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Annual Report & Accounts 2013 - REPORT OF THE CHIEF EXECUTIVE
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To make the acquisition financially enhancing for our shareholders, deep cuts were needed and it was necessary to reduce the inherited headcount by around a third, which, along with property and other cost reductions, reduced the expenditure base by around 50%. A number of in-house functions were outsourced and GVC has a number of significant partnerships in cost-efficient jurisdictions. GVC sees this as a blueprint for its future expansion. This success has not just been achieved however through cost cutting. GVC has very much focused on driving-up its revenues against strong currency headwinds in both Brazil and Turkey. The Group has grown its revenues in local currencies and those reported in Euros through a combination of intensive CRM activity and VIP management. Of course a key driver of the revenue success is the achievement of consistently high sports margins. There will of course be times when the sports results are "punter-friendly." GVC's aim has been to use the skills of its trading teams (around 100 employees and a sixth of the Group's workforce) and combine this with state-of-the-art event feeds. This approach has enabled GVC to deliver an aggregate sports margin of 9.6% in 2013. GVC's customers want great service, great products and a great experience. The Group is unrelenting in the delivery of these factors, without which the highly competitive landscape will entice players away from GVC. For that reason, the Group has been investing in its mobile product and has witnessed a significant increase in the take-up of mobile to around 19% of sportsbook NGR, albeit, from a low base of around 10%. This is a trend that GVC sees continuing and being ever more important for customer retention. In-play betting continues to grow and now represents around 70% of the sports wagers placed. Football, tennis and basketball represent around 90% of customer wagering. Operationally, by early 2014 GVC had: • migrated its main gaming licence to Malta; • integrated its Betboo product; • consolidated its payment wallets; and • outsourced at significantly lower cost some of its IT and Customer Services support functions. I am also pleased to report on our high-level KPIs based on "pro-forma" revenues ("PFR") over the last nine quarters expressed in €000's per day. Gaming & other Sports Sports Sports revenues wagers margin NGR €000's Total PFR €000's % €000's €000's €000's Q1-2014 3,773 10.1% 254 302 556 Q1-2013 1,894 12.5% 209 185 394 Q1-2012 1,530 11.5% 148 141 289 Q4-2013 3,926 8.4% 244 279 523 Q4-2012 1,453 12.3% 162 162 324 Q3-2013 3,335 9.8% 267 251 518 Q3-2012 1,402 10.4% 123 149 272 Q2-2013 3,637 9.2% 275 267 542 Q2-2012 1,286 10.8% 120 166 286 Sports wagers have doubled in value over Q1-2013 to just under €3.8 million per day and revenues per day have not only grown by 41% year-on-year but have grown 6.3% in the last quarter alone. Gaming revenues have also increased across all of the Group's markets and are expected to benefit further by our continued investment in our mobile product. The Group has been impacted by a stronger Euro, and we estimate that the impact of this in 2013 alone would be around €25k per day, thus GVC's underlying growth rates are closer to 50%. GVC HOLDINGS PLC ANNUAL REPORT 2013 7 BUSINESS REVIEW