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Annual Report & Accounts 2009 - Report of the Chief Executive
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7 REPORT OF THE CHIEF EXECUTIVE Introduction and financial overviews In 2009, though trading conditions were difficult for the industry as a whole, the Gaming VC Group continued to grow revenues and perform well. Group revenue increased to c54.0 million, and 7.7% compared to 2008. Like for like sports revenues grew 44% from c6.3 million to c9.1 million from a hold of 17.9% (2008: 13.4%). Gaming revenues excluding Betboo were 2.5% lower at c42.7 million (2008: c43.8 million). Betboo revenues amounted to c2.2 million for the six months since acquisition. As explained more fully in the report of the Finance Director, the profit before tax was affected by two noncash items arising from the Betboo acquisition totalling c1.1 million and exceptional charges of c1.5 million. Clean EBITDA, at c17.4 million (2008: c19.5 million), was c2.1 million lower than 2008 as a result of our continued expansion into new business lines with lower margins and increased marketing spend on the mature CasinoClub business. Operations CasinoClub During the year CasinoClub revenue fell by 18.8% to c29.6 million and contribution in this area of the business fell by 20.1% to c20.6 million. The contribution margin remained at 70%. The core German casino business has been affected by challenging economic conditions which in turn effected player yields, in particular at the VIP levels. The board is encouraged that the volumes have stabilised in the latter part of 2009 with H2 revenues only dropping by 3.3% compared to H1. Jon Salmon, ex-Head of Marketing for Party Gaming, joined the Group earlier in 2010 and increased marketing investment is planned for 2010 to support the CasinoClub brand. The board is confident of the prospects for this business in 2010. Betaland Betaland enjoyed a year of significant growth in 2009 and moved into profitability with total revenues increasing by 56% to c20.8 million; a sports betting margin of 17.9% was achieved (2008: 13.4%). During 2009, 21,845 new funded accounts were created (2008: 15,153) and 4.2 million bets were taken (2008: 3.5 million). The board is pleased with the continued progress that Betaland has made in the year. Within only two years, the business has become profitable. The recruitment of Jim Humberstone, ex-Head of Sportsbook of Sportingbet, who joins the Group on 19 April 2010, further strengthens our sports betting management team. The board is confident that revenues and profits from our European sports betting operations will continue to grow and expects to launch additional language versions in H2 2010. Betboo Betboo, a Latin American e-gaming portal, was acquired in July 2009. The management team responsible for the success of the business has all been retained. Betboo to date has had minimal marketing invested into the brand but marketing will be increased in the second part of 2010. The business is expected to grow materially thereafter. Winzingo Winzingo is a Spanish facing bingo site, focussing on the Spanish market. The business is a small part of the business and results have been disappointing to date. A review of the business is currently being undertaken. Regulatory Unlike the majority of other listed gaming entities, the Gaming VC group has never taken bets or wagers from residents of the USA. The Group has licences in Malta and Netherlands Antilles. The Interstate Treaty regarding gambling in Germany was passed on 1 January 2008. Inter alia, this states that "Public games of chance may only be organised or arranged with the permission of the competent authority of the respective Federal State. Organising and arranging them without this permission (unauthorised game of chance) is