherry introduces

a new generation of games for the

Swedish restaurant and bingo markets.

19

98

Cherry acquires 35 percent

of Net Entertainment

AB.

19

99

quickly got things moving.

The technology was refined and made gaming

on the Internet increasingly more attractive. At the

same time a gaming boom spread over Sweden,

and playing on the Internet quickly grew from

something somewhat suspect to something just as

natural as sitting with a bag of crisps on the sofa

watching television on a Friday night.

As a result of the different operations that developed

it was decided that the operations in Cherry at

that time would be better off in separate companies,

and in 2006 the company was divided into Betsson,

Net Entertainment and Cherry.

20

00

20

01

Cherry acquires First Casino. Maritime Gaming

starts in the Mediterranean. A cooperation

agreement is signed with AB Svenska Spel

concerning value slot machines. Cherry

invests excess liquidity in IT companies,

primarily in the Internet sector.

Cherry acquires Kinnevik’s holding in Net Entertainment.

Payment is made through a special issue of shares, whereby

Kinnevik becomes the largest owner in Cherry. The parent

company’s B-shares are listed on the OM Stockholm

Exchange’s O-list on 22 June. Cherry launches a new logo.

Cherry is forced to implement cost

savings and to write down goodwill

in Net Entertainment.

20

02

20

03

Cherry buys into the English sport

gaming company Betsson.com. Cherry

signs a large agreement with Danish

Shell on the establishment of gaming

environments at petrol stations.

Cherry implements the only oversubscribed rights issue for

the year, which brings SEK 20 million for existing shareholders.

Net Entertainment sells its first CasinoModule to

Expekt.com. The cooperation agreement with Svenska Spel

concerning Jack Vegas is discontinued according to plan.

cherry 50 years |

9


PART 1 CHERRY – 50 YEAR ANNIVERSARY

20

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10 | cherry 50 years

Restaurant Casino – a stable base

Right from the very beginning, 50 years ago,

Cherry was at that time a dominant player on the

market for Restaurant Casino in Sweden. And so it

has remained throughout the years.

On the side of business operations such as slot

machines, international ventures, maritime gaming

and online gaming, restaurant casino has existed

as a secure and stable base. It is basically built

on the same business concept today as in 1963, i.e.

to offer manned gaming tables for gaming experiences

at restaurants and other places of entertainment.

The staff are an important part of the business

concept, and Cherry is famous for its high

level of service and competent personnel.

After 50 years in the industry, Cherry is stronger

than ever and has a full 60 percent of the Swedish

market. Cherry continues to grow by taking venues

from competitors and through acquisitions.

But the prospects for operations have changed

through the years, partly from fluctuating trends in

entertainment, and partly from competition in the

form of other attractions. The regulations around

restaurant casino have also made life tougher for

Cherry, namely because stakes have not been increased

in line with rising costs. It is becoming

more and more difficult to earn money at restaurant

casino in Sweden today, and a large number of job

opportunities are threatened unless the rules are

changed.

20

07

Net Entertainment delivers a significant

number of Casino Modules to

international customers. Partly owned

Betsson.com achieves its commercial

breakthrough.

Net Entertainment develops

strongly. Cherry

acquires the outstanding

parts of Betsson.

Cherry launches the product

EventCasino. Betsson distributes

Net Entertainment to shareholders.

20

08

Cherry changes its name to Betsson and

distributes Cherry Casino to shareholders.

A new group is established and listed on

AktieTorget.

Cherry launches the gaming

site PlayCherry.com. Cherry

launches 11 boxer tables for

Blackjack and discontinues

land-based gaming in

Denmark.

20

09

20

10

Cherry – today – and in the future

The company that still prides itself in the stylised

cherries is obviously a completely different company

to the one started 50 years ago. But the emphasis

is still the same, to offer fun & excitement in a very

responsible way.

The winds of change are now blowing for us

to vitalise our operations and establish the foundation

for another 50 years of growth. Cherry’s

gaming services are now mainly to be found on

the Internet and in restaurants. The business area

Maritime Gaming was sold in the autumn of 2012,

thereby concluding a long and important era in the

company.

Several new ventures have been launched on the

basis of Cherry’s new gaming platform, including

the net casino EuroSlots, the mega lottery EuroLotto

and the re-launch of CherryCasino. No one will be

surprised if other exciting ventures emerge, for

the objective of achieving more growth in Online

Gaming.

The existence of private gaming companies has

been questioned regularly throughout the years,

which makes it even more important for Cherry

to emphasise its work with social responsibility.

Cherry wants to take a far reaching social responsibility

by sponsoring associations and culture and

by giving players the opportunity to easily limit

their playing. Social responsibility is an integral

part of Cherry’s corporate culture.

Cherry receives a gaming licence for Casino on the net in

Schleswig-Holstein. Cherry sold in February trademarks and

domains related to the Automaten Group to Betsson AB

(publ). The proceeds amounted to SEK 286.0 million. Cherry

acquired the gaming site CherryCasino.com in February.

20

11

Cherry acquires the Automaten

group and becomes a leading

player in online slot machines.

Cherry acquires Astral

Marine Services Ltd and

Joker Casino. It reinforces

its position during the

year as market leader

in restaurant casino in

Sweden.

Cherry launches Europe’s

largest lottery with daily draws,

EuroLotto.com and the affiliate

portal, CherryAffiliates.com.

20

12

2013

Cherry acquires City-, Snättringe- and

Göteborg Casino and sells the business

area Maritime Gaming. Cherry

receives its own gaming license on

Malta. A new in-house developed

gaming platform is launched in 2012,

EuroSlots.com, and a new logo sees

the light of day. Cherry

invests in Yggdrasil.


Cherry’s vision

Cherry should be a leading gaming operator on all markets where we are active.

BUSINESS CONCEPT

Cherry offers fun & excitement with

entertaining and exciting games in

a safe environment.

OVERALL STRATEGY

` To respect the players by offering

user-friendly, entertaining and

exciting games in a safe environment.

` Develop new business ideas where

gaming or related products/services

will contribute to a moment of fun

and excitement.

` Seek growth and profitability.

Growth shall be organic as well as

through acquisition.

` Work for a re-regulated gaming

market in Sweden.

` To operate games with extensive

social responsibility.

OVERALL OBJECTIVES

The following overall objectives should

be a guiding principle for group activities

seen over a business cycle.

` Cherry should grow faster than the

market.

` The growth rate of profits should

exceed 10 percent a year.

` The equity ratio should amount to at

least 30 percent.

` Dividend shall be 50 percent

of net profit.

cherry 50 years |

11


PART 1 ONLINE GAMING

Online Gaming:

New trademarks and new technology

Cherry is playing to win

Cherry’s business model has undergone a significant change in the last year in

the transfer from white label in cooperation with partners, to operation based

on its own licence and platform. With a completely new and modern gaming

platform and extensive marketing resources, Cherry has laid the foundation

for many years of profitable growth in the future.

From now on future growth will be created from our own

platform, where Cherry has control over its customers, products

and offerings. With the right technology, competence

and resources the focus is now on creating growth with exciting

products and an growth focused marketing strategy.

EUROPE’S NEWEST GAMING EXPERIENCE

In November 2012 Cherry launched EuroSlots.com – a

new product focusing on Cherry’s core area – online slot

12 | cherry 50 years

machines. EuroSlots offers many innovative functions and

games, but what makes the venture especially interesting is

what cannot be seen from the outside. EuroSlots has in fact

been built up from the bottom on a completely new in-house

developed platform.

“After extensive development work it is extremely pleasing

to finally have launched EuroSlots.com on our own platform

with our own gaming licence,” says Marius Andersen, CEO

of Cherry Malta Ltd.


EuroSlots.com

Launched in November 2012

in seven different languages,

based on the platform developed

by Cherry. Offers online

slot machines with the focus

on user-friendliness.

CherryAffiliates.com

A separate portal for all our

competent affiliates, where

they can follow their own

results, collect marketing

material and take part in

campaigns.

With its own platform Cherry can create a completely

new flexibility, which among other things provides access

to new markets.

“We obtain better control over the product offering and

strong financial leverage with low variable costs, which over

time improves our margins.”

EuroSlots offers a wide range of the best games available

online. The platform is designed from the bottom up with

the help of the latest technology and is focused on simplicity

and security.

“EuroSlots has been developed with the player in the

centre and gives us the opportunity to connect in principle

all types of games. There is also well-integrated functionality

for responsible gaming, where players can set the limits

themselves.”

The platform is prepared to meet all the requirements set

in different markets. Europe is moving towards a patchwork

of regulations and a flexible platform that can be adapted to

current rules and regulations is an import factor for success.

JACKPOT WITH AUTOMATEN SITES

Cherry sold the Automaten sites (Sverige-, Norges- and

DanmarksAutomaten) in January 2013 for a total of SEK

286 million. This is a very substantial increase in Cherry’s

resources.

“The sale is an importance piece of the puzzle in the new

start of our operations on the Internet, where future growth

is created from our own platform,” adds Marius Andersen.

In conjunction with the sale of the Automaten sites Cherry

acquired the CherryCasino.com site. This will be incorporated

in the EuroSlots platform and consists of an important

piece of the puzzle to gain synergies between Restaurant

Casino and Online Gaming.

EuroLotto.com

Europe’s largest daily lottery

draw with a mega jackpot.

Sponsors Special Olympics,

the largest sports event for

persons with intellectual

disabilities.

SpilleAutomater.com

Starts in the spring of 2013

with a strong focus on online

slot machines based on

Cherry’s platform.

CherryCasino.com

A classical casino on the

Internet started by Cherry in

2000, and which once again

is being managed by the

company.

EuroSlots offers a wide range of

the best games available online.

The platform is designed from

the bottom up with the help of

the latest technology.

A GATEWAY TO GERMANY

Cherry’s subsidiary PlayCherry Ltd (Malta) received a

licence in January 2013 in the German federal state

Schleswig-Holstein to offer online casino.

“We see the casino licence as an acknowledgement that

our platform and organisation complies with the high

requirements set to be able to compete on regulated

markets. The licence means that we will be able to market

our gaming in an effective way.”

Schleswig-Holstein is expected to join the other 15 federal

states soon, but in all probability it will not be possible to recall

already issued licences. The licence is an important part

in successfully being able to address the German market.

CONTINUED FOCUS ON EXPANSION

Cherry will continue to work in 2013 with the roll out and

marketing of the EuroSlots platform in new markets, both

under the trademark EuroSlots.com and under local trademarks,

e.g. SpilleAutomater.com.

“We are keeping our sharp focus on growth, with further

investments in new and innovative products. This is fundamental

to create future value,” says Marius Andersen in

conclusion.

cherry 50 years |

13


PART 1 RESTAURANT CASINO

Restaurant Casino:

Cherry’s lead is increasing

more and more

The business area Restaurant Casino experienced its best year yet in 2012. Both

turnover and profits reached new heights. Yet despite a good year for the restaurant

sector, the market for Restaurant Casino continues to shrink in Sweden. Thanks to

ongoing work with procedures and strategic acquisitions, Cherry has succeeded in

increasing both the number of venues and the turnover per table.

14 14 | | cherry 50 50 åryears


Cherry has been successful in its efforts to start gaming in

many new restaurants, but at the same time has been forced to

close other venues because operations were unprofitable.

“In total we have seen an increase in the number of

venues, thanks to our proactive efforts. We are maintaining

and increasing turnover on a market that overall continues to

shrink” says Ulf Bergström, Business Area Manager at Cherry

Casino AB.

INCREASED GAMING PER TABLE

At the venues where Cherry is still open, customers are playing

more than ever before, largely thanks to a series of implemented

measures.

“We have raised the lowest stake level at most venues to

SEK 40 or 50. We have also continued to work on refining

the training of our personnel, so that there is a higher level

of competence than ever before.”

NEW ACQUISITIONS INCREASE TURNOVER

During the year Cherry acquired three competitors –

Göteborgs Casino, Snättringe Casino and City Casino – and

thereby took over operations at several well-known pubs and

restaurants in Gothenburg and Stockholm.

BETTER CONTROL WITH NEW SYSTEM

The launch of the new cash terminals, which in addition to

card payment facilities offer full integration with the new

statistics and business system, is now ready.

“The new system works excellently. All data and statistics

go directly into the system.”

Cherry now has much better statistics and opportunities

for follow-up, and can optimise staffing and opening hours

with better control of statistics on individuals and tables. The

system permits full control of the flow of markers and money

over time, and provides much faster reporting directly

from the venues.

“Legislation hasn’t kept up”

Gustaf Hoffsted (Conservative) is a member of the Swedish Parliament in the Standing

Committee on Cultural Affairs. He explains his standpoint for raising the stake levels.

Why is it important to implement

this motion?

“Today’s gaming legislation concerning

Restaurant Casino from 1995 has not

kept up with the general cost trends. In

practice the maximum stake with a SEK

50 chip has remained unchanged for 18

years. Restaurant Casino has been de-

clining for many years, and if we don’t

introduce a certain adjustment of the

stakes the survival of the entire industry

will be at risk. This risks job opportunities.

I also think that Restaurant Casino is a

nice part of the integrated entertainment

on offer in our restaurants.

Which social consequences can an

increase involve?

“Above all it should be possible to

secure the 1 200 jobs that exist today,

while at the same time it should be

possible to create an additional 1 000 job

opportunities by increasing the stakes. I

believe that restaurant casino can continue

to maintain its low level of problematic

gaming, even after a certain increase in

the stakes. In comparison with the alternatives

offered at Casino Cosmopol or

foreign based gaming on the Internet, the

stake levels are very low and the problems

of addiction to gaming limited.

FURTHER IMPROVEMENTS

Cherry continues to make small changes within the strict

framework of laws and restrictions surrounding the industry.

“We try to get better in all areas, so that we can give our

guests a few moments of fun and excitement,” promises Ulf

Bergström, who is proud to have taken part in building up

Sweden’s largest restaurant casino.

EAGERLY AWAITED MOTION FOR RAISING THE STAKES

The reason for the shrinking Restaurant Casino market

is the legal maximum limit for stakes, which has not been

raised in line with the expenses of gaming operators. The

maximum stake today is about SEK 73, but in practice SEK

50 – which it has been now for almost 20 years. The current

legislation is from 1995 and it has quite simply not kept

up with the times. This has meant a constant decline and

halving of the industry since year 2000.

But after Cherry has spent a long time working to inform

politicians and decision-makers, a member of the Swedish

Parliament has finally written a motion to increase the

stakes. Jan R Andersson (Conservative) proposes raising the

stakes from today’s SEK 70 to 200.

“The next step is for the motion to be considered by the

Ministry of Culture in the spring. At the very best we could

see a change in the law by the end of the year, but there is a

big risk that it will take longer,” adds Ulf Bergström.

The proposed raising of the stakes is a pure case of survival

for Cherry, because wage costs and other costs are rising at

a higher rate than earnings.

“With the raised levels of stakes we would be able to open

more venues and keep them open for more days in the week.

This is estimated to create up to 1 000 new job opportunities,

primarily openings for young unemployed persons.

If the stakes are not raised this will have consequences for

our business operations and job opportunities will be lost

over time.

Which groups will benefit most from the

newly created jobs?

“The industry employs today mainly

young people aged between 18–25 in all

parts of the country. Newly created jobs

will in all likelihood be “openings” that

help us to keep unemployment down

among young people, while also providing

a valuable introduction to working

life.

cherry 50 years |

15


PART 1 dEVELOPMENT PROjECTS

Yggdrasil Gaming:

New gaming company with

innovative number games

16 | | cherry 50 years


Yggdrasil Gaming is a completely new gaming company founded by industry

veteran Fredrik Elmqvist. Yggdrasil supplies innovative and exciting number

games on the Internet, which are sold to different operators. Cherry is both

a pilot customer and a financial investor in the company. For Cherry this

investment is a step towards standing out from the rest and keeping one

step ahead of competitors.

Fredrik Elmqvist, former CEO of Net Entertainment Malta, is

running Yggdrasil together with a close-knit team of colleagues

with solid backgrounds in both online casino and state regulated

lotteries.

Number games are deeply rooted in our consciousness, but

Yggdrasil is the first on the market to make use of the popularity

of number games and combine them with other well-proven

gaming concepts.

“Most people often have one or more favourite numbers, so

we start by giving the player opportunities to play their favourite

numbers by clicking, choosing, doubling up and scratching their

favourite numbers,” says Fredrik Elmqvist, CEO of Yggdrasil

Gaming.

With their concept “NUMB3RS L0V3RS”, Yggdrasil offers a

In 2011 the lottery market

amounted to $ 262 billion. A

large part of the lottery market is

expected to move online, in what

is called “the Final Frontier”.

wide range of lottery games, including the action packed 3D-

Keno, and scratch lotteries for occasional players and high-rollers.

The games are available on computers, mobiles and tablets, and

offer support for 11 European languages and several different

currencies.

In 2011 the lottery market amounted to $ 262 billion. A large

part of the lottery market is expected to move online, in what

is called “the Final Frontier” in the gaming market, after sport

gaming, bingo, casino and poker have successfully established

themselves online.

“We intend to be a key player for operators who want to take

market shares for number games on the Internet,” continues

Fredrik Elmqvist. “We therefore offer our licensed customers

a full-scale product portfolio of innovative games for both newcomers

and veterans.”

Yggdrasil’s business concept is to supply its gaming portfolio

to licensed gaming operators, with the focus on Europe. There

is a big demand for many operators to reinforce their offering

in number games, which today is an underrepresented product

category at private gaming operators on the Internet.

Cherry will as a pilot customer be able to derive significant

benefits from Yggdrasil Gaming’s innovative gaming catalogue.

The products will be offered on Cherry’s web pages.

“As a financial investor we hope that the investment will gene-

rate a good yield for our shareholders,” says Emil Sunvisson, CEO

of Cherry.

The tree of life

The regenerative power in Yggdrasil is our innovative

gaming catalogue, according to Fredrik Elmqvist.

“In the gaming industry everything is called something like

Game, Tech, Play, Bet–and so on,” says Fredrik Elmqvist.

“Reasonably generic. I wanted to have something

that stood out, but still has associations with the

Nordic. And then the name Yggdrasil wasn’t

charged with values, so you could more or

less fill it with whatever you wanted to.”

“Yggdrasil is the tree of life in the old

mythology. We try to create different worlds

for our games and at the same time create

our own world on the basis of the experiences

and lessons we have brought

with us to the business adventure.”

cherry 50 years |

17


PART 1 AkTIEN

The share

Cherry’s B-share is listed on AktieTorget.

SHARE STRUCTURE

At the end of the year Cherry had

12 805 642 shares, divided into

997 600 A-shares and 11 805 042

B-shares. Each A-share carries 10 votes

per share, while each B-share carries

one vote. The shares have equal rights

to the assets and profits in Cherry.

SHARE ISSUES

In 2010 Cherry completed a non-cash

issue of 100 000 A-shares and 6 301 321

B-shares in conjunction with the acqui-

sition of the Automaten group. Cherry

also completed in 2010 a preferential

share issue for acquisition of the Auto-

maten group consisting of 336 600

A-shares and 2 063 895 B-shares at

a subscription price of SEK 12 per

share. The shares were subscribed to

315 percent, of which 99 percent with

the support of preferential rights and

216 percent without the support of

preferential rights, which 99 percent

with the support of preference rights

and 216 percent without the support of

preference rights, which gave Cherry

Share price 12/2011–12/2012

30

27

24

21

18

15

dec 2011

18 | | cherry 50 years

mar 2012

SEK 28 805 940 before issue costs.

The number of shares increased to a

total of 8 801 816 shares via the preferential

share issue and to 12 802 642 for

the issue in kind, divided into 997 600

A-shares and 11 085 042 B-shares.

The share capital increased by SEK

4 840 998.80 from SEK 2 200 454.30

to SEK 7 041 453.10.

In 2009 Cherry also completed the

issue in kind of 45 454 B-shares in conjunction

with the acquisition of operations

in Knock Out AB (Joker Casino).

The company’s share capital thereby

increased by SEK 24 999.70 to SEK

2 200 454.30.

CONVERTIBLES AND OPTIONS PROGRAMME

At an extraordinary general meeting on

19 October 2011 a decision was taken

to introduce a long-term incentive programme

for leading executives and key

persons in Cherry. The decision involves

the issue of a maximum of 500 000

subscription options to persons with

permanent positions in Cherry to

subscribe to the same number of new

jun 2012

shares in Cherry AB.

455 000 subscription options have

been offered to permanent employees,

of which 100 percent have been subscribed

to. The subscription options

were issued at the market price, which

was set at SEK 0.93 and brought in equity

of SEK 423 thousand for the group.

The subscription price for the shares

was set to SEK 22.94, which consists of

130 percent of the average share price

during 20 days of trading before the

date of the meeting, 19 October. The

subscription of shares can take place

during the period 1 November to 30

November 2014. An additional 45 000

subscription options are held by the

wholly-owned subsidiary Cherry Casino

Syd AB. In that the share price from

the introduction of the programme and

as of the balance sheet date exceeds the

subscription price SEK 22.94 the options

had a dilution effect on profit per

share for 2012. In total the options have

exceeded the subscription price for 331

days as of 31-12-2012. This has involved

a dilution effect of 403 548 shares.

sep 2012

dec 2012


19

OWNERSHIP STRUCTURE

As of 31 December 2012 the number

of shareholders in Cherry amounted to

1 932 (1 956).

Several larger holdings in the company

are registered in foreign banks.

This practice means that the board has

incomplete information as to who the

ultimate owners of Cherry are.

LIQUIDITY GUARANTEE

Cherry appointed Remium on 26

September 2007 as a liquidity guarantor

for Cherry’s B-share. The policy

employed by the board of having a liquidity

guarantor is to ensure a lower

investment cost and less risk for investors

trading with the share.

A total of 622 631 (667 317) shares

have changed owners during the year,

which corresponds to approx. 5 (6)

percent of the average total number of

issued B-shares.

PRICE MOVEMENTS AND TURNOVER

The price (last paid) on the balance

sheet date 31 December 2012 was SEK

29.00 in comparison with SEK 17.70

on 31 December 2011. The market

capitalization in 2012 increased to SEK

371.4 million from SEK 226.7 million

on 31 December 2011, which corresponds

to an increase of 64 percent.

The average price per trading day in

2012 was SEK 26.6 (24.0). The highest

official quotation was SEK 30.90 on

28 May and the lowest was SEK 17.80

on 3 January.

Total turnover in 2012 amounted

to SEK 16 583 827 (16 032 717), which

The 21 largest shareholders as of 31 December 2012

Name A-shares B-shares

equals an average of just over SEK

65 809 (63 121) per trading day.

A standard trading unit in Cherry B

is 200 shares.

TRANSFER TO SHAREHOLDERS VIA

SHARE REDEMPTION PROGRAMME

The board proposes that the annual

general meeting decides upon a transfer

to shareholders of SEK 143.4 million

(9.6), corresponding to SEK 11.20 per

share (0.75) through a share redemption

programme, of which SEK 1.20 per

share corresponds to an ordinary

transfer and SEK 10.00 per share to

an extraordinary transfer to the shareholders.

The full proposal will be presented

in good time prior to the annual

general meeting.

Proportion of

share capital. %

Proportion of

residual value. %

Per Hamberg family 295 621 529 753 6.4 16.0

Morten Klein 65 660 2 776 000 22.2 15.8

Lars Kling family 295 621 409 942 5.5 15.5

Lorang Andreassen with family 34 340 1 804 474 14.4 9.9

Rolf Lundström 104 400 150 989 2.0 5.5

Lindwall family 89 761 182 812 2.1 5.0

CAIL 56 098 397 015 3.5 4.4

Arild Karlsen via company 0 919 836 7.2 4.2

Altraplan Bermuda Ltd 56 099 216 345 2.1 3.6

Björn Hornerud Grene via company 0 768 843 6.0 3.5

Knutsson Holdings and Knutsson family 0 575 344 4.5 2.6

BP2S PARIS/NO CONVENTION 406 385 3.2 1.9

EFG PRIVATE BANK S.A.. W8IMY 0 237 759 1.9 1.1

Anders Holmgren via company 0 207 528 1.6 1.0

Rolf Åkerlind family 0 180 800 1.4 0.8

Emil Sunvisson via company 0 176 000 1.4 0.8

Gunnar Lind 0 171 720 1.3 0.8

JP Morgan Bank 0 138 630 1.1 0.6

Fredrik Sidfalk 0 134 816 1.1 0.6

Provibis Invest AB 0 121 749 1.0 0.6

LÄNSFÖRSÄKRINGAR SMÅBOLAGSFOND 0 120 000 0.9 0.6

Other shareholders 0 1 178 302 9.2 5.4

Total 997 600 11 805 042 100.0 100.0

cherry 50 years |

19


PART 1 LEAdING ExECUTIVES ANd BOARd OF dIRECTORS

Leading executives Board of Directors

20 | cherry 50 years

Emil Sunvisson

born 1971, Gnesta

CEO Cherry AB (plc)

Employed in the group since 2011

Former board member since 2006

Share holding: 176,600 B-shares via company

200,000 subscription options

Fredrik Burvall

born 1972, Nacka

CFO and vice CEO Cherry AB (plc)

responsible for investor relations (IR)

cherry ab (publ)

Employed in the group since 2006

Share holding: 49,900 B-shares

50,000 subscription options

Marius Andersen

born 1974, Malta

business area manager Online Gaming

Employed in the group since 2010

Share holding: 50,000 subscription options

Per-Anders Persson

born 1959, Solna

business area manager Restaurant Casino

region north

Employed in the group since 1979

Share holding: 37,240 B-shares

20,000 subscription options

Ulf Bergström

born 1966, Kungsbacka

business area manager Restaurant Casino

region south

Employed in the group since 1986

Share holding: 37,168 B-shares

20,000 subscription options

Aron Moberg-Egfors

born 1977, Borås

sales manager Restaurant Casino

Employed in the group since 2009

Share holding: 102,598 B-shares

30,000 subscription options

Auditors

PwC:

Appointed at AGM 20-05-2010 for period to AGM 2014.

Senior auditor: Niklas Renström, Auditor, born 1974,

Saltsjö-Boo, authorised public accountant.

Rolf Åkerlind

born 1943, Saltsjöbaden

chairman

Member of the board since 2006

Other assignments: Chairman i SEAB AB and

Stark Fasadrenovering and board

member in Constant Clean AB

Share holding: 180,800 B-shares. Includes holding via

family members and endowment assurance.

Morten Klein

born 1969, Oslo

board member

Member of the board since October 2011

Other assignments: Chairman in Klein Holding AS,

Norwandia AS, Morten Klein AS and

Yes Games AS

Share holding: 65,660 A-shares, 2,776,000 B-shares

Anders Holmgren

born 1973, Stockholm

board member

Member of the board since 2010. Founder of gaming site Betsson.

Other assignments: Chairman Northberry AB,

Fu Sheng, Interactive Ltd and member

in NASP AB

Share holding: 207,528 B-shares via company

Martin Wattin

born 1974, Stockholm

board member

Member of the board since annual general meeting 2011

Other assignments: Chairman Rabble Communications AB,

Apotekslinsen AB, member in i Mostphotos

AB and CEO of Inbox Investment AB

Share holding: 27,361 B-shares

Kjell Berggren

born 1958, Stockholm

board member

Member of the board since 2010

Other assignments: Senior Vice President, Global Head of

Expansion/Development Esprit

Share holding: No shareholding

Jörgen Olsson

born 1976, Gävle

employee representative, board member

Appointed by HRF as employee representative since 2007

Share holding: 750 B-shares via associated company


Cherry’s

Annual Report 2012

The Board of Directors and the CEO of Cherry AB (plc), corporate identity number

556210-9909, with registered office in Stockholm, is hereby submitting the annual

report for the fiscal year 2012 for the Parent Company and for the Group. The

Annual Report including the Auditor’s Report comprises the pages 22– 61.

Cherry has during 2012 changed the name of the Parent Company from

Cherryföretagen AB (plc) to Cherry AB (plc).

21


Part 2 AdministrAtion report

The results of the year’s activities and the position of the parent company and the group are

presented in the administration report and the following income statements and balance sheets,

cash flow statements, specifications of equity and other related notes and comments. The reporting

currency for the parent company and the group is Swedish kronor (SEK). The consolidated income

statements and balance sheets for the group and the parent company are subject to the approval

of the annual general meeting on 7 May 2013.

Administration report

ABOUT CHERRY

Cherry’s business concept is to offer fun &

excitement with entertaining and exciting

gaming in a safe environment. Cherry’s activities

during the most part of 2012 have been

divided into three business areas, along with

group-wide and development projects. One

business area, Maritime Gaming, was discontinued

in November 2012.

ONLINE GAMING

Online gaming via the websites EuroSlots.com,

SverigeAutomaten.com, NorgesAutomaten.com,

DanmarksAutomaten.com and EuroLotto.com,

including affiliate activities from Cherry-

Affiliates.com, is all managed by subsidiaries

from Malta. SverigeAutomaten.com, Norges-

Automaten.com and DanmarksAutomaten.com

were divested in the first quarter of 2013, while

Cherry acquired CherryCasino.com.

RESTAURANT CASINO

Traditional casino gaming (Blackjack and Roulette)

is managed at some 250 Swedish restaurants

and night clubs. Event casino is also offered

to companies and private persons.

MARITIME GAMING

Discontinued in November 2012.

GROUP-WIDE AND DEVELOPMENT PROJECTS

Cherry has several development projects managed

within the group to create new services and

products that support Cherry’s business concept,

expansion and development strategy. Up

until the time the product or service in launched

and established, the cost is taken centrally within

the group and reported in segment reporting as

”Development Projects” to create transparency

in what the group’s different business areas

generate. Cherry invested in Yggdrasil in 2012

within the framework of a development project.

Yggdrasil supplies innovative and exciting

number games on the internet, which is sold to

different operators. Cherry is both a pilot customer

and a financial investor.

22 | annual report 2012

THE PAST YEAR

THE GROUP – FISCAL YEAR 2012

Group sales increased by 28 percent to SEK 473.1

million (368.7). EBITDA increased by 161 percent

and amounted to SEK 115.9 million (45.3)

and EBIT amounted to SEK 36.8 million (40.0).

Adjusted for comparative items, revaluation

of additional purchase price and goodwill, sales

increased by 16 percent to SEK 399.7 million

(344.9) and EBIT by 122 percent to SEK 36.8

million (16.6).

Group profit after financial items amounted

to SEK 32.6 million (39.0) and profit after tax

amounted to SEK 31.0 million (38.0), corresponding

to SEK 2.35 (3.08) per share after

dilution and minority interest.

Return on equity was 9 percent (13) and on

total capital 8 percent (9). Cash holdings in the

group amounted to 59.0 MSEK (30.4) at the

end of the period, and the equity ratio amounted

to 86 percent (70).

ONLINE GAMING – FISCAL YEAR 2012

Earnings for the fiscal year increased by 21 percent

to 265.1 MSEK (219.1) and operating profit

(EBIT) improved by 95 percent to 33.7 MSEK

(17.3).

NorgesAutomaten, SverigeAutomaten and

DanmarksAutomaten continued to deliver

stable results. Earnings from CherryAffiliates.

com continued to develop positively. EuroSlots.

com, which is based on Cherry’s own platform,

was launched on 21 November. EuroSlots has

been launched in Finland and during December

the customer database at PlayCherry.com

migrated from IGT (International Game Technology)

to Cherry’s platform. Volumes on the

platform remain relatively small, but are growing

at a fast percentage rate. During the fiscal

year Cherry focused on maintaining the large

customer database taken in via EuroLotto.

Deposited amounts increased in 2012 by 6

percent to SEK 665.9 million (627.3) and the

number of active customers amounted as of

31-12-2012 to 30 565 (40 316). The number of

new customers amounted in 2012 to 107 399

(128 568) and the number of registered customers

amounted at the end of the period to

325 901 (218 502).

IMPORTANT EVENTS IN ONLINE GAMING

DURING THE FISCAL YEAR OF 2012:

Cherry launched a new product on 21 November,

EuroSlots.com, focusing on online

slot machines. EuroSlots is based on a newly

developed platform with its own licence in

Malta issued by LGA (Lotteries and Gaming

Authority). EuroSlots offers many creative

functions and games from Net Entertainment

and Microgaming. The launch means

that Cherry has full control over the product

offering and also better financial leverage

with low variable costs. This allows Cherry

to maintain its focus on growth in Online

Gaming with further investments in new

innovate products, which is fundamental to

create future value.

Cherry received a licence in October from

LGA (Lotteries and Gaming Authority) in

Malta.

IMPORTANT EVENTS AFTER THE REPORTING

PERIOD:

Cherry’s subsidiary PlayCherry Ltd (Malta)

received a licence in January 2013 in the

German federal state Schleswig-Holstein

to offer online casino. Schleswig-Holstein

adopted a new law in 2012 which makes it

possible to issue licences for online gaming

to private actors. A total of 20 casino licences

have been issued, and the local tax is 20

percent of gaming earnings.

Cherry sumbitted a lawsuit in January 2013 at

Oslo City Court against the Norwegian state

concerning the injunction issued against

Cherry AB. In the injunction Lotteri- og Stiftelsestilsynet

demands that Cherry AB close

its offer of gaming for money and stops marketing

in relation to Norwegian citizens for

EuroLotto.com. Cherry will await the decision

of the court before taking any measures.

• In February Cherry Malta Ltd sold its trademarks

and domains related to SverigeAutomaten,

NorgesAutomaten and Danmarks-

Automaten to Betsson AB (plc). The proceeds

amounted to SEK 286.0 million. In conjunction

with the sale, Cherry acquired the

gaming site CherryCasino.com for SEK 1.0

million. Cherry has the right to earning and

profits from the Automaten sites up until


31-03-2013, which will be reported in the results

for discontinued operations. The initial

net proceeds of SEK 225 million have been

regulated through the delivery of a corresponding

1 063 895 new issue of Betsson

B-shares. The shares were sold on 21 February

and the transaction provided Cherry with SEK

228.7 million before deductions for transaction

costs. The sale was executed to a discount

of approx. 2.0 percent in relation to

the trading price for the Betsson share at the

time. The remaining proceeds will be regulated

with liquid assets after twelve months. The

Automaten sites sites generated earnings in

2012 of SEK 168.2 million. CherryCasino.

com generated earnings in 2012 of SEK 1.5

million. Goodwill arising in conjunction with

the acquisition of the Automaten group,

and which as of 31 December 2012 amounted

to SEK 260.6 million, was written down as a

result of the sale to SEK 0.0 million.

THE AUTOMATEN GROUP

• The terms and conditions required for payment

of the additional purchase price have

not been met. The liability for the additional

purchase price has therefore been valued to

zero as of 31-12-2012. Since the acquisition

was implemented according to IFRS 3 began

to be applied, the revaluation of the additional

purchase price of SEK 73 446 thousand

(23 828) has been reported in the income statement

(included in Other operating income)

in the consolidated financial statements.

• The goodwill attributable to the Automaten

Group has undergone an impairment test,

whereby a write-down requirement of SEK

73 447 thousand was identified.

• The acquisition of the Automaten Group has

given Cherry a lot of experience and knowhow,

despite the fact that the high thresholds

to reach the additional purchase price have

not been met.

RESTAURANT CASINO – FISCAL YEAR 2012

Earnings for the fiscal year increased by 7

percent and amounted to SEK 134.5 million

(125.8). Operating profit (EBIT) improved by 22

percent and amounted to SEK 12.3 million

(10.1). The main explanation for the increase

in earnings and improvement in profit is that

Cherry has taken venues from competitors,

and acquired Snättringe and City Casino in

July 2012, and Göteborgs Casino in December.

Cherry has in 2012 signed 60 new Restaurant

Casino agreements in Sweden. At the

same time 44 venues have been closed as a result

of unprofitability, conceptual changes, loss

of alcohol licences or bankruptcy, and two venues

were closed for the season at the year end.

Cherry’s market share increased and amoun-

ted to 58 percent (55) of the active gaming tables

according to statistics from Lotteriinspektionen

(Gaming Authority of Sweden) for December

2012. Cherry had at the end of the quarter gaming

at 254 venues (240) with a total of 349 tables (345).

IMPORTANT EVENTS IN 2012:

Cherry signed an agreement in July with

Gröne Jägaren in Stockholm, which is one the

most well-known restaurants in Stockholm.

• In July Cherry took over the casino business

from City Casino AB and Snättringe

Restaurang AB, which includes 16 venues.

The agreement with City Casino AB and

Snättringe Restaurang AB is based on the

allocation of earnings over a limited period.

Cherry estimates that annual sales will increase

by approx. SEK 8 million as a result of

the acquisition and that it will have a positive

effect on profit, starting from the acquisition.

The venues are in the Stockholm area and the

most well-known venues include Victoria,

Collage, Vasakoppen Café, O´Learys Södertälje

and Soft Bar & Kök.

• On 26 September a motion was submitted

to the Swedish Parliament (2012/13:Kr221)

with the implication that the maximum stake

for Blackjack should be adjusted to SEK 200

from the current level of just over SEK 70. The

motion is expected to be considered by the

Ministry of Culture in the spring of 2013.

An increase in the stake level is estimated to

provide prospects for 1 000 new job opportunities

for young people aged 18–25. In addition

to this, indirect jobs are expected in the restaurant

sector as a result of improved profitability.

• In December Cherry took over the casino business

from Göteborgs Casino AB, which includes

11 venues in and around Gothenburg.

Cherry estimates that the acquisition will increase

sales by approx. SEK 6 million a year

and that it will have a positive effect on profit,

starting from the acquisition. Some of the

most well-known places taken over include

Jamesons Pub, P C Restaurang, Restaurang

Babar, Restaurang Bryggeriet Göteborg,

Restaurang Excet/Lemon bar, The Flying

Scotsman and Tribeca.

SALE OF MARITIME GAMING

The Maritime business area has been divested

during the year.

Cherry completed on 8 November 2012 the

sale of all shares in Cherry Maritime Gaming

AB, Astral Maritime Services Ltd and Cherry

Services Ltd to Bell Casino AB. Bell Casino AB

took over the companies from 30-09-2012.

In total Cherry has received SEK 36.3 million

in proceeds from the sale of the shares, dividends

from the sold subsidiaries and repayment

of debt to the parent company, and Cherry’s net

cash holdings increased with SEK 27.8 million.

Cherry reported a result for the fiscal year from

the sale of Maritime Gaming of SEK -0.6 million.

Earnings from discontinued operations

Cost of discontinued operations

Result for discontinued operations to

time of disposal

Capital loss

Result discontinued operations

annual report 2012 |

67.7

-68.3

-0.6

0.0

-0.6

Cherry applied IFRS 5 for disposal of the maritime

segment. IFRS 5 specifies how discontinued

operations should be presented and what

information should be issued for discontinued

operations. The results of discontinued operations

should be reported in a separate income

statement, and in the company’s income statement

is taken up under the item “Result from

discontinued operations” (net after tax). A further

analysis of the result from discontinued

operations is included in Note 32.

GROUP-WIDE AND DEVELOPMENT PROJECTS

Cherry focuses on finding profitable products

and services that support the group’s business

concept and long-term strategy. Earnings for

the fiscal year 2012 in development projects

amounted to SEK 0.0 million (0.0) and were

charged to operating profit (EBIT) by SEK -0.4

million (-0.2).

During the period 2012 to 2007 the group

has launched the following development projects,

including acquisitions:

2012:

• Investment in Yggdrasil, which develops innovative

online number gaming and which

in 2013 will be sold to different operators.

• Launch of own platform through the website

EuroSlots.com – European online slot

machines.

• Acquisition of three restaurant casino companies,

Snättringe-, City- and Göteborgs Casino.

2011:

• Launch of Europe’s largest lottery with daily

draws, EuroLotto.com

• Launch of CherryAffiliates.com – which will

in time increase sales and profitability in

Online Gaming.

GROUP-WIDE

The parent company supplies and sells internal

services to other group companies, primarily

within finance, economics, and business development,

and supplies the listing platform,

administration and management. The Parent

Company also has some revenues from external

licences. The parent company changed its name

in 2012 from Cherryföretagen AB to Cherry AB.

23


Part 2 AdministrAtion report / mAnAgement And control

INVESTMENTS

The investments of the Cherry Group in intangible,

tangible and financial fixed assets

amounted during the year to SEK 15.2 million

(6.4).

LIQUID ASSETS AND CASH FLOW

Liquid assets for the group amounted on 31

December to SEK 59.9 million (30.4). Interest

bearing liabilities amounted to SEK 1.8 million

(15.8). Cherry has in the fourth quarter amortised

in advance the last part of the acquisition

loan related to the acquisition of the Automaten

group in 2010 of SEK 6.7 million.

The cash flow from operations amounted

to SEK 41.1 million (24.8). The equity ratio

amounted to 86 percent (70) at the year end.

EMPLOYEES

The average number of employees (number of

employees converted to full-time jobs) within

the group amounted to 204 (203) for the year.

At the end of the year the number of employees

amounted to 677 (722) persons. The majority

of employees in the group are active as

croupiers or dealers at the Swedish Restaurant

Casino. Most of them are young people who

combine their studies with part time work in

the evenings and at weekends.

FUTURE PROSPECTS

The business area Online Gaming is estimated

to grow more quickly than the online gaming

market. H2 Gambling Capital estimated in

November 2012 that the global online gaming

market would grow by 9.1 percent in 2013. Online

gaming is characterized by severe competition

and rules and regulations, which can quickly

change in the different European countries. Cherry

estimates that the company will report negative

margins in the business area Online Gaming

in the second and third quarters in 2013 as a result

of the investment in growth and the sales of

the Automaten sites. Cherry will launch several

products and services that will be accommodated

within the business area Development Projects

to support Cherry’s business concept and longterm

strategy.

The legal situation for gaming on the Internet

changes on a regular basis in different geographical

markets. Pressure is still being exerted on

countries in the EU to adapt national legislation

to the applicable EU laws, with the free movement

of products and services. Several countries

have advised that they are working with new legislation

that will be compatible with the requirements

of EU.

The market for Restaurant Casino is shrinking

every year. An increase in the stakes would

be able to create growth and job opportunities.

Jan R Andersson (Conservative) has submitted a

24 | annual report 2012

motion to the Riksdag (2012/13:Kr221) with the

implication that the maximum stake for Blackjack

should be adjusted to SEK 200 from the

current level of just over SEK 70. The motion is

expected to be taken up for consideration by the

Ministry of Culture in the spring of 2013.

Cherry is not issuing a forecast for 2013.

ESSENTIAL RISKS AND

UNCERTAINTY FACTORS

POLITICAL DECISIONS

Gaming on most national markets is strictly

regulated by law and all gaming activities are

in principle subject to licence. Cherry’s operations

are therefore influenced to a considerable

extent by political decisions. The legal situation

for gaming on the Internet changes on a regular

basis in different geographical markets.

Cherry is actively engaged in remaining informed

of any changes concerning gaming

legislation in Europe.

LEGAL DISPUTES

Persons who suffer from an addiction to

gaming may come to sue companies within the

Cherry Group for their gaming abuse. Even if

such claims are overruled, they could give rise

to substantial legal costs and possibly a loss of

confidence in Cherry, which by extension would

lead to a reduction in earnings. Cherry’s gaming

sites give customers the opportunity to

decide for themselves how much they want to

play for and there are several gaming responsibility

tools for players on the sites, where the

player can decide to switch off, or limit the

amount to play etc. Cherry also works together

with our partners with Global Gambling Guidance

Group (G4), an organisation that certifies

responsible gaming websites on the Internet.

Concerning traditional gaming we have the opportunity

via physical croupiers to refuse players

who have, for example, been drinking too

much. The stakes in Restaurant Casino are restricted,

which minimises the risk of addiction.

Cooperation agreements with partners and

customers can result in legal disputes and applications

for summons.

During 2011 Cherry received a claim from

Norway’s Lotteri- og stiftelsetilsyn (Gaming

and Foundation Authority) where they demanded

that Cherry should stop its marketing

of gaming on EuroLotto.com in relation to Norwegian

players. Cherry finds that the claims of

Norway’s Lotteri- og stiftelsetilsyns are invalid

in that they are directed towards the parent

company Cherry AB (plc) and not EuroSlots

Ltd, and also because they are in conflict with

EEA law, which is superordinate to Norwegian

legislation. Cherry issued an appeal on 5 May.

On 8 July Norway’s Lotteri- og stiftelsetilsyn informed

that the case will be referred to Lotteri-

nemnda (Lottery Committee) in Norway. On 28

October Norway’s Lotterinemnda announced

that the injunction of Lotteri- og stiftelsetilsynet

against Cherry remained in place. On 9 January

2012 the Ministry of Culture announced that

the claim remained in place. No penalties have

been announced.

Cherry submitted a lawsuit in January

2013 at Oslo City Court against the Norwegian

state concerning the injunction issued against

Cherry AB. Cherry will await the decision of

the court before taking any measures.

Cherry has in 2012 initiated a legal process

against a supplier in Online Gaming. Cherry

has won in the first instance and feels confident

of winning the legal process, which would

have a positive financial effect on Cherry.

Cherry estimates that the process will be resolved

in 2013, or in the first half of 2014.

There are no other legal disputes in progress

from previous years and no lawsuits or other

claims other than the above that have been

directed at Cherry during the year or after the

year end.

COMPETITION

The Swedish restaurant casino market is a mature

market and characterised by a large number

of small players. In line with a possible

reconciliation of Swedish gaming legislation to

international legislation, the board expects that

competition may increase. The board considers

that Cherry has an established and solid position

on the Swedish restaurant casino market.

Further political decisions with a negative

effect for the Cherry Group, or increased competition

from financially stronger competitors,

can result in significant negative effects

for Cherry. There are many competitors with

similar products in online gaming and this

competition can in the future come to further

increase from Internet based players. Online

gaming is a highly competitive market, and

one that requires a lot of marketing. Cherry is

actively engaged in strategic policies to handle

any increase in the competition.

RELIANCE ON LARGE CUSTOMERS

There are more than 200 customers in the

business areas in the Cherry Group. No single

customer accounts for more than ten percent

of group sales. Cherry is actively engaged in reinforcing

its customer relations in all business

segments.

CUSTOMER AGREEMENTS

Some of the customer agreements in the

Cherry Group in Restaurant Casino can be

cancelled, i.e. if the restaurant or night club in

which the activity is conducted is transferred,

sold or its management is taken over by another


operator. This is a standard regulation in the

industry. Even if Cherry signs long-term agreements

there is therefore no guarantee that a

contractual obligation will persist during the

term of the agreement.

ECONOMIC SITUATION

The restaurant casino sector has historically

followed developments in the restaurant sector.

Online gaming is relatively insensitive to

changes in economic activity.

CHANGES IN CONSUMER BEHAVIOUR

Cherry’s traditional gaming is challenged by

online gaming. One risk to which Cherry is

exposed is that in the future it could become

too expensive to adapt to what customers want

to have for gaming options, or that laws prohibit

traditional gaming from offering equally

attractive forms of gaming as on the Internet.

Cherry has through its own platform EuroSlots

taken a major step towards becoming an important

player in online gaming, and also sees

opportunities that traditional gaming and online

gaming will come closer to each other,

which could also produce new opportunities.

Management and control

LEGISLATION AND ARTICLES OF ASSOCIATION

Cherry AB (plc) shall in the first instance

apply the Swedish Companies Act and the

regulations that follow from the listing of the

share at AktieTorget. Cherry shall also in its

activities follow the regulations specified in

Cherry’s articles of association. This is available

on Cherry’s website.

ANNUAL GENERAL MEETING

Notice is given of the annual general meeting

no earlier than six weeks and no later than four

weeks prior to the meeting. The notice contains

information on application and on the right to

participate and vote at the meeting, the listed

agenda and the issues that are to be considered,

information on proposed dividends, and the

main content of other proposals. Shareholders

or their representatives can vote for the full

number of shares owned or represented. Proposals

to the meeting should be addressed to the

Board of Directors and submitted in good time

before notice is issued. The minutes from the

meeting are submitted to shareholders on request,

and are available at the company’s website.

Nomination procedures are carried out by one

of the largest shareholders appointed to the

CASH HANDLING

Cash is handled in the Cherry Group, which

does involve the risk of theft and robbery. In

addition to this only a certain part of cash handling

is insured. The risks involved with handling

cash in Restaurant Casino have nevertheless

been reduced in that the physical handling

of cash at most of the venues is not handled

by the Cherry Group. Most of the handling

is managed by the customers instead (restaurants

and night clubs). The Cherry Group also

cooperates with Nokas, Loomis and others in

Restaurant Casino. Cash is still handled and

transported, however, at some venues in the

group. Theft has occurred at some of Cherry’s

venues, but this is thoroughly investigated and

the group cooperates with Säkert Företag in

Malmö. Cherry continuously strives to improve

security for our personnel and the handling of

cash by developing new and better systems,

reviewing routines, and increasing credit and

cash card handling at our venues. Cherry also

has an internal control system, which quickly

detects deviations and thefts.

RELIANCE ON PARTNERS AND KEY PERSONS

Cherry relies on the agreements companies enter

into with restaurants and night clubs in Restaurant

Casino activities. If Cherry loses a large

nomination committee. The following nomination

committee has been appointed prior to

the annual general meeting in 2013:

Morten Klein (appointed by Morten Klein

AS), John Wattin (appointed by the Hamberg

family), Pontus Lindwall (appointed by the

Kling family) and Rolf Åkerlind (Chairman of

Cherry AB). Rolf Åkerlind gives notice of the

nomination committee. The AGM in 2012

appointed Rolf Åkerlind and Anders Holmgren

to the audit committee. The full Board of Directors

is included in the remuneration committee.

BOARD OF DIRECTORS

Board members are elected annually at the

AGM for the period until the next AGM is held.

There are no rules concerning the longest

period of time a member can be included on

the board. There are six members in Cherry’s

board. Five of the members are elected at the

AGM and one member is appointed by the

employee organisation HRF. The members

include persons linked to Cherry’s large shareholders,

Morten Klein and Martin Wattin, as

well as persons independent of them. The CEO

is not included in the board.

By the definition of the Stockholm Stock Ex-

number of such agreements this would have a

negative effect on operations.

In Online Gaming operations Cherry has

signed an agreement with Otto Malta Ltd for

EuroLotto, where Cherry utilises their licence and

technology. Cherry engages several consultants

and partners for the development, management

and marketing of Cherry’s online operations. If

any of these consultants or partners should fail

to meet their obligations in relation to Cherry

this could have a negative effect on operations.

For a description of financial risks, refer to

Note 3.

RESEARCH AND DEVELOPMENT

Cherry does not undertake research activities.

Development work is reported as assets in the

balance sheet, where it complies with the requirements

set in IFRS. Cherry has conducted

development projects in 2012 in Online Gaming,

which comply with these requirements and are

reported as intangible assets. SEK 5.6 million

(1.2) has been activated for development costs

in 2012.

ENVIRONMENT

Cherry does not conduct any activities subject

to licence or notification in accordance with the

Environment Act.

change the number of board members independent

of the company should be 80 percent and the

number of members independent of the larger

shareholders 40 percent. More than half of the

board members and more than half of the members

of the group executive have underdone training

courses in the regulations of the Stockholm

Stock Exchange. The CEO is presenting facts to

the board. Occasionally persons from the management

team participate in board meetings as

presenters of special issues. The CFO acts as the

board’s secretary.

The board held twelve meetings at which

minutes were taken in 2012. The board has

paid special attention to strategic, financial and

accounting issues, major investments, disposals

of operations and development projects, as

well as decisions regarding advance payments

of gaming shares to venue owners. The work

of the board follows a plan to ensure that

it receives all the required information.

The companies that Cherry jointly owns

with external owners have their own functional

board. Cherry’s representatives in these

boards consist of persons from Cherry’s management

team and/or other Cherry employees

with suitable competence profiles. The compa-

annual report 2012 |

25


Part 2 mAnAgement And control

nies Cherry owns on Malta have autonomous

boards.

The company auditors report their observations

from their audit of the annual report

and their assessment of the company’s internal

routines and control to the audit committee

and the board. The board has adopted an

agenda and issued instructions concerning

the allocation of work between the board and

the CEO, as well as information that the board

should receive on a regular basis.

MANAGEMENT TEAM

The board has delegated the operative responsibility

for the administration of the company

and the group to the company’s CEO. Most subsidiaries

normally only have a formal executive

board, consisting of the CEO and, or CFO, or the

business area manager. The CEOs of the subsidiaries

therefore report internally directly

to Cherry’s CEO. Instructions have been prepared

for respective CEOs in the wholly owned

subsidiaries, which are transparent with the

instructions for Cherry’s CEO.

Cherry’s management team consisted at

the year-end of six persons: Cherry’s CEO,

the CFO who is also responsible for IR and

vice CEO for the Cherry Group, two business

area managers for Restaurant Casino divided

into two geographical areas (South and North),

the sales manager for Restaurant Casino, and

a business area manager for Online Gaming.

The group executive met on two occasions in

2012. The meetings dealt with earning trends,

reports and issues prior to and after board

meetings. Issues dealt with also concerned

the budget, forecasts, investments, security,

risks within the group and policies, as well as

reviews of market trends and the general economic

situation. Business area related projects

were also discussed and decided upon. In addition

to group executive meetings, regular management

meetings are held with the management

in respective segments, where specific

segment issues are dealt with.

REMUNERATION

Remuneration to the board, CEO and other

leading executives during the year is indicated

in Note 7.

INCENTIVE PROGRAMMES 2011–2014

At an extraordinary general meeting on 19

October 2011 a decision was taken to introduce

a long-term incentive programme for leading

executives and key persons in Cherry. The

decision involves the issue of a maximum of

500 000 subscription options to persons with

permanent positions in Cherry to subscribe to

the same number of new shares in Cherry AB.

455 000 subscription options have been offered

to permanent employees, of which 100 percent

26 | annual report 2012

have been subscribed to.

An additional 45 000 subscription options

are held by the wholly owned subsidiary Cherry

Casino Syd AB. More information on the options

programme is available in Note 7.

AUDIT

PwC was chosen as auditor in 2010, with

authorised public accountant Niklas Renström

as senior auditor up until the AGM in 2014. PwC

conducts audits of Cherry AB and all the Swedish

subsidiaries, and all the companies in Malta.

The audit of the annual report and consolidated

financial statements takes place in

January–February. An audit of internal routines

and the control system also takes place

throughout the year, which is reported to the

audit committee, the board and executive.

Reports are submitted to both the audit committee

and the board of observations made

during the audit of the annual accounts and

assessment of the company’s internal routines

and financial control. In addition to the audit

assignment, Cherry has also used PwC for consultations

in accounting issues. The remuneration

paid is indicated in Note 8.

DISCHARGE OF LIABILITY

The board has been authorised at the AGM in

2012 during the period to the next AGM, on

one or more occasions and with or without

preferential rights for shareholders, to take

a decision on the non-cash issue of a total of

1 280 000 shares in the B series in conjunction

with the acquisition of companies. The issue

price for the new shares will be based on the

market price of the company share.

The purpose of this authorisation is to enable

efficient acquisition by means of payment

with shares.

GUIDELINES FOR REMUNERATION AND OTHER

COMPENSATION TO LEADING EXECUTIVES

The Swedish Companies Act stipulates that

the board shall at the annual general meeting

set out proposals for guidelines in relation to

salaries and other compensation for leading

executives. The annual general meeting shall

thereafter decide upon the guidelines to apply

for compensation from the company to leading

executives. The leading executives in this context

refer to the persons who together with the

CEO constitute the group executive.

UPDATED GUIDELINES

A decision was taken at the annual general

meeting in 2012 that the remuneration to the

board would amount to SEK 780 000, of which

SEK 290 000 to the chairman and SEK 110 000

to each of the other board members, and including

SEK 50 000 to the chairman in the

audit committee.

It was decided that compensation would be

paid to the auditor on approval of the accounts.

It was decided that the level of remuneration

for leading executives would be in line

with the market and competitive, with a view

to attracting and retaining competent executives.

Remuneration shall consist of fixed salaries,

and where appropriate variable salaries,

and include pension commitments and other

benefits such as a company car.

Any variable remuneration offered to leading

executives shall be determined on the basis

of the fulfilment of group-wide and individual

targets set in advance in relation to the results

of their administration and the financial development

of the company, and in consideration

of the personal development of the executives

concerned. Variable remuneration may only be

paid up to 100 percent of the fixed salary.

The normal retirement age is 65. Pensions

shall be in line with the market and based on

defined contributions. Pension premiums are

maximised to 35 percent of annual salary, including

bonuses.

The employment termination notice period

is normally six to twelve months if notice

is given on the initiative of the company, and

six months if such notice is at the initiative of

the executive. If notice is given by the company,

severance pay can be paid to an amount corresponding

to 12 months salary.

The board may depart from any such guidelines

if there are special grounds to do so in

individual cases.

PROPOSED GUIDELINES FOR 2013

Remuneration is paid to the chairman, board

members and the audit committee in accordance

with the decision of the annual general

meeting. Remuneration to the CEO and other

leading executives consists of a basic salary, in

some cases variable salary, pension commitments

and other benefits, and is decided by the

remuneration committee.

Remuneration to the CEO shall consist of

a fixed basic salary and a variable salary based

on the results for the group and pension commitments

in accordance with the ITP plan. The

variable part shall be maximised to the scale of

the fixed remuneration. Remuneration to the

CEO is negotiated by the chairman and decided

by the board.

Remuneration to other leading executives

shall consist of a fixed basic salary and in some

cases a variable salary and pension commitments

in accordance with the ITP plan. The

variable part shall be maximised to 100 percent

of the fixed remuneration, and shall be paid on

the basis of the performance targets approved

by the board. Salaries for leading executives

are negotiated by the CEO and decided by the

chairman.


The normal retirement age is 65. Pensions

shall be in line with the market and based on

defined contributions. Pension premiums are

maximised to 35 percent of annual salary, including

bonuses.

The period of notice is normally six to

twelve months if notice is given on the initiative

of the company, and six months if such

notice is at the initiative of the executive. If

notice is given by the company, severance pay

can be paid to an amount corresponding to 12

months salary.

The board proposes that remuneration to

the auditor is paid on current account.

The board may depart from any such guidelines

if there are special grounds to do so.

INFORMATION ON PARENT COMPANY

The parent company supplies and sells internal

services to other group companies, primarily

within finance, economics, business development,

administration and management, as

well as other external licence earnings. Earnings

for the fiscal year amounted to SEK 2.0

million (1.8) and profit/loss before tax amounted

to SEK -18.5 million (38.6). The fall in profits

in the parent company is attributable to losses

incurred on disposal of the share in the Maritime

operations and because no anticipated

dividends from remaining subsidiaries has

been reported, which took place in the year end

accounts for 2011.

The investments of the parent company in

tangible and intangible assets amounted to SEK

162 thousand (496). Liquid assets amounted at

the year end to SEK 41.3 million (17.8).

LISTING AND OWNERSHIP

The Cherry B-share has been listed on Aktie-

Torget since 12 September 2006. Cherry had

12 802 642 shares at the end of the year, divided

into 997 600 A-shares and 11 805 042

B-shares. Each A-share carries 10 votes, while

each B-share carries one vote. The shares have

equal rights to the assets and profits in Cherry.

The company had a total of 1 932 shareholders

at the end of the year. The largest owners

are the Hamberg family with 6.4 percent of

the capital and 16.0 percent of the votes, and

Morten Klein with a 22.2 percent holding and

15.8 percent of the votes. See also page 19 for

additional information on the owners.

PROPOSED ALLOCATION OF PROFITS

The board proposes that no dividends are paid

for the fiscal year of 2012 and that previously

communicated dividends are replaced by a redemption

programme as below.

The full proposal will be presented in good

time prior to the annual general meeting.

The following assets remain

at the disposal of the AGM: (TSEK)

Unappropriated profits and free funds 363 544

Profit/loss for the year

-18 470

Total

345 074

The board proposes that the whole amount,

345 074 thousand, should be carried forward.

TRANSFER TO SHAREHOLDERS VIA

SHARE REDEMPTION PROGRAMME

The board proposes that the annual general

meeting decides upon a transfer to shareholders

of SEK 143.4 million (9.6), corresponding to

SEK 11.20 per share (0.75) through a redemption

programme, of which SEK 1.20 per share corresponds

to an ordinary transfer to shareholders

and SEK 10.00 per share corresponds to an

extraordinary transfer to shareholders. After the

redemption programme is completed the unappropriated

profit and free funds in Cherry AB

will amount to SEK 201.7 million.

STATEMENT BY THE BOARD AS PER 20 CHAP.

8 § OF THE COMPANIES ACT (2005:551)

With respect to the proposal of the board concerning

a reduction of the share capital with

repayment to shareholders, the board hereby

issues the following statement in accordance

with 20 chapter 8 § of the Companies Act.

The unappropriated profit in the company as

of 31 December 2012 amounted to SEK 345.1

million, and net profit/loss for the year amounted

to SEK -18.5 million. The annual general meeting

thereby has an unappropriated profit of

SEK 345.1 million at its disposal.

There is full coverage for the restricted

equity in the company after the proposed share

redemption programme. The board has taken

into consideration the consolidation requirements

and liquidity for the company and the

group through an overall assessment of the financial

position of the company and the group

and their opportunity to meet their obligations

in the long term. The proposed share redemption

programme does not endanger the capacity

of the company to make the investments deemed

to be necessary. The financial position of the

company does not give rise to any other assessment

than that the company can continue its

operations and that the company is expected to

fulfil its obligations in the short and long term.

In addition to the assessment of the company’s

consolidation and liquidity requirements,

the board has also taken into consideration all

other known circumstances that can be of

importance for the financial position of the

company.

With reference to the above the board considers

the share redemption programme to be

justified in relation to the requirements set by

the type of operations, scope and risks for the

equity in the company the group, and the consolidation,

liquidity and other requirements for

the company and the group.

REPORT BY THE BOARD AS PER 20

CHAP. 13 § OF THE COMPANIES ACT

With reference to the proposal by the board as

above, the board hereby submits the following

report in accordance with 20 chapter 13 § of the

Companies Act.

The proposed share redemption programme

implies that the board proposes to reduce share

capital by SEK 3 520 726.55 through the withdrawal

of 997 600 shares of the A series and

11 805 042 shares of the B shares for repayment

to shareholders. The shares to be withdrawn

consist of the shares which after allocation of

the shares as above are designated redemption

shares. Payment for each redemption share

shall be SEK 11.20, which exceeds the nominal

value of the share by approx. SEK 10.93. Any

withdrawn redemption shares of the A and B

series held by the company shall be withdrawn

without repayment and such amounts shall be

allocated to free funds to be disposed of by the

annual general meeting. The total redemption

value thereby amounts to SEK 143 389 thousand,

which constitutes approx. 41 percent of

the unrestricted equity in the company and

approx. 40 percent of the equity in the group.

It can be seen from the annual report

for 2012 that the equity ratio for the group

amounts to 86 percent. The proposal by the

board implies a reduction of the share capital

in the company by SEK 3 520 726.55. To

achieve an efficient redemption process without

the need for approval from the Swedish

Companies Registration Office or general court

of law, the board proposes that the annual general

meeting decides to restore the share capital

in the company to its original amount by increasing

the share capital by SEK 3 520 726.55

through a bonus issue of shares, which means

a transfer from the unrestricted equity in the

company to the share capital in the company.

No new shares will be issued in conjunction

with the increase in share capital.

Taken as a whole the proposal of the board

as above means that dividends in the company

will be reduced by no more than SEK 143 389

thousand to approx. SEK 201 685 thousand

in accordance with the balance sheet on 31

December 2012. The restricted equity and

share capital in the company will remain unchanged

after the issue of bonus shares.

annual report 2012 |

27


Part 2 group

Consolidated income statement

(Amounts in TSEK) NOTE 2012 2011

Income from gaming operations 399 588 343 289

Other operating income 6 73 587 25 465

Total 4 473 175 368 754

Operating expenses

Running costs in gaming operations -248 917 -217 364

Other external expenses 8, 14 -21 926 -21 369

Personnel expenses 7 -86 079 -84 639

Other operating expenses 10 -322 -179

Operating profit before depreciation and write-downs 115 931 45 203

Depreciation and write-down of intangible and tangible fixed assets 9 -5 654 -5 110

Write-down of goodwill 15 -73 447 -

Total operating expenses -436 345 -328 661

Operating profit 36 830 40 093

Financial items

Interest income and other similar items 11 252 98

Interest expenses and other similar items 11 -4 410 -1 176

Total financial items -4 158 -1 078

Profit before tax 32 672 39 015

Tax 12 -1 670 -991

Profit for year from remaining operations 31 002 38 024

Discontinued operations

Profit for the year from discontinued operations 32 -624 -4 187

Profit for the year 30 378 33 837

Attributable to:

Parent company shareholders 30 396 36 030

Holdings without controlling influence -18 -2 193

Profit for period 30 378 33 837

Earnings per share, calculated on profit attributable to parent company shareholders during the year

Earnings per share after dilution

13

Earnings from remaining operations 2.42 2.97

Earnings from discontinued operations -0.05 -0.16

Earnings for the year 2.37 2.81

Earnings per share after dilution

Earnings from remaining operations 2.35 2.97

Earnings from discontinued operations -0.05 -0.16

Net income 2.30 2.81

Proposed dividend per share (SEK) 1.20 0.75

Consolidated statement of comprehensive income

(Amounts in TSEK) 2012 2011

Profit for the year 30 378 33 837

Other comprehensive income

Conversion differences -12 753 -2 182

Total other comprehensive income -12 753 -2 182

TOTAL COMPREHENSIVE INCOME

Attributable to

17 625 31 655

Parent company shareholders 17 642 33 858

Holdings without controlling influence -17 -2 203

28 | annual report 2012


Consolidated balance sheet

Assets (amounts in TSEK) NOTE 2012-12-31 2011-12-31

Fixed assets

Intangible fixed assets 15 272 164 352 994

Tangible fixed assets 16 7 263 28 685

Deferred tax claims 12, 17 17 157

Other long-term receivables 17 430 595

Total fixed assets 279 874 382 431

Current assets

Stock 608 995

Accounts receivable 19 26 580 19 574

Tax receivables 12 9 006 10 726

Other receivables 20 7 833 17 060

Prepaid expenses and accrued income 21 3 192 6 714

Liquid assets 59 057 30 457

Total current assets 106 276 85 526

TOTAL ASSETS 386 150 467 957

Equity and liabilities (amounts in TSEK) NOTE 2012-12-31 2011-12-31

Equity

22

Share capital 7 041 7 041

Other added capital 297 159 297 159

Unappropriated funds including profit for year 27 946 18 843

Equity referable to parent company shareholders 332 146 323 043

Holdings without controlling influence 89 2 443

Total equity 332 235 325 486

Long-term liabilities

Long-term interest bearing liabilities 24 1 083 8 377

Other long-term liabilities 24 - 72 825

Deferred tax liabilities 12 116 432

Total long-term liabilities 1 199 81 634

Current liabilities

Current interest bearing liabilities 26 693 7 359

Accounts payable 25 6 235 9 062

Tax liabilities 12 10 842 12 205

Other liabilities 26 11 742 15 376

Accrued expenses and prepaid income 27 23 204 16 835

Total current liabilities 52 716 60 837

TOTAL EQUITY AND LIABILITIES 386 150 467 957

Memorandum items

Pledged assets 28 6 529 10 206

Contingent liabilities None None

annual report 2012 |

29


Part 2 group

Consolidated statement of changes in equity

(Amounts in TSEK)

30 | annual report 2012

Share

capital

Equity referable to parent company shareholders

Other

added

capital

Conversion

reserves*

Unappropriated

funds including

profit for year Total

Holdings without

controlling influence

Opening equity 01-01-2011 7 041 296 736 -32 165 26 751 298 363 4 646 303 009

Comprehensive income - - - - - - 0

Profit for the year - - - 36 030 36 030 -2 193 33 837

Other comprehensive income

Conversion differences - - -2 172 - -2 172 -10 -2 182

Total other comprehensive income 0 0 -2 172 0 -2 172 -10 -2 182

Total comprehensive income 0 0 -2 172 36 030 33 858 -2 203 31 655

Contributions from and value transfers to shareholders, reported directly in equity

Option premiums - 423 - - 423 - 423

Issue costs - - - - 0 - 0

Dividends - - - -9 601 -9 601 - -9 601

Total contributions from and value transfers to

shareholders, reported directly in equity

0 423 0 -9 601 -9 178 0 -9 178

Closing equity 31-12-2011 7 041 297 159 -34 337 53 180 323 043 2 443 325 486

Opening equity 01-01-2012 7 041 297 159 -34 337 53 180 323 043 2 443 325 486

Comprehensive income - - - - - -

Profit for the year - - - 30 396 30 396 -18 30 378

Other comprehensive income - - - - - - 0

Conversion differences - - -12 754 - -12 754 1 -12 753

Total of other comprehensive income 0 0 -12 754 0 -12 754 1 -12 753

Total comprehensive income 0 0 -12 754 30 396 17 642 -17 17 625

Contributions from and value transfers to shareholders, reported directly in equity

Acquisition of minority interest - - - 1 062 1 062 -2 444 -1 382

Contribution from minority interest - - - - 0 107 107

Dividends - - - -9 601 -9 601 - -9 601

Total contributions from and value transfers to

shareholders, reported directly in equity

0 0 0 -8 539 -8 539 -2 337 -10 876

Closing equity 31-12-2012 7 041 297 159 -47 091 75 037 332 146 89 332 235

* The conversion reserve is in its entirety attributable to revaluation of net assets in foreign subsidiaries.

Total

equity


Consolidated cash flow statement

Including discontinued operations* (amounts in TSEK) NOTE 2012 2011

Operating activities

Profit after financial items

Adjustments for items not included in cash flow

32 044 35 306

- Accumulated depreciation and write-downs 82 730 11 390

- Revaluation of additional payments -73 447 -23 828

- Other items 384 -508

Income tax paid -1 335 201

Cash flow from operating activities before changes in working capital 40 376 22 561

Changes in working capital

Changes in inventories 201 97

Changes in current receivables -11 881 -2 795

Changes in current liabilities 12 495 4 990

Cash flow from operating activities 41 191 24 853

Investments

Acquisition of intangible fixed assets 15 -9 136 -1 505

Acquisition of tangible fixed assets 16 -6 097 -4 909

Disposal of tangible fixed assets 135 319

Disposal of operations 27 789 -

Outgoing payments of restaurant loans - -75

Incoming payments of restaurant loans 165 -

Cash flow from investment operations 12 856 -6 170

Financing activities

Option premiums 22 - 423

Change in long-term loans -13 339 -5 327

Dividends paid -9 601 -9 601

Minority payments -1 275 -

Cash flow from financial activities -24 215 -14 505

Change in liquid assets 29 832 4 178

Opening liquid assets 30 457 26 380

Exchange rate differences, liquid assets -1 232 -101

Closing liquid assets 59 057 30 457

Supplementary information

Unutilised credits amounted to 15 000 15 000

During the period interest received amounted to 251 85

During the period interest paid amounted to -546 -1 214

* For information concerning cash flow attributable to discontinued operations, see Note 32.

annual report 2012 |

31


Part 2 pArent compAny

Parent company income statement

(Amounts in TSEK) NOTE 2012 2011

Net sales 5 1 864 1 780

Other operating income 6 87 48

Total 1 951 1 828

Operating expenses

Other external expenses 8, 14 -4 998 -4 533

Personnel expenses 7 -7 934 -9 304

Depreciation and write-down of intangible and tangible fixed assets 9 -276 -290

Other operating expenses 10 -182 -

Total operating expenses 5 -13 390 -14 127

Operating profit -11 439 -12 299

Financial items

Result from participations in group companies 11 -3 620 51 717

Interest income and other similar items 11 210 222

Interest expenses and other similar items 11 -3 621 -1 083

Total financial items -7 031 50 856

Profit before tax -18 470 38 557

Tax 12 - -

NET PROFIT/LOSS FOR THE YEAR -18 470 38 557

Parent company statement of comprehensive income

(Amounts in TSEK) 2012 2011

Profit for the year -18 470 38 557

Other comprehensive income

Total of other comprehensive income 0 0

TOTAL COMPREHENSIVE INCOME -18 470 38 557

32 | annual report 2012


Parent company balance sheets

Assets (amounts in TSEK) NOTE 2012-12-31 2011-12-31

Fixed assets

Intangible fixed assets

Trademarks 15 182 89

Total intangible fixed assets 182 89

Tangible fixed assets

Inventories 16 190 397

Total tangible fixed assets 190 397

Financial fixed assets

Participations in group companies 17, 18 306 975 408 447

Total financial fixed assets 306 975 408 447

Total fixed assets 307 347 408 933

Current assets

Receivables from group companies 26 200 56 905

Tax receivables 12 - 15

Other receivables 20 500 452

Prepaid expenses and accrued income 21 363 542

Liquid assets 41 252 17 768

Total current assets 68 315 75 682

TOTAL ASSETS 375 662 484 615

Equity and liabilities (amounts in TSEK) NOTE 2012-12-31 2011-12-31

Equity

Restricted equity

22

Share capital 7 041 7 041

Statutory reserve 1 924 1 924

Total restricted equity 8 965 8 965

Unrestricted equity

Share premium reserve 256 391 256 391

Unappropriated profit 107 153 78 197

Profit for the year -18 470 38 557

Total unrestricted equity 345 074 373 145

Total equity 354 039 382 110

Provisions

Other provisions 23 - 71 483

Total provisions 0 71 483

Long-term liabilities

Long-term interest bearing liabilities 24 - 6 667

Total long-term liabilities 0 6 667

Current liabilities

Current interest bearing liabilities 26 - 6 667

Accounts payable 25 320 560

Liabilities to group companies 17 138 12 309

Tax liabilities 12 298 -

Other liabilities 26 205 195

Accrued expenses and prepaid income 27 3 662 4 624

Total current liabilities 21 623 24 355

TOTAL EQUITY AND LIABILITIES 375 662 484 615

Memorandum items

Pledged assets 28 8 313 21 778

Contingent liabilities None None

annual report 2012 |

33


Part 2 pArent compAny

Parent company statement of changes in equity

(Amounts in TSEK)

34 | annual report 2012

Share

capital Statutory reserve

Share premium

reserve

Unappropriated profit

including profit for year

Opening equity 01-01-2011 7 041 1 924 256 391 87 799 353 155

Comprehensive income - - - - -

Profit for the year - - - 38 557 38 557

Total of other comprehensive income 0 0 0 0 0

Total comprehensive income 0 0 0 38 557 38 557

Contributions from and value transfers to shareholders, reported directly in equity

Dividends - - - -9 602 -9 602

Total contributions from and value transfers to

shareholders, reported directly in equity

0 0 0 -9 602 -9 602

Closing equity 31-12-2011 7 041 1 924 256 391 116 754 382 110

Opening equity 01-01-2012 7 041 1 924 256 391 116 754 382 110

Comprehensive income - - - - -

Profit for the year - - - -18 470 -18 470

Total of other comprehensive income 0 0 0 0 0

Total comprehensive income 0 0 0 -18 470 -18 470

Contributions from and value transfers to shareholders, reported directly in equity

Dividends - - - -9 601 -9 601

Total contributions from and value transfers to

shareholders, reported directly in equity

0 0 0 -9 601 -9 601

Closing equity 31-12-2012 7 041 1 924 256 391 88 683 354 039

Total

equity


Parent company cash flow statement

Operating activities (amounts in TSEK) 2012 2011

Profit after financial items -18 470 38 557

Adjustments for items not included in cash flow

- Accumulated depreciation and write-downs 276 290

- Profit from sale of subsidiaries 19 982 -

- Profit liquidation of subsidiaries - -7 016

- Group contributions -11 862 -12 432

- Other* 4 182 -5

Income tax paid 476 1 895

Cash flow from operating activities before changes in working capital -5 416 21 289

Changes in working capital

Changes in current receivables 6 984 -1 308

Changes in current liabilities 14 296 8 921

Cash flow from operating activities 15 864 28 902

Investments (amounts in TSEK) 2012 2011

Acquisition of intangible fixed assets -139 -64

Acquisition of tangible fixed assets -23 -432

Disposal of shares and participations in subsidiaries 30 716 -

Liquidation of subsidiaries - 861

Cash flow from investment operations 30 554 365

Financing operations (amounts in TSEK) NOTE 2012 2011

Amortisation loans 22 -13 333 -6 666

Dividends paid -9 601 -9 602

Cash flow from financing operations -22 934 -16 268

Change in liquid assets 23 484 12 999

Opening liquid assets 17 768 4 769

Closing liquid assets 41 252 17 768

Supplementary information

Unutilised credits amounted to 15 000 15 000

During the period interest received amounted to 210 52

During the period interest paid amounted to -465 -1 083

* 2012: Other refers to current value calculation of additional purchase of SEK 1 962 thousand and discontinued operations of SEK 2 220 thousand.

annual report 2012 |

35


Part 2 notes

Note 1:

General information

Cherry AB (parent company, CIN 556210-9909)

and its subsidiaries (collectively Cherry or the

group) is a Swedish group which via subsidiaries

and partners offers fun & excitment on land

and online. Cherry offers its partners gaming,

gaming systems, personnel, equipment and expertise

on the gaming market.

Gaming operations are run via subsidiaries

at restaurant in Sweden and on the Internet

(NorgesAutomaten.com, SverigeAutomaten.com,

DanmarksAutomaten.com, PlayCherry.com, Euro-

Lotto.com and CherryAffiliates.com) from Malta.

The Maritime operations were discontinued

in November. These offered gaming at sea onboard

ships in the North Sea/Baltic, the English

Channel/the Irish sea and the Mediterranean.

The parent company is a Swedish limited

company (plc) with its head office in Stockholm.

The address of the company is Blekholmstorget

30, SE-111 64 Stockholm. The parent

company B-share is listed on AktieTorget.

This annual report and consolidated financial

statements have been approved for publication

by the board on 6 April 2013 and will be presented

to the annual general meeting on 7 May

2013 for adoption.

Note 2:

Accounting principles

GENERAL ACCOUNTING PRINCIPLES

The group applies IFRS.

The consolidated financial statements have

been prepared in accordance with the Swedish

Annual Accounts Act, RFR 1 Supplementary

Accounting Regulations for Groups, International

Financial Reporting Standards (IFRS)

and interpretations from IFRIC, such as have

been approved by the Commission of the European

Communities for application in the EU.

The parent company applies the same accounting

principles as the group, with the exception

of in those cases indicated below in the

section “Parent company accounting principles”.

The applied accounting principles correspond

with those applied in the previous year,

with the exception of the following.

NEW AND CHANGED STANDARDS

APPLIED BY THE GROUP 2012

As of 1 January 2012 the group will apply the

following new items and supplements in IFRS.

IFRS 7 “Financial instruments: Disclosures”,

changes concerning removal of financial assets

from the balance sheet.

IAS 12 “Income taxes” changes concerning

reporting of deferred tax depending on whether

36 | annual report 2012

the reported value of assets will be recovered

by means of use in operations or through sale.

None of the IFRS or IFRIC interpretations,

which for the first time are mandatory for the

fiscal year that began on 1 January 2012, have

had any essential impact on the group.

NEW STANDARDS, CHANGES AND INTER-

PRETATIONS OF EXISTING STANDARDS

THAT HAVE STILL NOT COME INTO FORCE

AND WHICH HAVE NOT BEEN APPLIED IN

ADVANCE BY THE GROUP

Several new standards and changes of interpretations

and existing standards came into

force in the fiscal year that begins after 1 January

2012 and have not been applied during the

preparation of the consolidated financial statements.

None of these are expected to have any

essential impact of the consolidated financial

statements, with the exception of the following:

In IAS 1 “Structure of financial statements”

changes have been introduced concerning

other comprehensive income. The most important

change in the changed IAS 1 is the

requirement that the items reported in “other

comprehensive income” should be presented

as divided into two groups. This allocation is

based on whether the items may come to be

reclassified in the income statement (reclassification

adjustments), or not. The change does

not consider the issue of which items should

be included in “other comprehensive income”.

IFRS 13 “Fair value measurement” is to ensure

that valuations to fair value will be more

consistent and less complex in that the standard

provides an precise definition and mutual

source in IFRS for fair value valuations and

related disclosures. The standard provides

guidance for fair value valuations for all types

of assets and liabilities, financial and nonfinancial.

This requirement does not expand

the application area for when fair value should

be applied, but provides guidance around how

it should be applied when other IFRS already

require or permit valuation to fair value.

IAS 19 “Remuneration to employees” was

changed in June 2011. Costs for employment

in previous years will not be reported immediately.

Interest expenses and expected yields on

administration assets will be replaced by a net

interest calculated with the help of the discount

interest, based on the net surplus or net deficit

in the defined benefit plan. The group has still

not evaluated the effect.

IFRS 9 “Financial instruments” concerns

the classification, valuation and recognition

of financial liabilities and assets. IFRS 9 was

issued in November 2009 for financial assets

and in October 2010 for financial liabilities,

and replaces the parts in IAS 39 related to

classification and valuation of financial instruments.

IFRS 9 specifies that financial assets

should be classified in two different categories;

valuation to fair value, or valuation to accrued

acquisition value. Classification is determined

on the first accounting occasion on the basis

of the company’s business model and characteristic

attributes in the contractual cash flows.

No significant changes have occurred for financial

liabilities in comparison with IAS 39. The

main amendment refers to liabilities that are

identified to fair value. For these, the part of the

change in fair value attributable to the credit

crisis will be recognized in other comprehensive

income instead of income, in so far as this

does not lead to an accounting mismatch. The

group intends to apply the new standard by

the fiscal year that starts on 1 January 2015 and

has therefore not yet evaluated the effects. The

group will assess the effects of the remaining

phases concerning IFRS 9 when they are completed

by IASB.

IFRS 10 “Consolidated financial statements”

is based on already existing principles

when it identifies control as the decisive factor

to determine if a company should be included

in the consolidated financial statements. The

standard provides further guidance to assist

with the establishment of control when this

is difficult to assess. The group intends to apply

IFRS 10 for the fiscal year that begins on

1 January 2013 and has still not assessed the

full effect on the financial statements.

IFRS 12 “Disclosures of interests in other

entities” includes disclosure requirements for

subsidiaries, joint arrangements, associated

companies and non-consolidated structured

companies. The group intends to apply IFRS

12 for the fiscal year that begins on 1 January

2013 and has still not assessed the full effect on

the financial statements.

None of the other IFRS or IFRIC interpretations

that have so far not come into force are

expected to have any essential impact on the

group.

APPLIED VALUATION PRINCIPLES

Assets and liabilities are reported at historic

acquisition values, with deductions for value

depreciation and write-downs in those cases

where this is applicable. Some financial instruments

are valued to their fair value.

Fixed assets and long-term liabilities consist

of amounts that are expected to be recovered or

paid after more than twelve months from the

balance sheet date. Current assets and current

liabilities consist of amounts that are expected

to be recovered or paid within twelve months

from the closing of the accounts.


FUNCTIONAL AND

REPORTING CURRENCY

The parent company uses Swedish kronor (SEK)

as its functional currency, which is also used

as the reporting currency for the group and

the parent company. Financial reports are

therefore presented in Swedish kronor and all

amounts are, unless otherwise stated, rounded

off to the nearest thousand.

FOREIGN CURRENCY

TRANSACTIONS AND BALANCE SHEET

ITEMS IN FOREIGN CURRENCY

Transactions in foreign currency are converted

to the functional currency according to the exchange

rates applicable on the transaction date,

or the date when the items are re-valued. Exchange

rate profits and losses incurred during

the payment of such transactions are reported

in the income statement as other operating income

or other operating expenses.

Receivables and liabilities related to operations

in foreign currency are valued at the yearend

rate. Exchange rate differences incurred

during conversion are reported in the income

statement as other operating income or other

operating expenses.

Currency rate profits and losses attributable

to loans and liquid assets are reported in the income

statement as financial income or expenses.

CONVERSION OF FOREIGN OPERATIONS

Assets and liabilities in foreign operations are

converted in the consolidated financial statements

from the functional currencies of the

operations at the year-end rates. Earnings and

costs are converted at the average rate for the

year. The currency rates are taken from the

Riksbank. Conversion differences incurred

during conversion are reported in other comprehensive

income and accumulated in a separate

component in equity, designated conversion

differences.

Goodwill and adjustments of fair value incurred

during the acquisition of a foreign operation

are treated as assets and liabilities for this

activity, and are converted at the year-end rate.

Exchange rate differences are reported in other

comprehensive income.

ASSESSMENTS AND ESTIMATES

The preparation of financial statements in

accordance with IFRS requires the executive

management to make assessments and estimates

and to make assumptions that influence

the application of the accounting principles

and reported amounts for assets, liabilities,

earnings and costs.

Estimates and assumptions are regularly reviewed

and based on historical experience and

other factors, including expectations of future

events, that are considered to be justified in

the prevailing conditions. The results of these

estimations and assumptions are used to assess

the reported values of assets and liabilities,

which otherwise would not be clear from other

sources. The actual result can deviate from

these estimations and assessments.

During the preparation of Cherry’s consolidated

financial statements the board and the

CEO have come to the conclusion that the valuation

of gaming agreements and concessions,

customer and restaurant receivables and the

write-down of goodwill are the critical areas

where other estimates and assessments would

have an effect on the financial position and

results.

WRITE-DOWNS

When the group assesses the write-down requirements

for gaming agreements and concessions

the utility value is assessed on the basis

of forecast future cash flows from the cash

generating units defined as ventures. The most

important assumptions in these calculations

refer to the expected rate of growth of turnover

and development of the operating margin.

The write-down requirement for goodwill

is assessed annually be comparing the recovery

value with the reported value of the asset.

The most important assumptions in these calculations

refer to the expected rate of growth

of turnover, growth rate or forecast period,

and interest. Write-downs of goodwill are not

restored. For a description of write-downs of

goodwill in 2012, see Note 15.

CUSTOMER AND RESTAURANT RECEIVABLES

Customer and restaurant receivables constitute

an important part of Cherry’s balance sheet.

Provisions for uncertain receivables are based

on the credit worthiness of the debtor and

the amount that expected to be received. For

a more detailed description of the executive’s

assessment of customer and restaurant receivables,

see Note 19 and 20.

SUPPLEMENTARY PAYMENTS

In conjunction with the acquisitions made in

recent years the acquisition price has been made

up of supplementary payments paid during an

agreed time after the acquisition, and based on

the development of turnover and earnings and

other parameters. The executive assess on a regular

basis the expected result of supplementary

payments. The fair value of conditional purchase

amounts is estimated through the application

of the so-called productive value method.

The estimates are based on a discount rate of

interest with the assumption of an expected re-

sult of the supplementary payment.

As of 31 December 2012 there were no supplementary

payments related to the acquisitions

of the last few years that would involve payments

in the future. The terms and conditions

required for payment have not been achieved

and the revaluation of previously reported liabilities

is reported in the income statement as

other operating income.

CONSOLIDATED FINANCIAL

STATEMENTS – GROUNDS FOR

CONSOLIDATION

The consolidated financial statements include

the parent company Cherry AB and all the

subsidiaries. The subsidiaries are all the companies

where the group is entitled to arrange

financial and operative strategies with a view to

achieving financial benefits, in a way normally

employed for a shareholding of more than half

of the voting rights. Subsidiaries are included

in the consolidated financial statements as of

the date the controlling influence is transferred

to the group. They are excluded from the consolidated

financial statements as of the date

when the controlling influence is no longer

valid.

The group applies the acquisition method

for acquisitions.

ACQUISITIONS 2010 AND LATER

All payments to acquire a business operation

are reported at the fair value on the date of acquisition.

The revaluation of any supplementary

payments over and above what was assessed at

the time of the acquisition is reported in the

income statement. Holdings without a controlling

interest in the acquired business can

optionally for each acquisition be valued at either

the fair value or the proportional share of

the net assets in the acquired business, which

are held without controlling interest. All acquisition

related transaction costs are recognised

and reported in the consolidated income statement

as sales and administration expenses.

The excess consisting of the difference between

the acquisition value and the fair value

of the group’s share of identifiable acquired

assets, liabilities and contingent liabilities is

reported as goodwill.

ACQUISITIONS 2009 AND EARLIER

All payments to acquire a business operation

are reported at the fair value on the date of acquisition.

The revaluation of any supplementary

payments over and above what was assessed

at the time of the acquisition is adjusted in relation

to the acquisition value. All acquisition related

transaction costs are reported as a part of

the acquisition value for the acquired business

annual report 2012 |

37


Part 2 notes

operations. If the cost of the acquisition of the

company exceeds the fair value of the identifiable

assets, liabilities and contingent liabilities,

the difference is reported as goodwill. If the fair

value of the acquired net assets exceeds the cost

of the acquisition, the identification and calculation

of the value of the acquired net assets

will be reassessed. Any excess amounts after

this reassessment are immediately reported in

the income statement.

The consolidated income statement includes

the income statements for the parent

company and the directly or indirectly owned

subsidiaries after the elimination of internal

group transactions and depreciation of revaluations

made in conjunction with acquisition.

The earnings and costs of subsidiaries are

included in the consolidated financial statements

from the date the controlling influence

arises (acquisition date) and the date it ceases.

Internal group receivables and liabilities, including

transactions between companies in the

group and thereby associated profits, are eliminated

in their entirety.

HOLDINGS WITHOUT

CONTROLLING INFLUENCE

Holdings without controlling interest are reported

in the consolidated statement of the financial

position in equity, separately from the

equity of parent company owners.

Receivables in parent company ownerships

in subsidiaries that do not lead to a loss of the

controlling influence are reported as equity

transactions. The reported values for the holdings,

with and without controlling influence,

are adjusted so that they reflect changes in

their relative holdings in the subsidiary. Any

differences between the amount with which

the holding without controlling influence is adjusted

and the fair value of the paid or received

compensation are reported directly in equity

and allocated to parent company shareholders.

REPORTING OF DISCONTINUED

OPERATIONS

Cherry applies IFRS 5 Fixed assets held for sale

and discontinued operations. IFRS 5 implies

that such operations are reported separately

from remaining operations in the consolidated

income under the heading “Result from discontinued

operations”. Comparative periods

have been re-valued correspondingly.

In the consolidated financial statements for

2012, the Maritime operations have been reported

as discontinued. Note 32 indicates the

effects of these adjustments for 2012 and 2011

in the income statement.

38 | annual report 2012

REPORTING OF BUSINESS AREAS

Group operations are divided up into business

areas on the basis of which parts of the operations

the company’s highest executive follows

up, the so-called management approach, or

executive perspective. In this annual report we

have chosen to call segments for business areas

in accordance with IFRS 8. The basis for the

division of the business areas corresponds with

the group’s operative structure and the internal

reporting to the CEO and the board.

Cherry’s business areas are divided up into

Online Gaming and Restaurant Casino. The

business area Maritime Gaming has been disposed

of in 2012 and is reported in discontinued

operations. Cherry also runs several development

projects. Up until the time the product

or service is launched these costs are reported

under the heading “Joint and other” in the

business area reporting to clarify what the respective

business areas in the group generate.

EARNINGS

Earnings are reported in the income statement

when in all probability the future financial benefits

will accrue to the group and these benefits

can be calculated in a reliable way. Earnings in

the group consist of gaming income, consultancy

and service income, licence revenues and

other revenues.

EARNINGS FROM GAMING ACTIVIES

This item includes gaming income and consultancy

and service income.

Earnings from gaming activities in the

group are reported net after deductions for

player winnings, and for poker, casino, gaming

and bingo after deductions for player winnings,

bonuses and loyalty programmes. Gaming income

is reported when payment is received,

because this concurs with the date when the

gaming/service took place or was delivered.

Assignments in consultancy and service

activities are normally of short duration and income

from these is reported when the assignment

has been completed.

Internal group sales are eliminated in the

consolidated financial statements.

OTHER OPERATING INCOME

Other operating income mainly includes licence

revenues, recovered write-downs of receivables,

exchange profit in operations and

the results of sales of fixed assets. Licence revenues

are periodised linearly over the period the

revenues refer to. Other earnings are reported

when the risks and benefits associated with the

ownership rights have been transferred to the

buyer and the earned amount can be calculated

reliably.

RUNNING COSTS IN

GAMING OPERATIONS

Running costs in gaming operations for Restaurant

& Event Casino and Maritime Gaming

refer to gaming shares to venues and shipping

companies, gaming tax, licence fees, purchased

materials and purchased services directly related

to gaming operations.

Running costs in gaming operations for

Online Gaming refer to shares to gaming operators,

support, and purchased services directly

related to gaming operations.

Running costs in gaming operations are

periodised in line with delivery of the gaming

or service.

WRITE-DOWNS

Assessment of the residual value of assets and

useful period is carried out on an annual basis.

If there is an indication that tangible or

intangible assets with a fixed useful period, or

financial fixed assets in the group, have an excessively

high book value, then an analysis is

made where the recovery value is determined

for individual or naturally associated types of

assets. If the reported value exceeds the calculated

recovery value, this value is immediately

written-down.

For intangible assets with an indeterminate

useful period and intangible assets that are still

not ready for use, the recovery value is determined

every year. Write-downs are reported

when an asset’s reported value exceeds the recovery

value.

A write-down is reversed if there has been a

change in the circumstances used to determine

the recovery value, with the exception of writedowns

of goodwill which are not recovered.

A reversal is made at the most up to a value

that does not exceed the book value that should

have been reported, with deduction for depreciation,

if no write-down should have been made.

Write-downs are included in the income

statement item, Depreciation and write-downs.

TAXES

Income tax reported in the income statement

includes the actual tax, i.e. the tax that should

be paid or received in the year, adjustments for

tax in previous years, and deferred tax.

Items reported in the income statement

therefore include such related tax effects. Items

reported directly to equity include associated

tax effects directly to equity.

The valuation of all tax liabilities and receivables

is made at nominal amounts and in

accordance with the stipulated tax regulations

and tax rates, or those that have been advised

and will in all probability be applied.

Deferred tax is calculated in accordance


with the balance sheet method on the basis of

temporary differences between reported and

tax values of assets and liabilities, with the application

of the tax rates and tax regulations that

are decided or advised at the year-end. Temporary

differences are not taken into consideration

in group-wide goodwill, nor in differences

attributable to participations in subsidies and

associated companies, which are not expected

to be taxed within the foreseeable future.

Deferred tax receivables concerning deductible

temporary differences and deficit deductions

are only reported to the extent that it

is likely that they will be utilised and result in

lower tax payments in the future. The determining

factor for whether a deferred tax receivable

concerning a deficit deduction will be

reported or not is whether an assessment can

be made of how likely it is that the group will

be able to utilise it for settlement in relation to

future taxable profits. Consideration is taken in

this context to expected taxable income in coming

periods and the opportunity of legal set-off

in relation to profits in companies in the same

country.

FINANCIAL ASSETS AND LIABILITIES

Cherry classifies its financial instruments in

the following categories:

1. Loans receivable and other receivables.

2. Financial assets or liabilities at fair value

via the income statement.

3. Other financial liabilities.

4. Financial assets and liabilities that can be sold.

1. CLASSIFICATION AS “LOANS RECEIVABLE

AND ACCOUNTS RECEIVABLE”

Operating receivables, including accounts receivable,

are classified as “Loans receivable

and accounts receivable” are valued to the accrued

acquisition value. In the balance sheet

these are reported as accounts receivable and

liquid assets, with the exception of items with

a due date more than twelve months after the

balance sheet date, which are classified as financial

fixed assets. Bank balances and loans

receivable and accounts receivable are valued at

the accrued acquisition value. Returns on bank

balances and short-term investments are reported

as financial income in the consolidated

income statement.

The value of loans receivable and accounts

receivable is reviewed on a regular basis and

write-downs are reported in operating expenses.

2. CLASSIFICATION AS “FINANCIAL ASSETS/

LIABILITIES VALUED AT FAIR VALUE VIA

THE INCOME STATEMENT”

When assets in this category are held, changes

in value are reported on a regular basis at fair

value. The revaluation of derivatives held to

minimise transaction risks for the operative

business is reported in operating profit, and

derivatives held to minimise transaction risks

for the financial business are reported in net

finance. A financial asset is classified in this

category if it is held for trading purposes, i.e.

has mainly been acquired with a view to disposal

in the short term, or if the group executive

has classified it as such. Cherry has not held

any assets classified in this category during the

reported periods. When liabilities in this classification

are held they are reported in the same

way as “Financial assets valued to fair value

via the income statement”. Liabilities in this

category refer to the allocation of supplementary

payments, which are reported as other longterm

liabilities in the balance sheet.

3. CLASSIFICATION AS “OTHER

FINANCIAL LIABILITIES”

This category includes loan liabilities and accounts

payable. Liabilities in this category are

valued to the accrued acquisition value with

the application of the effective interest method.

Loan liabilities are also reported initially at the

received amount after deduction for transaction

costs. If the fair value differs from what should

be repaid on the due date, the loan liability is

then reported to the accrued acquisition value,

which means that the difference is periodised

in accordance with the effective interest method

as an interest expense. Cherry applies IAS 23,

Loan expenses. In accordance with this standard

loan expenses referring to borrowing directly

attributable to acquisition, performance and

production of qualified assets, are included as

part of the acquisition value of the investment.

Cherry has, however, no borrowing attributable

to such investments at the present time, which

is why costs for borrowing are charged to the

income statement. Loan liabilities, short-term

investments and liquid assets are reported in

accordance with the business date principle.

Borrowing is classified as short-term liabilities

if the group does not have an unconditional

right to defer payment of the debt for at least

twelve months after the balance sheet date.

4. CLASSIFICATION AS “FINANCIAL ASSETS

THAT CANNOT BE SOLD”

Cherry has no financial liabilities or assets

classified in this category.

On the balance sheet date there were no tangible

differences between book value and fair

value in the group’s assets and liabilities. For

allocation in respective category, see Note 29.

INTANGIBLE FIXED ASSETS

GOODWILL

Goodwill corresponds to the positive difference

between the acquisition price and fair

value of the group’s share of the identifiable

net assets in the acquired company or business

operation as of the date of acquisition. Because

goodwill has an indeterminate useful period it

is reviewed annually in relation to write-down

requirements and is reported at its acquisition

value with the deduction of any accumulated

write-downs. Profits and losses in conjunction

with the disposal of companies include the

book value of the goodwill that is attributable

to discontinued company. Write-downs of goodwill

are not restored.

Goodwill is allocated to cash-generating

units during the examination of any writedown

requirements. This allocation is made

to the cash-generating units or groups of

cash-generating units, determined in accordance

with the group’s operating segments,

which are expected to benefit from the acquisition

where the goodwill item arose.

OTHER INTANGIBLE FIXED ASSETS

Other intangible assets include acquired gaming

agreements and concessions, trademarks

and development costs. The intangible assets

are reported in the balance sheet at the acquisition

value, with deductions for accumulated

depreciation and write-downs. Depreciation is

based on the original acquisition value, reduced

by the estimated residual value and taking into

write-downs made.

Linear depreciation is applied over the useful life

of the assets as follows:

Acquired gaming agreements and

concessions

Trademarks

Development costs

Tenancy rights

annual report 2012 |

3-6 years

5 years

2-5 years

7 years

39


Part 2 notes

TANGIBLE FIXED ASSETS

Tangible fixed assets are reported at their

historic acquisition cost after deduction for

accumulated depreciation and any writedowns.

Repairs and maintenance are recognised

on a regular basis. Depreciation is based

on the original acquisition value, reduced by

the estimated residual value and taking into

write-downs made.

Linear depreciation is applied over the useful life

of the assets as follows:

Slot machines in use

3-10 years

Product gaming

2 years

Recreational gaming

2-5 years

Casino tables

5 years

Casino wheels, Sweden

3-5 years

Scanning system (maritime slot machines) 3-5 years

Registering equipment (Swedish casino) 3 years

Other gaming inventories

max 5 years

Office inventories

5 years

Computers

3 years

Vehicles

3-5 years

INVENTORIES

Inventories are valued at the lower of the acquisition

cost after the requisite deduction for obsolescence

and net sales value. The acquisition

value for the inventory is calculated through

the application of the FIFO method.

LEASING

Leasing is classified as either financial or operational

leasing.

Leasing where an essential part of the risks

and advantages of the ownership are retained

by the lessor is classified as operational leasing.

Payments made during the leasing period

(after deductions for any incentives from the

lessor) are recognized in the income statement

linearly over the leasing period.

The group leases some tangible fixed assets.

Leasing agreements of fixed assets where the

group essentially holds the financial risks and

advantages associated with the ownership is

classified as financial leasing. At the start of the

leasing period financial leasing is reported in

the balance sheet at the lower of the fair value

of the leasing object and the current value of

minimum lease charges.

Each leasing payment is allocated between

amortisation of the liability and financial expenses.

The corresponding payment obligations,

after deduction of financial expenses, are

included in the balance sheet items Long-term

borrowing and Short-term borrowing. The interest

part in the financial expenses is reported

in the income statement, allocated over the

leasing period so that each accounting period

is charged with an amount that corresponds to

40 | annual report 2012

a fixed interest rate for liability reported during

respective periods. Fixed assets held in accordance

with financial leasing agreements are

written-down during the shorter period of the

asset’s useful life and leasing period.

The scope of Cherry’s operational leasing

agreements is reported in Note 14 and financial

leasing agreements are indicated in Note 16.

REMUNERATION TO EMPLOYEES

SHORT-TERM REMUNERATION

Short-term remuneration to employees is calculated

with discounting and reported as an

expense when the related services are received.

A provision for estimated bonus payments and

other contractual compensation is reported

when the group has legal or informal obligations

to make such payments as a result of the

fact that the services in question have been received

from the employees and the provision

amount can be estimated reliably.

PENSION COMMITMENTS

Pension plans are financed through payments

from respective group companies and in some

cases from the employees. All pensions are

reported as defined contributions. Group payments

concerning defined contribution pension

plans are recognised during the period

the employees have performed the services to

which the contributions refer. Pensions for employees

who have chosen the opportunity of an

alternative ITP and pensions for croupiers and

dealers are defined contributions.

Pension commitments for some the company’s

employees are secured through insurance

in Alecta. Alecta’s surplus can be distributed to

policy holders and/or the insured. At the end of

2012, Alecta’s surplus amounted in the form of

the collective consolidation level to 130 percent

(preliminary data, the last previous year it was

143 percent). The collective consolidation level

consists of the market value of Alecta’s assets

in percent of the insurance commitments calculated

in accordance with Alecta’s insurance

undertakings, which do not correspond with

IAS 19.

COMPENSATION ON NOTICE OF TERMINATION

Compensation on the termination of employment

is paid when an employee is given notice

by the company prior to the normal pension

date, or when an employee accepts a voluntary

retirement from in exchange for such compensation.

The group reports severance pay

when it is manifestly obliged to give notice to

an employee in accordance with a detailed formal

plan without the opportunity of recall. In

the event the company has issued an offer to

encourage voluntary retirement, the severance

pay is based on the number of employees who

are estimated to accept the offer. Benefits due

more than 12 months after the end of the reporting

period are discounted to current value.

INCENTIVE PROGRAMME

The 2011–2014 incentive programme for the

Cherry group does not come under IFRS 2 and

share related compensation. Employees are offered

options at market prices.

PROVISIONS

A provision is reported in the balance sheet

when the group has an existing legal or informal

obligation as a result of an event that has

occurred, and where it is likely that an outflow

of financial resources will be needed to regulate

the obligation and it is possible to make

a reliable estimation of the amount. A provision

for restructuring is reported when the

group has established a detailed and formal

restructuring plan, and the restructuring has

either been begun or has been officially acknowledged.

Provisions are reported in the balance

sheet under other current and long-term

liabilities. When the outflow of resources is

estimated to take place later than one year after

the balance sheet date, the expected future cash

flow is discounted and the provision is reported

at capitalised value.

CASH FLOW STATEMENT AND

DEFINITION OF LIQUID ASSETS

The cash flow statement is prepared in accordance

with the indirect method. The reported

cash flow only included transactions that permit

incoming or outgoing payments. Liquid

assets are classified as cash and bank balances

with a term shorter than three months, and

which are only exposed to a negligible risk of

fluctuations in value.

PARENT COMPANY

ACCOUNTING PRINCIPLES

The parent company accounting is prepared

in accordance with the Annual Accounts Act

and RFR 2 Accounting regulations for legal

entities. The parent company applies the same

principle as the group, with the exception

of the following. The principles remain unchanged

in comparison with previous years,

unless otherwise stated in Changes in accounting

principles.

Deviations between group and parent company

accounting principles are motivated by

the limitations the Annual Accounts Act imposes

in the application of IFRS in the parent

company and the tax regulations that enable

different accounting for legal entities than for

the group.


CHANGES IN ACCOUNTING PRINCIPLES 2012

Unless otherwise stated below the parent

company accounting principles in 2012 have

changed in line with what has been specified

for the group.

GROUP CONTRIBUTIONS AND SHARE-

HOLDER CONTRIBUTIONS

The parent company reports group contributions

received in accordance with the same

principle as ordinary dividends, i.e. as a financial

income. Group contributions are reported

as financial expenses. Shareholder contributions

are made directly to equity at the recipient

and activated in shares and participation at the

issuer, in so far as there are no write-downs.

FINANCIAL POLICY

The group’s financial operations are conducted

on the basis of the financial policy established

by the board and is characterised by a low level

of risk. Financial operations and the management

of financial risks are coordinated via the

parent company Cherry AB, which is also responsible

for the placement of excess liquidity.

Financing of subsidiaries mainly takes place via

the parent company and a cash pool, to which

all Swedish companies are linked. The operational

subsidiaries manage their own financial

risks within the framework established by the

board and in coordination with the parent

company. Disclosures on Cherry’s financial risk

management reflect the information issued

internally to leading executives.

CURRENCY EXPOSURE RISKS

The group is exposed to changes in the foreign

exchange rate as some of its sales take place

in currencies that differ from the costs (transaction

exposure). Results are also affected by

changes in foreign exchange rates when the

results of the foreign subsidiaries are converted

to Swedish kronor (translation exposure).

Group equity is also affected by changes in foreign

exchange rates when the assets and liabilities

in foreign subsidiaries are recalculated to

GROUP COMPANIES

Participations in group companies are reported

in the parent company at the acquisition value,

reduced by any write-downs. Conditional proceeds

are valued on the basis of the likelihood

that they will be received. Any changes in the

provision/receivable are added to, or reduce

the acquisition value.

DIVISION INTO RESTRICTED

AND UNRESTRICTED EQUITY

In the parent company balance sheet equity is

divided up into restricted and unrestricted equity

in accordance with the Annual Accounts Act.

Note 3: Financial risk management

Swedish kronor (translation exposure).

All the earnings of the business area Online

Gaming are in euro and majority of its costs

are also in euro. Cherry does not implement

hedging for this part at present.

Foreign companies are mainly financed

through equity and intergroup loans, which are

issued either in the parent company currency

or in the currency of the subsidiary. Hedging

of equity in foreign subsidiaries is not implemented.

If the Swedish currency fell by 5 percent

in relation to the euro, with all other variables

constant, profit after tax on 31 December 2012

would have been SEK 1.6 million higher mainly

as a result of gains from the conversion of the

results from Online Gaming.

Earnings items in foreign group and associated

companies are not hedged.

Exchange rates used in consolidated

financial statements

Average rate 2012 2011

EUR 8.71 9.03

GBP 10.73 10.41

Closing rate (Ultimo) 2012 2011

EUR 8.62 8.94

GBP 10.49 10.68

ANTICIPATED DIVIDENDS

The parent company reports anticipated dividends

from subsidiaries in those cases where

the parent company has the sole right to the

scope of the host transfer and if the parent

company has taken a decision on the scope

of the dividend before its financial reports

are published. No anticipated dividends were

reported in the annual accounts for the fiscal

year of 2012.

REFINANCING RISKS,

LIQUIDITY RISKS AND

CAPITAL MANAGEMENT

Group operations are mainly financed with their

own resources. As of the year end 31-12-2012

the group had no loans apart from financial

leasing. Cherry also has a standing overdraft

facility in Sweden for SEK 15 million.

The table below shows group liabilities allocated

by the time remaining to the contractual

due date. The amounts shown in the table are

the contractual, non-discounted cash flows.

Cherry has traditionally aimed for a low

level of debt with an equity ratio of at least 30

percent. The tangible fixed assets in the group

mainly consist of gaming and gaming equipment.

Future investments in tangible fixed assets

are mainly estimated to be financed with

internally generated resources. There may be a

need for external financing in the event of any

major acquisitions of companies. The objective

is primarily to implement acquisitions through

cash payment and, or the issue of shares.

INTEREST RISKS

Group earnings and cash flows from operations

are essentially independent of changes in

interest levels on the market. Excess liquidity

in the group is banked in accordance with

As of 31 December 2012 Less than 3 months From 3 months to 1 year From 1 to 2 years From 2 to 5 years More than 5 years

Acquisition loan - - - - -

Other long-term liabilities - - - - -

Financial leasing 172 520 1 083 - -

Accounts payable and other

liabilities

12 865 15 954 - - -

annual report 2012 |

41


Part 2 notes

group finance policy. Short terms are applied.

With the exception of financial leasing, Cherry

had no interest bearing loans as of 31-12-2012.

COUNTERPARTY RISKS AND CREDIT RISKS

Cherry has no essential concentration of credit

risks. The company estimates that it has more

than 200 customers in its business operations.

No single customer accounts for more than

10 percent of group sales. Concerning Online

Gaming, Cherry bears the responsibility for

any credit risks of customers and also for any

jackpots.

Cherry has its own platform for Online

Gaming, as well as white label solutions. For

white label solutions, Cherry’s partners are

responsible for all the credit risks of customers

and for any jackpots, where provisions are

made monthly. Concerning its own platform,

Cherry is responsible for credit risks and

jackpots. Provisions are also made monthly for

jackpots. Individual units in respective business

areas may, however, have a larger exposure to

individual customers. All jackpots are randomly

generated. Depending on the results, earnings

and profit may be affected in the short term.

Cherry has several partners who pay on a

monthly basis. There is risk of one or more of

these partners become insolvent and failing to

pay their debts to Cherry.

Cherry issues advance payments, so-called

restaurant loans, to some of the customers in

the group, which is a natural part of Cherry’s

gaming operations in Restaurant Casino. The

terms and conditions for repayment rates are

agreed individually with respective restaurant

42 | annual report 2012

owners. Cherry receives compensation corresponding

to the market interest rate for outstanding

loans. Restaurant loans are a competitive

factor in the industry and are of important

for the outcome of the business negotiations

concerning venue agreements. Their issue

involves a credit risk. To minimise this risk

the borrower takes out security in the form of

corporate or real estate mortgages, personal

guarantees and, or other mortgaging of property.

All loan issues undergo Cherry’s credit assessment.

In 2012 a credit resolution in excess

of SEK 300 thousand was taken by the board

of Cherry, a credit resolution of SEK 150-300

thousand by the president together with the

chairman, and a credit resolution of up the

SEK 150 thousand by the president.

In Cherry’s business operations no official

independent external credit rating service is

available for customers. Nevertheless, risk assessments

of customer credit worthiness are

made on the basis of their financial position,

previous experience and other factors. Individual

risk limits are established on the basis of

internal or external credit assessments in accordance

with the limits set by the board. The

use of credit limits is followed up regularly.

The credit quality of financial assets that

neither have fallen due for payment nor are

in need of a write-down is assessed through

reference to external credit ratings (if such

are available) or to the payment history of the

counterparty.

Cash handling in the Cherry group does

take place, but has significantly diminished

now that Maritime Gaming has been discon-

tinued. The risks involved with handling cash

in Restaurant Casino have nevertheless been

reduced in that the physical handling of cash at

most of the venues is not handled by the Cherry

Group, along with the introduction of card

terminals at almost all of the Cherry venues.

This has led to a significant reduction in the

handling of cash. In those cases where cash

handling does take place, most of the handling

is managed by our partners, i.e. restaurants,

hotels and night clubs. This does involve a

credit risk for Cherry. Reversal accounting of

internal control systems is used minimise this

risk, which quickly detects deviations. Security

companies such as Nokas, Loomis and others

are often used in those cases where Cherry

handles cash.

TAX RISKS

Cherry conducts its business operations

through subsidiaries in Malta, Gibraltar and

Sweden. Operations, including transactions

between group companies, are managed in accordance

with the company’s interpretation of

current tax laws, gaming agreements and regulations,

or by the interpretation of them by the

government agencies concerned. In addition,

these regulations can change, possibly with a

retroactive impact. The decisions of tax authorities

can have a negative effect on the previous

or current tax situation for the group. The company

and its subsidiaries are, in so far as this

can be known, not currently the object of any

form of tax audit.


Note 4: Reporting per business area

2012

Restaurant

Casino

Online

Gaming

Group-wide and

development projects

Discontinued operations

Maritime Gaming

annual report 2012 |

Total for

the group

Profit/loss

External income 134 526 265 115 87 - 399 728

Revaluation of supplementary proceeds - 73 447 - - 73 447

Intergroup income 7 2 313 1 863 - -

Total income 134 533 340 875 1 950 0 -

Operating profit (EBIT) 12 345 33 643 -9 158 - 36 830

Profit before tax - - - - 32 672

Profit after tax from remaining operations - - - - 31 002

Profit from discontinued operations - - - -624 -624

Net profit after tax - - - - 30 378

Other disclosures

Assets 19 304 325 335 41 511 - 386 150

Liabilities -22 713 -24 676 -6 526 - -53 915

Company acquisitions 2 500 - - - 2 500

Other investments 1 319 5 307 3 859 2 248 12 733

Depreciation and write-downs -2 670 -76 036 -395 -3 629 -82 730

2011

Restaurant

Casino

Online

Gaming

Group-wide and

development projects

Discontinued operations

Maritime Gaming

Total for

the group

Profit/loss

External income 125 819 219 059 48 - 344 926

Revaluation of supplementary proceeds - 23 828 - - 23 828

Intergroup income - 3 223 1 780 - -

Total income 125 819 246 110 1 828 0 -

Operating profit before depreciation (EBITDA) 11 992 43 412 -10 962 - 45 203

Operating profit (EBIT) 10 182 41 086 -11 925 - 40 093

Profit before tax - - - - 39 015

Profit after tax from remaining operations - - - - 38 024

Profit from discontinued operations - - - -4 187 -4 187

Net profit after tax - - - - 33 837

Other disclosures

Assets 20 003 384 493 19 374 44 087 467 957

Liabilities -19 276 -108 068 -5 378 -9 749 -142 471

Company acquisitions 264 - - - 264

Other investments 697 2 563 496 2 394 6 150

Depreciation and write-downs -2 483 -2 325 -290 -6 292 -11 390

For definition of business segments and group-wide and development projects, see page 22 in the annual report.

For further information on discontinued operations, see Note 32.

SALES, ASSETS AND INVESTMENTS PER GEOGRAPHICAL AREA

2012 Scandinavia Rest of Europe Group

External income 333 449 66 279 399 728

Assets 56 619 329 531 386 150

Company acquisitions 2 500 - 2 500

Other investments 2 722 10 011 12 733

2011 Scandinavia Rest of Europe Group

External income 302 447 42 479 344 926

Assets 58 440 409 517 467 957

Company acquisitions 264 - 264

Other investments 2 749 3 401 6 150

43


Part 2 notes

Note 5: Transactions with associated companies

The parent company has a close affiliation with its subsidiaries (see Note

18). Services sold to subsidiaries refer in similarity to the previous year

mainly to management services, rental and office costs, future invoiced

expenditures. Transactions with subsidiaries take place at market rates.

Remuneration the chairman of the board, board members and executives

is reported in Note 7.

None of the board members or executives in Cherry or its subsidiaries

have, or have had, any direct or indirect involvement in any business

transactions with Cherry or its subsidiaries that are, or have been, unusual

in terms of their character or conditions.

Note 6: Other operating income

44 | annual report 2012

The sellers of the Automaten group have been engaged as consultants to

Inprom Ltd on Malta.

Consultancy services have been included at market rates and in 2012

the amount of SEK 7 027 thousand (6 558) has been invoiced to Inprom

Ltd.

As of 31-12-2012 there were no receivables from or liabilities to associated

companies.

Cherry has not, nor have its subsidiaries, had or issued loans, set

guarantees or entered into personal guarantees on behalf of any of the

board members, or executives in Cherry or its subsidiaries.

Parent Company

Purchases and sales, group companies 2012 2011

Net sales of subsidiaries 1 864 1 780

Share of total earnings 100% 100%

Purchases from subsidiaries 563 750

Share of total operating expenses 0.0% 0.1%

Group Parent Company

2012 2011 2012 2011

Revaluation of condition proceeds 73 447 23 828 - -

Exchange rate differences in operations 74 1 338 41 2

Licence revenues 46 46 46 46

Recovered write-down of receivables 12 11 - -

Capital gains from sale of fixed assets 8 78 - -

Other - 164 - -

Total 73 587 25 465 87 48


Note 7: Personnel

2012 2011

Average number of employees including discontinued operations Total of which, men Total of which, men

Parent company

Sweden 4 75% 4 75%

Total for parent company 4 75% 4 75%

Subsidiaries

Sweden 132 30% 130 30%

England 7 40% 20 40%

Greece 25 29% 28 29%

Malta 30 50% 12 50%

Poland 6 0% 9 0%

Total for subsidiaries 200 30% 199 30%

Group total including discontinued operations 204 30% 203 31%

The average number of employees in discontinued operations amounted to 44 66

Group Parent Company

Salaries, other compensation and payroll overhead 2012 2011 2012 2011

Board, CEO, vice CEO and other executives -6 991 -8 779 -3 030 -5 628

Other employees -59 420 -57 714 -1 535 -517

Total -66 411 -66 493 -4 565 -6 145

Of which variable remuneration to CEO, other executives -1 382 -337 -20 -21

Payroll overhead (including pension expenses) -16 440 -16 926 -2 357 -2 851

Pension expenses including payroll tax

Board, CEO, vice CEO and other executives -1 287 -1 605 -721 -939

Other employees -1 893 -1 406 -94 -33

Total -3 180 -3 011 -815 -972

Of which in discontinued operations

Salaries and remuneration to executives -495 -749 - -

Salaries other employees -5 773 -9 088 - -

Payroll overhead (including pension expenses) -1 386 -1 974 - -

Pension expenses executives -116 -200 - -

Pension expenses other employees -291 -379 - -

DECISION AND DRAFTING PROCESS

Remuneration is paid to the chairman and board members in accordance

with the decision of the annual general meeting. No remuneration is paid for

committee work. No remuneration is paid to the employee representative.

The general meeting has decided on the following guidelines concerning

remuneration to executives.

Remuneration to the CEO and other executives consists of their basic

salary, variable remuneration, other benefits and pensions. Other executives

refer to the five persons who together with the CEO constitute the

group executive. For the composition of the group executive, see page 20.

The division between basic salary and variable remuneration should

stand in proportion to responsibility and authorization of the executive.

Variable remuneration for other executives is limited to SEK 200–500

thousand for 2012. The variable remuneration is based on results in relation

to individual set targets approved by the chairman. Pension benefits

and other benefits for the CEO and other executives are included as part of

the total remuneration.

annual report 2012 |

45


Part 2 notes

Remunerations and other benefits for executives in 2012

Remunerations and other benefits for executives in 2011

46 | annual report 2012

Basic

salary

Basic

salary

Variable

remuneration

* Other executives include Per-Anders Persson, Ulf Bergström, Aron Moberg-Egfors, Marius Andersen and Lars-Gunnar Persson.

For further information, see executives on page 20.

Variable

remuneration

Pension

expenses

Other

remuneration Total

Chairman of the board Rolf Åkerlind -200 - - -210 -410

Board member Kjell Berggren -100 - - - -100

Board member Per Hamberg -33 - - - -33

Board member Anders Holmgren -100 - - - -100

Board member Emil Sunvisson -58 - - -34 -92

Board member Morten Klein - - - - 0

Board member Martin Wattin -83 - - - -83

Total remuneration to the board, including to chairman -574 0 0 -244 -818

CEO Emil Sunvisson -650 - -170 - -820

Former CEO Gunnar Lind -1 011 - -458 -2 530 -3 999

Vice CEO Fredrik Burvall -854 -21 -127 - -1 002

Other executives* -2 316 -237 -375 - -2 928

Other executives in discontinued operations -670 -79 -161 - -910

Total -6 075 -337 -1 291 -2 774 -10 477

* Other executives include Per-Anders Persson, Ulf Bergström, Marius Andersen and Lars-Gunnar Persson.

For further information, see executives on page 20.

Pension

expenses

Other

remuneration Total

Chairman of the board Rolf Åkerlind -340 - - -33 -373

Board member Kjell Berggren -107 - - - -107

Board member Anders Holmgren -107 - - - -107

Board member Morten Klein - - - - 0

Board member Martin Wattin -107 - - - -107

Total remuneration to the board including to chairman -661 0 0 -33 -694

CEO Emil Sunvisson -1 491 -240 -440 - -1 931

Vice CEO Fredrik Burvall -810 -119 -140 - -970

Other executives* -3 501 -733 -361 - -4 356

Other executives in discontinued operations -495 -290 -116 - -701

Total -6 958 -1 382 -1 057 -33 -8 652


COMMENTS TO TABLE ON PREVIOUS PAGE:

• Basic salary refers to salary and other benefits, including car and fuel benefits.

• Variable remuneration refers to recognised variable remuneration, which

is based on achieved targets and is paid in 2013.

• Pension expenses refer to the cost that has affected net profit for the year

excluding payroll tax. The chairman and members of the board have not

received any remuneration in addition to the board remuneration in 2012.

• In 2011 the chairman received extra remuneration for extra commitments

concerning current operations to support the CEO.

OPTIONS PROGRAMME

At an extraordinary general meeting on 19 October 2011 the proposal by the

board to introduce an incentive programme for executives and key persons

in the Cherry group was approved. The programme involves an offer to

acquire options at market prices (as per Black & Scholes) for shares in the

B series in Cherry and 455 000 options have been subscribed to. The option

price was SEK 0.93 per option and the redemption price was set to SEK

22.94 per share. Each option entitles the acquisition of one share during the

redemption period 1–30 November 2014.

Changes in the number of outstanding share options and their weighted

average redemption price are as follows:

Average

redemption

price in SEK

per option

2012 2011

Options

(thousands)

Average

redemption

price in SEK

per option

Options

(thousands)

As of 1 January 22.94 455 000 -

Allocated 0 22.94 455 000

As of 31 December 22.94 455 000 22.94 455 000

The weighted average fair value for options allocated in 2011, determined

with the Black-Scholes valuation model, was SEK 17.64 per option. Important

input data in the model included the weighted average share price of

SEK 17.44 on the day of allocation, the above redemption price, volatility of

30 percent, and expected dividend of SEK 3.75, an expected term of 3 years

and an annual risk-free interest of 1.5 percent.

A total of 500 000 options have been issued in the programme for

2011–2014. These were subscribed free of charge by the subsidiary Cherry

Casino Syd AB and the options that were not subscribed, 45 000 options,

are still held by the subsidiary.

LOYALTY

With the objective of motivating executives, the board has decided to issue

remuneration for loyalty to be paid by 1 November 2014 to selected employees

who at the time of payment are still employed in Cherry.

The remuneration can be paid to an amount that net after tax corresponds

to a maximum of SEK 565 thousands including payroll overhead. This remuneration

including payroll overhead is recognised at the rate it is earned

during the period 1 November 2011–31 October 2014.

TERMS OF EMPLOYMENT FOR CEO

The CEO Emil Sunvission is employed until further notice, up to the age of 65.

In addition to a fixed salary the CEO has the opportunity to receive variable

remuneration. The scope of the CEO’s variable remuneration is related

to the achievement of the targets set by the board in this context.

In addition to pension benefits in accordance with the General Insurance

Act (ATP and AFP) the CEO is entitled to an extended pension premium.

Salary on which a pension is based does not include variable remuneration,

company car or other benefits. The pension is a defined contribution. No

agreement exists on the right to an early retirement pension before 65 years

of age. The pension is non-transferable.

If notice is given by Cherry, the CEO is entitled to a term of notice of six

months and severance pay corresponding to 12 months salary. No deduction

will be made from severance pay if a salary is received from another

position. If notice is given by the CEO, the term of notice is six months.

Severance pay will not be paid in this case.

TERMS OF EMPLOYMENT FOR EXECUTIVES

Employment contracts include regulations on remuneration and terms of

notice.

For business area managers and subsidiary managers variable remuneration

in 2012 has a limit of 100 percent of the fixed annual salary, excluding

benefits. Variable remuneration is based on an earning period of one year.

The result is based on to what extent to which an individual achieves set

targets in advance.

The targets are primarily quantitative and are set by the president after

approval by the chairman of the board.

An employee can normally give notice with a term of six months in the

contract. No severance pay is paid in this case. If notice is given by Cherry,

executives are entitled to a term of notice of six months and severance pay

corresponding to 6 months salary. No deduction will be made from severance

pay if a salary is received from another position.

The executive in Sweden is entitled to pensions in accordance with the

ITP system, or equivalent, and to a certain increase in person premiums.

Salary on which a pension is based does not include variable remuneration

or a company car. The total pension premium including extended pensions

does not exceed 10 price base amounts for anyone. No agreement exists on

the right to an early retirement pension before 65 years of age. Pensions

are defined contributions, with the exception of ITP premiums which are

defined benefit plans. Pensions are non-transferable.

For pensions concerning executives on Malta, Cherry’s subsidiaries only

pay salaries and payroll overheads since these persons handle their own

pensions.

Employment contracts normally include a competition clause that is

valid during the term of employment and for an additional 12 to 24 months.

2012 2011

Gender balance in corporate management Number of men Number of women Number of men Number of women

Board 6 - 6 -

Other executives 2 - 2 -

Total parent company 8 0 8 0

Other executives 4 - 4 -

Total group 12 0 12 0

annual report 2012 |

47


Part 2 notes

Note 8: Remuneration to auditors

Note 9: Depreciation and write-downs

48 | annual report 2012

Group Parent Company

2012 2011 2012 2011

Gaming agreements and concessions -1 372 -1 058 0 -

Development costs -1 652 -1 509 0 -

Trademarks and domain names -402 -422 -47 -68

Inventories and gaming equipment -2 229 -2 121 -230 -222

Total -5 654 -5 110 -276 -290

Note 10: Other operating expenses

Group Parent Company

2012 2011 2012 2011

PricewaterhouseCoopers AB

Audit assignment -517 -536 -183 -168

Auditing in addition to audit assignment -120 - -120 -

Tax advising -55 - -55 -

Other assignments - -57 - -57

Total

Other audit companies

-692 -593 -358 -225

Audit assignment -61 -70 - -

Auditing in addition to audit assignment - - - -

Tax advising - - - -

Other assignments 0 -155 - -

Total -61 -225 0 0

Total -753 -818 -358 -225

of which in discontinued operations -231 -291 -120 -

The audit assignment refers to remuneration for the audit stipulated by law, i.e. such work as is necessary to produce the audit report, as well as audit

advising issued in conjunction with the audit assignment.

Group Parent Company

2012 2011 2012 2011

Capital loss from sale of fixed assets -322 -179 -182 -

Total -322 -179 -182 0


Note 11: Financial items

Group Parent Company

2012 2011 2012 2011

Group contributions - - 11 862 12 432

Profit from disposal of subsidiaries - - -19 982 7 016

Result on liquidation - - - 7 016

Dividends from subsidiaries - - 4 500 32 269

Result from participations in group companies - - -3 620 58 733

Interest income 252 98 210 73

Changes in exchange rates, net - - - 149

Financial income 252 98 210 222

(of which group companies) - - - -

Interest expenses -2 510 -1 067 -2 428 -1 083

Interest expenses, financial leasing - -103 - -

Changes in exchange rates, net -1 900 -6 -1 193 -

Financial expenses -4 410 -1 176 -3 621 -1 083

(of which group companies) - - 0 -1 081

Total net finance -4 158 -1 078 -7 031 57 872

Note 12: Tax

Group Parent Company

Tax expenses in income statements 2012 2011 2012 2011

Allocation to current and deferred tax

Current tax -1 519 -1 564 - -

Deferred tax -151 573 - -

Total -1 670 -991 0 0

Group Parent Company

Difference between real tax expense and tax expense based on applicable tax rate 2012 2011 2012 2011

Reported profit before tax 32 672 39 015 -18 470 38 557

Tax as per applicable tax rate (26.3%) -8 593 -10 261 4 858 -10 140

Tax attributable to previous year - - - -

Difference in tax in foreign operations 7 073 3 614 - -

Tax effect of non-reported deficit deductions -18 -1 031 - -157

Tax effect of utilised loss deductions not reported previously 206 - 157 -

Tax effect of changes in tax rate 23 - - -

Tax effect of non-taxable/non-deductible items -361 6 687 -5 014 10 297

Total tax -1 670 -991 0 0

Specification of deferred tax:

Tax changes for temporary differences -35 -100 - -

Tax on group contributions from discontinued operations - 673 - -

Tax expenses on changes in balance sheet allocations -116 - - -

Total deferred tax -151 573 0 0

As a result of the change in the Swedish corporate tax from 26.3% to 22.0% applicable from 1 January 2013 the reported values for deferred tax concerned

has been recalculated. Deferred tax which was expected to be restored after 1 JanuarY 2013 has been calculated by using the effective tax rate of 22.0%.

For specification of changes in deferred tax receivables, see Note 17.

annual report 2012 |

49


Part 2 notes

50 | annual report 2012

Group Parent Company

Taxes in balance sheets 2012 2011 2012 2011

Deferred tax receivables

- Deferred tax receivables, temporary differences 17 157 - -

Total Long-term receivables 17 157 0 0

Of the reported deferred tax receivables, SEK 17 thousand is expected to be used within one year from the balance sheet date.

Current receivables

- Tax receivables 9 006 10 726 - 15

Total 9 006 10 726 0 15

Deferred tax liabilities

- Deferred tax, temporary differences - -432 - -

- Deferred tax, overdepreciation -116 - - -

Total -116 -432 0 0

Of the reported deferred tax liabilities, SEK 0 thousand is expected to be used within one year from the balance sheet date.

Current liabilities

- Tax liabilities -10 842 -12 205 -298 -

Total -10 842 -12 205 -298 0

Non-reported deferred tax receivables concerning deficit deductions amounted to SEK 1 056 thousand (2 071) . This reduction is attributable to

discontinued operations. No part of the deferred tax receivables concerning deficit deductions is limited in time.

Note 13: Earnings per share

Earnings per share before dilution is calculated by dividing the result

attributable to parent company shareholders by a weighted average

number of outstanding ordinary shares during the period, excluding any

redeemed shares held as shares by the parent company.

To calculate earnings per share after dilution the weighted average

number of outstanding shares is adjusted for the dilution effect of all

potential ordinary shares. The parent company only has one category of

potential ordinary shares with a dilution effect, i.e. share options. For

these a calculation is made for the number of shares that could have been

purchased at fair value (calculated as the average market price for the par-

Group

2012 2011

Net profit for remaining operations attributable to parent company shareholders. 31 020 38 024

Net profit for total operations attributable to parent company shareholders. 30 396 36 030

Total number of outstanding shares 1 January 12 802 642 12 802 642

Issue of shares during the year - -

Total number of outstanding shares 31 December 12 802 642 12 802 642

Average number of shares prior to dilution 12 802 642 12 802 642

Effect of options 403 548 -

Average number of shares after dilution 13 206 190 12 802 642

Earnings per share (SEK)

Earnings per share from remaining operations prior to dilution 2.42 2.97

Earnings per share from remaining operations after dilution 2.35 2.97

Earnings per share from total operations prior to dilution 2.37 2.81

Earnings per share from total operations after dilution 2.30 2.81

ent company shares), for an amount corresponding to the monetary value

of the subscription rights linked to the outstanding share options. The

number of shares calculated is compared with the number of shares that

would have been issued on the assumption that the share options were

utilised. The calculation shows that outstanding options (455 000 options

in the options programme 2011–2014) had a dilution effect for 331 days in

2012. A total of 500 000 options were set out, but the remaining 45 000

options have not been issued and are placed in Cherry Casino Syd AB.


Note 14: Leasing

Leasing and rental costs for equipment that is rented and included in the concept of operational leasing amounted to:

Group Parent Company

2012 2011 2012 2011

Recognised leasing and rent expenses -499 -507 -126 -147

Future minimum charges concerning non-terminable operational leasing and rental agreements will be incurred as below:

Group Parent Company

2012 2012

- in 2013–2016 -499 -155

- in 2014-2017 -259 -117

- after 2017 -155 -13

Total -913 -285

Note 15: Intangible fixed assets

Group Goodwill

Gaming

agreements

& concessions

2012 2011

Development

costs

Trade

marks &

domain

names Total Goodwill

Gaming

agreements

& concessions

Development

costs

Trade

marks &

domain

names Total

Opening acquisition value 346 792 9 345 2 989 1 428 360 554 349 014 12 563 1 823 1 370 364 770

Investments - 5 075 1 379 182 6 636 - 264 1 177 64 1 505

Increase through acquisition - 2 500 - - 2 500 - - - - 0

Discontinued operations - -3 147 - - -3 147 - - - - 0

Other sales & retirements - 0 - - 0 - -3 560 - - -3 560

Exchange rate differences -12 721 -21 -110 -39 -12 890 -2 222 -37 -12 -7 -2 278

Closing accumulated

acquisition value

334 071 13 752 4 258 1 572 353 653 346 792 9 230 2 988 1 427 360 437

Opening depreciation - -4 961 -1 494 -988 -7 443 - -4 047 - -571 -4 618

Depreciation &

write-downs in the year

-73 447 -1 372 -1 652 -402 -76 873 - -1 099 -1 509 -422 -3 030

Discontinued operations - 2 705 - - 2 705 - - - - 0

Depreciation and write-downs for

discontinued operations in the year

- - - - 0 - - - - 0

Other sales & retirements - 0 - - 0 - 216 - - 216

Exchange rate differences - 21 72 29 122 - -31 15 5 -11

Closing accumulated depreciation -73 447 -3 608 -3 074 -1 361 -81 489 0 -4 961 -1 494 -988 -7 443

Recognised value 260 624 10 144 1 184 211 272 164 346 792 4 269 1 494 439 352 994

2012 2011

Parent company Trademarks Total Trademarks Total

Opening acquisition value 378 378 313 313

Acquisitions in the year 139 139 64 64

Closing accumulated acquisition value 517 517 377 377

Opening depreciation -289 -289 -220 -220

Depreciation in the year -47 -47 -68 -68

Closing accumulated depreciation -335 -335 -288 -288

Recognised value 182 182 89 89

annual report 2012 |

51


Part 2 notes

WRITE-DOWN OF GOODWILL

The goodwill reported for the group derives from the acquisition of the

Automaten group in 2010.

The goodwill, which has a reported value of SEK 260 million, belongs

to the cash generating unit Online Gaming. Since goodwill is not writtendown,

a write-down test has been made in accordance with IAS 36 in the

fourth quarter of 2012 by comparing future discounted cash flows with

the reported value. The test showed there was a write-down requirement

of SEK 73 million.

The recovery value is based on cash flow forecasts based on actual

results in operations in 2011 and 2012 and a five year forecast, which is

52 | annual report 2012

based on a business plan and budget for 2013. The growth rate in the first

five years is expected to be in line with the industry.

Cash flows for the years after 2018 have been extrapolated by an annual

growth rate of 2 percent, which corresponds to an assumed average

future rate of inflation and lies at the level of expectations in the industry.

The forecasted cash flows have been discounted with an interest rate

of 13.7 percent before tax.

The discount interest reflects the specific risk applicable for the cash

flow generating unit Online Gaming.

The most important assumptions in the five year forecast and the methods used to estimate the values are as follows:

Important variables Method to estimate values

Sales

Operating margin

A forecast based on current market plans, updated annually on the basis of actual results. The forecast is based on previous

experiences and external sources of information.

The operating margin largely depends on which market investments are implemented. Amounts are determined in annual

budgets for the unit. The forecast is based on previous experiences and external sources of information.

The actual outcome of operations in 2012 for Cherry Online Gaming did

not live up the high expectations.

The following sensitivity analyses of the calculation of the present

value in conjunction with the write-down assessment have been made:

A general reduction of the sales growth rate by 1 percentage unit in the

forecast period, a general reduction of the operating margin by 1 percentage

unit in the forecast period, a general increase in WACC by 1 percentage

Note 16: Tangible fixed assets

unit, and a general reduction of the growth rate after the forecast period

by 0.5 percentage unit. The sensitivity analyses show that none of the

adjustments on their own will generate any essential write-down requirement.

In February 2013 the trademarks and domains related to Sverige-

Automaten, NorgesAutomaten and DanmarksAutomaten were sold to

Betsson AB (plc). For a more detailed description, see Note 33.

Group: Inventories and gaming equipment Parent company: Inventories

2012 2011 2012 2011

Opening acquisition value 90 658 84 090 1 073 694

Investments 6 097 4 909 23 433

Discontinued operations -73 397 - - -

Other disposals and retirements - -1 734 - -54

Reclassifications - 3 367 - -

Exchange rate changes -1 826 142 - -

Closing accumulated acquisition value 21 532 90 774 1 096 1 073

Opening depreciation -62 089 -54 866 -676 -508

Discontinued operations 52 749 - - -

Other disposals and retirements - 1 584 0 54

Annual depreciation -2 229 -2 121 -230 -222

Annual depreciation for discontinued operations -3 628 -6 239 - -

Reclassifications - -337 - -

Exchange rate changes 929 -110 - -

Closing accumulated depreciation -14 268 -62 089 -905 -676

Recognised value 7 263 28 685 190 397


This item includes leasing objects that the group holds in accordance with financial leasing agreements with the following amounts:

Participations in group companies 2012 2011

Acquisition value of activated financial leasing 3 367 3 367

Accumulated depreciation -1 684 -1 010

Future minimum charges concerning financial leasing agreements will have the following results:

- in 2013-2016

- in 2014-2017

- after 2017

Total

Note 17: Financial fixed assets

Group

Parent Company

annual report 2012 |

Group 2012

Participations in group companies 2012 2011

Opening acquisition value 408 447 435 649

Annual acquisitions - -

Disposal of subsidiaries -28 026 -

Liquidation of subsidiaries - -1 000

Revaluation of conditional proceeds -73 446 -26 202

Closing book value 306 975 408 447

Group Parent Company

Deferred tax receivables 2012 2011 2012 2011

Opening value 157 239 - -

Tax receivables attributable to discontinued operations -104 - - -

Changes in tax, deficit deductions - - - -

Tax changes for temporary differences -36 -82 - -

Exchange rate differences - - 0 0

Closing value 17 157 - -

Group Parent Company

Other long-term receivables 2012 2011 2012 2011

Opening value 595 520 - -

Changes in long-term receivables -165 75 - -

Closing value 430 595 0 0

-707

-993

-

-1 700

53


Part 2 notes

Note 18: Participations in group companies

Company CIN Head office Participation % No. of shares 2012 2011

Cherry Casino AB 556225-3806 Stockholm 100% 20 000 8 313 8 313

Cherry Casino Syd AB 556229-6730 Gothenburg 100% 20 000 6 972 6 972

Playcherry PR & Media AB 556420-9632 Stockholm 100% 5 000 1 670 1 670

Cherry Malta Ltd C 47263 Malta 100% 1 200 190 020 263 466

- Inprom Ltd C 43 921 Malta 100% 125 000 - -

- Esprom Ltd C 48657 Malta 100% 1 200 - -

- Playcherry Ltd C 43059 Malta 100% 280 000 - -

- Yggdrasil Holding Ltd C 57560 Malta 95% 100 000 - -

- Yggdrasil Ltd 108 560 Gibraltar 95% 2 000 - -

- Yggdrasil Gaming Ltd C 57683 Malta 95% 40 000 - -

Euroslots Gaming Ltd C 48654 Malta 100% 12 000 100 000 100 000

- EuroSlots Ltd C 48658 Malta 100% 1 200 - -

- Cherry Ltd Gibraltar 100% 2 000 - -

Astral Marine Services Ltd * 3522485 England 100% 200 000 - 14 561

Cherry Maritime Gaming AB * 556207-4335 Solna 100% 10 000 - 13 465

- Cherry Services Ltd * CY 10165761Q Cypern 55% 275 - -

- Briseis Development Corp ** Liberia 55% 500 - -

Total 306 975 408 447

Note 19: Accounts receivable

54 | annual report 2012

2012 2011

Accounts receivable 26 580 23 972

Minus: reserves for uncertain receivables -2 670 -4 398

Accounts receivable – net 23 910 19 574

2012 2011

Accounts receivable in euro 25 770 17 053

Accounts receivable in SEK 810 5 930

Accounts receivable in GBP - 989

Accounts receivable 26 580 23 972

Note 20: Current receivables

* Company sold during 2012 ** Company discontinued during 2012

Accounts receivable in the group have terms of payment of 10–30 days and

therefore the value in the balance sheet corresponds with the real value. The

maximum exposure to credit risks concerning accounts receivable as of the balance

sheet date is the reported net value for the receivables mentioned above.

In general Cherry does not have any guarantees for accounts receivable, but

there are guarantees for some restaurant loans and some accounts receivable.

As of 31 December 2012, SEK 19 676 thousand (8 497) of accounts receivable

were older than 30 days. Of these SEK 3 162 thousand (4 398) have been

reserved as uncertain. The due receivables for which no write-down has been

made refer to several customers where Cherry has a separate agreement concerning

the payment period. In total profit for the year has been charged with

expenses for suspected and confirmed customer losses of SEK 2 670 thousand

(3 616) concerning accounts receivable.

Group Parent Company

2012 2011 2012 2011

Short-term part of restaurant loan 1 708 2 664 - -

Receivable gaming cash, small change cash, money in slot machines 3 277 10 149 - -

Gaming shares 1 045 1 818 - -

VAT 390 948 131 188

Other 1 413 1 481 369 264

Total 7 833 17 060 500 452


RESTAURANT LOANS

Restaurant loans have different terms of payment, depending on the

agreements made with respective owners. Loans seldom have a life term

longer than one year. The part of the restaurant loan expected to be paid

later than one year from the balance sheet date is reported as long-term

receivables.

As of 31 December 2012, restaurant loans amounting to SEK 1 105

thousand (1 210) were due. Of these SEK 1 007 thousand (1 080) have

been reserved as uncertain.

RECEIVABLE GAMING CASH, SMALL CHANGE CASH,

MONEY IN SLOT MACHINES

These receivables have short terms and payment is normally received

within 15 to 30 days. As of 31 December 2012, SEK 174 thousand (301) of

receivables were older than 30 days. Of these SEK 77 thousand (83) have

been reserved as uncertain.

In total profit for the year has been charged with expenses for suspected

and confirmed losses concerning receivables of gaming cash, small change

cash and money in slot machines to an amount of SEK 31 thousand (31).

Note 21: Prepaid expenses and accrued income

Note 22: Equity

GAMING SHARES

Gaming shares refer to receivables at venues where the restaurant looks

after the cash takings, or where Cherry has other receivables from the

restaurant owner. The accounts are settled monthly in arrears, through

so-called “krögarbrev”. Krögarbrev (restaurant invoices) are due for payment

10 to 30 days after they are issued.

As of 31 December 2012, gaming shares amounting to SEK 496 thousand

(553) were due. Of these SEK 465 thousand (498) have been assessed

to be uncertain and have been reserved in their entirety.

In total profit for the year has been charged with expenses for suspected

and confirmed customer gaming share receivables to an amount of SEK

126 thousand (122).

OTHER CURRENT RECEIVABLES

In total, profit for the year has been charged with expenses for suspected

and confirmed customer losses of SEK 441 thousand (428) concerning

other receivables.

Group Parent Company

2012 2011 2012 2011

Rent 626 405 75 110

Insurance 126 413 93 281

Accrued interest income 70 - - -

Other prepaid expenses 2 370 5 896 195 151

Total 3 192 6 714 363 542

Composition of share capital 2012 2011

Parent company No. of shares Share capital No. of shares Share capital

Shares, A series (10 votes) 997 600 549 997 600 549

Shares, B series (1 vote) 11 805 042 6 493 11 805 042 6 493

Total shares 12 802 642 7 041 12 802 642 7 041

The nominal value of the share was SEK 0.55 as of 31-12-2012. Both A- and

B-shares have equal rights to assets and profits in the company.

An issue of 500 000 subscription options was decided at an extraordinary

general meeting on 19-10-2011. The company’s share capital can increase

by a total of SEK 275 thousand.

annual report 2012 |

55


Part 2 notes

Note 23: Other provisions

56 | annual report 2012

Parent Company

2012 2011

Other provisions

Conditional supplementary proceeds - -71 483

Total 0 -71 483

See also Note 30.

Note 24: Long-term liabilities

Group Parent Company

2012 2011 2012 2011

Long-term interest bearing liabilities

Liabilities to credit institutions - -6 667 - -6 667

Liabilities related to financial leasing -1 083 -1 710 - -

Total -1 083 -8 377 0 -6 667

Granted non-utilised credit amounted to 15 000 15 000 15 000 15 000

Long-term non-interest bearing liabilities

Guarantee liabilities - -1 342 - -

Condition proceeds - -71 483 - -

Total 0 -72 825 0 0

No part of long-term liabilities falls due for payment later than five years after the balance sheet date. Concerning conditional proceeds, see Note 30.

Note 25: Accounts payable

Accounts payable in the group have standard terms of payment and therefore the value in the balance sheet corresponds with the real value.

Note 26: Current liabilities

Group Parent Company

2012 2011 2012 2011

Current interest bearing liabilities

Liabilities to credit institutions - -6 667 - -6 667

Liabilities related to financial leasing -693 -692 - -

Total

Other current liabilities

-693 -7 359 - -6 667

Personnel tax -2 637 -2 459 -146 -157

Gaming taxes -1 453 -1 564 - -

Gaming shares to venues -3 910 -3 817 - -

VAT -3 167 -3 069 - -

Other -575 -4 467 -59 -38

Total -11 742 -15 376 -205 -195

Note 27: Accrued expenses and prepaid income

Group Parent Company

2012 2011 2012 2011

Accrued salaries -5 613 -6 494 -2 076 -3 441

Holiday pay -4 202 -4 276 -98 -68

Payroll overheads -3 062 -2 717 -326 -147

Other -10 327 -3 348 -1 162 -968

Total -23 204 -16 835 -3 662 -4 624


Note 28: Pledged assets relating to liabilities in company

Note 29: Financial assets and liabilities

Group Parent Company

2012 2011 2012 2011

Shares in subsidiaries 6 529 10 206 8 313 21 778

Total 6 529 10 206 8 313 21 778

Loans receivable

and accounts

receivable

Financial assets and

liabilities reported at fair

value via the income statement

Other financial

liabilities

Total

reported value

Non financial

assets

and liabilities

Non financial assets and liabilities include taxes and personnel related balance sheet items regulated by a standard other than IFRS 7.

annual report 2012 |

Total

balance sheet

Group 2012

Other long-term receivables 430 - - 430 - 430

Accounts receivable 26 580 - - 26 580 - 26 580

Other receivables 7 443 - - 7 443 12 588 20 031

Liquid assets 59 057 - - 59 057 - 59 057

Total 93 510 0 0 93 510 12 588 106 098

Long-term interest bearing liabilities - - 1 083 1 083 - 1 083

Current interest bearing liabilities - - 693 693 - 693

Accounts payable - - 6 235 6 235 - 6 235

Other liabilities - - 4 485 4 485 41 303 45 788

Total 0 0 12 496 12 496 41 303 53 799

Group 2011

Other long-term receivables 595 - - 595 - 595

Accounts receivable 19 574 - - 19 574 - 19 574

Other receivables 16 112 - - 16 112 18 388 34 500

Liquid assets 30 457 - - 30 457 - 30 457

Total 66 738 0 0 66 738 18 388 85 126

Long-term interest bearing liabilities - - 8 377 8 377 - 8 377

Other long-term liabilities - 72 825 - 72 825 - 72 825

Current interest bearing liabilities - - 7 359 7 359 - 7 359

Accounts payable - - 9 062 9 062 - 9 062

Other liabilities - - 8 284 8 284 36 132 44 416

Total 0 72 825 33 082 105 907 36 132 142 039

Parent company 2012

Other receivables 369 - - 369 494 863

Liquid assets 41 252 - - 41 252 - 41 252

Total 41 621 0 0 41 621 494 42 115

Accounts payable - - 320 320 - 320

Other liabilities - - 59 59 3 808 3 867

Total 0 0 379 379 3 808 4 187

Parent company 2011

Accounts receivable - - - 0 - 0

Other receivables 264 - - 264 745 1 009

Liquid assets 17 768 - - 17 768 - 17 768

Total 18 032 0 0 18 032 745 18 777

Long-term interest bearing liabilities - - 6 667 6 667 - 6 667

Other long-term liabilities - 72 825 - 72 825 - 72 825

Current interest bearing liabilities - - 6 667 6 667 - 6 667

Accounts payable - - 560 560 - 560

Other liabilities - - 38 38 4 781 4 819

Total 0 72 825 13 932 86 757 4 781 91 538

57


Part 2 notes

Note 30: Acquisition of companies

ADJUSTMENTS IN 2012 OF PREVIOUS ACQUISITIONS

AUTOMATENGRUPPEN

The terms and conditions required for payment of the conditional proceeds

have not been met. The liability for these proceeds has therefore

been valued to zero. Since the acquisition was implemented after IFRS 3

began to be applied, the revaluation of SEK 73 446 thousand (23 828)

has been reported in the income statement (included in Other operating

income) in the consolidated financial statements.

Note 32: Discontinued operations

MARITIME OPERATIONS

Cherry completed on 8 November 2012 the sale of all shares in Cherry

Maritime Gaming AB, Astral Maritime Services Ltd and Cherry Services

Ltd to Bell Casino AB. The discontinued operations have previously comprised

the Maritime segment, which has now been completely discon-

58 | annual report 2012

The goodwill attributable to the Automaten group has undergone an

impairment test, whereby a write-down requirement of SEK 73 447

thousand was identified. See also Note 15.

During the year no payments concerning conditional proceeds have

been made for the Automaten group.

Note 31: Transactions with holdings without controlling influence

TRANSACTIONS 2012

On 23 February 2012 Cherry reached an agreement on the acquisition of

additional shares in the partly-owned subsidiary Cherry Services Ltd and

in Briseis Development Corporation. Cherry previously owned 55 percent

of the shares and votes in the companies and the agreement concerns the

remaining 45 percent. The proceeds amounted to SEK 1 382 thousand

and were paid in cash on entry.

Since Cherry already had a controlling influence in the company, the acquisition

was reported as equity transactions in accordance with IAS 27.

Cherry Services Ltd and Briseis Development Corporation were included

in the Maritime business operations that were discontinued during the

year.

tinued as a result of the sale. Cherry received total proceeds of SEK 36.3

million for shares, dividends from the sold companies and repayment of

group loans that had been issued to the discontinued companies.

Analysis of results from discontinued operations 2012 2011

Earnings 67 733 99 108

Operating expenses -64 874 -96 538

Depreciation -3 637 -6 280

Result from discontinued operations before tax -778 -3 710

Income tax 154 -477

Result from discontinued operations after tax -624 -4 187

Capital loss - -

Profit for the year from discontinued operations -624 -4 187

Cash flow attributable to discontinued operations

Cash flow from operating activities -2 914 3 623

Cash flow from investment operations 24 386 -2 206

Cash flow from financing operations -1 774 324

Total cash flow 19 698 1 741


Note 33: Events after the end of the reporting period

In February 2013 the trademarks and domains related to SverigeAutomaten,

NorgesAutomaten and DanmarksAutomaten were sold to Betsson AB

(plc). The proceeds amounted to SEK 286.0 million, of which SEK 225

million has been regulated through the delivery of a corresponding new

issue of 1 063 895 Betsson B-shares and transfer of CherryCasino.com.

The remaining proceeds, SEK 60 million, will be regulated with liquid

assets after twelve months. In conjunction with the sale, Cherry acquires

the gaming site CherryCasino.com for SEK 1.0 million.

Cherry sold its shareholding in Betsson in February, which brought in

SEK 228.7 million before deductions for transaction costs.

Slot machine sites generated earnings in 2012 of SEK 168.2 million.

CherryCasino.com generated earnings in 2012 of SEK 1.5 million.

Goodwill arising in conjunction with the acquisition of the Automaten

group and which as of 31 December 2012 amounted to SEK 260.6 million,

was written-down as a result of the sale to zero in the first quarter of 2013.

annual report 2012 |

59


Part 2 signAtures / Auditor’s report

Signatures

The annual report and consolidated financial statements for Cherry AB

(plc) in the year 2012 have been approved for publication following a

decision taken by the board on 12 April 2013.

It is proposed that the annual report and consolidated financial statements

be adopted at the annual general meeting on 7 May 2013.

The board of directors and CEO hereby declare that the consolidated

accounts have been prepared in accordance with international financial

reporting standards IFRS, as adopted by the EU, and give a true and

fair view of the group’s financial position and results of operations. The

Stockholm, 12 april 2013.

Rolf Åkerlind

Chairman

Anders Holmgren

Board member

Emil Sunvisson

CEO

Our audit report was submitted on 12 April 2013.

PricewaterhouseCoopers AB

Niklas Renström

Authorised public accountant

60 | annual report 2012

Kjell Berggren

Board member

Martin Wattin

Board member

annual report has been prepared in accordance with generally accepted

accounting principles and gives a true and fair view of the financial position

and results of operations for the parent company.

The administration report for the group and parent company gives

a true and fair view of the development of group and parent company

operations, financial position and results of operations, and describes

essential risks and uncertainty factors that face the parent company and

the companies included in the group.

Morten Klein

Board member

Jörgen Olsson

Employee representative


Auditor’s report

TO THE ANNUAL MEETING OF THE SHAREHOLDERS OF CHERRY AB (PLC)

CORPORATE IDENTITY NUMBER 556210-9909

REPORT ON THE ANNUAL ACCOUNTS

AND CONSOLIDATED ACCOUNTS

We have audited the annual accounts and consolidated accounts of

Cherry AB for the year 2012. The annual accounts and consolidated

accounts of the company are included in the printed version of this

document on pages 22–60.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE CEO

AND PRESIDENT (“PRESIDENT”) FOR THE ANNUAL ACCOUNTS

AND CONSOLIDATED ACCOUNTS

The Board of Directors and the President are responsible for the preparation

and fair presentation of these annual accounts and consolidated

accounts in accordance with International Financial Reporting

Standards, as adopted by the EU, and the Annual Accounts Act, and for

such internal control as the Board of Directors and the President determine

is necessary to enable the preparation of annual accounts and consolidated

accounts that are free from material misstatement, whether due

to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these annual accounts and

consolidated accounts based on our audit. We conducted our audit in

accordance with International Standards on Auditing and generally

accepted auditing standards in Sweden. Those standards require that

we comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance about whether the annual accounts and

consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about

the amounts and disclosures in the annual accounts and consolidated

accounts. The procedures selected depend on the auditor’s judgement,

including the assessment of the risks of material misstatement of the annual

accounts and consolidated accounts, whether due to fraud or error. In

making those risk assessments, the auditor considers internal control

relevant to the company’s preparation and fair presentation of the annual

accounts and consolidated accounts in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the company’s internal control.

An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by

the Board of Directors and the President, as well as evaluating the overall

presentation of the annual accounts and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate

to provide a basis for our audit opinion.

OPINIONS

In our opinion, the annual accounts have been prepared in accordance

with the Annual Accounts Act and present fairly, in all material respects,

the financial position of the parent company as of 31 December 2012 and

of its financial performance and its cash flows for the year then ended

in accordance with the Annual Accounts Act. The consolidated accounts

have been prepared in accordance with the Annual Accounts Act and

present fairly, in all material respects, the financial position of the group

as of 31 December 2012 and of their financial performance and cash

flows for the year then ended in accordance with International Financial

Reporting Standards, as adopted by the EU, and the Annual Accounts Act.

The statutory administration report is consistent with the other parts of

the annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of shareholders

adopt the income statement and balance sheet for the parent company

and the group.

REPORT ON OTHER LEGAL

AND REGULATORY REQUIREMENTS

In addition to our audit of the annual accounts and consolidated accounts,

we have also audited the proposed appropriations of the company’s profit

or loss and the administration of the Board of Directors and the President

of Cherry AB for the year 2012.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE PRESIDENT

The Board of Directors is responsible for the proposal for appropriations

of the company’s profit or loss, and the Board of Directors and the President

are responsible for administration under the Companies Act.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion with reasonable assurance on

the proposed appropriations of the company’s profit or loss and on the

administration based on our audit. We conducted the audit in accordance

with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors’ proposed appropriations

of the company’s profit or loss, we examined the Board of Directors’

reasoned statement and a selection of supporting evidence in order to be

able to assess whether the proposal is in accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in addition

to our audit of the annual accounts and consolidated accounts, we examined

significant decisions, actions taken and circumstances of the company

in order to determine whether any member of the Board of Directors

or the President is liable to the company. We also examined whether any

member of the Board of Directors or the President has, in any other way,

acted in contravention of the Companies Act, the Annual Accounts Act or

the Articles of Association.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinions.

OPINIONS

We recommend to the annual meeting of shareholders that the profit be

appropriated in accordance with the proposal in the statutory administration

report and that the members of the Board of Directors and the

President be discharged from liability for the financial year.

Stockholm April 12, 2013

PricewaterhouseCoopers AB

Niklas Renström

Authorized Public Accountant

annual report 2012 |

61


Part 2 definitions

Definitions

EARNINGS Gaming income is reported net after deductions for player winnings, bonuses and

loyalty programmes. Cherry reports its share of income from lotteries as income.

RUNNING COSTS IN GAMING OPERATIONS Running costs in gaming operations refer to direct costs such as gaming shares to

venues, gaming taxes and licences, purchasing of materials, and purchased services

directly related to gaming operations.

AVERAGE TOTAL CAPITAL Balance sheet total at the start of the fiscal year plus balance sheet total at the end of

the fiscal year divided by two.

AVERAGE EQUITY Equity at the start of the fiscal year plus equity at the end of the fiscal year, divided by two.

RETURN OF TOTAL CAPITAL Result after financial items plus financial expenses in relation to average total capital.

RETURN ON CAPITAL EMPLOYED Result after financial items plus financial expenses in relation to average capital employed.

RETURN ON EQUITY Profit/loss after tax in relation to average equity.

PROFIT MARGIN Result after financial items in relation of turnover for the period.

OPERATING MARGIN Operating profit in relation to turnover for the period.

OPERATING PROFIT BEFORE DEPRECIATION (EBITDA) Result before tax, financial items, depreciation and write-downs.

OPERATING PROFIT (EBIT) Result before tax and financial items.

EQUITY RATIO Equity at the end of the period in percent of balance sheet total at the end of the period.

ACID-TEST RATIO Current assets excluding inventories in relation to current liabilities, including proposed

but not adopted share dividends.

NUMBER OF EMPLOYEES The number of persons employed when salaries for the last month were paid out.

AVERAGE NUMBER OF EMPOYEES The number of employees converted to full-time employment (annual).

NUMBER OF SHARES The number of shares at the end of respective period.

AVERAGE NUMBER OF OUTSTANDING SHARES The weighted average number of outstanding shares during the period.

EARNINGS PER SHARE Profit after tax in relation to average number of outstanding shares during the period.

EARNINGS PER SHARE AFTER DILUTION Net income divided by the weighted average of the number of outstanding shares during

the year adjusted for the additional number of shares during conversion, including

options with dilution effect. Calculated according to IAS 33 Earnings per share.

CASH FLOW PER SHARE The cash flow in relation to the average number of outstanding shares during the period.

EQUITY PER SHARE Equity in relation to the number of shares at the end of the period.

DIVIDEND PER SHARE Completed/proposed dividend.

SHARE PRICE The last share price paid for the last share transaction of the period.

NUMBER OF (REGISTERED) SHAREHOLDERS The number of Euroclear and nominee registered shareholders according to the

Euroclear list of shareholders/share register.

62 | annual report 2012


www.cherry.se

info@cherry.se

Stockholm (HQ)

Cherry

Headquarters

Cherry AB (Publ)

Blekholmstorget 30

111 64 Stockholm

Tel: +468-514 969 40

Fax: +468-514 969 59

info@cherry.se

CEO Emil Sunvisson

CFO/IR Fredrik Burvall

Malta, Sliema

Online Gaming: EuroLotto.com, EuroSlots.com, CherryCasino.com,

SpilleAutomater.com and CherryAffiliates.com

Companies: EuroSlots Ltd, EuroSlots Gaming Ltd,

Cherry Malta Ltd, PlayCherry Ltd, Inprom Ltd,

Esprom Ltd.

71 Triq It-Torri, Level 3 & 4

Sliema, SLM1609, Malta

Tel: +356 -2276 6000

Fax: +356 - 2134 0665

CEO Marius Andersen

Malta, Sliema

Online Gaming: Yggdrasil Gaming

Companies: Yggdrasil Gaming Ltd, Yggdrasil Holding Ltd

71 Triq It-Torri, Level 3

Sliema, SLM1609, Malta

Tel: +356 9962 5104

CEO Fredrik Elmqvist

www.yggdrasilgaming.com

Cherry Casino

Umeå

Restaurant Casino Northern Sweden

(Söderhamn in the South to Riksgränsen in the North)

Cherry Casino AB

Kungsgatan 42

90 325 Umeå

Tel: +4690-12 57 30

Fax: +4690-13 37 13

Business area manager Per-Anders Persson, +46709-27 96 25

Stockholm

Restaurant Casino Middle Sweden

(Stockholm, Mälardalen, Östergötland)

Cherry Casino AB

Blekholmstorget 30

111 64 Stockholm

Tel: +468-514 969 40

Fax: +468-514 969 59

Business area manager Per-Anders Persson, +46709-27 96 25

Gothenburg

Restaurangcasino Southern Sweden

(Värmland, Skaraborg, Jönköping, Kronoborg

counties and south)

Cherry Casino AB

Fürstenbergsgatan 4

416 64 Göteborg

Tel: +4631-80 15 55

Fax: +4631-80 29 99

Business area manager Ulf Bergström, +46709-27 96 50

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