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Annual Report & Accounts 2005 - Chief Executive's Review
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CHIEF EXECUTIVE’S REVIEW Over the past financial year we have established a robust operational framework which will allow Gaming VC to move to the next stage of growth as we leverage our position as a leading online Casino in German speaking markets. The strong increase in revenues is a testament to the durability of our Casino business and the strengths of our marketing strategy which both indicate future growth opportunities. The German gaming market remains considerably buoyant and we are consistently adding to our customer base. The strategy going forward is to continue to build on the strongly cash generative core business in German speaking markets, whilst looking selectively at opportunities to enter other national markets with a Casino offering that is custom tailored to each targeted country. Casino Gaming VC is now in a position where we have a reliable customer base that provides the Group with good forward visibility of earnings. To further sustain growth, we have developed a monthly direct mail campaign for customer acquisition, in addition to the quarterly publication of our Casino Club magazine. These new campaigns follow two high volume test direct mail campaigns that we ran in July and August 2005. The combination of these two marketing initiatives has resulted in strong customer acquisition and retention levels that are among the highest in the industry with our average customer playing for 22 months. This anchor marketing campaign has now been operating for 6 months and has significantly improved the performance of the core business as shown below: Q3 2005 Q4 2005 Q1 2006 New registrations 8,458 11,187 14,777 New depositing customers 4,663 5,245 7,428 Daily average revenue e98,500 e106,350 e112,800 In addition, we have begun to add e-mail, banner and affiliate programmes to our overall marketing strategy in support of our direct mail efforts, and we are also working on the launch of new casino games, such as a football biased slot game for the World Cup in June 2006. New territories One of our growth strategies is to examine opportunities to replicate our proven business model in new geographical markets. In Spain, additional marketing spend has been allocated to drive the customer numbers needed to achieve critical mass. Spain was selected as the first test market for a new casino as it was identified as a market that had no contentious legislation for internet gaming, an appropriate level of internet infrastructure and no current dominant market leader in the online gaming sector. An initial broad media campaign to heighten customer awareness of the Casino Club brand was launched in September 2005. Encouragingly, visits to the Spanish site in September and October 2005 were over 9,000 per day, with online channels showing good leads to the site. However, the conversion of leads to paid play was significantly slower than expected. Subsequent analysis identified areas of web navigation and Spanish support services as contributing factors. These issues have now been addressed with both site and customer support improvements. Phase two of the Spanish marketing campaign, which entails a low additional cost, went live in March 2006. Since February 2006, we have soft launched a second new casino in Russia in conjunction with experienced local business people who have significant internet and marketing experience. The new site (www.casino-club.ru) offers the usual suite of casino games in both Euros and Roubles. Gaming VC’s initial financial investment in this new casino represents only a small part of our overall marketing budget for 2006. With both Spain and Russia, it is still too early to have statistically meaningful operating data. Following a detailed operational review in 2005, we now have sophisticated reactive feedback controls in place which are integral to both trials. These give us instant and detailed market data which will ensure that additional resources will only be committed where we have a strong degree of confidence about the potential for significant upside.