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Chief Executive's Statement
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7 Winzingo, the Group’s Spanish focused Bingo site was launched in Q1 2008. Its growth was slower than anticipated, but the Board remains committed to maximising the Spanish bingo market, which it believes will be profitable as local understanding improves. GVC has written-off its working capital loan in Winzingo during 2008 and treated this as an exceptional item and the business is now close to achieving break-even. Costs continue to be closely controlled. The executive team was strengthened in 2008 by the appointment of an industry experienced Group Finance Director and GVC expects to see efficiencies in 2009 in the area of outsourced professional services. Acquisitions The Group continues actively to review potential acquisitions and is in advanced negotiations to acquire a leading South American online sport and gaming business, currently with a focus on the Brazilian marketplace. There are of course no assurance that the transaction will complete. A further announcement will be made in due course. It is the Board’s intention to utilise the knowledge and skills of the Group’s stronger management team to look for additional acquisitions which can leverage GVC’s CRM, marketing, and trading capabilities, whilst, being able to maintain the Group’s dividend. Regulatory Unlike many of other listed gaming groups GVC has never taken bets or wagers from residents of the USA. Accordingly there is no exposure to either US fines or penalties. The Group has licences in Malta, Italy and the Netherlands Antilles and its core German business operates under the European licence in Malta. Following the passing in January 2008 of the German Interstate Treaty, the EU Commission took infringement provisions against Germany whose action was seen to be contrary to EU law. Therefore, it continues to be unclear from a legal perspective as to whether national or EU law applies. Q1 2009 Trading update and outlook Against the backdrop of a slower Q4 2008 across the industry, the first three months of 2009 trading has been slightly ahead of management’s expectations. Group NGR was c14.9 million in Q1 2009 compared to c13.3 million in Q1 2008 and c11.6 million in Q4 2008. This represents 26% growth compared to last quarter and 12% compared to the same quarter in 2008. Casino Club remains the GVC’s largest brand, but the Group’s other brands are growing in importance. Betaland and Betpro, whilst operating on lower margins, continue to show solid growth (up 105% on Q1 2008). Thus in Q1 2009, Betaland and Betpro represented 44% of NGR (Q1 2008: 24%). Diversification outside Germany continued in Q1 2009 with non German revenues for the first time representing a majority at 56% of total. The strategy of using our experienced CRM team to maintain the profits in GVC’s German casino has allowed the Group to continue to invest in new products or acquisitions outside Germany in 2009. This strategy is not expected to alter the Group’s current dividend policy. The Group’s strategy to diversify away from Germany continues to be successful. GVC’s non-German brands are growing strongly and their percentage contribution to Group revenue is increasing. GVC continues to seek acquisition opportunities in selected additional markets. In the first three months of 2009, trading has been slightly ahead of management’s expectations across all divisions of the Group and the Board is cautiously optimistic that 2009 will be a successful year. Kenneth Alexander Chief Executive 20 April 2009