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Annual Report & Accounts 2007 - Chief Executive's Statement
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CHIEF EXECUTIVE’S STATEMENT The successful implementation of our strategy has produced record results for the 2007 ¢nancial year. The Group has taken a number of steps to improve the pro¢tability of its core German business including tighter control of overheads and expenditure. The distribution of all direct mail to recruit customers was stopped in May 2007, and marketing efforts were concentrated on af¢liate marketing and search engine optimisation with customer recruitment remaining at historic levels. In June 2007, the Group renegotiated its casino/poker operating contract with Boss Media on more favourable commercial terms. In order to remain competitive, Gaming VC believes it is important to utilise other software providers. New brands utilising £ash casino and live dealer casino products will be launched during 2008 and a new poker brand www.pokerkings.com was launched in December 2007. In September 2007, Gaming VC launched a sportsbook licenced in Malta (www.betaland.com) and in the ¢rst quarter of 2008, has secured an additional Italian sportsbook licence (www.betpro.it). The Maltese sportsbook launch has exceeded our expectations and represents a signi¢cant step for Gaming VC in developing business outside of Germany. The new business has continued to grow during 2008 and Italy will continue to be a key strategic market for the Group in the ¢nancial year ahead. Further sportsbook sites will be launched under the ‘Betaland’ brand in 2008 to assist with diversi¢cation. To further extend the Group’s product range, Gaming VC launched a bingo site, www.winzingo.es, in the ¢rst quarter of 2008, using the proven software from Parlay. This site will initially be focused on the Spanish female market and rolled out across other European territories in due course. Consistent with the change in marketing strategy, the Group replaced direct marketers with experienced executives from the online gaming industry including af¢liate marketing. In addition, an experienced Customer Relationship Management (CRM) teams allow us to concentrate on the retention of existing casino customers. The CRM expertise that was recruited in 2007 together with further recruits will be employed to set up a new CRM centre during the second quarter of 2008 to handle all aspects of customer service, currently provided by Boss Media. By bringing all areas of customer contact in-house Gaming VC will have complete control over all areas of the customer interface. This should signi¢cantly enhance retention and maximise the lifetime value of customers. Group Financial Performance Net Revenue Gross Pro¢t All C’000 2007 2006 2007 2006 Casino 38,164 38,365 28,685 28,377 Poker 3,420 2,208 2,409 1,038 Sports Betting 1,123 ^ 1,075 ^ Total 42,707 40,573 32,169 29,415 In 2007, the total gross wagers placed were C1.8 billion (2006: C1.6 billion) and net revenues were C42.7 million (2006: C40.6 million). A signi¢cant proportion of the revenue growth is attributable to the commencement of sports betting during the year, which accounted for C1.1 million of the increase. The gross pro¢t for the ¢nancial year ended 31 December 2007 was C32.2 million (2006: C29.4 million). C1.1 million of the increased gross pro¢t was generated from the sportsbook activity started in 2007. Casino operating activities in 2007 remained at a similar level and margin to 2006 and poker net revenues increased by 55% year-on-year. In both 2007 and the prior year less than 1% of the gross margin was earned from customers residing outside the European Union and Gaming VC have never transacted any wagering activity by customers in the US. 3