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Annual Report & Accounts 2006 - Chief Executive's Review
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Gaming VC Annual Report 2006 Net ˘nancing income for the ˘nancial year ended 31 December 2006 of C0.1 million (2005: net ˘nancing costs C0.6 million) are analysed in note 3 to the ˘nancial statements. 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 Group intends to add new gaming licences within the EU in 2007 to those already held in Curacao. The impact of this will be to strengthen the EU business operationally but it will increase the overall group tax charge going forward. It is expected that Gaming VC will increase its tax charge from a current base level of 2% of operating pro˘ts to closer to 10% by 2008. The ˘nal charge will depend on both the markets where growth is achieved and future developments on taxation in the domiciles Gaming VC operates in. In the reporting period the Group generated C17.9 million (2005: C17 million) from operating activities. After payment of dividends totalling C15.6 million during the year, the Group’s closing cash balance as at 31 December 2006 was C9.4 million (2005: C7.2 million). The Group had no signi˘cant capital expenditure during the year and does not envisage any material capital expenditure in 2007. Dividends The Board considers 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 ˘nal dividend of 13p (gross) (c C0.193) per share (2005: 21p per share), making a total distribution of 26p per share (c C0.386) for the year. This will be paid on 29 May 2007 to shareholders on the register at the close of business on 27 April 2007. While the total dividend for 2006 will be greater than the earnings per share in the year, given the ˘nancial performance of the Group in 2006 and the positive start to 2007, the Board considers the ˘nal dividend is appropriate. As at 31 March 2007 our cash balances were more than suf˘cient to cover the ˘nal dividend. Outlook Trading for the ˘rst three months of the 2007 ˘nancial year has been in line with expectations. Likely bene˘ts of the revised marketing strategy include increased player acquisition numbers with an associated reduction in customer acquisition costs together with an increased retention of the existing customer base. It is expected that these initial bene˘ts will be experienced in the last quarter of the ˘nancial year. The impact of the associated costs of this strategy which will be incurred before the bene˘t is received will be offset by the savings made on a signi˘cant reduction in the use of direct mail as a marketing tool. Gaming VC has started 2007 in a much stronger and more competitive position than last year. Management’s combined experience in the online gaming industry places Gaming VC in an excellent position to diversify its operations into new European territories. I am con˘dent for the future. Kenneth Alexander Chief Executive