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Annual Report & Accounts 2006 - Chief Executive's Review
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Gaming VC Annual Report 2006 CHIEF EXECUTIVE’S REVIEW I am delighted to be in a position to give my ˘rst statement as Chief Executive since my appointment on 1 March 2007. In this report I would like to give you an insight into the challenges the Group currently faces and what our objectives will be in the coming year in taking the business forward. Notwithstanding more encouraging announcements by the EU Commission on the regulatory environment surrounding online gaming in Germany, diversi˘cation into other European markets is the key strategic objective for Gaming VC during the next twelve months. The Group is con˘dent that it will obtain a gaming licence in Italy in Q2 2007 which will permit the introduction of a sportsbook. The Group envisages a subsequent launch of bingo and tournament poker. Opportunities are also being looked at to secure licences or to enter new territories enabling diversi˘cation into new markets outside Germany. No investment will be made in any new market until a comprehensive business plan and experienced local executives are in place. The Group’s German customer base has been built by means of off-line direct mail marketing and this marketing strategy has remained the core marketing strategy in recruiting new customers. Ongoing, other marketing channels will be targeted which are expected to lower the Group’s customer acquisition costs. Accordingly, direct mail marketing will be used on a smaller scale for retention purposes for our established higher value German customers. However, new recruitment channels focusing on online and af˘liate marketing will make our marketing more ef˘cient and are more suited to an online business. This change in focus to concentrate more on online marketing will require different marketing skills from those that have been required in the past and recruitment has commenced to effectively implement this strategy. The change in strategy from direct mail to online marketing, with a dedicated marketing team possessing the skills to implement the revised strategy, is expected to improve the growth prospects of Gaming VC and materially improve marketing ef˘ciency. Customer Retention Management (CRM) will also have an increased focus ongoing in the business. The gaming industry is maturing and the levels of sophistication employed to maintain and work the existing customer database is increasing all the time. To improve in this area, work has also started to recruit the necessary expertise and to invest in the most appropriate tools to implement effective CRM. It is expected that these actions will increase lifetime values and reduce attrition, both critical areas for online gaming operations as the market matures and focus increases on maintaining the existing customer base. As well as diversifying geographically during the new ˘nancial year there will be diversi˘cation in terms of Gaming VC’s product range. A strategic review is being carried out to ensure that the Group is operating on the optimal platform for its business requirements and we will be looking to offer an increased range of gaming products, including ˘xed odds games and bingo, and explore the possibility of launching a sportsbook in conjunction with our entry into new markets. Casino 2006 2005 % Change New registrations 52,774 32,840 61% New depositing customers 22,916 18,023 27% Daily average revenue o105,091 o109,907 (4.4%) Total revenue o38,358,324 o40,116,120 (4.4%) Casino revenues fell by 4% despite new depositing customers increasing by 27% year-on-year. This reŁects a disappointing third quarter and a high-staking account in December 2006 which reduced that month’s revenue by C0.3 million which was subsequently recovered in January 2007. This trend highlights the issues with our marketing strategy over the last twelve months where direct mail marketing and CRM efforts not deliver growth in total volumes despite an increase in depositing customers.