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Latest Results

Gaming VC Holdings S.A., a leading European online gaming company, today announces its preliminary results for the year ended 31 December 2007.

Highlights Chairman's Statement Chief Executive's Statement Income Statement Statement of Recognised Income and Expense Balance Sheet Statement of Cashflows Notes

Download The full results are available to download in PDF format.

 

Highlights

• Gross profit increased 9.5% to €32.2 million (2006: €29.4 million);
• Operating profit up* 28.1% to €17.3 million (2006: €13.5 million);
• Net revenues were up 5.2% to €42.7 million (2006: €40.6 million);
• Maltese gaming licences acquired, reducing regulatory risk in the European Union;
• Successful diversification, having acquired a sports betting licence;
• Recommended final dividend of €0.20 (c£0.16) (2006:€0.19 (£0.13)).

*before exceptional items and share option charge

Commenting on the results, Kenneth Alexander, Chief Executive of Gaming VC, said: “I am delighted with the performance of the Group during 2007 with record profitability delivered during the year. It has been a year of transformation and change in strategic direction. Acquiring our European licences and diversifying into new products and markets leaves the Group in a much stronger position moving forward. I am confident that Gaming VC is now well placed to continue its successful growth story.”

 

Chairman’s Statement

I am pleased to present the 2007 full year results for Gaming VC which demonstrate strong growth and are in line with expectations.

Over the last year, the Group has successfully implemented the important strategic and operational objectives as set out in Gaming VC’s 2006 results by the then newly appointed Chief Executive, Kenneth Alexander, including:

• Reducing the risk from potential German legislative issues;
• Improving the profitability of the German business;
• Diversifying into other territories and into other products; and
• Strengthening the level of expertise within the business.

The outcome of carefully following these strategies is record profitability for the Group. The financial results for the year ended 31 December 2007 show an operating profit before exceptional items and share option charges of €17.3 million (2006: €13.5 million), an increase of 28 per cent.

I believe that the current dividend policy remains appropriate for the Group. The core business is cash generative and not capital intensive, and we will continue to return excess cash flow to shareholders as appropriate. The Board is recommending a final dividend of €0.20 (c£0.16) giving a total distribution of €0.40 (c£0.29) for the current financial year (2006: €0.384 and £0.26). This final dividend will be paid on 30 May 2008 to all shareholders of record at the close of business on 9 May 2008.

To reduce risk from potential legislative issues in Europe the majority of our business, including all of our German operations, now operates under our Maltese licences. We look forward to a resolution of the regulatory debate within the EU.

We are pleased with the results for the first quarter of 2008 and are confident that we will continue to build on the strong momentum created in 2007.

Adrian Smith, Chairman
22 April 2008

 

Chief Executive’s Statement

The successful implementation of our strategy has produced record results for the 2007 financial year.

The Group has taken a number of steps to improve the profitability of its core German business, including tighter control of overheads and expenditure. The distribution of all direct mail to recruit customers was stopped in May 2007 and marketing efforts were concentrated on affiliate marketing and search engine optimisation with customer recruitment remaining at historic levels.

In June 2007, the Group renegotiated its casino/poker operating contract with Boss Media on more favourable commercial terms. In order to remain competitive, Gaming VC believes it is important to utilise other software providers. New brands utilising flash casino and live dealer casino products will be launched during 2008 and a new poker brand www.pokerkings.com was launched in December 2007.

In September 2007, Gaming VC launched a sportsbook licenced in Malta (www.betaland.com) and in the first quarter of 2008, has secured an Italian sportsbook licence (www.betpro.it). The Maltese sportsbook launch has exceeded our expectations and represents a significant step for Gaming VC in developing business outside of Germany. The new business has continued to grow during 2008 and Italy will be a key strategic market for the Group in the financial year ahead. Further sportsbook sites will be launched under the ‘Betaland’ brand in 2008 to assist with diversification.

To further extend the Group’s product range, Gaming VC launched a bingo site, www.winzingo.es, in the first quarter of 2008, using the proven software from Parlay. This site will initially be focused on the Spanish female market and rolled out across other European territories in due course.

Consistent with the change in marketing strategy, the Group replaced direct marketers with experienced executives from the online gaming industry including affiliate marketing. In addition, an experienced Customer Relationship Management (CRM) team allows us to concentrate on the retention of existing casino customers. The CRM expertise that was recruited in 2007, together with further recruits, will be employed to set up a new CRM centre during the second quarter of 2008 to handle all aspects of customer service, currently provided by Boss Media. By bringing all areas of customer contact in-house Gaming VC will have complete control over all areas of the customer interface. This should significantly enhance retention and maximise the lifetime value of customers.

Group Financial Performance

All € '000			Net Revenue				Gross Profit
		2007		2006		2007		2006
Casino		38,164		38,365		28,685		28,377
Poker		3,420		2,208		2,409		1,038
Sports Betting		1,123		-		1,075		-
Total		42,707		40,573		32,169		29,415

In 2007, the total gross wagers placed were €1.8 billion (2006: €1.6 billion) and net revenues were €42.7 million (2006: €40.6 million). A significant propotion of the revenue growth is attributable to the commencement of sports betting during the year, which accounted for €1.1 million of the increase. The gross profit for the financial year ended 31 December 2007 was €32.2 million (2006: €29.4 million). €1.1 million of the increased gross profit was generated from the sportsbook activity started in 2007. Casino operating activities in 2007 remained at a similar level and margin to 2006 and poker net revenues increased by 55% year-on-year. In both 2007 and the prior year less than 1% of the gross margin was earned from customers residing outside the European Union and Gaming VC has never transacted any wagering activity by customers in the US.

In the 2007 financial year there were no significant one-off jackpot winners on the Group’s slot machine games with associated “progressive” jackpots. The total of the available jackpots at the end of December 2007 was €3.2 million (2006: €2.2million) with the largest available individual jackpot being €1.6 million (2006: €1.3 million).

The Group operating profit before exceptional items and share option charges for the financial year ended 31 December 2007 increased by 28% to €17.3 million (2006: €13.5 million) after the deduction of distribution and administrative expenses. The Group incurred no exceptional charges in the year (2006: €41.5 million) and generated an operating profit before financing of €16.5 million (2006: loss of €28.9 million).

Distribution costs of €5.8 million (2006: €7.1 million) reflect the savings generated due to the change in customer recruitment from direct mail to affiliate marketing which has been partly offset by the additional costs of €1.0 million for the 2007 sportsbook launch.

The major items within the administrative expenses incurred (excluding amortisation) during the financial year are detailed below

	2007	2006
	€’000	€’000
Employment costs	2,886	3,434
Travel	548	886
Legal, accounting and tax	2,432	1,682
All other costs	990	775
Total administrative expenses	6,856	6,777

Employment costs are analysed in note 2 to the financial results.

Within the legal, accounting and tax costs for 2007 are expenses related to the acquisition of the Maltese operating licences in the year.

The amortization of intangible assets is detailed in note 6 to the financial results. This is a non-cash charge primarily to reflect the reduction in economic value over the useful lives of these assets.

Net financing income for the financial year of €0.1 million (2006: net financing income €0.1 million) are analysed in note 3 to the financial results. The majority of Group revenues are in Euros, as are the majority of both the cost of distribution and administration.

Due to the increased levels of business in both Malta and Italy projected in 2008 compared to 2007, it is estimated that Gaming VC will increase its tax charge from a current base level of 2% of operating profits to closer to 5% in 2008. The final charge will depend on both the markets where growth is achieved and future developments on taxation in the domiciles Gaming VC operates in.

In the reporting period the Group generated €19 million (2006: €17.9 million) of cash flows from operating activities. After payment of the dividends totalling €12.2 million during the year, the Group’s closing cash balance as at 31 December 2007 was €15.9 million (2006: €9.4 million). Capital expenditure in the financial year across the Group was € 0.6 million (2006: €0.3 million) which primarily reflects new equipment and software related to the setting up of the Maltese operations. A similar level of capital expenditure is envisaged in 2008 relating to the acquisition of the Italian licence and the establishment of an in-house customer service centre.

Dividends

The Board is recommending a final dividend of €0.20 (c£0.16) giving a total distribution of €0.40 (c£0.29) for the current financial year (2006: €0.38 and £0.26). This final dividend will be paid on 30 May 2008 to all shareholders of record at the close of business on 9 May 2008.

Outlook

During the first three months of the 2008 financial year trading has been slightly ahead of expectations due to both resilience in the German casino business and better than expected sportsbook performance.  The total revenues are 12% ahead of the same period in the previous year and 6% more funded accounts have been recruited. Compared to the fourth quarter of 2007 revenue is 23% higher and there have been 3% more funded accounts recruited.

We will continue to focus on maintaining German casino volumes with the reduced cost base and aggressively growing revenue outside Germany through new initiatives including the Italian operation, bingo and through affiliate marketing.

We move into 2008 with an experienced team now in place and a clear strategic direction that will continue the transformation of the business from a German casino supported by direct mail into a significant European gaming business using efficient online marketing for recruitment and industry leading CRM.

Kenneth Alexander, Chief Executive
22 April 2008

 

Consolidated Income Statement
For the year ended 31 December 2007

			Year ended 31 December 2006
		Year ended 31 December 2007	Before goodwill impairment	Goodwill impairment	Total
In thousands of euro	Note
Revenue	1	42,707	40,573	-	40,573
Cost of Sales		(10,538)	(11,158)	-	(11,158)
Gross profit		32,169	29,415	-	29,415
Net operating expenses ( including exceptional items and share option charges)		(15,665)	(25,075)	(33,274)	(58,349)
Operating profit before exceptional items and share option charge		17,319	13,505	-	13,505
Share option charge		(815)	(893)	-	(893)
Exceptional items	6	-	(8,272)	(33,274)	(41,546)
Operating profit/(loss) before financing		16,504	4,340	(33,274)	(28,934)
EBITDA		19,480	15,536	-	15,536
Depreciation		(57)	(35)	-	(35)
Amortisation		(2,919)	(11,161)	(33,274)	(44,435)
Financial income	3	459	163	-	163
Financial expense	3	(332)	(68)	-	(68)
Net financing income		127	95	-	95
Profit/Loss before Tax		16,631	4,435	(33,274)	(28,839)
Income tax income	4	11	-	-	-
Profit/(Loss) for the year		16,642	4,435	(33,274)	(28,839)
Profit/(Loss) per ordinary share
Basic earnings per share (euro)	7	0.534			(0.93)
Diluted earnings per share (euro)	7	0.534			(0.93)

 

Consolidated statement of recognised income and expense
For the year ended 31 December 2007

		Year ended	Year ended
		31 December 2007	31 December 2006
In thousands of euro
Profit/(Loss) and total recognised income and expense for the year		16,642	(28,839)

 

Consolidated Balance Sheet
As at 31 December 2007

		31 December 2007	31 December 2006
In thousands of euro	Note
Assets
Property, plant and equipment	5	521	56
Intangible assets	6	55,724	58,548
Deferred tax asset		11	-
Total non-current assets		56,256	58,604
Trade receivables		3,021	1,892
Other receivables and prepayments		1,274	417
Cash and cash equivalents		15,859	9,407
Total current assets		20,154	11,716
Total assets		76,410	70,320
Equity
Issued share capital		38,608	38,608
Share premium		51,977	57,926
Retained earnings		(18,623)	(29,853)
Total equity attributable to equity holders of the parent		71,962	66,681
Liabilities
Income tax payable	4	18	18
Trade and other payables		1,538	1,317
Accrued expenses		2,892	1,101
Withholding tax on dividends		-	1,203
Total current liabilities		4,448	3,639
Total liabilities		4,448	3,639
Total equity and liabilities		76,410	70,320

 

Consolidated statement of cashflows
For the year ended 31 December 2007

		Year ended 31 December 2007	Year ended 31 December 2006
In thousands of euro	Note
Cash flows from operating activities
Cash receipts from customers		41,578	40,833
Cash paid to suppliers and employees		(22,545)	(22,934)
Net cash from operating activities		19,033	17,899
Cash flows from investing activities
Interest received		459	154
Disposal of equipment		40	-
Acquisition of property, plant and equipment	5	(562)	(45)
Acquisition of intellectual property	6	(95)	(231)
Net cash from investing activities		(158)	(122)
Cash flows from financing activities
Dividend paid		(12,176)	(15,612)
Net cash from financing activities		(12,176)	(15,612)
Net increase in cash and cash equivalents		6,699	2,165
Cash and cash equivalents at beginning of the year		9,407	7,233
Effect of exchange rate fluctuations on cash held		(247)	9
Cash and cash equivalents at end of the year		15,859	9,407

 

Notes

The notes are available in the PDF download.