Gaming VC said it was closing in on an acquisition in South America as the Aim-listed online gambling company looks to diversify beyond its core German casino business.

The Luxembourg-based group, 29 per cent owned by activist hedge fund Audley Capital Management, said it was in advanced talks to buy a South American online sports and gaming business, focused on the Brazil market.

“GVC continues to seek acquisition opportunities in selected additional markets,” said Kenneth Alexander, chief executive.

Worried by regulatory uncertainty, GVC, whose Casino Club brand has nearly 60,000 active customers, now generates 56 per cent of its revenues outside Germany, with markets developing in Italy and eastern Europe.

The company, subject to a bid approach last year, said that after declining at the end of last year volumes had recovered in the first quarter. Net gaming revenues rose 12 per cent on the first quarter of 2008 and totalled €50.1m for the year, up 17.5 per cent on 2007.

The first quarter results were slightly ahead of expectations, said Mr Alexander.

Pre-tax profit for the year rose marginally to €16.9m, as did basic earnings per share to €0.53, after marketing and affiliate costs more than doubled.

Staff costs rose 40 per cent after the group created an in-house customer relations team. Last month, it signed a long-term strategic deal with software provider Boss Media.

A final dividend of €0.20 per share makes for a total dividend of €0.40 per share. Its cash balance rose from €12.6m to €17.3m.

Shares fell nearly 10 per cent to 187½p on Tuesday, a decline that Robert Sanders, an analyst at house broker Arbuthnot, attributed to profit-taking.

“The figures are very robust and the share price has had a good run over the last month or so,” he said.

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