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Chief Executive's Statement
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6 CHIEF EXECUTIVE’S STATEMENT Introduction and financial overview I am delighted that the Board’s strategy to diversify the Group’s product offering away from Germany continues to be successful. Group Net Gaming Revenue (“NGR”) has increased 17.5%, gross profit increased 22.5%, and profit before tax is slightly ahead of 2007 despite the required spending on marketing and infrastructure to support the business. Non-German NGR was 46% of total revenue in 2008 compared to 24% in 2007. Gaming VC achieved total revenues of c50.1 million, of which, c6.5 million (2007: c1.1 million) was from sports. A margin of 13.2% was achieved on the Group’s sports business during 2008, (2007: 11.8%). Highlights • Net Gaming Revenue increased by 17.5% to c50.1 million (2007: c42.6 million) • Gross profits increased by 22.5% to c40.9 million (2007: c33.4 million) • Southern European business now generating 9% of contribution (2007: 1%) • Operating profit increased to c16.4 million (2007: c16.2 million) • Profit before tax rose, despite investment in marketing, to c16.9 million (2007: c16.6 million) • Proposed final dividend of c0.20 per share • Cash at bank, net of customer balances, at the balance sheet date equal to c0.56 per share, and c0.75 at 31 March 2009 Net current assets and cash, were, at year-end, c19.2 million and c18.8 million respectively (2007: c15.7 million, and c15.9 million), 22% and 19% greater than 2007. Net of customer and similar liabilities the Group’s cash position was c17.5million. Additional analysis and comments on the financial performance and financial position are included in the Finance Director’s Statement. Operations 2008 was the Group’s first full year operating from its Maltese licence (granted August 2007) and Gaming VC’s first full year of operating the sportsbook brand www.betaland.com. In April 2008, the Group was granted a licence in Italy and trades under www.betpro.it. Both of these offerings were heavily marketed to boost growth and the Board continues to be pleased with the results with quarter on quarter growth being seen on both brands. The Group’s sportsbooks have achieved net win margins of over 13% and generated 13% of Group revenues and 15% of its gross profits. In line with Group strategy, the launch of other products outside its core German casino market continued to assist GVC in diversifying away from Germany in 2008. The Board expects our non-German revenues as a percentage of total revenues to continue to grow in 2009. GVC’s office in Malta has now been staffed-up with highly skilled personnel in both customer services and sports trading, and it is already seeing the benefits of bringing these skills in-house. During the year, the Group opened a legal branch in Israel, employing first class customer relationship management (“CRM”) and affiliate marketing teams. GVC now has around 70 people in the Group, including long-term contractors, and closely monitors their performance and link rewards to their performance and Group performance, so that business interests are aligned. GVC continues to work closely with its software providers, principally Boss Media, to ensure that the Group’s customers receive quality products. Recently the Group signed a long term contract with Boss Media to continue to offer their games to GVC’s German customers. Outside Germany GVC uses other suppliers such as Net Entertainment, Parlay, Evolution Gaming and Game Account.