TIDMSPO
RNS Number : 8477J
Sportech PLC
22 August 2019
22 August 2019
Sportech PLC
("Sportech" or the "Group")
Interim results for the six months ended 30 June 2019
Sportech (LSE: SPO), the international betting technology
business, is pleased to announce its interim results for the six
months ended 30 June 2019.
Highlights
-- Appointed new Chairman and CEO and strengthened senior
management team by appointing new CTO and adding new COO and CCO
roles, with focus on accountability and tangible long-term growth
delivery.
-- Total Group revenue of GBP32.6 million (2018: GBP33.2 million using constant currency).
-- EBITDA before Sports Betting investments of GBP4.3 million
and Adjusted EBITDA of GBP3.4 million (2018: GBP4.4 million and
GBP3.9 million using constant currency). The 2019 Adjusted EBITDA
includes GBP0.9 million of costs related to Sports Betting (2018:
GBP0.5 million).
-- Business turnaround driving efficiencies as transformation of business continues at pace.
-- Corporate costs further reduced by 22 percent.
-- 'Challenge Everything' drive delivering future operational
efficiencies, including cost reductions executed in H1 that will
generate efficiencies in H2 and beyond.
-- Digital transformation initiated across Group, supported by
acquisition of additional platform and talent.
-- Revenue growth in Racing, Bump 50:50 and Lottery offset by Venues' challenges.
-- Delivered growth in core pari-mutuel ('Tote') business, with
key initiatives such as the World Pool successfully launched;
Global Pool also secured and new contracts secured in the US and
Europe.
-- Bump 50:50: Strengthened market position with a record number
of client acquisitions during the period.
-- Venues: Challenging wagering handle being tackled via cost
management, asset review and strategic initiatives.
-- Developed proprietary Sports Betting platform, certified
integration with Sportradar and commenced marketing to potential
clients.
-- Positive decisions taken to restructure the business in H1
resulted in Exceptional cash outflows of GBP1.5m (2018: GBP1.7m).
Management are focussed on extricating the Group in 2019 from
historical expensive strategies and delivering an efficient lower
operational cost base going forward.
-- Group net cash of GBP11.8 million at 30 June 2019 (31 December 2018: GBP14.7 million).
-- The Board's current outlook for the full year remains in line with expectations.
Financial Summary
H1 2018 H1 2018
Constant Reported
GBPm's H1 2019 Currency(6,7) Currency(7)
-------------------------------------------------- -------- --------------- -------------
Revenue 32.6 33.2 31.4
Gross Profit 22.8 24.0 22.8
Contribution(1) 22.1 23.0 21.9
Adjusted EBITDA pre-Sports Betting Investment(2) 4.3 4.4 3.3
Adjusted EBITDA(3) 3.4 3.9 2.8
Loss before tax from continuing operations(4) (2.4) (0.6) (0.6)
Adjusted loss before tax from continuing
operations(5) (0.5) (0.2) (0.2)
1. Contribution is defined as gross profit, less marketing and distribution costs.
2. Excludes Sports Betting Investment during the period,
amounting to GBP0.9 million (2018: GBP0.5 million).
3. Adjusted EBITDA is earnings before interest, taxation,
depreciation and amortisation, share option charges and exceptional
items as reported in note 7 of the Interim Financial
Statements.
4. Decrease from 2018 mainly due to fall in Adjusted EBITDA,
higher depreciation and amortisation (GBP0.4m), amortisation of the
acquired intangible with Lot.to (GBP0.3m), increased share option
charge (GBP0.4), higher exceptional costs (GBP0.2m) and higher
finance costs (GBP0.2m), mainly foreign exchange).--
5. Adjusted loss from continuing operations is the aggregate of
Adjusted EBITDA, normalised share option charges, depreciation,
amortisation (excluding amortisation of acquired intangibles) and
finance charges.
6. Prior year comparatives have been adjusted for estimated
impact of IFRS 16 (increase in 2018 EBITDA of GBP0.9m). IFRS 16
allows reported comparatives not to be restated for the change in
accounting policy for leases.
7. 2018 numbers have been corrected for a presentational
reclassification of reward points from marketing expense to net off
from revenue in the Venues division (six months ended 30 June 2018
reported: GBP155k, six months ended 30 June 2018 constant currency:
GBP166k).
Richard McGuire, Chief Executive Officer of Sportech PLC,
said:
"2019 marks a year of transition for Sportech with a clear focus
on challenging the predominantly "industrial" culture, whilst
driving efficiencies and delivering a range of products that
enhance user experience. Sportech has made good progress in the
period, with the Group's senior management team bolstered to help
ensure accountability and increased effectiveness across every
business line. Rigorous cost management remains a core focus for
the Group and the Board expects to see further benefits going
forward from the measures already taken.
"Further digitisation across existing and new business lines,
the elimination of certain expensive strategies, the implementation
of a lower operational cost base, and an enhanced global suite of
products form the roadmap for H2, positioning the Group for 2020
and beyond. Management remain committed to delivering a superior
product range to our global clients and remain confident about the
Group's future potential."
For further information, please contact:
Sportech PLC Tel: + 44 (0) 117 902 9000
Giles Vardey, Chairman
Richard McGuire, Chief Executive Officer
Thomas Hearne, Chief Financial Officer
Peel Hunt Tel: +44 (0) 20 7418 8900
(Corporate Broker to Sportech)
Dan Webster / George Sellar
Buchanan Tel: +44 (0) 20 7466 5000
(Financial PR adviser to Sportech)
Henry Harrison-Topham / Mark Court / Jamie Hooper
Notes to Editors:
About Sportech
Sportech PLC, the international betting technology business,
provides and operates betting technology solutions for some of the
world's best-known gaming companies, sports teams, lotteries and
horse and greyhound racetracks, as well as owning and operating its
own gaming venues in Connecticut under exclusive licences.
The Group focuses on highly regulated markets worldwide. It has
more than 29,000 betting terminals deployed to over 400 clients in
37 countries. Its global systems process US$12 billion in betting
handle annually. In the US, it operates under 35 licences across 37
states. The Group has invested over US$60 million in the last five
years in the successful expansion of its US gaming Venues and in
developing its technology services, resulting in its proprietary
Quantum(TM) System being the most widely deployed pari-mutuel
betting system globally.
Group Overview
Sportech PLC, the international betting technology business,
provides and operates betting technology solutions for some of the
world's best-known gaming companies, sports teams, racetracks,
casinos and lottery clients, as well as owning and operating its
own gaming venues in Connecticut under exclusive licences.
The Group focuses on highly regulated markets worldwide. It has
29,000 betting terminals deployed to over 400 clients in 37
countries. Its global systems process US$12 billion in betting
handle annually. In the US, it operates under 35 licences across 37
states. The Group has invested over US$60 million in the last five
years in the successful expansion of its US gaming Venues and in
developing its technology services, resulting in its proprietary
Quantum(TM) System being the most widely deployed pari-mutuel
betting system globally.
Revenue EBITDA
GBP'000 H1 2019 H1 2018(1,2) H1 2019 H1 2018(1,3)
-------- ------------- -------- -------------
Racing and Digital 17,937 16,888 3,726 3,562
Venues 14,990 16,652 1,409 1,871
Intercompany elimination / corporate
costs (294) (321) (829) (1,063)
-------- ------------- -------- -------------
32,633 33,219 4,306 4,370
Sports Betting investment - - (905) (513)
-------- ------------- -------- -------------
Total at constant currency 32,633 33,219 3,401 3,857
Exchange rate impact - (1,794) - (181)
IFRS 16 adjustment added back - - - (879)
-------- ------------- -------- -------------
Total reported 32,633 31,425 3,401 2,797
-------- ------------- -------- -------------
1. 2018 numbers are at constant currency.
2. 2018 revenue has been corrected for a presentational
reclassification of reward points from marketing expense to net off
from revenue in the Venues division.
3. The Group has adopted IFRS 16 Leases at 1 January 2019. The
Group has selected the modified retrospective transition method
which allows prior year reported numbers to not be restated in the
financial statements. The above prior year figures have been
adjusted for IFRS 16 for comparability purposes only. The
adjustment represents the 2019 lease rentals which would have been
operating costs in 2019 if IFRS 16 had not been adopted, translated
at 2019 exchange rates. GBP673k is related to Venues and GBP206k is
related to Racing and Digital.
Sportech Racing and Digital
Sportech Racing and Digital provides betting technologies and
services to 295 racetrack, off-track betting network, casino,
lottery and online pari-mutuel operator clients, plus an additional
145 commingling clients, in 37 countries and 37 US states. We have
an estimated 29,000 betting terminals, 27 white-label betting
websites and 25 white-label mobile apps deployed worldwide and our
systems annually process US$12 billion in betting handle.
The increase of 6.2% in Sportech Racing and Digital's revenues
resulted from growth across all products. Lottery, Bump and our
international businesses led the growth against a modest decline in
our US business. We continue to leverage our core global Tote
wagering platform whilst developing a digital product suite to
complement our global capability to deliver a robust modern
platform to our B2B international client-base. The success of the
inaugural World Pool event at Royal Ascot with our clients Ascot
Racecourse and Betfred Totepool, and in association with the Hong
Kong Jockey Club, highlighted many strengths of our international
Tote systems and services, delivering key global commingling
initiatives such as this. Shortly thereafter, the agreement to
deliver a Global Pool for Sports Information Services ("SIS")
further emphasises our clients' belief in the strengths of our
systems. In addition, we seamlessly processed over 100 million
transactions during the Kentucky Derby. We continue to strengthen
our web and mobile platforms and to pursue financial efficiencies
and user enhancements with a new wagering hardware strategy.
H1 2018 H1 2018
Constant Reported
GBP'000 H1 2019 Currency* Currency
--------- ----------- ----------
Sales revenue 1,007 645 637
Service revenue 16,930 16,243 15,928
--------- ----------- ----------
Total revenue 17,937 16,888 16,565
--------- ----------- ----------
Contribution 14,834 14,535 14,247
Contribution margin 83% 86% 86%
Adjusted operating expenses (11,108) (10,973) (10,973)
--------- ----------- ----------
Adjusted EBITDA 3,726 3,562 3,274
--------- ----------- ----------
Intangible assets capex 1,389 1,669 1,569
Tangible assets capex 810 683 646
--------- ----------- ----------
Total capex 2,199 2,352 2,215
--------- ----------- ----------
*Operating expenses are adjusted by GBP206k for IFRS 16
Leases.
In January 2019, the Group completed the acquisition of Lot.to
Systems Limited and commenced the integration of Lot.to talent and
technologies, in the areas of Tote digital development, Sports
Betting and iLottery. Key executives have been appointed to senior
management positions within Sportech to help execute the Group's
strategic initiatives with an emphasis on accountability, while the
"Challenge Everything" culture introduced at the beginning of the
year has been used to underpin Sportech's approach to efficiency,
innovation and the user experience across all divisions and at all
levels of the organisation.
Sportech's Quantum(TM) System software and our global service
delivery network delivered a seamless inaugural World Pool, an
international commingling project designed to maximise liquidity by
combining tote betting from global outlets. The division also
signed new commingling client SIS for which Sportech is creating
and disseminating a worldwide racing pool.
In total, the Racing team signed eight contract extensions,
including one with Boyd Gaming for continued servicing of their two
racetracks in Louisiana, US. New clients include Belterra Park -
also a Boyd Gaming property - and SIS.
The division's digital transformation is underway, with the
appointment of a new Chief of Digital Development, investment in
our digital infrastructure and the delivery of the latest G4
betting website to online clients. In addition to the G4 upgrades
rolled out to existing clients, digital deployments include new
white label G4 websites and Digital Link(R) Mobile apps for Parx
Racing in Pennsylvania and for Camarero Park in Puerto Rico.
The division also progressed its terminal hardware project,
identifying a new terminal line that will be introduced in H1 2020
to streamline capex, improve efficiency and provide an innovative
and engaging end user experience.
Bump 50:50
Sportech's Bump 50:50 sports raffle business provides the
technologies and services that allow charitable foundations
associated with professional and college sports teams and
entertainment venues to sell and fulfil 50/50 raffles to generate
funds for their charitable missions. Jackpots are divided equally
between the foundation and the winner.
Revenues grew 17% at constant currency versus the prior period,
from GBP691k to GBP808k. In H1 2019, the Bump 50:50 business added
clients at an unprecedented rate, with an additional 18 clients
signed year to date. An additional 18 clients renewed their
contracts. Of the 18 new clients, seven were non-sports or
entertainment affiliated charities such as the Special Olympics.
This is an early result of a strategy to open up a significant new
potential client base for Bump 50:50's proven package of technology
and raffle sales strategies that help charities maximise
fundraising for their good causes.
Bump 50:50 is seeking to continue expansion into non-sports
markets while continuing to enhance technology, develop new raffle
variations and pursue new team clients. A new Bump 50:50 CTO was
appointed in the period to drive technology initiatives. The Group
also held its second annual client relations event, Bump Academy
Vegas, hosting representatives from 50 clients and prospective
clients to learn how to maximise fundraising using Bump 50:50's
proven tools for growth.
Critical investment was made during the period to enable the
business to execute its growth strategy, which seeks to deliver
enhanced performance from 2020 onwards. These include new licences,
new progressive product design, technology for mobile and online
growth and investment in the Bump Academy client event. This has
caused a reduction in EBITDA which was GBP7k for H1 2019, versus
GBP141k in H1 2018.
Lottery
We increased sales agent distribution capability to a key client
with the delivery of additional terminals and launched a
progressive lottery. Sportech enters the Lottery marketplace in
earnest with the acquisition of the technology platforms and talent
of Lot.to Systems and the blending of these assets into Sportech's
organisation. Sportech is combining lottery games resident on
Sportech's Quantum(TM) System, its POS terminal hardware and
software technology and enhanced iLottery product suite from Lot.to
to offer a comprehensive lottery solution with a key mobile
component and robust administrative, CRM and marketing tools.
Sportech Venues
Sportech Venues operates all betting on horse racing, greyhound
racing and jai alai in the state of Connecticut under an exclusive
and in-perpetuity licence for retail, online and telephone
betting.
Our Connecticut retail operation experienced handle softness in
H1, down 10% on the previous period, which illustrated the high
operational leverage concerns. The attraction of Sports Betting in
neighbouring states, some issues with the quality of racing product
during the period and a lack of potential Triple Crown winner were
main deficiencies. We are tackling this with immediate cost
management actions, detailed analysis of our estate and a variety
of strategic initiatives.
We closed one venue during the period with the expiration of a
high-cost lease, resulting in no discernible loss of revenue as
customers shifted to other regional outlets and to online
platforms. We have also placed one of our freehold assets on the
market for sale, as it's in a beneficial tax development zone for
developers, and will appraise the market as events develop.
Sportech Venues now anticipates enforcement of the protections
of Sportech's exclusive off-track betting licence in the State of
Connecticut through legislation passed in June 2019, coming into
effect October 2019, and are developing a strategy to enhance
returns as the only legal and licensed operator in the State for
pari-mutuel betting. To support this acquisition campaign and the
anticipated addition of legal Sports Betting in the State, we
launched a redesigned MyWinners.com website under a new brand
unveiled with the launch.
The Group engaged in a comprehensive and sustained campaign and
made significant progress elevating Sportech's profile as a key
participant in any comprehensive gaming solution which Connecticut
lawmakers design. Sportech continues to be a proactive supporter of
legislation to regulate Sports Betting, deliver licensing to
current in-state gaming operators and provide a competitive
consumer product to minimise the attraction of the illegal
market.
H1 2018 H1 2018
Constant Reported
GBP'000 H1 2019 Currency(1,2) Currency(2)
-------- --------------- -------------
F&B - Stamford 961 1,153 1,081
F&B - Other 1,294 1,350 1,265
-------- --------------- -------------
F&B - Total 2,255 2,503 2,346
Wagering revenue 12,735 14,149 13,273
Total revenue 14,990 16,652 15,619
Contribution 7,275 8,158 7,651
Contribution margin 49% 49% 49%
Adjusted operating expenses (5,866) (6,287) (6,565)
-------- --------------- -------------
Adjusted EBITDA 1,409 1,871 1,086
-------- --------------- -------------
Total capex 153 292 274
-------- --------------- -------------
1. Operating expenses are adjusted by GBP673k for IFRS 16
Leases.
2. 2018 numbers have been corrected for a presentational
reclassification of reward points from marketing expense to net off
from revenue (six months ended 30 June 2018 reported: GBP155k, six
months ended 30 June 2018 constant currency: GBP166k).
US Sports Betting
The B2B Sports Betting opportunity in the US is highly
competitive with a B2B gold rush continuing as states adopt
legislation. Sportech is engaged with targeted sales and marketing
efforts during the period and continue to pursue opportunities.
In 2018, Sportech entered into an agreement with Sportradar to
deliver Sports Betting solutions to US operators with Sportradar's
data, trading and risk management services and a third-party
technology platform. In early H1, Sportech opted to develop a
proprietary Sports Betting platform in-house to integrate with the
Sportradar managed trading system. This proprietary solution,
development of which is nearing completion, offers Sportech greater
control and flexibility and will produce greater economic
efficiency as and when we deploy it at our B2C Venues in
Connecticut and for B2B clients elsewhere.
Sports Betting remains a complex issue both in the State of
Connecticut and in other states. Sustained government relations
work in Connecticut helped keep Sportech in the forefront for a
state-wide gaming solution but Connecticut lawmakers did not
legalise Sports Betting in the 2019 legislative session. We remain
fully cooperative with the State and all stakeholders in seeking to
deliver a solution that protects Sportech's investments and the
interests of Sportech staff across the State.
With the development of our proprietary Sports Betting platform,
integrated with Sportradar data and risk management, we believe
that Sportech remains in a good position to offer a competitive
integrated sports and race betting solution in other US states and
will update the market as events develop.
Corporate Costs
The focus on efficiency drive throughout the business extended
to our corporate cost base where costs dropped 22% during the
period to GBP829k (2018: GBP1,063k).
Depreciation and Amortisation
The Group's normal depreciation and amortisation charge
increased from GBP2.4 million (constant currency) to GBP3.4
million. The increase is mainly due to adopting IFRS 16
(GBP731k).
Exceptional Costs
The Group had exceptional administration costs of GBP0.7 million
(2018: GBP0.5 million). H1 2019 items include redundancy payments
and staff exits in line with employment contracts, legal and
actuarial costs in relation to the UK defined benefit scheme
buy-in, ongoing litigation costs, professional tax advisory work
and the closure of certain non-core and expensive business.
As noted below, management is focussed on extricating the Group
in 2019 from historical expensive strategies and therefore
anticipates a significant reduction in "Exceptional Costs" in
2020.
Net Finance (Costs)/Income
The Group has no debt. The Group has net finance costs of GBP0.4
million (2018: income of GBP0.1 million). The increase in costs is
a result of adopting IFRS 16 and foreign exchange movements.
Taxation
A tax credit for the period of GBP0.5 million represents the
expected weighted average annual taxation rate on profits and
losses in the jurisdictions in which the Group operates of 19.7%
(2018: GBP28k, 1.2%). Tax paid in the period was GBP0.4 million,
being withholding taxes (2018: GBP0.8 million).
Net Cash/Net Current Assets
The Group held cash balances of GBP11.8 million, excluding
customer balances (31 December 2018: GBP14.7 million). The decrease
in cash is mostly attributable to working capital movements, the
acquisition of Lot.to and payments of exceptional costs.
Capital Expenditure
Capital expenditure in the period was GBP2.4 million (2018:
GBP2.5 million). The decrease is due to a GBP168k reduction in the
capitalisation of intangible assets offset by an increase of GBP43k
spend of tangible assets, mostly related to new servers to enhance
our digital offering.
Shareholders' Funds
Total equity and the Group's net assets at 30 June 2019 are
GBP50.8 million (31 December 2018: GBP52.4 million). The reduction
being; GBP1.0 million IFRS 16 transition adjustment, GBP2.0 million
loss after tax, GBP0.2 million currency movements, GBP0.2 million
defined benefit buy-in cost, net of GBP1.1 million share option
reserve movement and GBP0.7m increase in equity from the issue of
shares in consideration for the acquisition of Lo.to Systems
Limited.
Auditor change
The Company undertook a competitive tender process for the
position of statutory auditor during the period. It was mutually
agreed with PricewaterhouseCoopers LLP ("PwC") that PwC would not
participate in the tender as the length of their possible tenure
would have only allowed one more year before mandatory rotation
rules applied. Also, the current PwC engagement leader had served
his maximum five year term on the Sportech audit. There were no
other matters connected with PwC ceasing to hold office as auditors
of the Company and a letter stating such, which was received from
PwC on 20 August 2019, will be sent to every person who under s423
of the Companies Act 2006 is entitled to be sent copies of the
accounts by 3 September 2019 as required by s520(2) of the
Companies Act 2006.
BDO LLP were selected through the tender process and will be
appointed as auditor of the Company for the year ending 31 December
2019. The appointment of BDO as auditor will be subject to
confirmation by the shareholders at the 2020 Annual General Meeting
of the Company.
Outlook
Effective cost management, whilst assessing and delivering
innovative products across the businesses, remains the core focus
for the Group. Digitisation across existing and new business lines
forms the roadmap for the second half and management is determined
to extricate the Group from historical expensive strategies and
investment plans by the end of 2019 to position Sportech
appropriately, with a clear vision and growth strategy. The Board's
current outlook for the full year remains in line with
expectations.
Venues
The delivery of an appropriate Sports Betting licence is
critical to the growth of the Connecticut venues business and will
continue to be a key focus for senior management. We shall update
the market with developments in the Group's real estate portfolio
and will seek to execute a revenue growth model capitalising on the
exclusive pari-mutuel licence. There are certain commercially
sensitive partnership plans under review and Sportech shall
appraise the market at an appropriate time.
Racing and Digital
Digitisation of the Group's core Quantum(TM) System Tote will
continue in the second half, leading to an expansion of our global
footprint and elevation of service to our core Tote clients, as we
simultaneously explore new avenues for digital growth and
streamlined capex. Acquired CRM, administrative and reporting tools
are being integrated with our Tote and Digital platforms to deliver
enhanced capabilities to clients.
The H1 investment in Bump has created the capacity to extend our
range of services to a wider range of clients with an enhanced
product suite, including new progressive jackpots and additional
proprietary functionality.
Lottery
We will leverage our combined Sportech lottery and acquired
iLottery platforms to expand our client base and enhance our
product suite through digitisation and innovation.
Sports Betting
--
The Group changed tactics and developed a proprietary Sports
Betting platform during H1 2019 and has commenced marketing our B2B
capabilities to US clients. We believe we have a strong product
offering, supported by Sportradar media agreements announced this
year with the NFL and NBA leagues. The position in Connecticut,
where we have our B2C business, is more complex with uncertainty
around State licensing. However we are focused on seeking a
solution that could provide an engaging Sports Betting product to
our consumers across the State in venue and online, similar to our
current pari-mutuel licence.
Tax matters
As previously announced, the Company is in ongoing discussions
with tax regulators in respect of certain historical tax
liabilities.
Following the Spot the Ball VAT reclaim in 2016, the Group filed
tax returns and paid corporation tax on the income, some of which
was treated as a capital gain and offset against capital losses in
the Group of GBP23 million, reducing the corporation tax bill on
the refund by GBP4.6 million. HMRC have challenged the tax
treatment adopted and the Company remains in discussions with them
to resolve the matter. The Board took extensive professional advice
on the treatment in the tax returns and believe the tax paid was
appropriate. We will continue to update as progress is made.
In addition, the Group made an 'in escrow' payment to HMRC of
GBP1.3 million in Q1 2018 in order to progress an appeal the Group
is making against HMRC for VAT on head office costs going back a
number of years, assessments on which amount to GBP3.3 million
(including the GBP1.3m already paid). The Board continues to follow
professional advice on this matter and will update as progress is
made.
Richard McGuire
Chief Executive Officer
21 August 2019
Interim consolidated income statement
For the six months ended 30 June 2019
Six months Six months Year
ended ended
30 June 30 June ended
2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
---------------------------------------------------- ----- -------------- -------------- -------------
Revenue 32,633 31,425 63,462
Cost of sales 6 (9,798) (8,656) (17,619)
---------------------------------------------------- ----- -------------- -------------- -------------
Gross profit 22,835 22,769 45,843
Marketing and distribution costs 6 (726) (871) (1,732)
---------------------------------------------------- ----- -------------- -------------- -------------
Contribution 22,109 21,898 44,111
4,
Operating costs 6 (24,186) (22,553) (47,196)
Other income - - 173
Operating loss (2,077) (655) (2,912)
Finance costs 8 (247) - (67)
Finance income 8 34 40 85
Other financial (costs)/income 8 (151) 13 455
Loss before taxation from continuing operations (2,441) (602) (2,439)
Taxation - continuing operations 9 482 28 (2,019)
---------------------------------------------------- ----- -------------- -------------- -------------
Loss for the period from continuing operations (1,959) (574) (4,458)
Net (loss)/profit from discontinued operations 11 - (355) 1,822
---------------------------------------------------- ----- -------------- -------------- -------------
Loss for the period (1,959) (929) (2,636)
---------------------------------------------------- ----- -------------- -------------- -------------
Attributable to:
Owners of the Company (1,959) (929) (2,636)
---------------------------------------------------- ----- -------------- -------------- -------------
Basic earnings per share attributable to owners
of the Company
From continuing operations 12 (1.0)p (0.3)p (2.4)p
From discontinued operations 12 - (0.2)p 1.0p
---------------------------------------------------- ----- -------------- -------------- -------------
Total 12 (1.0)p (0.5)p (1.4)p
---------------------------------------------------- ----- -------------- -------------- -------------
Diluted earnings per share attributable to owners
of the Company
From continuing operations 12 (1.0)p (0.3)p (2.4)p
From discontinued operations 12 - (0.2)p 1.0p
---------------------------------------------------- ----- -------------- -------------- -------------
Total 12 (1.0)p (0.5)p (1.4)p
Adjusted earnings per share attributable to owners
of the Company
Basic 12 (0.2)p (0.1)p 0.3p
Diluted 12 (0.2)p (0.1)p 0.3p
---------------------------------------------------- ----- -------------- -------------- -------------
Interim consolidated statement of comprehensive income
For the six months ended 30 June 2019
Six months Six
ended months
ended
30 June 30
June
2019 2018 Year ended
31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
------------------------------------------------------- -------------- -------------- -------------
Loss for the period (1,959) (929) (2,636)
------------------------------------------------------- -------------- -------------- -------------
Other comprehensive (expense)/income:
Items that will not be reclassified to profit and
loss
Actuarial gain on retirement benefit liability - - 315
UK defined benefit pension scheme "buy-in" insurance (234) - -
contract purchased
Deferred tax on movement on retirement benefit
liability - - (83)
------------------------------------------------------- -------------- -------------- -------------
(234) - 232
Items that may be subsequently reclassified to
profit and loss
Currency translation differences (211) 766 2,411
------------------------------------------------------- -------------- -------------- -------------
Total other comprehensive (expense)/income for
the period, net of tax (445) 766 2,643
------------------------------------------------------- -------------- -------------- -------------
Total comprehensive (expense)/income for the period (2,404) (163) 7
------------------------------------------------------- -------------- -------------- -------------
Attributable to:
Owners of the Company (2,404) (163) 7
------------------------------------------------------- -------------- -------------- -------------
Interim consolidated statement of changes in equity
For the six months ended 30 June 2019
Other reserves
-------------------------------------
Capital Share Foreign
Ordinary redemption option Pension exchange Retained
shares reserve reserve reserve reserve earnings Total
Six months ended 30 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
June 2019
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
At 1 January 2019
(audited) 37,350 10,312 7,536 (414) 8,537 (10,949) 52,372
Adjustment for
adoption of IFRS
16* - - - - - (985) (985)
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Restated at 1
January 2019 37,350 10,312 7,536 (414) 8,537 (11,934) 51,387
Comprehensive
expense
Loss for the
period - - - - - (1,959) (1,959)
Other comprehensive
expense
Currency
translation
differences - - - - (211) - (211)
UK defined benefit
pension scheme
"buy-in"
insurance
contract
purchased - - - (234) - - (234)
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
expense - - - (234) (211) (1,959) (2,404)
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Transactions with
owners
Share option
charge - - 1,073 - - - 1,073
Shares issued in
relation to the
acquisition of
Lot.to Systems
Limited 400 - - - - 314 714
Total transactions
with owners 400 - 1,073 - - 314 1,787
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total changes in
equity 400 - 1,073 (234) (211) (1,645) (617)
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
At 30 June 2019
(unaudited) 37,750 10,312 8,609 (648) 8,326 (13,579) 50,770
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
* Net of deferred tax
Other reserves
--------------------------------------------------
Capital Share Foreign
Ordinary redemption option Pension exchange Retained
shares reserve reserve reserve reserve earnings Total
Six months ended 30 June 2018 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
At 1 January 2018 (audited) 37,123 10,312 6,608 (646) 6,126 (8,313) 51,210
Comprehensive expense
Loss for the period - - - - - (929) (929)
Other comprehensive
income/(expense)
Currency translation
differences - - - 42 724 - 766
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
income/(expense) - - - 42 724 (929) (163)
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Transactions with owners
Share option charge - - 660 - - - 660
Employment taxes paid on
vesting
of options - - (67) - - - (67)
Shares issued in relation to
PSP 227 - (227) - - - -
Total transactions with
owners 227 - 366 - - - 593
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Total changes in equity 227 - 366 42 724 (929) 430
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
At 30 June 2018 (unaudited) 37,350 10,312 6,974 (604) 6,850 (9,242) 51,640
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Other reserves
---------------------------------------------------------------
Capital Share Foreign
Ordinary redemption option Pension exchange Retained
shares Reserve reserve reserve reserve earnings Total
Year ended 31 December 2018 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
At 1 January 2018 (audited) 37,123 10,312 6,608 (646) 6,126 (8,313) 51,210
Comprehensive
income/(expense)
Loss for the year - - - - - (2,636) (2,636)
Other comprehensive income
Actuarial gain on defined
benefit
pension liability * - - - 232 - - 232
Currency translation
differences - - - - 2,411 - 2,411
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total other comprehensive
income - - - 232 2,411 - 2,643
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
income/(expense) - - - 232 2,411 (2,636) 7
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Transactions with owners
Share option charge - - 1,222 - - - 1,222
Employer taxes paid on
vesting
of options - - (67) - - - (67)
Shares issues in relation
to
the PSP 227 - (227) - - - -
Total transactions with
owners 227 - 928 - - - 1,155
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total changes in equity 227 - 928 232 2,411 (2,636) 1,162
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
At 31 December 2018
(audited) 37,350 10,312 7,536 (414) 8,537 (10,949) 52,372
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
* Net of deferred tax
Interim consolidated balance sheet
As at 30 June 2019
As at As at As at
30 30 June 31 December
June 2018 2018
2019 (Unaudited) (Audited)
(Unaudited)
Note GBP000 GBP000 GBP000
------------------------------- ----- --------------- --------------- --------------
ASSETS
Non-current assets
Intangible fixed assets 13 15,846 12,550 13,551
Property, plant and equipment 14 25,533 25,766 26,337
Right-of-use assets 15 7,162 - -
Trade and other receivables 16 601 2,289 667
Deferred tax assets 6,563 7,259 5,979
------------------------------- ----- --------------- --------------- --------------
55,705 47,864 46,534
------------------------------- ----- --------------- --------------- --------------
Current assets
Trade and other receivables 16 10,637 11,479 8,169
Inventories 2,864 2,609 2,576
Assets held for sale - 270 -
Cash and cash equivalents 17 14,888 16,437 17,915
------------------------------- ----- --------------- --------------- --------------
28,389 30,795 28,660
------------------------------- ----- --------------- --------------- --------------
TOTAL ASSETS 84,094 78,659 75,194
------------------------------- ----- --------------- --------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 18 (14,647) (16,164) (12,946)
Provisions 19 (737) (1,050) (977)
Lease liabilities 21 (1,234) - -
Financial liabilities 22 (500) - -
Current tax liabilities (6,516) (7,008) (6,563)
------------------------------- ----- --------------- --------------- --------------
(23,634) (24,222) (20,486)
------------------------------- ----- --------------- --------------- --------------
Net current assets 4,755 6,573 8,174
------------------------------- ----- --------------- --------------- --------------
Non-current liabilities
Retirement benefit liability (898) (1,345) (902)
Lease liabilities 21 (7,297) - -
Provisions 19 (1,495) (1,452) (1,434)
(9,690) (2,797) (2,336)
------------------------------- ----- --------------- --------------- --------------
TOTAL LIABILITIES (33,324) (27,019) (22,822)
------------------------------- ----- --------------- --------------- --------------
NET ASSETS 50,770 51,640 52,372
------------------------------- ----- --------------- --------------- --------------
EQUITY
Ordinary shares 37,750 37,350 37,350
Other reserves 26,599 23,532 25,971
Retained earnings (13,579) (9,242) (10,949)
------------------------------- ----- --------------- --------------- --------------
TOTAL EQUITY 50,770 51,640 52,372
------------------------------- ----- --------------- --------------- --------------
Interim consolidated statement of cash flows
For the six months ended 30 June 2019
Six months Six months Year
ended
ended 30 June ended
31 December
2018
30 June 2018 (Audited)
2019 (Unaudited)
(Unaudited)
Note GBP000 GBP000 GBP000
---------------------------------------------------- ----- -------------- --------------- --------------
Cash flows from operating activities
Net cash generated from operations, before
exceptional items 20 2,819 2,560 5,890
Interest received 34 41 85
Interest paid - - (22)
Tax paid (393) (772) (2,029)
Net cash generated from operating activities
before exceptional items 2,460 1,829 3,924
Exceptional cash inflows - 487 487
Exceptional cash outflows 7 (1,469) (1,697) (2,320)
Cash generated from operations - continuing
operations 991 619 2,091
Cash used in operations - discontinued operations - (83) (37)
---------------------------------------------------- ----- -------------- --------------- --------------
Net cash flows from operating activities 991 536 2,054
---------------------------------------------------- ----- -------------- --------------- --------------
Cash flows from investing activities
Investment in joint ventures and associates 23 (230) (187) (291)
Disposal of Football Pools division - - 275
Disposal of Sportech Racing BV (net of transaction
costs) 235 - 2,411
Contingent consideration paid for Bump (Worldwide)
Inc. - (167) (167)
Purchase of Lot.to Systems Limited, net of
cash acquired 10 (729) - -
Investment in intangible fixed assets 13 (1,401) (1,569) (3,106)
Purchase of property, plant and equipment 14 (963) (920) (1,927)
---------------------------------------------------- ----- -------------- --------------- --------------
Cash used in investing activities - continuing
operations (3,088) (2,843) (2,805)
Cash used in investing activities - discontinued - (54) -
operations
---------------------------------------------------- ----- -------------- --------------- --------------
Net cash used in investing activities (3,088) (2,897) (2,805)
---------------------------------------------------- ----- -------------- --------------- --------------
Cash flows from financing activities
Payment of lease liabilities (889) - -
Net cash used in financing activities (889) - -
---------------------------------------------------- ----- -------------- --------------- --------------
Net decrease in cash and cash equivalents (2,986) (2,361) (751)
Effect of foreign exchange on cash and cash
equivalents (41) (96) (91)
Net cash and cash equivalents at the beginning
of the period 17,915 19,170 18,757
Net cash and cash equivalents at the end of
the period 14,888 16,713 17,915
Less cash held by asset held for sale - (276) -
---------------------------------------------------- ----- -------------- --------------- --------------
Group cash and cash equivalents at the end
of the period 14,888 16,437 17,915
Represented by:
Cash and cash equivalents 17 14,888 16,437 17,915
Less customer funds 17 (3,093) (3,960) (3,187)
Adjusted net cash at the end of the period 17 11,795 12,477 14,728
---------------------------------------------------- ----- -------------- --------------- --------------
Notes to the consolidated interim financial statements
For the six months ended 30 June 2019
1. General information
Sportech PLC (the "Company") is a company domiciled in the UK
and listed on the London Stock Exchange. The Company's registered
office is Collins House, Rutland Square, Edinburgh, Midlothian,
Scotland EH1 2AA. The condensed consolidated interim financial
statements of the Company as at and for the period ended 30 June
2019 comprise the Company, its subsidiaries, joint ventures and
associates (together referred to as the "Group"). The Company's
accounting interim reference date is 30 June. Consistent with the
normal monthly reporting process, the actual date to which the
balance sheet has been drawn up is to 30 June 2019 (2018: 1 July
2018). For ease of reference in these condensed interim financial
statements, all references to the results for the period are for
the period ended 30 June 2019 (2018: 30 June 2018) and the
financial position at the same date. The principal activities of
the Group are the provision of pari-mutuel betting (B2C) and the
supply of wagering technology solutions (B2B).
The condensed consolidated interim financial statements were
approved for issue on 21 August 2019.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of Section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2018 were approved by the Board of Directors on 20 March
2019 and delivered to the Registrar of Companies. The Report of the
Auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under Section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have
not been reviewed or audited.
2. Basis of preparation
a. These condensed consolidated interim financial statements
have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Services Authority and with IAS
34 'Interim Financial Reporting' as adopted by the European Union.
They do not include all the information and disclosures required in
the annual financial statements and should be read in conjunction
with the Group's annual financial statements for the year ended 31
December 2018 which have been prepared in accordance with IFRSs as
adopted by the European Union.
b. After making reasonable enquiries, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the financial statements.
c. The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing these
condensed consolidated interim financial statements, significant
judgements have been made by management with respect to the
assumptions underpinning the Group's tax liabilities and the
carrying value of intangible fixed assets.
d. The principal risks and uncertainties for the Group remain
the same as those detailed on pages 30 and 31 of the 2018 Sportech
PLC Annual Report and Accounts, where descriptions of mitigating
activities carried out by the Group are also outlined. Those risks
are regulation, product popularity, technological changes, customer
concentration and industry competition, foreign exchange and
failure to implement a Sports Betting strategy.
e. Management have corrected the accounting for award points
granted to players in the Sportech Venues Segment, these awards
were previously charged to the income statement within marketing
and distribution costs. The value of the awards are now debited to
revenue. The prior year presentation has been corrected for
comparability purposes. The effect on prior year revenue in the six
month period to 30 June 2018 was a reduction of GBP155k (year ended
31 December 2018: GBP256k), there is a corresponding reduction in
marketing and distribution costs.
3. Accounting policies
The following standards, amendments and interpretations that are
not yet effective and have not been adopted early by the Group are
as follows:
Applicable
for financial
year beginning
Standard or interpretation on or after
---------------------------- ----------------
IFRS 17 Insurance Contracts 1 January 2021
---------------------------- ----------------
IFRS 17 is not relevant to the Group.
The following standards, have been adopted by the Group with
effect from 1 January 2019:
Applicable
for financial
year beginning
Standard or interpretation on or after
--------------------------------------------------------------- ----------------
IFRS 16 1 January 2019
IFRS 9 (2014) Financial Instruments (Amendment - Prepayment 1 January 2019
Features with Negative Compensation and Modifications
of Financial Liabilities
IAS 28 - Investments in Associate and Joint Ventures 1 January 2019
(Amendment - Long-term Interests in Associates and Joint
Ventures)
Annual Improvements to IFRSs 2015 - 2017 Cycle (IFRS 1 January 2019
3 Business Combinations and IFRS 11 Joint Arrangements,
IAS 12 Income Taxes and IAS 23 Borrowing Costs)
IFRIC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019
Amendments to IAS 19 Employee Benefits 1 January 2019
--------------------------------------------------------------- ----------------
Of the above, only IFRS 9 and IFRS 17 are not relevant to the
Group. All of the other pronouncements are relevant, but only the
application of IFRS 16 has had an impact on the Group's
accounting.
Except as described below, the accounting policies applied in
these condensed interim financial statements are the same as those
applied in the last annual financial statements (the policy for
recognising and measuring income taxes in the interim period is
described in note 9).
The changes in accounting policies are also expected to be
reflected in the Group's consolidated financial statements for the
year ended 31 December 2019.
The Group has initially adopted IFRS 16 Leases from 1 January
2019. IFRS 16 introduced a single, on-balance sheet accounting
model for leases. As a result, the Group, as a lessee, has
recognised right-of-use assets recognising its rights to use the
underlying assets and lease liabilities representing its obligation
to make lease payments. Lessor accounting is not applicable to the
Group but would have remained the same under IFRS 16 if it
were.
The Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognised in retained earnings on 1 January 2019. Accordingly,
the comparative information presented for 2018 has not been
restated - i.e. it is presented as previously reported, under IAS
17 and related interpretations. The details of the changes in
accounting policies are disclosed below:
A) Definition of a lease
Previously, the Group determined at contract inception whether
an arrangement was or contained a lease under IFRIC 4 Determining
whether an arrangement contains a lease. The Group now assesses
whether a contract is or contains a lease based on a new definition
of a lease. Under IFRS 16, a contract is, or contains a lease if a
contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
On transition to IFRS 16, the Group elected to apply the
practical expedient to grandfather the assessment of which
transactions are leases. It applied IFRS 16 only to contracts that
were previously identified as leases. Contracts that were not
identified as leases under IAS 17 and IFRIC 4 were not re-assessed.
Therefore, the definition of a lease under IFRS 16 has been applied
only to contracts entered into or changed on or after 1 January
2019.
At inception or reassessment of a contract that contains a lease
component, the Group allocates the consideration in the contract to
each lease and non-lease component on the basis of their relative
stand-alone process.
B) As a lessee
The Group leases many assets including property, vehicles and IT
equipment.
As a lessee the Group previously classified leases based on its
assessment of whether a lease transferred substantially all the
risks and rewards of ownership. Under IFRS 16, the Group recognises
right-of-use assets and lease liabilities for most leases i.e.
these leases are on-balance sheet.
However, the Group has elected to not recognise right-of-use
assets and lease liabilities for leases of low-value assets
(<GBP4,000 asset values) and leases with terms of less than 12
months.
The Group presents right-of-use assets separate to tangible
fixed assets that it owns. The carrying amounts of right-of-use
assets, by nature of asset, are as per below:
Tangible fixed assets
------------------------------------------------------------------------------- -------
Short leasehold Long leasehold
land and land and Plant Fixtures
buildings buildings Vehicles and machinery and Fittings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ---------------- --------------- ----------- --------------- -------------- -------
Balance at 1 January
2019 2,668 4,987 237 - 26 7,918
Balance at 30 June
2019 2,158 4,798 186 - 20 7,162
---------------------- ---------------- --------------- ----------- --------------- -------------- -------
The Group presents lease liabilities separately on the face of
the balance sheet.
i) Significant accounting policies
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, and subsequently at cost less accumulated
depreciation and impairment losses, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate in the jurisdiction in which the asset resides as the discount
rate.
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by lease payments made.
It is remeasured when there is a change in the future lease
payments arising from a change in an index or rate, a change in the
estimate of the amount expected to be payable under a residual
value guarantee, or as appropriate, changes in the assessment of
whether a purchase or extension option is reasonably certain to be
exercised or a termination option is reasonably certain not to be
exercised.
The Group has applied judgement to determine the lease term for
some lease contracts in which it is a lessee that include renewal
options and break clauses. The assessment of whether the Group is
reasonably certain to exercise such options impacts the lease term,
which significantly affects the amount of lease liabilities and
right-of-use assets recognised.
ii) Transition
Previously, the Group classified leases as operating leases
under IAS 17. These included betting venues, offices, vehicles and
IT equipment. The leases typically run for periods of 3 to 5 years,
but some property leases exist with significantly longer terms.
Some property leases include an option to extend the lease for
periods of typically 3 years and some of the longer leases have
termination options, "break clauses", (some with penalties). Some
leases also provide for rent changes based on local price
indices.
At transition, for leases classified as operating leases under
IAS 17, lease liabilities were measured at the present value of the
remaining lease payments, discounted at the Group's incremental
borrowing rate (in the jurisdiction the lease resides) as at 1
January 2019. Right-of-use assets are measured at an amount equal
to the lease liability at the inception of the lease.
The Group used the following practical expedients when applying
IFRS 16 to leases previously classified as operating leases under
IAS 17.
- Applied the exemption not to recognise right-of-use assets and
liabilities for leases with less than 12 months of lease term.
- Excluded initial direct costs from measuring the right-of-use
asset at the date of initial applications.
- Used hindsight when determining the lease term if the contract
contains options to extend or terminate the lease.
C) Impacts on the financial statements
i) Impacts on transition
On transition to IFRS 16, the Group recognises additional
right-of-use assets and additional lease liabilities, recognising
the difference in retained earnings, net of deferred tax. The
impact on transition is summarised below.
At
1 January 2019
GBP000
----------------------------------------------------- ----------------
Right-of-use asset presented in property, plant and
equipment 7,918
Lease liabilities 9,196
Deferred tax asset 293
Retained earnings (985)
----------------------------------------------------- ----------------
When measuring lease liabilities for leases that were classified
as operating leases, the Group discounted lease payments using its
incremental borrowing rates in the jurisdictions in which the
leases are located. The weighted average rate applied was
5.75%.
Deferred tax has been provided as the initial reduction in
reserves on transition to IFRS 16 is spread over the remaining
lease term for tax relief purposes.
At
1 January 2019
GBP000
-------------------------------------------------------------- ----------------
Operating lease commitment at 31 December 2018 as disclosed
in the Group's consolidated financial statements 12,226
Exclude rentals in JV company included in the above
commitments (474)
-------------------------------------------------------------- ----------------
Restated commitments excluding JV rentals 11,752
Less:
Discounted using the incremental borrowing rates at
1 January 2019 (3,526)
Recognition exemption for leases of low value assets (9)
Recognition exemptions for leases with less than 12
months lease term at transition (30)
Correction of rental amounts to accurately reflect liability (238)
Add:
Extension options reasonably certain to be exercised 1,247
-------------------------------------------------------------- ----------------
Lease liabilities recognised at 1 January 2019 9,196
-------------------------------------------------------------- ----------------
ii) Impacts for the period
In relation to those leases under IFRS 16, the Group has
recognised depreciation and interest costs, instead of operating
lease expense. During the six months ended 30 June 2019, the Group
recognised GBP731,000 of depreciation charges and GBP247,000 of
interest costs from these leases.
4. Adjusted performance measures
The Board of Directors assesses the performance of the operating
segments based on a measure of adjusted EBITDA which excludes the
effects of non-recurring expenditure such as exceptional items and
asset impairment charges. The share option expense is also
excluded. Interest is not allocated to segments as the Group's cash
position is controlled by the central finance team. This is
considered the most reliable indicator as it is the closest
approximation to cash generated by underlying trade, excluding the
impact of one-off items of a material nature, adoption of IFRS 16
and working capital movements.
Adjusted EBITDA is not an IFRS measure, nevertheless it is
widely used by both the analyst community to compare with other
gaming companies and by management to assess underlying
performance.
A reconciliation of the adjusted operating expenses used for
statutory reporting and the adjusted performance measures is shown
below:
Six months Six months Year
ended ended
30 June 30 June ended
Note 2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
---------------------------------------------- ------ --------------- --------------- --------------
Operating costs per income statement (24,186) (22,553) (47,196)
Add back:
Sports Betting investment 905 490 1,428
Depreciation 14,15 2,344 1,388 2,860
Amortisation, excluding acquired intangible
assets 13 1,065 953 1,917
Amortisation of acquired intangible assets 13 314 - -
Share option charge, excluding acceleration
of charge for departing management 324 660 1,222
Accelerated IFRS 2 charge for departing - -
management 749
Exceptional items 7 682 451 3,453
--------------- --------------- --------------
Adjusted operating costs (17,803) (18,611) (36,316)
Other operating income* - - 173
--------------- --------------- --------------
Total adjusted net operating costs (pre
Sports Betting investment) (17,803) (18,611) (36,143)
--------------- --------------- --------------
*Other operating income of GBP173k in 2018 was an insurance
payout for business interruption following hurricane Maria and is
considered to be non-exceptional operating income and is included
in adjusted net operating costs.
Adjusted EBITDA is calculated as follows:
Six months Six months Year
ended ended
30 June 30 June ended
2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
---------------------------------------------------- --------------- --------------- --------------
Revenue 32,633 31,425 63,462
Cost of sales (9,798) (8,656) (17,619)
---------------------------------------------------- --------------- --------------- --------------
Gross profit 22,835 22,769 45,843
Marketing and distribution costs (726) (871) (1,732)
---------------------------------------------------- --------------- --------------- --------------
Contribution 22,109 21,898 44,111
Adjusted operating income and costs (pre Sports
Betting investment) (17,803) (18,611) (36,143)
---------------------------------------------------- --------------- --------------- --------------
Adjusted EBITDA pre Sports Betting investment 4,306 3,287 7,968
Sports Betting investment (905) (490) (1,428)
---------------------------------------------------- --------------- --------------- --------------
Adjusted EBITDA 3,401 2,797 6,540
Adjustment to prior year for IFRS 16 comparability
purposes* - 879 1,748
---------------------------------------------------- --------------- --------------- --------------
3,401 3,676 8,288
---------------------------------------------------- --------------- --------------- --------------
*IFRS 16 transition requires that prior year numbers are not
restated. The above figures for IFRS adjustments are for
comparability purposes only. They represent the 2019 lease rentals
which would have been operating costs in 2019 if IFRS 16 had not
been adopted, translated at 2018 exchange rates.
Sports Betting investment includes lobbying costs, additional
staff costs and travel and consultants, and also includes an
allocation of senior management time. Of these costs, GBP335k were
external costs and GBP570k were internal (year ended 31 December
2018: GBP508k were external costs and GBP920k were internal).
Contribution is also an adjusted performance measure disclosed
in the financial statements, being the revenue less directly
variable costs of trade. This is presented to explain the
underlying profit margins earned by the Group from its trade.
Adjusted profit is also an adjusted performance measure used by
the Group. This uses adjusted EBITDA, as defined above as
management's view of the closest proxy to cash generation for
underlying divisional performance, and deducting share option
charges, depreciation, amortisation of intangible assets (other
than those which arise in the acquisition of businesses) and
finance charges. This provides an adjusted profit before tax
measure, which is then taxed by applying an estimated adjusted tax
measure. The adjusted tax charge excludes the tax impact of income
statement items not included in adjusted profit before tax.
Six months
ended
30 June
2019
(Unaudited)
-------------
Total
Continuing operations GBP000
----------------------------------------------------------- -------------
Adjusted EBITDA 3,401
Share option charge, excluding acceleration of charge for
departing management (324)
Depreciation (2,344)
Amortisation (1,065)
Finance income 34
Finance costs (247)
----------------------------------------------------------- -------------
Adjusted loss before tax (545)
-----------------------------------------------------------
Tax at 31.0% 169
-------------
Adjusted loss after tax (376)
-------------
Six months ended 30 June Year ended 31 December
2018 2018
(Unaudited) (Audited)
------------------------------------ ------------------------------------
Continuing Discontinued Total Continuing Discontinued Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ----------- ------------- -------- --- ----------- ------------- --------
Adjusted EBITDA 2,797 114 2,911 6,540 175 6,715
Share option charge (660) - (660) (1,222) - (1,222)
Depreciation (1,388) (48) (1,436) (2,860) (93) (2,953)
Amortisation (excluding
amortisation of
acquired intangibles) (953) (34) (987) (1,917) - (1,917)
Finance income/(charges) 40 - 40 18 (18) -
-------------------------- ----------- ------------- -------- ----------- ------------- --------
Adjusted (loss)/profit
before tax (164) 32 (132) 559 64 623
-------------------------- ----------- ------------- ----------- -------------
Tax* 8 (139)
-------- --------
Adjusted (loss)/profit after
tax (124) 484
-------- --------
* The adjusted tax rate for the six months ended 30 June 2018 is
6.0% and for the year ended 31 December 2018 is 22.7%.
5. Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors, which
makes strategic and operational decisions.
The Group has identified its operating segments as outlined
below:
- Sportech Racing and Digital - provision of pari-mutuel
wagering services and systems worldwide principally to the
horseracing industry;
- Sportech Venues - off-track betting venue management; and
- Corporate costs - central costs relating to the overall management of the Group.
The Board of Directors assesses the performance of the operating
segments based on a measure of adjusted EBITDA as defined in note
4. The share option expense is also excluded. Interest is not
allocated to segments as the Group's cash position is controlled by
the central finance team. Sales between segments are at arm's
length.
Six months ended 30 June
2019 (Unaudited)
-----------------------------------------------------------------
Inter-segment
Racing Corporate elimination
and Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ------------------------ --------- ------------ -------------- -------------
Revenue from sale of
goods 1,007 - - - 1,007
Revenue from food and
beverage sales - 2,255 - - 2,255
Revenue from rendering of
services 16,930 12,735 - (294) 29,371
-------------------------- ------------------------ --------- ------------ -------------- -------------
Total revenue 17,937 14,990 - (294) 32,633
Cost of sales (2,793) (7,299) - 294 (9,798)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Gross profit 15,144 7,691 - - 22,835
Marketing and
distribution costs (310) (416) - - (726)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Contribution 14,834 7,275 - - 22,109
Adjusted operating costs (11,108) (5,866) (829) - (17,803)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Adjusted EBITDA (pre
Sports Betting
investment) 3,726 1,409 (829) - 4,306
Sport betting investment - (905) - - (905)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Adjusted EBITDA 3,726 504 (829) - 3,401
Share option charge,
excluding acceleration
of charge for departing
management - - (324) - (324)
Depreciation (1,206) (1,128) (10) - (2,344)
Amortisation (excluding
amortisation
of acquired intangibles) (1,001) - (64) - (1,065)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Segment result 1,519 (624) (1,227) - (332)
Acceleration of IFRS 2
charge for
departing management - - (749) (749)
Amortisation of acquired
intangibles (314) - - - (314)
Exceptional costs (352) (52) (278) - (682)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Operating profit/(loss) 853 (676) (2,254) - (2,077)
Net finance costs (364)
Loss before taxation (2,441)
Taxation 482
-------------
Loss for the period from
continuing
operations (1,959)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Other segment items
Capital expenditure -
intangible
fixed assets 1,389 - 12 - 1,401
Capital expenditure -
property, plant
and equipment 810 153 - - 963
-------------------------- ------------------------ --------- ------------ -------------- -------------
Six months ended 30 June
2018 (Unaudited)
------------------------------------------------------------------------------------------------
Inter-segment
Racing Corporate elimination
and Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- -------------- --------- ------------ -------------- ---------
Revenue from sale of goods 637 - - - 637
Revenue from food and beverage sales - 2,346 - - 2,346
Revenue from rendering of services 15,928 13,273 - (759) 28,442
---------------------------------------- -------------- --------- ------------ -------------- ---------
Total revenue 16,565 15,619 - (759) 31,425
Cost of sales (1,930) (7,485) - 759 (8,656)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Gross profit 14,635 8,134 - - 22,769
Marketing and distribution costs (388) (483) - - (871)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Contribution 14,247 7,651 - - 21,898
Adjusted operating expenses (10,973) (6,565) (1,073) - (18,611)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA (pre Sports Betting
investment) 3,274 1,086 (1,073) - 3,287
Sport betting investment - (490) - - (490)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA 3,274 596 (1,073) - 2,797
Share option charge - - (660) - (660)
Depreciation (838) (537) (13) - (1,388)
Amortisation (837) - (116) - (953)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Segment result 1,599 59 (1,862) - (204)
Exceptional costs (48) (40) (363) - (451)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Operating profit/(loss) 1,551 19 (2,225) - (655)
---------------------------------------- -------------- --------- ------------ --------------
Net finance income 53
Loss before taxation (602)
Taxation 28
---------
Loss for the period - continuing
operations (574)
Net loss from discontinued operations (355)
---------
Loss for the period (929)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Other segment items
Capital expenditure - intangible
fixed assets 1,569 - - - 1,569
Capital expenditure - property,
plant and equipment 646 274 - - 920
---------------------------------------- -------------- --------- ------------ -------------- ---------
Year ended 31 December 2018
(Audited)
-------------------------------------------------------
Inter-segment
Racing Corporate elimination
and Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- -------------- --------- ------------ -------------- ---------
Revenue from sale of goods 1,770 - - (44) 1,726
Revenue from food and beverage
sales - 4,724 - - 4,724
Revenue from rendering of services 32,234 25,399 - (621) 57,012
----------------------------------------- -------------- --------- ------------ -------------- ---------
Total revenue 34,004 30,123 - (665) 63,462
Cost of sales (3,991) (14,241) - 613 (17,619)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Gross profit 30,013 15,882 - (52) 45,843
Marketing and distribution costs (736) (996) - - (1,732)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Contribution 29,277 14,886 - (52) 44,111
Adjusted net operating expenses (20,634) (13,473) (2,088) 52 (36,143)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA (pre Sports Betting
investment) 8,643 1,413 (2,088) - 7,968
Sport betting investment - (1,428) - - (1,428)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA 8,643 (15) (2,088) - 6,540
Share option charge - - (1,222) - (1,222)
Depreciation (1,715) (1,115) (30) - (2,860)
Amortisation (1,743) - (174) - (1,917)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Segment result 5,185 (1,130) (3,514) - 541
Exceptional costs (2,214) (65) (1,174) - (3,453)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Operating profit/(loss) 2,971 (1,195) (4,688) - (2,912)
Net finance income 473
Share of loss after tax of joint
ventures -
---------
Loss before taxation (2,439)
Taxation (2,019)
---------
Loss for the year - continuing
operations (4,458)
Net profit from discontinued operations 1,822
---------
Loss for the period (2,636)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Other segment items
Capital expenditure - intangible
fixed assets 3,095 - 11 - 3,106
Capital expenditure - property,
plant and equipment 1,529 398 - - 1,927
----------------------------------------- -------------- --------- ------------ -------------- ---------
6. Expenses by nature
Six months Six months Year
ended ended
30 June 30 June ended
2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
----------------------------------------------- ---- --------------- --------------- -------------
Cost of sales
Tote and track fees 5,856 5,526 11,261
F&B consumables 665 705 1,405
Betting and gaming duties 400 363 738
Repairs and maintenance cost of sales 196 169 335
Ticket paper 467 392 888
Programs 259 275 498
Outsourced service costs 1,000 885 1,684
Cost of inventories sold, including provision
for obsolete inventory 955 341 810
Total cost of sales 9,798 8,656 17,619
----------------------------------------------------- --------------- --------------- -------------
Marketing and distribution costs
Marketing 525 629 1,261
Vehicle costs 65 112 232
Freight 136 130 239
----------------------------------------------------- --------------- --------------- -------------
Total marketing and distribution costs 726 871 1,732
----------------------------------------------------- --------------- --------------- -------------
Operating costs
Staff costs - gross, excluding share option
charges 14,155 13,639 27,532
Less amounts capitalised (1,389) (1,047) (2,923)
----------------------------------------------------- --------------- --------------- -------------
Staff costs - net 12,766 12,592 24,609
Property costs 1,930 2,562 5,314
IT & communications 671 657 1,355
Professional fees 2,356 2,040 4,391
Travel and entertaining 624 679 1,353
Banking transaction costs and FX 154 163 310
Provision for doubtful debts - - (76)
Other costs 207 408 488
----------------------------------------------------- --------------- --------------- -------------
Adjusted operating costs 18,708 19,101 37,744
Share option charge, excluding exceptional
accelerated charges 324 660 1,222
Acceleration of IFRS 2 charge for departing
management 749 - -
Depreciation 2,344 1,388 2,860
Amortisation, excluding amortisation of
acquired intangibles 1,065 953 1,917
Amortisation of acquired intangibles 314 - -
Exceptional costs 682 451 3,453
----------------------------------------------------- --------------- --------------- -------------
Total operating costs 24,186 22,553 47,196
----------------------------------------------------- --------------- --------------- -------------
7. Exceptional items
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
----------------------------------------------------- ---- --------------- --------------- ---------------
Exceptional costs:
Redundancy and restructuring costs in respect of
the rationalisation and
modernisation of the business 287 251 1,178
Expenses in relation to the UK defined benefit
pension scheme "buy-in" 105 - -
Acquisition costs in relation to Lot.to Systems
Limited 52 - -
Investment in S&S JV (immediately impaired) 230 187 291
Release of onerous contract provisions provided
in relation to exit from California operations
- offsetting investment above (179) (187) (291)
Costs in relation to the Spot the Ball VAT refund - 160 205
Costs in relation to legacy tax disputes 37 - 111
One off start-up costs of new ventures, including
new venue builds and joint ventures - 40 29
Costs in relation to exiting the Group's interests
in India 18 - 51
Impairment of contingent consideration in relation
to NYX Gaming - - 1,729
Legal costs in relation to intellectual property
infringement lawsuit 132 - 150
Total exceptional costs 682 451 3,453
----------------------------------------------------------- --------------- --------------- ---------------
Below is a summary of exceptional cash (outflows)/inflows:
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
------------------------------------------------------------ ---- --------------- --------------- ---------------
Exceptional cash outflows:
Redundancy and restructuring costs in respect of
the rationalisation and
modernisation of the business (846) (999) (1,332)
Expenses in relation to the UK defined benefit -
pension scheme "buy-in" (105) -
UK defined benefit pension scheme "buy-in" insurance -
contract purchased (234) -
Staff bonuses paid in relation to Football Pools
disposal plus final costs paid - (301) (307)
Acquisition costs in relation to Lot.to Systems
Limited (52) -
Spot the Ball bonus paid to former Director and
associated legal fees - (292) (315)
Costs in relation to the Spot the Ball VAT refund (45) (73) (73)
Costs in relation to legacy tax disputes (37) - (111)
One off start-up costs of new ventures, including
new venue builds and joint ventures - (32) (32)
Costs in relation to exiting the Group's interests
in India (18) - -
Legal costs in relation to intellectual property
infringement lawsuit (132) - (150)
------------------------------------------------------------------ --------------- --------------- ---------------
Total exceptional cash outflows (1,469) (1,697) (2,320)
------------------------------------------------------------------ --------------- --------------- ---------------
Exceptional cash inflows:
Cost settlement received from HMRC regarding Spot
the Ball VAT refund - 487 487
Total exceptional cash inflows - 487 487
------------------------------------------------------------------ --------------- --------------- ---------------
The Trustees of the Sportech Pension Scheme entered into a
contract with Just Retirement Limited ("Just") on 28 March 2019 to
insure the liabilities of the scheme. The Trustees and Just are
working through due diligence and under-writing in order for an
anticipated full buy-out and winding up of the scheme to be
completed prior to the year end. The policy cost was GBP2,450,000
which was paid utilising the assets in the scheme, which were
valued at GBP2,216,000 and an additional cash payment from the
Company of GBP234,000. The Company is also paying all
administrative, actuarial and legal costs the Scheme is incurring
in the process.
8. Net finance (costs)/income
Six months Six Year
ended months
ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
----------------------------------------------------------- -------------- -------------- --------------
Finance costs:
Interest payable on bank loans and overdrafts - - (22)
Interest on lease liabilities (247) - -
Interest on defined benefit pension obligation - - (45)
----------------------------------------------------------- -------------- -------------- --------------
Total finance costs (247) - (67)
----------------------------------------------------------- -------------- -------------- --------------
Finance income 34 40 85
Other finance (costs)/income:
Foreign exchange (loss)/gain on financial assets and
liabilities denominated in foreign currency (139) (25) 363
Unwinding of interest on discounted non-current balances (12) 38 92
----------------------------------------------------------- -------------- -------------- --------------
Total other financial (costs)/income (151) 13 455
----------------------------------------------------------- -------------- -------------- --------------
Net finance (costs)/income (364) 53 473
----------------------------------------------------------- -------------- -------------- --------------
9. Taxation
Taxation is provided based on management's best estimate of the
expected weighted average annual taxation rate for the full year.
The estimated weighted average annual tax rate for the year ended
31 December 2019 is 19.7% (2018: 1.2%). The movement is a result of
a change in mix of profits/(losses) in jurisdictions with varying
tax rates.
The Group continues to hold a tax provision of GBP4,600k for tax
potentially due on the 2016 Spot the Ball refund. Further
provisions are held totaling GBP2,005k for other uncertain tax
positions.
10. Acquisition of Lot.to Systems Limited
On 1 February 2019, the Group acquired 100% of the issued share
capital of Lot.to Systems Limited ("Lot.to") a UK-based digital
gaming technology business. The acquisition provides Sportech with
a leading digital gaming platform, iLottery and a specialist team
focused on innovative digital gaming technologies. It also helps
solidify the Group's global gaming capabilities and services
position. Importantly, the acquisition also provides Sportech with
growth opportunities through broadening the suite of gaming
services offered by the Group.
UK-regulated Lot.to is recognised as a digital specialist in the
lottery sector which has developed turn-key solutions. Whilst its
proprietary 'Rapid Lotto' and lotto betting verticals online have
been its core consumer products, Lot.to's iLottery platform has the
capability to operate in any gambling vertical including
self-service POS terminals plus online and mobile interfaces.
Goodwill arising on the acquisition amounted to GBPnil.
The following table summarises the fair value of consideration
paid for Lot.to and the amounts of the assets acquired and
liabilities assumed recognised at acquisition date.
Unaudited
Fair value of consideration at 1 February 2019 Note GBP000
--------------------------------------------------- ------ ----------
Ordinary shares in Sportech PLC (2,000,000 shares
at 35.7p*) 714
Repayment of shareholder loan 1,300
------------------------------------------------------------ ----------
Total fair value of consideration transferred 2,014
------------------------------------------------------------ ----------
Recognised provisional fair value of identifiable
assets acquired and liabilities assumed
--------------------------------------------------- ------ ----------
Intangible fixed assets - software 2,112
Intangible fixed assets - licences 150
Tangible fixed assets - fixtures and fittings 1
Cash at bank and in hand 71
Trade and other receivables 99
Trade and other payables (14)
Corporation tax liability (3)
Deferred tax on acquired intangibles (402)
------------------------------------------------------------ ----------
Total identifiable net assets 2,014
------------------------------------------------------------ ----------
Total fair value of consideration transferred 2,014
------------------------------------------------------------ ----------
*share price of the Company on 1 February 2019.
There was no contingent consideration payable. The shareholder
loan was agreed to be repaid in three installments of GBP300,000 on
completion date, GBP500,000 by 31 March 2019 and GBP500,000 by 31
December 2019.
Acquisition costs amounted to GBP52,000 and have been recognised
as an expense in the consolidated income statement as an
exceptional item (see note 7).
The fair values of identifiable assets acquired and liabilities
assumed are considered provisional in nature due to the business
combination occurring just five months prior to the period end.
Management will continue to monitor the provisional values during
the year ended 31 December 2019 to ensure any fair values
amendments are identified as a hindsight adjustment.
No contingent liabilities have been recognised as at the
acquisition date.
Lot.to has contributed revenues of GBP170,000 and a loss of
GBP121,000 to the Group results from the acquisition date to 30
June 2019. Had the acquisition occurred on 1 January 2019, the
Group's revenue for the period ended 30 June 2019 would have been
GBP32,642,000 and the Group's loss for the period would have been
GBP1,989,000. These amounts have been determined by applying the
Group's accounting policies and adjusting the results of Lot.to to
reflect additional amortisation that would have been charged,
assuming the fair value adjustments to intangible assets had been
applied from 1 January 2019.
The premium on the shares issued in Sportech PLC of GBP314k is
recorded as a merger reserve in retained earnings.
11. Net (loss)/profit from discontinued operations
Results from discontinued operations includes the Football Pools
division, disposed of in June 2018, and also the Venues business in
The Netherlands, Sportech Racing BV and its subsidiaries ("Sportech
Holland"). Sportech Holland was disposed of in full on 26 July 2018
and was considered to be a held for sale asset as at 30 June 2018.
The sale of this business to RBP Luxembourg SA was structured as a
locked box, with an effective date of 1 January 2018. The risks and
benefits of its cash generation were therefore transferred to the
purchaser from that date. Control of the entity did not however
transfer until completion of the deal on 26 July 2018 and
accordingly its results were included in the six months ended 30
June 2018 as those of a discontinued operation.
Six months ended June Year ended 31 December
2018 (Unaudited) 2018
(Audited)
--------------------------- ---------------------------
FP* Holland Total FP* Holland Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- -------- -------- --- ------- -------- --------
Revenue - 2,631 2,631 - 3,065 3,065
Cost of sales, marketing
and distribution and adjusted
operating expenses 46 (2,562) (2,516) 78 (2,968) (2,890)
-------------------------------- ------- -------- -------- ------- -------- --------
Adjusted EBITDA 46 69 115 78 97 175
Depreciation and amortisation - (82) (82) - (93) (93)
Exceptional items - (461) (461) - (461) (461)
Finance costs - - - - (18) (18)
--------------------------------
Profit/(loss) before tax 46 (474) (428) 78 (475) (397)
Tax, excluding tax arising
on disposal - - - (169) - (169)
-------------------------------- ------- -------- -------- ------- -------- --------
Profit/(loss) after tax 46 (474) (428) (91) (475) (566)
Net gain on disposal (note
11a) 73 - 73 59 2,329 2,388
-------------------------------- ------- -------- -------- ------- -------- --------
Net result from discontinued
operations 119 (474) (355) (32) 1,854 1,822
-------------------------------- ------- -------- -------- ------- -------- --------
* Holland results for 2018 are to the date of disposal of 26
July 2018.
11a) Net gain on disposal
Six months ended June
2018
FP
(Unaudited)
GBP000
--------------------------------------------------- ------------- ----------- ---------------
Consideration, net of working capital adjustments 73
Gain on disposal 73
Year ended 31 December 2018
FP Holland Total
(Audited) (Audited) (Audited)
GBP000 GBP000 GBP000
--------------------------------------------------- ------------- ----------- ------------------
Consideration, net of working capital adjustments 73 3,007 3,080
Net assets disposed of - (318) (318)
Transaction costs incurred in the year - (360) (360)
--------------------------------------------------- ------------- ----------- ------------------
Pre-tax gain on disposal 73 2,329 2,402
Tax arising on disposal (14) - (14)
--------------------------------------------------- ------------- ----------- ------------------
Gain on disposal 59 2,329 2,388
--------------------------------------------------- ------------- ----------- ------------------
Of the consideration receivable for Sportech Racing BV,
GBP2,692k was received in cash during 2018 and GBP314k was recorded
as contingent consideration receivable and was received in January
2019. Transaction costs of GBP79k were also paid in January 2019,
the rest having been settled in cash in 2018. No tax is payable on
the disposal of Sportech Racing BV as Substantial Shareholder
Relief is being applied.
12. Earnings per share
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
(Unaudited) (Unaudited) (Audited)
----------
Basic EPS Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
(Loss)/profit
for the
period
(GBP000) (1,959) - (1,959) (574) (355) (929) (4,458) 1,822 (2,636)
Weighted
average no
of shares
('000) 188,331 188,331 188,331 186,029 186,029 186,029 186,393 186,393 186,393
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Basic EPS (1.0)p - (1.0)p (0.3)p (0.2)p (0.5)p (2.4)p 1.0p (1.4)p
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
(Unaudited) (Unaudited) (Audited)
----------
Diluted EPS Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
(Loss)/profit
for the
period
(GBP000) (1,959) - (1,959) (574) (355) (929) (4,458) 1,822 (2,636)
Weighted
average no
of shares
('000) 188,331 188,331 188,331 186,029 186,029 186,029 186,393 186,393 186,393
Dilutive N/A - N/A
potential N/A N/A N/A N/A - N/A
ordinary
shares ('000)
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Total
potential
ordinary
shares ('000) 188,331 188,331 188,331 186,029 186,029 186,029 186,393 186,393 186,393
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Diluted EPS (1.0)p - (1.0)p (0.3)p (0.2)p (0.5)p (2.4)p 1.0p (1.4)p
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Adjusted EPS
Adjusted EPS is calculated by dividing the adjusted profit after
tax attributable to owners of the Company, as defined in note 4, by
the weighted average number of ordinary shares in issue during the
year.
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2019 2018 2018
Note (Unaudited) (Unaudited) (Audited)
---------------------------------- ------ -------------- --------------- ---------------
Adjusted (loss)/profit after tax
(GBP000) 4 (376) (124) 484
Basic Adjusted EPS (pence) (0.2)p (0.1)p 0.3p
Diluted Adjusted EPS (pence) (0.2)p (0.1)p 0.3p
---------------------------------- ------ -------------- --------------- ---------------
13. Intangible fixed assets
Six Six Year
months months
ended ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
Note GBP000 GBP000 GBP000
-------------------------------------------------------- ----- -------------- -------------- --------------
At 1 January 13,551 11,629 11,629
Additions - continuing operations 1,401 1,569 3,106
Additions - business combination 10 2,262 - -
Amortisation charge for period - continuing operations (1,379) (953) (1,917)
Movement as a result of foreign exchange 11 305 733
-------------- -------------- --------------
Net book amount at end of period 15,846 12,550 13,551
-------------------------------------------------------- ----- -------------- -------------- --------------
14. Property, plant and equipment
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
------------------------------------------ -------------- -------------- --------------
At 1 January 26,337 25,705 25,705
Additions 963 920 1,927
Additions - business combination 1 - -
Depreciation charge for period (1,613) (1,388) (2,860)
Movement as a result of foreign exchange (155) 529 1,565
-------------- -------------- --------------
Net book amount at end of period 25,533 25,766 26,337
------------------------------------------ -------------- -------------- --------------
15. Right-of-use assets
Six
months
ended
30 June
2019
(Unaudited)
GBP000
------------------------------------------ --------------
At 1 January - on transition to IFRS 16 7,918
Depreciation charge for period (731)
Movement as a result of foreign exchange (25)
--------------
Net book amount at end of period 7,162
------------------------------------------ --------------
16. Trade and other receivables
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
----------------------------------------------------- -------------- -------------- --------------
Non-current
Trade and other receivables 601 660 667
Contingent consideration receivable from disposal - 1,629 -
of Sportech-NYX Gaming, LLC
----------------------------------------------------- -------------- -------------- --------------
Total non-current trade and other receivables 601 2,289 667
----------------------------------------------------- -------------- -------------- --------------
Current
Trade and other receivables 10,637 11,479 8,169
Total trade and other receivables 11,238 13,768 8,836
----------------------------------------------------- -------------- -------------- --------------
17. Cash and cash equivalents
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
Note GBP000 GBP000 GBP000
--------------------------------- ----- -------------- -------------- --------------
Cash and short-term deposits 11,795 12,477 14,728
Customer funds 18 3,093 3,960 3,187
Total cash and cash equivalents 14,888 16,437 17,915
--------------------------------- ----- -------------- -------------- --------------
Customer funds are matched by liabilities of an equal value
within trade and other payables (see note 18).
Included within cash and short-term deposits as at 30 June 2019
are amounts held in tills and vaults and other estimated amounts
required by the Group to fund day to day working capital
commitments totalling approximately GBP2.5m.
18. Trade and other payables
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
Note GBP000 GBP000 GBP000
--------------------------------------- ----- -------------- -------------- --------------
Trade payables 6,115 6,014 4,018
Other taxes and social security costs 331 157 113
Accruals 4,884 5,825 5,382
Deferred income 224 208 246
Player liability 17 3,093 3,960 3,187
Total trade and other payables 14,647 16,164 12,946
--------------------------------------- ----- -------------- -------------- --------------
19. Provisions
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
------------------------------------------------------ ---- -------------- -------------- --------------
At beginning of period 2,411 2,626 2,626
Utilised during the period - (186) (96)
Release of discount interest to the income statement 12 7 22
Credit to income statement - share of loss of
JV (179) - (291)
Currency movements (12) 55 150
------------------------------------------------------------ -------------- -------------- --------------
Total provisions 2,232 2,502 2,411
------------------------------------------------------------ -------------- -------------- --------------
Provisions are in relation to:
Current provisions
Onerous contracts 737 1,050 977
Total current provisions 737 1,050 977
------------------------------------------------------------ -------------- -------------- --------------
Non-current provisions
Onerous contracts 1,377 1,338 1,315
Other 118 114 119
Total non-current provisions 1,495 1,452 1,434
------------------------------------------------------------ -------------- -------------- --------------
20. Cash flow from operating activities
Reconciliation of loss before taxation to cash flows from
operating activities for continuing operations
Six months Six months Year
ended ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
--------------------------------------------------- -------------- --------------- --------------
Loss before taxation - continuing operations (2,441) (602) (2,439)
Adjustments for:
Net exceptional items 682 451 3,453
Depreciation and amortisation 3,723 2,341 4,777
Net finance charges/(income) 364 (53) (473)
Share option expense 1,073 660 1,222
Employers' taxes paid on options vested - (67) (67)
Changes in working capital:
(Increase)/decrease in trade and other receivables (2,240) (1,556) 1,831
(Increase)/decrease in inventories (306) 122 76
Increase/(decrease) in trade and other payables,
excluding player liabilities 2,058 176 (2,805)
(Decrease)/increase in customer funds (94) 1,088 315
Cash generated from operating activities, before
exceptional items 2,819 2,560 5,890
21. Lease liabilities
As at
30 June
2019
(Unaudited)
Maturity analysis - contractual undiscounted cashflows GBP000
---- --------------
Less than one year 1,697
Between 2 and 5 years 4,071
More than 5 years 5,984
Total 11,752
--------------
The weighted average incremental borrowing rate applied to
the lease liabilities was 5.75%.
As at
30 June
2019
(Unaudited)
Lease liabilities included in the balance sheet GBP000
---- --------------
Current 1,234
Non-current 7,297
Total 8,531
--------------
As at
30 June
2019
(Unaudited)
GBP000
---- --------------
At 1 January 2019 9,196
Interest charged to the income statements 247
Lease rentals paid (889)
Movement as a result of foreign exchange (23)
Total 8,531
--------------
22. Financial liabilities
Six Six months Year
months ended
ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
Amounts payable to former shareholder of Lot.to Systems
Limited 500 - -
The final instalment of the original GBP1,300k shareholder loan
to Lot.to Systems Limited which was assumed by Sportech PLC on the
acquisition of the whole of the share capital of Lot.to Systems
Limited is repayable on or before 31 December 2019.
23. Related party transactions
The extent of transactions with related parties of the Group and
the nature of the relationship with them are summarised below.
a. Key management compensation is disclosed below:
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
---- -------------- -------------- --------------
Short-term employee benefits 623 511 752
Consultancy fees - 174 76
Share-based payments 49 164 388
Accelerated IFRS 2 charge for departing management 755 - -
Pay in lieu of notice 300 - -
Post-employment benefits 2 5 5
Total 1,729 854 1,221
-------------- --------------
b. The Group invested the following amounts of cash into each of
its joint ventures and associates during the period:
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
---- -------------- -------------- --------------
S&S Venues California, LLC 230 187 291
-------------- --------------
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
S&S Venues California, LLC GBP000 GBP000 GBP000
---- -------------- -------------- --------------
At 1 January - - -
Additions 230 187 291
Income statement items:
Impairment (121) (71) (44)
Share of loss after tax (109) (116) (247)
-------------- --------------
Net income statement expense (230) (187) (291)
Total - - -
-------------- --------------
The net income statement expense has been charged to exceptional
costs (see note 7), given the provision for onerous contracts in
relation to this joint venture, has been released to exceptional
costs, having been recorded through exceptional costs in 2017. In
2019 the losses exceed the amounts provided which were the lease
rentals only.
24. Contingencies
Contingent items
Tax
The Group's activities in recent periods have resulted in
material tax liabilities crystallising. The ultimate tax liability
due, in all instances, is subject to a degree of management
judgement. The judgements which are made are done so in good faith,
with the aim of always paying the correct amount of tax at the
appropriate time. Management work diligently with the Group's
external financial advisors in quantifying the anticipated accurate
and fair tax liability which arises from material one-off events
such as the Spot the Ball legal case and the disposal of the
Football Pools. Management have an open, transparent and
constructive relationship with tax regulators and engage positively
when discussing any difference in legal interpretation between that
of the Group and the regulators.
Certain contingent items exist at the reporting date with
respect to tax liabilities as outlined below.
Corporation tax
Judgement has been applied by management as to the corporation
tax which arises on the sale of the Football Pools in June 2017.
Exposure to further liabilities as a result of differences to
management judgement exists and a possible further tax liability
could arise.
VAT
As disclosed in the 2015 interim financial statements, HMRC have
previously challenged the recovery of VAT by Sportech PLC as an
active holding company providing wholly economic activities. This
challenge was aligned to European Case Law which ultimately ruled
in the taxpayer's favour.
HMRC adjusted their challenge to Sportech in 2017 to instead
focus on the value of the economic activities that Sportech PLC
provides to its trading subsidiaries, the majority of which are
based overseas. Assessments have been raised totaling GBP3.3m for
the period to 30 June 2017, citing an under-valuation of the
Group's management supplies which is made primarily to its exempt
UK Football Pools business. The Group has continued to engage its
external advisors on this issue and has entered into a formal
appeals process and further dialogue with HMRC.
To continue with the appeal, and in accordance with due process,
GBP1.3m was paid to HMRC in 2018 (HMRC agreed to defer payment of
the remaining amount). A provision of GBP1.7m has been made in the
Group accounts and Management consider that the likelihood of any
further material outflow, over this amount, being made to HMRC to
settle this issue is remote.
Irish subsistence claims
The Irish Revenue have assessed the Group for EUR106k for income
tax allegedly underpaid in relation to subsistence claims of Irish
field crew. Management believe that this assessment is incorrect
and that all subsistence claims paid were made without tax
deduction in accordance with relevant regulations. An appeal is
being pursued and no provision has been recorded in these financial
statements.
Other contingent items
M&A activity
Both the 2017 sale of the Football Pools division and the 2018
sale of the Group's Venues business in The Netherlands have
customary seller warranties under the terms of the Sale and
Purchase Agreements. Those warranties have been provided in good
faith by management in light of the probability of certain events
occurring. The possibility of material claims being made under the
seller warranties in either deal is considered by management to be
remote.
Legal
The Group is engaged in certain disputes in the ordinary course
of business which could potentially lead to outflows greater than
those provided for on the balance sheet. The maximum possible
exposure considered to exist, in view of advice received from the
Group's professional advisors, is up to GBP0.6m. Management are of
the view that the risk of those outflows arising is not probable
and accordingly they are considered contingent items.
Statement of Directors' responsibilities
The Directors confirm that these condensed consolidated interim
financial statements have been prepared in accordance with IAS 34
as adopted by the European Union and that the Interim Management
Report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last Annual Report and Accounts.
A list of current Directors of Sportech PLC is maintained on the
Sportech PLC website: www.sportechplc.com.
On behalf of the Board
Richard McGuire Tom Hearne
Chief Executive Officer Chief Financial Officer
21 August 2019 21 August 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAEPFAANNEAF
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August 22, 2019 02:01 ET (06:01 GMT)
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