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Annual Report & Accounts 2009 - Chairman's Statement
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5 CHAIRMAN'S STATEMENT In my second year as Chairman, I am happy to report that, despite 2009's historically difficult economic operating conditions, the Group has had a relatively successful year, managerially, operationally and financially. Results Financially, the Group has achieved growth in Net Gaming Revenue ("NGR") to c54.0 million (2008: c50.1 million). Clean EBITDA, at c17.4 million (2008: c19.5 million), was lower than in 2008 as a result of our continued expansion into new business lines with lower margins and increased marketing spend on the mature CasinoClub business. Betboo acquisition Gaming VC completed the acquisition of Betboo in July 2009. Betboo is one of the leading online gaming operators in the still small but rapidly growing Latin American market, and was recently named the Latin American Operator of the Year at the eGaming Review Awards. We have been encouraged by its performance since acquisition. As shareholders will be aware from our previous announcements, the acquisition of Betboo comprised initial consideration of US$4 million (c3 million) together wiht an earn-out capped at US$26 million. Operations The company has now evolved into a mature operating company with industry-leading staff and resources in Malta and Israel, as well as having third party contracts with service providers in Brazil and Uruguay. Regulatory and legal As more fully reported in the Report of the Chief Executive, the Group holds gaming licences in Malta and the Netherlands Antilles, and believes it has the necessary licences to conduct its current gaming operations. That said, there remains a lack of legal clarity among members of the European Union on the issue of European regulation, and this therefore continues to pose an unquantifiable risk to GVC. Shareholders were made aware on 27 August 2009 of the intended re-domiciliation from Luxembourg to the Isle of Man. The AIM Admission document, together with a circular to shareholders and voting forms, is expected to be dispatched on Monday 19 April and, subject to shareholder approval, we expect the new Isle of Man based holding company to be admitted to AIM in late May 2010. Boss Media Gaming VC is currently in dispute with Boss over an alleged infringement of the Group's intellectual property. The Group has made its concerns known to Boss. If the dispute is not resolved, Court proceedings will be instituted. The dispute is subject to legal, professional privilege. The Group is also in dispute with Boss over the ability of Boss to terminate a contract for services to the Betaland business. Strategy Gaming VC announced in January 2010 three elements to its strategy: 1. Additional marketing expenditure to protect the core CasinoClub business in Germany; 2. Marketing investment to expand CasinoClub outside German speaking markets; and 3. Launch of additional sportsbooks in new territories to replicate the success the Group has had in Italy. The Group announced the recruitment of Jon Salmon and Jim Humberstone to lead these initiatives. The financial impact of these three elements was expected to be c7 million in 2010. The expansion of CasinoClub outside German speaking markets has been delayed by the dispute with Boss and as a result the Group now expects to invest a total of c5 million during 2010, c2 million lower than earlier anticipated.