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Finance Director's Statement
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8 FINANCE DIRECTOR’S STATEMENT Overview GVC has introduced three new terms into its consolidated income statement to better explain its results going forward. The first, “Contribution” represents gross profits less marketing expenditure; the second, “EBITDA” is well understood, and means earnings before interest, taxation, depreciation and amortisation. The third is “Clean EBITDA”, which is EBITDA before exceptional items and share option charges. • Net Gaming Revenue grew 17.5% to c50.1million (2007: c42.6 million) • Gross profits rose 22.5% to c40.9 million (2007: c33.4 million) • Contribution rose 2.4% to c27.9 million (2007: c27.3 million) • Non-German business now generating 31% of contribution (2007: 21%) • Clean EBITDA reduced slightly to c19.5 million (2007: c20.0 million) • Operating profit increased to c16.4 million (2007: c16.2 million) • Profit before tax rose to c16.9 million (2007: c16.6 million) • Proposed final dividend of c0.20 per share • Cash at bank (net of customer balances) as at 31 December 2008 of c17.5 million and c24 million as at 17 April 2009 Net Gaming Revenue (“NGR”) The engine of growth during 2008 was the sportsbook, with revenues rising to c6.3 million (2007: c1.1 million) from a net win margin of 13.2% (2007: 11.7%). Gaming revenues grew 5% to c43.8 million (2007: c41.6 million), with Poker at c6.3 million (2007: c3.4 million) and Casino falling 2% to c37.5 million (2007: c38.2 million). In 2008, the mix of revenues both geographically and by product line changed. NGR from Germany was 54% (2007: 76%) and NGR from sports was 13% (2007: 3%). Cost of sales and Gross profit Cost of sales principally includes: payment processing costs, royalties on software licences and chargebacks/bad debts. By their very nature these costs vary with business activity and the mix of business. The Group has, in a number of circumstances, been able to favourably renegotiate the financial terms of some of these arrangements. Gross profit rose 22.5% to c40.9 million (2007: c33.4 million) increasing the gross profit ratio to 82% from 78%. Contribution Total marketing and affiliate costs rose to c13.0 million (2007: c6.1 million) reflecting the growth in business outside Germany. The net result of higher revenues, increased profit margins and higher marketing costs led to a c0.6 million increase in contribution to c27.9 million (2007: c27.3 million). The business outside Germany earned c8.7 million in contribution (2007: c5.6 million), 31% of the total (2007: 21%).