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Annual Report & Accounts 2006 - Chief Executive's Review
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Gaming VC Annual Report 2006 Poker 2006 2005 % Change New registrations 25,957 7,308 255% New depositing customers 11,845 3,355 353% Daily average revenue o6,051 o1,779 240% Total revenue o2,208,489 o327,362 575% Poker has demonstrated solid growth during the ˘nancial year and has compensated for the slight fall in Casino revenues. Similarly to the Casino, the marketing efforts on Poker will concentrate on online measurable channels to deliver the growth in our Poker offering. Group Financial Performance The total gross wagers placed were C1.6 billion (2005: C1.6 billion) and net revenues were C40.6 million (2005: C40.4 million). The gross pro˘t for the ˘nancial year ended 31 December 2006 was C29.4 million (2005: C30.8 million). The small decrease in gross margin has arisen due to both the impact of the one high stake roulette player discussed above, and the increased percentage of lower margin poker business in the total wagers placed. The primary operating cost element for the Group are the turnkey online casino services provided by Boss Media SA and its subsidiaries. In the ˘nancial year there were no signi˘cant one-off jackpot winners on the Group’s slot machine games with associated ‘‘progressive’’ jackpots, although 3 players won over C0.1 million each in the year (2005: none). The total of the available jackpots at the end of December 2006 was C2.2 million (2005: C1.7 million) with the largest available individual jackpot being C1.3 million (2005: C0.8 million). Upon this jackpot becoming payable it will be a charge against the relevant period’s gross pro˘t. The last major jackpot win was for C0.5 million in November 2004. The Group operating pro˘t for the ˘nancial year ended 31 December 2006 before exceptional items and share option charge was C13.5 million (2005: C13.9 million) after the deduction of distribution and administrative expenses. The Group incurred C41.6 million of exceptional charges in the year (2005: nil), these consist of C8.3 million of accelerated amortisation charges on the Groups software licences and a C33.3 million write down of goodwill after considering the potential impact of the continuing German Laender’s regulatory position against the online gaming industry in the foreseeable future. This resulted in a Group operating loss after exceptional items of C28.9 million (2005: pro˘t of C13.4 million). Net operating expenses before goodwill impairment in the year of C25.1 million (2005: C17.4 million) are analysed as distribution, administration and amortisation costs as detailed below. Distribution costs of C7.1 million (2005: C7.4 million) reŁect the third party marketing costs incurred by the Group to recruit active members to the Casino. The major items within the administrative expenses (excluding amortisation) incurred during the ˘nancial year are detailed below: 2006 2005 g’000 o’000 Employment costs 3,434 2,378 Travel 886 1,121 Legal, accounting and tax 1,682 1,941 Re-organisation costs ^ 545 All other costs 775 1,207 Total administrative expenses 6,777 7,192 Employment costs which are analysed in note 2 to the ˘nancial statements, include C0.4 million settlement for contractual obligations to Mr S Barlow and Mr S Miller on their standing down as Executive Directors of the Group. Of the total C44.4 million amortisation and impairment charge (2005: C2.8 million), detailed in note 6 to the ˘nancial statements, C41.6 million was an exceptional charge in 2006. C8.3 million reŁects accelerated amortisation of the Group’s software licenses following a review that identi˘ed a reduced bene˘cial life of the licenses due to both technical developments and price pressure on royalties in the market place; C33.3 million reŁects an ongoing concern regarding the continued uncertainty in the German regulatory position.