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Annual Report & Accounts 2005 - Chief Executive's Review
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The amortization of intangible assets is detailed in note 7 to the financial results. This is a non-cash charge primarily to re£ect the reduction in economic value over their useful lives of the intangible assets acquired on the purchase of the Casino business in December 2004. Net financing costs for the financial year ended 31 December 2005 of e0.6 million (2004: e0.007 million) are analysed in note 4 to the financial results. The majority of Group revenues are in Euros, as are both the cost of sales and marketing. Employment costs are primarily US Dollar denominated and most legal, tax and accounting services are incurred in Sterling. Dividend payments are also Sterling denominated. The Groupís operational structure, with the core business in Curacao, allows for an effective global tax charge of e0.01 million. The Group periodically reviews all of the relevant and controlling tax regulations to optimise the available benefits. A Group effective tax charge of less than 2% of net profit is envisaged to continue for the foreseeable future. In the reporting period the Group generated e17 million (2004: consumed e0.2 million) from operating activities. After payment of the interim dividend of e9.6 million during the year, the Groupís closing cash balance at 31 December 2005 was e7.3 million (2004: e1.3 million). Due to the nature of the business there are no significant working capital pressures on the Group during periods of revenue growth. The Group had no significant capital expenditure during the year and does not envisage any in 2006. Dividends We consider that the current dividend policy remains appropriate for the Group. The core business is cash generative and not capital intensive and we will continue to return excess capital to shareholders, as appropriate. The Board recommends a final dividend of 21p (gross) (c e0.302) per share (2004: nil), making a total distribution of 42p (c e0.604) for the year. This will be paid on 22 May 2006 to shareholders on the register at the close of business on 21 April 2006. While the total dividend for 2005 will be greater than the earnings per share in the year, given the financial performance of the Group in 2005 and the strong start to 2006, the Board considers the final dividend is merited. As at 31 March 2006 our cash balances were more than sufficient to cover the final dividend. Outlook Gaming VC has started 2006 in a strong position. We are exploring opportunities to replicate our casino product in other markets on a selective basis, but we will only commit meaningful resources after detailed feedback analysis and when we have confidence about the upside potential. In the meantime, our leading position in German speaking markets provides a very stable foundation, especially as we see significant potential for further growth in these core markets over the foreseeable future. We look forward to the remainder of the current financial year with much confidence. Steve Barlow Chief Executive