RNS Number : 8196X
Sportech PLC
01 September 2022
 

 

1 September 2022

Sportech PLC

("Sportech" or the "Group" or the "Company")

 

Interim Results

 

Sportech (AIM:SPO), an international betting technology business, is pleased to announce its interim results for the six months ended 30 June 2022 ("H1 2022" or the "period").

 

Summary

 

The Group stabilised revenue, improved EBITDA and returned £7 million to shareholders during the period as a result of online retail marketing projects, lower costs, the development of sports betting initiatives in Connecticut and the proceeds from an asset sale announced on 4 January 2022.

 

Group Adjusted EBITDA improved markedly during the period to £0.3 million (H1 2021: loss of £0.9 million). The commencement of Sports Betting in Connecticut in late 2021, where the Group has a commercial retail sports betting arrangement with the State via the Connecticut Lottery Corporation; stronger food and beverage revenues, digital business growth and lower corporate costs supported the improvement.

 

Following a return to pre-COVID revenues, a significant part of the former Sportech Lotteries division was sold to Inspired Entertainment Inc, as announced on 4 January 2022 (LEIDSA disposal). This enabled the Group to return a further £7 million to shareholders by means of a 7p per share dividend, announced on 27 April 2022, taking shareholder repayments to £42.5 million during the last 12 months and £117.5 million since 2017. Comparatives for H1 2021 have been restated to classify LEIDSA operating results to discontinued operations.

 

£m's

 

H1 2022

 

Constant

Currency4

H1 2021

Restated

Reported

Currency4

H1 2021

Revenue


12.6

12.6

11.8

Gross Profit


6.5

6.4

5.8

Contribution1


6.3

6.2

5.6

Adjusted EBITDA2


0.3

(0.8)

(0.9)

(Loss)/profit pre-tax from continuing operations


(0.8)

0.4

0.3

Adjusted loss before tax3


(0.4)

(1.7)

(1.7)

Distributions to shareholders


7.0

35.5

35.5

 

1.        Contribution is defined as gross profit, less marketing and distribution costs.

2.        Adjusted EBITDA is earnings from continuing operations before interest, taxation, depreciation and amortisation, share option charges, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.

3.        Adjusted loss is the aggregate of Adjusted EBITDA, share option charges, depreciation, amortisation (excluding amortisation of acquired intangibles) and certain finance charges.

4.        Prior year comparatives have been adjusted for discontinued operations (LEIDSA contract).

As the Group moves through the rest of the financial year, the corporate focus remains on delivering positive shareholder returns, operationally executing the delivery of sports betting across key locations and escalating the Group's digital wagering opportunities. The Board remain positive in the quality of the Group's innovative products, management strategy and continuing commercial relationships and are confident of achieving full year 2022 forecasts. There remains deferred contingent consideration potentially due to the Group in Q1 2023 of c£1.1 million (CAD$2 million) in connection with the Bump disposal, however this has not been recognised on the Group's balance sheet as a receivable due to the uncertainty over the revenue hurdle being achieved.

 

The business transformation continues with the following objectives:

 

•      Secure position within Connecticut expanded gaming.

•      Deliver a less capital-intensive business and significantly reduce the future corporate cost base.

•      Execute further licensing opportunities within digital lottery.

•      Evaluate and execute material corporate opportunities, delivering tangible investor returns.

 

Richard McGuire, Executive Chairman of Sportech, said: "The first half of 2022 recorded the successful execution of Group strategic objectives. Online revenue growth; non-core asset disposals; further shareholder capital returns and a US team focused on developing sports betting initiatives, all positive hallmarks of 2021, continued during the period. As previously announced, Nicola Rowlands, our outgoing CFO, will be leaving at the end of September, we wish her continued success. We also welcome Paul Humphreys to the Board as of today, as an Independent Non-executive Director. Paul's appointment further strengthens the Board, and he brings with him significant experience that is highly relevant to the strategy of the Group. Paul will chair the Group's Audit Committee.

 

The Group has a clear vision, a strong Board, a variety of attractive operating assets, no debt, and cash to meet strategic objectives in the second half of 2022 and beyond."

 

 

 

For further information, please contact:

 

Sportech PLC                                                                                        enquiries@sportechplc.com

Richard McGuire, Executive Chairman

Nicola Rowlands, Chief Financial Officer

 

Peel Hunt                                                                                              Tel: +44 (0) 20 7418 8900

(NOMAD and Corporate Broker to Sportech)

George Sellar / Andrew Clark / Lalit Bose

 

 

 



 

 

Group Overview

 

The Group underwent significant restructuring during 2021, completing the sale of various operational divisions, returning significant capital to investors and retaining sufficient net cash for a potential combination of growth investment and future investor returns. That momentum continued in H1 2022, following the sale of Sportech Lotteries LLC on 31 December 2021 and the payment of a 7p dividend per share. Positive marketing initiatives, lower costs and sports betting resulted in positive EBITDA despite a modest reduction in gross revenues, on a constant currency basis.

 


Revenue

 

EBITDA

£'000

Continuing operations

H1 2022

H1 20211

 

H1 2022

H1 20211

Venues

11,714

12,235


1,525

1,097

Digital

857

351


(107)

(375)

Corporate costs

-

-


(1,107)

(1,497)

Total at constant currency

12,571

12,586


311

(775)

Exchange rate impact

-

(759)


-

(121)

Total reported

12,571

11,827


311

(896)

 

1.        2021 numbers are at constant currency.

 

Sportech Digital

 

The acquisition of the technology platforms and talent of Lot.to Systems and the integration of these assets into Sportech's organisation completed in early 2019, resulting in further expansion of the Group's B2B lottery capabilities with a key mobile component and robust administrative, CRM and marketing tools. The team advanced digital lottery capabilities facilitating the sale of Sportech Lotteries LLC and the agreement to provide a digital lottery platform to Inspired Entertainment Inc.

 

The continuing digital business revenues increased versus H1 2021, and expenses were reduced resulting in an improved EBITDA for the period. The core focus for the Digital team, based in Chester, UK, remains pursuing licensing opportunities drawing on the Sportech brand, legacy, and digital expertise to deliver an enhanced consumer experience.

 

Digital

£'000

H1 2022

 

Constant Currency

H1 2021

 

Reported

Currency2

H1 2021

Service revenue

857


351


322







Contribution

355


127


115

Contribution margin

41.4%


36.2%


35.7%







Adjusted operating expenses1

(462)


(502)


(496)

Adjusted EBITDA

(107)

 

(375)

 

(381)







Intangible assets capex

97


95


95

Tangible assets capex

22


2


2

Total capex

119

 

97

 

97

 

1.               Adjusted operating expenses exclude depreciation and amortisation, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.

2.               Prior year comparatives have been adjusted for discontinued operations (LEIDSA contract).

 

Sportech Venues

 

Sportech Venues operates ten gaming venues, providing 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. In 2021, an agreement was concluded whereby Sportech can offer betting on all other sports across a number of Venue locations under licence of the Connecticut Lottery Corporation, (CLC). Management have worked tirelessly with the CLC to introduce retail sports betting across the State since Q4 2021 and have comprehensive marketing plans in place ahead of the 2022/23 American football season, commencing September 2022.

 

COVID related travel and hospitality restrictions within retail outlets eased during the period resulting in an 80.6% increase in food and beverage ("F&B") revenue. However, the H1 F&B revenue of £1.6 million remains below the £2.5 million H1 2018 high, indicating upward potential when office workers return to 'normal occupancy'.

 

Sportech was delighted to announce in August 2021 a commercial arrangement with the Connecticut Lottery Corporation ("CLC") which, subject to required regulatory consents, provided Sportech Venues Inc., in conjunction with CLC's sports book provider Rush Street Interactive Inc. ("RSI"), an ability to deliver sports betting across certain locations and promote CLC's online and mobile channels.

 

Contribution margin of 50.7% (H1 2021: 49.7%) was marginally better despite the costs of introducing sports betting capabilities during the period. At the end of the period, the division operated nine leasehold premises and one freehold premise in Connecticut, USA.

 

 Venues

£'000

H1 2022

 

H1 2021

Constant Currency

 

H1 2021

Reported

Currency

Wagering revenue

9,412


11,358


10,681

F&B

1,584


877


824

Sports betting commission

718


-


-

Total revenue

11,714


12,235


11,505







Contribution

5,939


5,864


5,506

Contribution margin

50.7%


47.9%


47.9%







Adjusted operating expenses1

(4,414)


(4,767)


(4,505)

Adjusted EBITDA

1,525

 

1,097

 

1,001


 

 

 

 

 

Total capex

15

 

-

 

-

 

1.        Adjusted operating expenses exclude depreciation and amortisation and separately disclosed items as reported in note 1 of the Interim Financial Statements.

 

Corporate Costs

 

Corporate costs reduced by £0.4 million to £1.1 million due to staff costs savings, having restructured in H2 2021, as well as a general drive to reduce costs of the PLC. Costs are expected to continue to be reduced though H2 2022 as we aim to align the costs as close as possible to the reduced size of the Group.

 

Depreciation and Amortisation

 

Capital expenditure and depreciation/amortisation is much reduced in the continuing group from that of the Group prior to the 2021 disposals. Depreciation and amortisation in the period reduced from £0.8 million to £0.7 million. This is despite 2022 depreciation increasing following the change in assumption on the lease term of the Stamford venue as at 31 December 2021 and the upward revaluation of certain assets at the same venue.

 

Separately Disclosed Items

 

The Group incurred administration costs in continuing operations during the period of £0.6 million (H1 2021: £0.5 million) which are shown as separately disclosed items. H1 2022 items include pay in lieu of notice payments to former Directors and settlement of contract liabilities. The Company does not expect further costs in H2 2022 as the business has mostly completed restructuring.

 

Net Finance Income

 

The Group has no debt. The Group had a net finance income in continuing operations of £0.1 million (H1 2021: £0.1 million), including £nil (H1 2021: £0.1 million) interest accrued on potential tax liabilities payable, £0.1 million (H1 2021: £0.1 million) interest payable on lease liabilities and £0.2 million (H1 2021: £0.2 million) foreign exchange gain on financial assets and liabilities denominated in foreign currency.

 

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 2022 is (3.7)% (2021: 49%). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates, the non-recognition of deferred tax on losses in the UK due to uncertainty of non-recovery as well as the utilization of previously unprovided tax assets in the US.

 

The Group paid tax on account during the period of £4.6 million to HMRC for tax potentially due on the 2016 Spot the Ball VAT refund (excluding interest). The payment was in line with the tax provision held on the balance sheet of £4.6 million at both 30 June 2021 and 31 December 2021. The current tax asset on the balance sheet as at 30 June 2022 is an estimated overpayment of preliminary taxes in the US on profits generated in the six months to 30 June 2022.

 

Net Cash

 

The Group held cash balances of £8.1 million, excluding customer balances (31 December 2021: £21.9 million). The reduction is due to the payment of a £7.0 million dividend, settling lease and other legacy liabilities as well as paying tax on account of £4.6 million relating to the Spot the Ball tax dispute with HMRC. Legacy liabilities are now substantially settled.

 

Capital Expenditure

 

Capital expenditure was controlled again in the period and amounted to £0.1 million (H1 2021: £1.1 million). £1.0 million in the prior year related to the discontinued operations and was mainly staff costs capitalised or expenditure agreed to be reimbursed by the buyer of the operation. Capital expenditure will increase into H2 2022 and 2023 as venues are improved to support continued sports betting growth and with the move of Sports Haven to a new building.

 

Shareholders' Funds

 

Shareholders' funds decreased by £6.8 million from 31 December 2021 to £13.0 million (31 December 2021: £19.8 million) following the dividend paid in the period. The loss made in the period of £0.8 million is offset in reserves by a foreign exchange gain on translation of net assets denominated in US dollar of £1.0 million, given the weakening of Sterling over the period.

 

Going Concern

 

After making reasonable enquiries and forecasting the Group's cash flows with reasonable downside assumptions applied, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements. The Directors have not included in the downside model any assumption of a further local or more widespread "lockdown" as a result of COVID-19 cases or a new pandemic arising. Under this scenario the Directors will take all actions necessary (as evidenced in 2020 and 2021) and make use of all government support available to ensure the Company and the Group continues in operational existence.

 

Outlook

 

Enhancing Group value remains the Board's key focus and the Group strategy is structured accordingly with regard to this central measure.

 



 

Interim consolidated income statement
For the six months ended 30 June 2022


 

 

Six months ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

 

Year

ended

31 December 2021
(Audited)

 

Note

£000

£000

£000

Revenue


12,571

11,827

22,942

Cost of sales

6

(6,043)

(5,982)

(11,489)

Gross profit


6,528

5,845

11,453

Marketing and distribution costs

6

(234)

(224)

(276)

Contribution


6,294

5,621

11,177

Other income

20a&23

155

2,575

4,101

Operating costs

6

(7,390)

(8,019)

(15,680)

Operating (loss)/profit


(941)

177

(402)

Finance costs

8

(93)

(154)

(305)

Finance income

8

232

230

461

(Loss)/profit before taxation from continuing operations


(802)

253

(246)

Taxation - continuing operations

9

(29)

(170)

(192)

(Loss)/profit for the period from continuing operations


(831)

83

(438)

Profit after taxation from discontinued operations

20g

-

26,699

35,001

(Loss)/profit for the period


(831)

26,782

34,563

 


 



Attributable to:

Owners of the Company

 

(831)

26,782

34,563

 


 



Basic (loss)/profit per share attributable to owners of the Company


 



From continuing operations

10

(0.8)p

-

(0.3)p

From discontinued operations

10

-

14.1p

20.6p

Total

10

(0.8)p

14.1p

20.3p

 


 



Diluted (loss)/profit per share attributable to owners of the Company


 



From continuing operations

10

(0.8)p

-

(0.3)p

From discontinued operations

10

-

14.1p

20.6p

Total

10

(0.8)p

14.1p

20.3p



 



Adjusted loss per share attributable to owners of the Company


 



Basic

10

(0.4)p

(0.7)p

(1.7)p

Diluted

10

(0.4)p

(0.7)p

(1.7)p


See note 4 for a reconciliation of the above interim consolidated income statement to the adjusted performance measures used by the Board of Directors to assess divisional performance.

 

Prior half year comparatives have been restated to exclude the results of the LEIDSA contract which have been included with the results of the Global Tote and Bump 50:50 within profit after taxation from discontinued operations.

 

 


Interim consolidated statement of comprehensive income
For the six months ended 30 June 2022


 

Six months ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

Year ended

31 December 2021
(Audited)

 

£000

£000

£000

(Loss)/profit for the period

(831)

26,782

34,563

Other comprehensive expense:

 



Items that will not be reclassified to profit and loss

 



Actuarial gain on retirement benefit liability

-

186

186

 

-

186

186

Items that may be subsequently reclassified to profit and loss

 



Currency translation differences - continuing operations

983

(1,324)

(617)

Currency translation differences - discontinued operations

-

432

(550)

Less: gain reclassified to profit and loss on disposal of foreign operations

-

(3,133)

(3,373)


983

(4,025)

(4,540)

Total other comprehensive income/(expense) for the period, net of tax

983

(3,839)

(4,354)

Total comprehensive income for the period

152

22,943

30,209


 



Attributable to:

 



Owners of the Company

152

22,943

30,209


The prior half year comparatives have been restated to show the reclassification of the cumulative foreign exchange gain on disposal of foreign operations to the profit and loss account, as well as splitting the currency translation differences in the period to 30 June 2021 between continuing operations and discontinued operations.


Interim consolidated statement of changes in equity
For the six months ended 30 June 2022

 


 

Other reserves

 

 




Ordinary shares

 

Capital

redemption reserve



Other reserve

 

Foreign exchange reserve

Retained earnings/ accumulated losses




Total

Six months ended 30 June 2022

£000

£000

£000

£000

£000

£000

At 1 January 2022 (audited)

1,000

888

314

2,325

15,295

19,822

Comprehensive expense







Loss for the period

-

-

-

-

(831)

(831)

Other comprehensive items







Currency translation differences

-

-

-

983

-

983

Total other comprehensive items

-

-

-

983

-

983

Total comprehensive items

-

-

-

983

(831)

152

Transactions with owners

 

 

 

 

 

 

Dividend paid

-

-

-

-

(7,000)

(7,000)

Total transactions with owners

-

-

-

-

(7,000)

(7,000)

Total changes in equity

-

-

-

983

(7,831)

(6,848)

At 30 June 2022 (unaudited)

1,000

888

314

3,308

7,464

12,974

 



Other reserves






Ordinary shares

 

Capital

redemption reserve



Other reserve

 

Foreign exchange reserve

Retained earnings/ accumulated losses




Total

Six months ended 30 June 2021 (Restated)

£000

£000

£000

£000

£000

£000

At 1 January 2021 (audited)

37,750

10,312

(638)

6,865

(29,130)

25,159

Comprehensive income







Profit for the period

-

-

-

-

26,782

26,782

Other comprehensive items







Actuarial gain on defined benefit

pension liability*

 

-

 

-

 

186

 

-

 

-

186

Cumulative actuarial loss on defined benefit pension liability

Disposed of, transferred to retained earnings

-

-

766

-

(766)

-

Currency translation differences

-

-

-

(4,025)

-

(4,025)

Total other comprehensive items

-

-

952

(4,025)

(766)

(3,839)

Total comprehensive items

-

-

952

(4,025)

26,016

22,943

Transactions with owners







Share option charge

-

-

-

-

261

261

Total transactions with owners

-

-

-

-

261

261

Total changes in equity

-

-

952

(4,025)

26,277

23,204

At 30 June 2021 (unaudited)

37,750

10,312

314

2,840

(2,853)

48,363

 

 

* Net of deferred tax.

 

 

 



Other reserves




Ordinary shares

Capital redemption reserve

Other reserve

Foreign exchange reserve

Retained earnings/ accumulated losses

Total

Year ended 31 December 2021 (Audited)

£000

£000

£000

£000

£000

£000

At 1 January 2021

37,750

10,312

(638)

6,865

(29,130)

25,159

Comprehensive (expense)/income







Profit for the year

-

-

-

-

34,563

34,563

Other comprehensive items







Actuarial gain on defined benefit

pension liability*

 

-

 

-

 

186

 

-

 

-

186

Cumulative actuarial loss on defined benefit pension liability

Disposed of, transferred to retained earnings

-

-

766

-

(766)

-

Currency translation differences

-

-

-

(4,540)

-

(4,540)

Total other comprehensive items

-

-

952

(4,540)

(766)

(4,354)

Total comprehensive items

-

-

952

(4,540)

33,797

30,209

Transactions with owners







Share option charge

-

-

-

-

334

334

Cancellation of capital redemption reserve

-

(10,312)

-

-

10,312

-

Capital reduction

(35,862)

-

-

-

35,862

-

Fees in relation to capital reduction

-

-

-

-

(66)

(66)

Fees in relation to share buy-back

-

-

-

-

(314)

(314)

Share buy-back

(888)

888

-

-

(35,500)

(35,500)

Total transactions with owners

(36,750)

(9,424)

-

-

10,628

(35,546)

Total changes in equity

(36,750)

(9,424)

952

(4,540)

44,425

(5,337)

At 31 December 2021

1,000

888

314

2,325

15,295

19,822

 

* Net of deferred tax

 

 



Interim consolidated balance sheet
As at 30 June 2022


 

 

As at

30 June
2022 (Unaudited)

Restated

As at

30 June
2021
(Unaudited)

 

As at

31 December
2021
(Audited)

 

Note

£000

£000

£000

ASSETS


 



Non-current assets


 



Goodwill


604

604

604

Intangible fixed assets

11

6,939

6,657

6,357

Property, plant and equipment

12

4,409

4,932

4,261

Right-of-use assets

13

4,813

1,079

4,657

Trade and other receivables

14

176

154

158

Total non-current assets


16,941

13,426

16,037

Current assets


 



Trade and other receivables

14

1,393

5,694

1,750

Inventories


140

128

124

Current tax receivable


54

-

-

Cash and cash equivalents

15

8,588

49,139

22,367

Total current assets


10,175

54,961

24,241

TOTAL ASSETS


27,116

68,387

40,278

LIABILITIES


 



Current liabilities


 



Trade and other payables

16

(6,959)

(9,754)

(7,945)

Provisions

17

(17)

(1,402)

(736)

Lease liabilities

19

(678)

(1,099)

(923)

Current tax liabilities


-

(4,871)

(4,718)

Deferred tax liabilities


-

(46)

-

Total current liabilities


(7,654)

(17,172)

(14,322)

Net current assets


2,521

37,789

9,919

Non-current liabilities


 



Lease liabilities

19

(6,477)

(2,852)

(6,091)

Deferred tax liabilities


(11)

-

(43)



(6,488)

(2,852)

(6,134)

TOTAL LIABILITIES


(14,142)

(20,024)

(20,456)

NET ASSETS


12,974

48,363

19,822

 


 



EQUITY


 



Ordinary shares


1,000

37,750

1,000

Other reserves


4,510

13,466

3,527

Retained earnings/(accumulated losses)


7,464

(2,853)

15,295

TOTAL EQUITY


12,974

48,363

19,822




Interim consolidated statement of cash flows
For the six months ended 30 June 2022


 

 

Six months

ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

 

Year

ended

31 December 2021
(Audited)

 

Note

£000

£000

£000

Cash flows (used in)/from operating activities


 



Cash (used in)/generated from operations, before separately disclosed items

18

(544)

2,467

511

Interest received


-

27

-

Interest paid


-

(2)

-

Tax refund received


-

1,442

1,442

Tax paid


(4,843)

(378)

(1,029)

Net cash generated (used in)/from operating activities before separately disclosed items


(5,387)

3,556

924

Cash inflows - other income

23

100

1,057

2,483

Cash outflows - separately disclosed items

7

(1,219)

(634)

(2,407)

Cash generated (used in)/from operations


(6,506)

3,979

1,000

Cash flows (used in)/from investing activities


 



Disposal of freehold property in New Haven, Connecticut (net of disposal costs)

20a

-

4,193

4,193

Disposal of LEIDSA contract (net of cash disposed of and transactions costs)

20f

26

-

9,417

Proceeds net of cash disposed of and disposal costs - Global Tote

20f

-

18,664

22,636

Proceeds net of cash disposed of and disposal costs - Bump 50:50

20f

-

4,732

4,644

Proceeds from sale of other intangible assets

20c

-

150

150

Investment in intangible fixed assets

11,20

(97)

(920)

(1,012)

Purchase of property, plant and equipment

12,20

(38)

(146)

(582)

Net cash generated from/(used in) investing activities


(109)

26,673

39,446

Cash flows used in financing activities


 



Principal paid on lease liabilities

19,20

(622)

(675)

(1,333)

Interest paid on lease liabilities

19,20

(69)

(103)

(179)

Share buy-back including transaction costs


-

-

(35,880)

Dividend paid


(7,000)

-

-

Interest received


-

-

27

Interest paid


-

-

(2)

Cash used in financing activities


(7,691)

(778)

(37,367)

Net (decrease)/increase in cash and cash equivalents


(14,306)

29,874

3,079

Effect of foreign exchange on cash and cash equivalents


527

(194)

(171)

Cash and cash equivalents at the beginning of the year


22,367

11,821

11,821

Add cash included in assets held for sale


-

7,638

7,638

Group cash and cash equivalents at the end of the period

15

8,588

49,139

22,367

Represented by:


 



Cash and cash equivalents

15

8,588

49,139

22,367

Less customer funds

15

(450)

(530)

(455)

Adjusted net cash at the end of the period

15

8,138

48,609

21,912


Notes to the consolidated interim financial statements
For the six months ended 30 June 2022

 

1.      General information

Sportech PLC (the "Company") is a company domiciled in the UK and listed on the London Stock Exchange's Alternative Investment Market ("AIM"). 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 2022 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 2022. The principal activities of the Group were the provision of pari-mutuel betting (B2C) and the supply of wagering technology solutions (B2B) up until the disposal of the Group's Global Tote business on 17 June 2021, the disposal of the Group's 50:50 Lottery division (Bump 50:50) on 2 June 2021 and the disposal of the Group's supply contract with LEIDSA in the Dominican Republic on 31 December 2021. Following the disposals, the Group now operates ten retail venues and MyWinners.com offering pari-mutuel betting (and also betting through an arrangement with the Connecticut Lottery Corporation) as well as a pari-mutuel betting site, 123Bet.com and a has a lottery technology development arm (B2B).

 

The condensed consolidated interim financial statements were approved for issue on 31 August 2022.

 

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 2021 were approved by the Board of Directors on 31 March 2022 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.

 

2.      Basis of preparation

a.      These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' and also in accordance with the measurement and recognition principles of UK adopted international accounting standards. 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 2021 which have been prepared in accordance with UK adopted international accounting standards.

 

b.      After making reasonable enquiries and forecasting the Group's cash flows with reasonable downside assumptions applied, 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 condensed consolidated interim financial statements. The forecasts used in the analysis of the Group's ability to continue in operational existence for the foreseeable future include both the base plan and downside scenarios which although Sportech has no connections with Russia or Ukraine through its operations (no employees located there nor any customers or suppliers in the region), include assumptions taking into account macro-economic potential indirect impacts of the events unfolding including impacts of prices rising globally.

 

c.      The preparation of condensed consolidated 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, the valuation of contingent consideration receivable 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 17 to 19 of the 2021 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, third party technology, foreign exchange, political marginalisation in Connecticut and global pandemics.

 

3.      Accounting policies

 

There are no new standards or amendments to standards or interpretations that are mandatory for the first time for the financial year beginning 1 January 2022 that would impact the Group financial statements. Therefore, all accounting policies applied in these condensed consolidated interim financial statements are consistent with those of the annual financial statements for the year ended 31 December 2021, as described in those annual financial statements.

 

The standards, amendments and interpretations that are not yet effective and have not been adopted early by the Group are listed in the 2021 Annual Report and accounts.  

 

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 expenditure management believe should be added back (separately disclosed items) and other income. The share option expense is also excluded given it is not directly linked to operating performance of the divisions. Interest is not allocated to segments as the Group's cash position is controlled by the central finance team. This measure provides the most reliable indicator of underlying performance of each of the trading divisions as it is the closest approximation to cash generated by underlying trade, excluding the impact of separately disclosed items and working capital movements.

 

Adjusted EBITDA is not an IFRS measure, nevertheless although it may not be comparable to adjusted figures used elsewhere, 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:


 

 

 

Note

 

 

Six months ended
30 June
2022
(Unaudited)

 

Restated

Six months ended
30 June
2021
(Unaudited)

 

 

Year

ended

31 December 2021
(Audited)



£000

£000

£000

Operating costs per income statement


(7,390)

(8,019)

(15,680)

Add back:


 



Depreciation

12,13,20d

537

379

982

Amortisation, excluding acquired intangible assets

11

132

131

129

Amortisation of acquired intangible assets

11

29

254

509

Reversal of impairment of property, plant and equipment

12

-

-

(335)

Loss on disposal of property, plant and equipment

12

131

-

-

Share option charge

5

-

261

334

Separately disclosed items

7

578

477

1,101

Total adjusted net operating costs


(5,983)

(6,517)

(12,960)

 

Adjusted EBITDA is calculated as follows:


 

 

Six months ended
30 June
2022
(Unaudited)

 

Restated

Six months ended
30 June
2021
(Unaudited)

 

 

Year

ended

31 December 2021
(Audited)


£000

£000

£000

Revenue

12,571

11,827

22,942

Cost of sales

(6,043)

(5,982)

(11,489)

Gross profit

6,528

5,845

11,453

Marketing and distribution costs

(234)

(224)

(276)

Contribution

6,294

5,621

11,177

Adjusted net operating costs

(5,983)

(6,517)

(12,960)

Adjusted EBITDA

311

(896)

(1,783)

 

Prior year comparatives for the period ended 30 June 2021 have been adjusted for discontinued operations related to the LEIDSA contract (prior full year comparatives were adjusted in the 2021 financial statements to exclude results of the Global Tote, Bump 50:50 business and LEIDSA).

Adjusted profit is also an adjusted performance measure used by the Group. This uses adjusted EBITDA, as defined above 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 certain 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 2022

(Unaudited)

Restated

Six months ended

30 June 2021

(Unaudited)

 

Year ended

31 December 2021

(Audited)

From continuing operations:

£000

£000

£000

Adjusted EBITDA

311

(896)

(1,783)

Share option charge

-

(261)

(334)

Depreciation

(537)

(379)

(982)

Amortisation (excluding amortisation of acquired intangibles)

(132)

(131)

(129)

Net finance costs (excluding certain finance costs - note 8)

(69)

(55)

(130)

Adjusted loss before tax

(427)

(1,722)

(3,358)

Tax at 6.0% (30 June 2021: 20.1%, 31 December 2021: 16.4%)

26

346

551

Adjusted loss after tax

(401)

(1,376)

(2,807)

 

 


 

Six months ended

30 June 2022

(Unaudited)

Restated

Six months ended

30 June 2021

(Unaudited)

 

Year ended

31 December 2021

(Audited)

From discontinued operations:

£000

£000

£000

Adjusted EBITDA

-

5,590

6,879

Depreciation

-

(100)

(221)

Amortisation (excluding amortisation of acquired intangibles)

-

(75)

(151)

Net finance costs (excluding certain finance costs - note 8)

-

(24)

54

Adjusted profit before tax

-

5,391

6,561

Tax at n/a% (30 June 2021: 22.9%, 31 December 2021: 25.8%)

-

(1,234)

(1,693)

Adjusted profit after tax

-

4,157

4,868



 

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 Digital - a pari-mutuel betting website and provision of lottery software and services worldwide;

-     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 2022 (Unaudited)


 

Sportech Digital

 

Sportech

Venues

 

Corporate costs



Group

 

£000

£000

£000

£000

Revenue from rendering of services

857

9,412

-

10,269

Revenue from food and beverage sales

-

1,584

-

1,584

Revenue from sports betting services

-

718

-

718

Total revenue

857

11,714

-

12,571

Cost of sales

(452)

(5,591)

-

(6,043)

Gross profit

405

6,123

-

6,528

Marketing and distribution costs

(50)

(184)

-

(234)

Contribution

355

5,939

-

6,294

Adjusted operating costs

(462)

(4,414)

(1,107)

(5,983)

Adjusted EBITDA

(107)

1,525

(1,107)

311

Depreciation

(6)

(518)

(13)

(537)

Amortisation (excluding amortisation of acquired intangibles)

(69)

(1)

(62)

(132)

Segment result

(182)

1,006

(1,182)

(358)

Amortisation of acquired intangibles

(29)

-

-

(29)

Loss on disposal of Property, plant and equipment

-

(131)

-

(131)

Separately disclosed items

-

(307)

(271)

(578)

Other income

-

155

-

155

Operating (loss)/profit

(211)

723

(1,453)

(941)

Net finance income

 

 

 

139

Loss before taxation from continuing operations

 

 

 

(802)

Taxation - continuing operations

 

 

 

(29)

Loss for the period from continuing operations          

 

 

 

(831)

Profit after taxation from discontinued operations

 

 

 

-

Loss for the period

 

 

 

(831)

Other segment items - capital expenditure

 

 

 

 

Intangible fixed assets

97

-

-

97

Property, plant and equipment

22

15

1

38



Six months ended 30 June 2021 (Unaudited)


Restated

Sportech Digital

 

Sportech

Venues

 

Corporate costs


Restated
Group

 

£000

£000

£000

£000

Revenue from rendering of services

322

10,681

-

11,003

Revenue from food and beverage sales

-

824

-

824

Total revenue

322

11,505

-

11,827

Cost of sales

(188)

(5,794)

-

(5,982)

Gross profit

134

5,711

-

5,845

Marketing and distribution costs

(19)

(205)

-

(224)

Contribution

115

5,506

-

5,621

Adjusted operating costs

(496)

(4,505)

(1,516)

(6,517)

Adjusted EBITDA

(381)

1,001

(1,516)

(896)

Share option charge

-

-

(261)

(261)

Depreciation

(5)

(366)

(8)

(379)

Amortisation (excluding amortisation of acquired intangibles)

(41)

-

(90)

(131)

Segment result

(427)

635

(1,875)

(1,667)

Amortisation of acquired intangibles

(254)

-

-

(254)

Profit on disposal of Sports Haven

-

2,575

-

2,575

Separately disclosed items

(173)

(8)

(296)

(477)

Operating (loss)/profit

(854)

3,202

(2,171)

177

Net finance income




76

Profit before taxation from continuing operations




253

Taxation - continuing operations




(170)

Profit for the period from continuing operations         




83

Profit after taxation from discontinued operations




26,699

Profit for the period




26,782

Other segment items - capital expenditure

 

 

 

 

Intangible fixed assets

95

-

-

95

Property, plant and equipment

2

-

-

2

 

The above table has been restated to exclude discontinued activities in relation to the LEIDSA contract. Results from the LEIDSA contract were within the Sportech Digital division in 2021, formally known as Sportech lotteries. Those in relation to Global Tote and Bump 50:50 were classified as discontinued in 2021 also.


Year ended 31 December 2021 (Audited)


Sportech

Digital

Sportech

Venues

Corporate costs


Group

 

£000

£000

£000

£000

Revenue from rendering of services

1,032

19,515

-

20,547

Revenue from food and beverage sales

-

2,115

-

2,115

Revenue from sports betting services

-

280

-

280

Total revenue

1,032

21,910

-

22,942

Cost of sales

(548)

(10,941)

-

(11,489)

Gross profit

484

10,969

-

11,453

Marketing and distribution costs

(76)

(200)

-

(276)

Contribution

408

10,769

-

11,177

Adjusted net operating costs (note 1)

(987)

(9,409)

(2,564)

(12,960)

Adjusted EBITDA

(579)

1,360

(2,564)

(1,783)

Share option charge

-

-

(334)

(334)

Depreciation

(10)

(950)

(22)

(982)

Amortisation (excluding amortisation of acquired intangible assets)

(97)

-

(32)

(129)

Segment result before amortisation of acquired intangibles

(686)

410

(2,952)

(3,228)

Amortisation of acquired intangibles

(509)

-

-

(509)

Reversal of impairment of property, plant and equipment

-

335

-

335

Separately disclosed items

(165)

(84)

(852)

(1,101)

Other income

100

4,001

-

4,101

Operating (loss)/profit

(1,260)

4,662

(3,804)

(402)

Net finance costs




156

Loss before taxation from continuing operations




(246)

Taxation




(192)

Loss for the year from continuing operations




(438)

Profit after tax from discontinued operations




35,001

Profit for the year




34,563

Other segment items - capital expenditure





Intangible fixed assets (continuing operations)

165

-

-

165

Intangible fixed assets (discontinued operations)

847

-

-

847

Property, plant and equipment (continuing operations)

4

27

-

31

Property, plant and equipment (discontinued operations)

551

-

-

551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.      Expenses by nature

 


 

 

Six months ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

 

Year
ended

31 December 2021
(Audited)

 

 

£000

£000

£000

Cost of sales



 


Tote and track fees


5,266

5,426

10,205

F&B consumables


536

305

818

Betting and gaming duties


54

48

99

Repairs and maintenance cost of sales


15

18

34

Programs


127

147

266

Cost of sales


45

38

67

Total cost of sales


6,043

5,982

11,489






Marketing and distribution costs





Marketing


224

210

253

Vehicle costs


10

14

23

Total marketing and distribution costs


234

224

276






Operating costs





Staff costs - gross, excluding share option charges


3,161

3,415

6,661

Less amounts capitalised


(89)

(95)

(165)

Staff costs - net


3,072

3,320

6,496

Property costs


1,201

1,378

2,581

IT & communications


301

224

457

Professional fees and licences


765

959

2,323

Insurance


500

475

968

Travel and entertaining


41

72

26

Banking transaction costs and FX


48

37

109

Other costs


55

52

-

Adjusted operating costs

 

5,983

6,517

12,960

Share option charge

 

-

261

334

Depreciation

 

537

379

982

Amortisation, excluding amortisation of acquired intangibles

 

132

131

129

Amortisation of acquired intangibles

 

29

254

509

Loss on disposal of property, plant and equipment

 

131

-

-

Reversal of impairment of property, plant and equipment

 

-

-

(335)

Separately disclosed items

 

578

477

1,101

Total operating costs

 

7,390

8,019

15,680

 



 

7.      Separately disclosed items


 

Six months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended

31 December 2021
(Audited)

 

Note

£000

£000

£000

Continuing operations


 



Included in operating costs:


 



Onerous contract provisions and other losses resulting from


 



exit from California operations

17

(69)

-

91

Redundancy and restructuring costs

i

330

179

625

Corporate activity


8

290

21

Costs in relation to the Spot the Ball VAT refund


-

-

10

Settlement of a contract

ii

304

-

-

Costs in relation to exiting the Group's interests in India


5

8

13

Costs in relation to the Group's move from Main Market to AIM


-

-

341



578

477

1,101

Discontinued operations


 



Included in operating costs

20b,20c

-

371

371



 



Total included in operating costs


578

848

1,472



 



Included in finance costs:


 



Interest accrued on corporate tax potentially due and unpaid at the balance sheet date on STB refund received in 2016

8

24

74

150



 



Total Separately disclosed items


602

922

1,622

 

i)              Redundancy and restructuring costs relate to settlements made to former Directors in lieu of notice.

ii)             The Group exited a royalty arrangement in the period relating to branding at its Connecticut venues. This required a termination fee to be paid amounting to £304k.

 

Below is a summary of cash outflows from separately disclosed items:

 

 

Six months ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

 

Year
ended

31 December 2021
(Audited)

 

 

£000

£000

£000

Continuing operations - cash outflows from separately disclosed items:


 



Redundancy and restructuring costs


(242)

(44)

(625)

Costs in relation to the Spot the Ball VAT refund


-

(27)

(37)

Costs in relation to corporate activity


(8)

(48)

(71)

Costs in relation to the Group's onerous leases in California


(660)

(1)

(785)

Costs in relation to exiting the Group's interests in India


(5)

(8)

(13)

Costs in relation to the Group's move from Main Market to AIM


-

-

(341)

Settlement of a contract


(304)

-

-



(1,219)

(1,872)

Cash outflows from separately disclosed items - discontinued operations


-

(506)

(535)



(1,219)

(634)

(2,407)



 

8.      Net finance costs

 

 


Six months ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

 

Year
ended 31 December 2021
(Audited)

 

Note

£000

£000

£000

Continuing operations:

 

 



Finance costs:

 

 



Interest accrued and paid on tax liabilities

 

(24)

(74)

(150)

Interest on lease liabilities

19

(69)

(80)

(155)

Total finance costs

 

(93)

(154)

(305)

Finance income:

 

 



Foreign exchange gain on financial assets and liabilities denominated in foreign currency

 

232

205

436

Interest received on overpaid tax

 

-

25

-

Interest received on bank deposits

 

-

-

25

Total finance income

 

232

230

461


 

 



Discontinued operations

20b,20c

-

54

54


 

 



Net finance income

 

139

130

210

 

Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in note 4.

 

 

Six months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended 31 December 2021
(Audited)

Continuing operations

£000

£000

£000

Foreign exchange gain on financial assets and liabilities denominated in foreign currency

232

205

436

Interest accrued and paid on tax liabilities

(24)

(74)

(150)


208

131

286

 

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 2022 is (3.7)% (2021: 49.0%). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates, the non-recognition of deferred tax on losses in UK due to uncertainty of recovery as well as the utilisation of previously unprovided deferred tax assets in the US.

 

At the prior period ends the Group held a tax provision of £4,600k for tax potentially due on the 2016 Spot the Ball refund (excluding interest). During the current reporting period the Group paid £4,600k into its UK corporate tax account to stop interest potentially payable accruing further. Management continues to remain of the view that the 2016 Sportech Pools Limited tax return was accurately filed, and no further tax is due. If this is ultimately found to be correct, the £4,600k is repayable to the Group plus interest from 15 March 2022. The remaining current tax asset is an estimated overpayment of preliminary taxes in the US on profits generated in the six months to 30 June 2022.

 

 

 



 

10.  Earnings per share

 

 

2022

2021 (restated)

Six months ended 30 June (Unaudited)

Continuing

Discontinued

Total

Continuing

Discontinued

Total

Basic EPS

 

 

 

 

 

 

(Loss)/profit for the period (£000)

(831)

-

(831)

83

26,699

26,782

Weighted average no of shares ('000)

100,000

100,000

100,000

188,751

188,751

188,751

Basic EPS

(0.8)p

-

(0.8)p

-

14.1p

14.1p

 

 

2021

Year ended 31 December (Audited)

Continuing

Discontinued

Total

Basic EPS

 

 

 

(Loss)/profit for the year (£000)

(438)

35,001

34,563

Weighted average no of shares ('000)

169,785

169,785

169,785

Basic EPS

(0.3)p

20.6p

20.3p

 

 

2022

2021 (restated)

Six months ended 30 June (Unaudited)

Continuing

Discontinued

Total

Continuing

Discontinued

Total

Diluted EPS

 

 

 

 

 

 

(Loss)/profit for the period (£000)

(831)

-

(831)

83

26,699

26,782

Weighted average no of shares ('000)

100,000

100,000

100,000

188,751

188,751

188,751

Dilutive potential ordinary shares ('000)

N/A

N/A

N/A

N/A

N/A

N/A

Total potential ordinary shares ('000)

100,000

100,000

100,000

188,751

188,751

188,751

Diluted EPS

(0.8)p

-

(0.8)p

-

14.1p

14.1p

 

 

 

2021

Year ended 31 December (Audited)

 

 

 

Continuing

Discontinued

Total

Diluted EPS

 

 

 

 

 

 

(Loss)/profit for the year (£000)

 

 

 

(438)

35,001

34,563

Weighted average no of shares ('000)

 

 

 

169,785

169,785

169,785

Dilutive potential ordinary shares ('000)

 

 

 

N/A

N/A

N/A

Total potential ordinary shares ('000)

 

 

 

169,785

169,785

169,785

Diluted EPS

 

 

 

(0.3)p

20.6p

20.3p

 

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.

 

Continuing operations

 

 

 

 

Note


Six months ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

 

Year ended
31 December

2021
(Audited)

Adjusted loss after tax (£000)

4

(401)

(1,376)

(2,807)

Basic Adjusted EPS (pence)

 

(0.4)p

(0.7)p

(1.7)p

Diluted Adjusted EPS (pence)

 

(0.4)p

(0.7)p

(1.7)p

 

 

 

 

11.  Intangible fixed assets


 

Six months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended 31 December 2021
(Audited)

 

 

£000

£000

£000

At 1 January

 

6,357

7,343

7,343

Additions

 

97

95

188

Amortisation charge for period

 

(161)

(460)

(789)

Disposal

 

-

(82)

(456)

Movement as a result of foreign exchange

 

646

(239)

71

Net book amount at end of period

 

6,939

6,657

6,357

 

12.  Property, plant and equipment


Six months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended 31 December 2021
(Audited)

 

£000

£000

£000

At 1 January

4,261

5,077

5,077

Additions

38

2

438

Disposal

-

-

(992)

Depreciation charge for period

(215)

(225)

(669)

Loss on disposal

(131)

-

-

Reversal of impairment

-

-

335

Movement as a result of foreign exchange

456

78

72

Net book amount at end of period

4,409

4,932

4,261

 

13.  Right-of-use assets


 

Six months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended 31 December 2021
(Audited)

 

Note

£000

£000

£000

At 1 January

 

4,657

1,133

1,133

Additions

 

-

169

1,240

Depreciation charge for period

 

(322)

(254)

(534)

Disposed of - exited lease early

 

(17)

-

-

Reassessment of lease assumptions - break clause

19

-

-

2,835

Transferred from held for sale

 

-

-

45

Movement as a result of foreign exchange

 

495

31

(62)

Net book amount at end of period

 

4,813

1,079

4,657

 

14.  Trade and other receivables


As at
30 June
2022
(Unaudited)

As at
30 June
2021
(Unaudited)

As at 31 December 2021
(Audited)

 

£000

£000

£000

Non-current

 



Trade and other receivables

176

154

158

Current

 



Trade and other receivables

1,393

5,694

1,750

Total trade and other receivables

1,569

5,848

1,908

 

Included in current trade and other receivables in the prior half year is £3,377k consideration to be received for the disposal of the Global Tote division (note 20e).

 

15.  Cash and cash equivalents


 

As at
30 June
2022
(Unaudited)

As at
30 June
2021
(Unaudited)

As at 31 December 2021
(Audited)

 

Note

£000

£000

£000

Cash and short-term deposits


8,138

48,609

21,912

Customer funds

16

450

530

455

Total cash and cash equivalents

 

8,588

49,139

22,367

 

Customer funds are matched by liabilities of an equal value within trade and other payables (see note 16).

 

16.  Trade and other payables


 

 

As at
30 June
2022
(Unaudited)

Restated

As at
30 June
2021
(Unaudited)

 

As at 31 December 2021
(Audited)

 

Note

£000

£000

£000

Trade payables


3,769

3,806

3,545

Other taxes and social security costs

 

307

575

178

Accruals and other payables

 

2,433

4,823

3,767

Deferred income

 

-

20

-

Player liability

15

450

530

455

Total trade and other payables

 

6,959

9,754

7,945

 

17.  Provisions


 

Six months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended 31 December 2021
(Audited)

 

 

£000

£000

£000

At beginning of period


736

1,442

1,442

Utilised during the period

 

(660)

-

(785)

(Released)/charged to the income statement

 

(69)

-

91

Currency movements

 

10

(40)

(12)

Total provisions

 

17

1,402

736

Provisions are in relation to:

 

 



Current provisions

 

 



Onerous contracts

 

17

1,402

736

The Group had committed financial obligations arising from leases it entered into in California. The amounts provided for in the prior year represented management's best estimate based on scenario analysis of what the Group was expecting to pay to settle the liabilities. During the prior year one lease dispute was settled resulting in a cash outflow of £785k (including legal fees). The second lease dispute was settled in early 2022, for £660k (including legal fees to date). Legal fees estimated as at 31 December 2021 were higher than actual fees incurred and therefore £69k of provision has been released to the income statement in operation expenses and shown as a negative separately disclosed item given the original expense was disclosed here. The estimated remaining legal fees to finalise the Group's exit from California amount to £17k, actual legal fees incurred to complete the process may differ from management's estimate.

 

 

18.  Cash flow from operating activities before separately disclosed items


Reconciliation of (loss)/profit before taxation to cash flows from operating activities before separately disclosed items:

 


 

 

Six months ended
30 June
2022
(Unaudited)

Restated

Six months ended
30 June
2021
(Unaudited)

 

Year
ended 31 December 2021
(Audited)

 

Note

£000

£000

£000

(Loss)/profit before taxation from continuing operations

 

(802)

253

(246)

Profit before taxation from discontinued operations

20b,c&d

-

27,332

35,987

Total (loss)/profit before tax

 

(802)

27,585

35,741

Adjustments for:

 

 



Net Separately disclosed items (included in operating costs)

7

578

848

1,472

Other income (excluding profit on disposal of Sports Haven)

23

(155)

(1,057)

(2,583)

Depreciation and amortisation

11,12,13

698

939

1,992

Loss on disposal of property, plant and equipment

12

131

-

-

Profit on disposal of Sports Haven

20a

-

(2,575)

(2,575)

Profit on disposal of discontinued operations

20e

-

(21,109)

(28,625)

Profit on disposal of software


-

(65)

(68)

Profit on disposal property, plant and equipment


-

-

(47)

Reversal of impairment of assets

12,13

-

-

(335)

Net finance charges

8

(139)

(130)

(210)

Share option expense


-

261

334

Changes in working capital:


 



Increase in trade and other receivables


(84)

(5,774)

(2,162)

(Increase)/decrease in inventories


(16)

205

192

(Decrease)/increase in trade and other payables, excluding player liabilities


(750)

2,776

(448)

(Decrease)/increase in player liabilities

15

(5)

563

(2,167)

Cash (used in)/generated from operating activities, before separately disclosed items

 

(544)

2,467

511

 

19.  Lease liabilities

 

As at

30 June
2022
(Unaudited)

As at

30 June
2021
(Unaudited)

As at

31 December
2021
(Audited)

Maturity analysis - contractual undiscounted cashflows

£000

£000

£000

Less than one year

810

1,416

1,211

Between 2 and 5 years

3,000

2,880

2,615

More than 5 years

5,093

1

4,824

Total

8,903

4,297

8,650

 

The weighted average incremental borrowing rate applied to the lease liabilities was 4.16%, lowest rate being 4.00% and the highest being 5.75%.


As at

30 June
2022
(Unaudited)

As at

30 June
2021
(Unaudited)

As at

31 December
2021
(Audited)

Lease liabilities included in the balance sheet

£000

£000

£000

Current

678

1,099

923

Non-current

6,477

2,852

6,091

Total

7,155

3,951

7,014

 

 

 

Six months ended

30 June
2022
(Unaudited)

Six months ended

30 June
2021
(Unaudited)

Year ended

31 December
2021
(Audited)

Movement in lease liability during the period

Note

£000

£000

£000

At 1 January

 

7,014

3,882

3,882

Interest charged to the income statement

8

69

80

155

New leases entered into

13

-

633

1,698

Reassessment of lease assumptions - break clause

13

-

-

2,835

Lease rentals paid

 

(691)

(621)

(1,354)

Disposed of on settlement of lease dispute

 

-

-

(169)

Disposal - early exit of lease

 

(23)

-

-

Movement as a result of foreign exchange

 

786

(23)

(33)

At period end

 

7,155

3,951

7,014

 

20.  Discontinued operations and profit on disposal

 

20a) On 28 April 2021 the Group completed the disposal of its freehold property in New Haven, Connecticut, known as "Sports Haven" for gross consideration of £4,346k ($6,000k). The asset was classified as held for sale as at 31 December 2020 and was part of the Sportech Venues division. Costs related to the disposal amounted to £153k ($210k). The property is to be leased back for 18 months to 31 October 2022 at a rental of c£36k per month ($50k). On disposal, a lease liability of £633k was recognised as well as a right-of-use asset of £169k. The profit on disposal is analysed as follows:


 

 

Six months ended

30 June
2022
(Unaudited)

Six months ended

30 June
2021
(Unaudited)

 

Year ended

31 December
2021
(Audited)


 

Note

£000

£000

£000

Cash consideration received


 

-

4,346

4,346

Net book value disposed of


 

-

(1,154)

(1,154)

Right-of-use asset recognised


13

-

169

169

Lease liability recognised


19

-

(633)

(633)

Costs of disposal


 

-

(153)

(153)

Profit after tax on disposal net of costs


 

-

2,575

2,575

 

20b) On 2 June 2021 the Group completed the disposal of its 100% interest in Bump (Worldwide) Inc. ("Bump") for gross final consideration of £4,941k ($8,462k), including a working capital settlement of £277k which differed slightly from the estimate which had been included in the 2021 Interim Financial Statements of £307k (which was received in the period to 30 June 2021). Final settlement was less than management's estimate and as a result £30k was repaid to the buyer in H2 2021. The division was classified as held for sale as at 31 December 2020 and was part of the Sportech Racing division.

 

 

 

 

 

 

 

 

 

 

 

 

 

The profit for the period and cashflows from Bump are shown below:


Note

Period ended 30 June 2022

(Unaudited)

Restated

Period ended 30 June 2021

(Unaudited)

Year ended 31 December 2021 (Audited)

Bump (Worldwide) Inc.:

 

£000

£000

£000

Revenue

 

-

810

810

Cost of sales, marketing and distribution and adjusted operating expenses

 

-

(487)

(487)

Adjusted EBITDA

 

-

323

323

Finance income

 

-

78

78

Profit before tax

 

-

401

401

Tax, excluding tax arising on disposal


-

-

-

Profit after tax

 

-

401

401

Gain from selling discontinued operations after tax (net of disposal costs)

20e

-

3,836

3,805

Profit for the period

 

-

4,237

4,206


 

 



Net cash flow from operating activities

 

-

462

462

Net cash flow used in investing activities

 

-

(37)

(37)

Net cash generated

 

-

425

425

 

The difference in gain from selling discontinued operations after tax (net of disposal costs) between the prior year half year numbers and the full year is the adjustment to the estimated working capital settlement and the amount agreed as final settlement.

 

Restatements:

i)              Gain on disposal has been restated to recycle the cumulative foreign exchange loss to the gain on disposal from P&L reserve as well as some corrections to disclosure of disposal costs which were incorrectly allocated to the gain on disposal of Global Tote.

ii)             Net cash flow from operating activities was misstated in the prior year interim statements (£134k), and has been restated to the correct amount of £462k in the above table.

 

Deferred contingent consideration

There remains deferred contingent consideration potentially due to Sportech of c£1.1m (CAD$2.0m) which is receivable if Bump achieves revenues in 2022 calendar year of CAD$6.5m or more (net of employee incentives of c£150k). The receivable and incentives payable thereon have not been recognised in the Group Consolidated accounts as at 30 June 2022 due to uncertainty over achievement of the target, see note 22.

 

20c) On 17 June 2021 the Group completed the disposal of its Global Tote division which also formed part of the Sportech Racing division and was classified as held for sale as at 31 December 2020. Final Gross Consideration amounted to £33,906k including a payment for cash transferred to the buyer with the business of £3,609k net of debt like items of £1,294k, received in July 2021 and a settlement of net working capital which was in excess of an agreed Target working capital (and other adjustments) of £559k. The estimate was lower than management's estimate of £781k which was accrued for at 30 June 2021. In addition, the historical underlying tote software code was disposed of by Sportech PLC to BetMakers Technology Group Limited within the same agreement, proceeds of £150k resulted in a profit on disposal of £68k.

 

 

 

 

 

 

 

 

 

 

 

 

The profit for the period and cashflows from Global Tote are shown below:


Note

Six months ended 30 June 2022

(Unaudited)

Restated

Six months ended 30 June 2021

(Unaudited)

Year ended 31 December 2021 (Audited)

Revenue

 

-

12,245

12,245

Cost of sales, marketing and distribution and adjusted operating expenses

 

-

(8,140)

(8,140)

Adjusted EBITDA

 

-

4,105

4,105

Other income


-

1,057

1,057

Profit on disposal of intangible assets


-

68

68

Separately disclosed items

 

-

(371)

(371)

Finance costs

 

-

(24)

(24)

Profit before tax

 

-

4,835

4,835

Tax, excluding tax arising on disposal

 

-

(195)

(195)

Profit after tax

 

-

4,640

4,640

Gain from selling discontinued operations after tax (net of disposal costs)

20e

-

17,273

17,051

Profit for the period

 

-

21,913

21,691


 

 



Net cash flow from operating activities

 

-

1,944

1,944

Net cash flow used in investing activities

 

-

(930)

(930)

Net cash flow used in financing activities

 

-

(160)

(160)

Net increase in cash generated

 

-

854

854

 

Separately disclosed items incurred in 2021 were redundancy and restructuring costs in respect of a rationalisation of this business. The difference in gain from selling discontinued operations after tax (net of disposal costs) between the prior year half year numbers and the full year is the adjustment to the estimated working capital settlement and the amount agreed as final settlement.

 

Restatements:

i)              Gain on disposal has been restated to recycle the cumulative foreign exchange loss to the gain on disposal from P&L reserve as well as certain corrections to disclosure of disposal costs which were incorrectly allocated to the gain on disposal of Bump and under accruals of disposal costs.

ii)             Net cash flow from operating activities was misstated in the prior year interim financial statements (£1,780k), and has been restated to the correct amount of £1,944k in the above table.

 

20d) On 31 December 2021 the Group completed the disposal of its wholly owned subsidiary, Sportech Lotteries, LLC which had the legal rights to the service contract with LEIDSA who operates the Dominican Republic national lottery. Gross Consideration amounted to £9,854k including an estimate for settlement of net working capital which was in excess of an agreed Target working capital of £431k. Of the consideration, £9,423k was received on 31 December 2021, the final working capital settlement has been received in Q1 2022, there was no variance to estimate as at 31 December 2021.

 

In addition, the Group's lottery software provider, Lot.to Systems Limited has signed a five-year contract with the buyer of Sportech Lotteries, LLC to provide an online lottery platform for LEIDSA in return for commission revenue up to c£1.5m ($2.0m) over the period.

 

 

 

 

 

 

 

 

 

The profit for the period and cashflows from Sportech Lotteries, LLC are shown below:


Note

Six months ended 30 June 2022

(Unaudited)

Six months ended 30 June 2021

(Unaudited

Year ended

31 December 2021

(Audited)

 

Sportech Lotteries, LLC:

 

£000

£000

£000

Revenue

 

-

1,618

3,364

Cost of sales, marketing and distribution and adjusted operating expenses

 

-

(456)

(913)

Adjusted EBITDA

 

-

1,162

2,451

Depreciation and amortisation


-

(175)

(372)

Profit on disposal of property, plant and equipment

 

-

-

47

Profit before tax

 

-

987

2,126

Tax, excluding tax arising on disposal


-

(438)

(791)

Profit after tax

 

-

549

1,335

Gain from selling discontinued operations after tax (net of disposal costs)

20e

-

-

7,769

Profit for the period

 

-

549

9,104


 

 



Net cash flow from operating activities

 

-

327

1,068

Net cash flow used in investing activities

 

-

-

(429)

Net cash inflow

 

-

327

639

 

20e) A summary of the gain on disposal for the year ended 31 December 2021 of each discontinued operation is as follows:

 



Global Tote Group

Bump (Worldwide) Inc.

Sportech Lotteries LLC

Total


Note

£000

£000

£000

£000

Cash consideration received and receivable


33,906

4,941

9,854

48,701

Cash disposed of


(3,609)

(116)

-

(3,725)

Cash consideration received and receivable net of cash disposed of

20f

30,297

4,825

9,854

44,976

Add cumulative foreign exchange movements recycled to the income statement


3,234

(101)

240

3,373

Costs of disposal


(1,511)

(118)

(405)

(2,034)

Less net assets disposed of:






Intangibles


6,582

274

209

7,065

Property, plant and equipment


5,001

210

180

5,391

Right-of-use assets


761

-

-

761

Deferred tax assets


12

-

-

12

Trade and other receivables


4,621

380

1,542

6,543

Inventories


2,479

-

-

2,479

Income tax payable


(44)

-

-

(44)

Trade and other payables


(2,660)

(63)

(11)

(2,734)

Lease liabilities


(786)

-

-

(786)

Retirement benefit liability


(997)

-

-

(997)



14,969

801

1,920

17,690

Pre-tax gain on disposal of discontinued operations


17,051

3,805

7,769

28,625

Taxation


-

-

-

-

Gain on disposal of discontinued operations


17,051

3,805

7,769

28,625

 

Costs of disposal include bonuses paid to Group employees of £1,173k for Global Tote, £85k for Bump and £375k for Sportech Lotteries, LLC (including employer's taxes payable).

 

 

 

 

A summary of the gain on disposal for the year ended 30 June 2021 of each discontinued operation is as follows:

 

Restated

 

Global Tote Group

Bump (Worldwide) Inc.

Total


Note

£000

£000

£000

Cash consideration received and receivable


34,127

4,972

39,099

Cash disposed of


(3,609)

(116)

(3,725)

Cash consideration received and receivable net of cash disposed of

20f

30,518

4,856

35,374

Add cumulative foreign exchange movements recycled to the income statement


3,234

(101)

3,133

Costs of disposal


(1,510)

(118)

(1,628)

Net assets disposed of:





Intangibles


6,582

274

6,856

Property, plant and equipment


5,001

210

5,211

Right-of-use assets


761

-

761

Deferred tax assets


12

-

12

Trade and other receivables


4,621

380

5,001

Inventories


2,479

-

2,479

Income tax receivable


(44)

-

(44)

Trade and other payables


(2,660)

(63)

(2,723)

Lease liabilities


(786)

-

(786)

Retirement benefit liability


(997)

-

(997)



14,969

801

15,770

Pre-tax gain on disposal of discontinued operations


17,273

3,836

21,109

Taxation


-

-

-

Gain on disposal of discontinued operations


17,273

3,836

21,109

 

Costs of disposal include bonuses paid to Group employees of £1,068k for Global Tote and £167k for Bump.

 

20f) A summary of the cash consideration at the prior year end received and receivable net of cash disposed of is as follows:

 



Global Tote Group

Bump (Worldwide) Inc.

Sportech Lotteries LLC

Total


Note

£000

£000

£000

£000



 

 

 

 

Cash consideration received in 2021 net of cash disposed of


24,352

4,825

9,423

38,600

Disposal costs paid in 2021


(1,716)

(181)

(6)

(1,903)

Cash consideration received net of cash disposed of and disposal costs paid in the period


22,636

4,644

9,417

36,697

Add back cash disposal costs paid in the period


1,716

181

6

1,903

Cash consideration received net of cash disposed of before disposal costs paid in the period


24,352

4,825

9,423

38,600

Cash consideration received in 2020 (including FX movement)


5,945

-

-

5,945

Consideration to be received in 2022


-

-

431

431

Cash consideration received and receivable net of cash disposed of before disposal costs paid in the period

20e

30,297

4,825

9,854

44,976

 

Cash consideration received in 2020 related to an Initial Payment received from BetMakers Technology Group Ltd for the disposal of Global Tote, the deposit was unconditional and non-returnable.

 

A working capital settlement of £425k was received for the disposal of Sportech Lotteries LLC in H1 2022, costs of disposal were also settled relating to bonuses, including employer taxes (£376k) and legal fees (£23). Net inflow of £26k is shown in investing activities in the cashflow statement.

 

 

 

A summary of the cash consideration at the prior half year end received and receivable net of cash disposed of is as follows:

 



Global Tote Group

Bump (Worldwide) Inc.

Total


Note

£000

£000

£000

Cash consideration received in 2020


6,180

-

6,180

Cash consideration received in H1 2021 net of cash disposed of


20,961

4,856

25,817

Disposal costs paid in H1 2021


(2,297)

(124)

(2,421)

Net cash received in H1 2021


18,664

4,732

23,396

Cash consideration receivable in H2 2021


3,377

-

3,377

Cash consideration received and receivable net of cash disposed of and disposal costs paid in the period


28,221

4,732

32,953

Add back cash disposal costs paid in the period


2,297

124

2,421

Cash consideration received and receivable net of cash disposed of before disposal costs paid in the period

20e

30,518

4,856

35,374

 

20g) Reconciliation to profit for the period included in the income statement:


Note

 

Six months ended 30 June 2022

(Unaudited)

Restated

Six months ended 30 June 2021

(Unaudited)

Year ended 31 December 2021 (Audited)

 

 

£000

£000

£000

Global Tote

20c

-

21,913

21,691

Bump

20b

-

4,237

4,206

Sportech Lotteries, LLC

20d

-

549

9,104


 

-

26,699

35,001

 

The differences between the prior half year numbers and the full year is true up of estimates in working capital settlements to actual, the half year included estimates for both Global Tote and Bump.

 

21.  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 months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended 31 December 2021
(Audited)

 

 

£000

£000

£000

Short-term employee benefits


294

722

1,236

Share-based payments


-

51

45

Pay in lieu of notice


245

-

391

Post-employment benefits


11

9

18

Total


550

782

1,690

 

22.  Contingencies

 

Contingent items

Bump deferred contingent consideration receivable

On 2 June 2021 the Group completed the disposal of its 50:50 lottery division, Bump 50:50. In addition to the consideration received during the year, there is potential further consideration due to the Group of CAD$2m if Bump 50:50 achieves revenues in the financial year ending 31 December 2022 of CAD$6.5m or more. The Group has received information from the buyer indicating that they believe Bump is likely to achieve revenue marginally in excess of CAD$6.5m, however insufficient information was provided for the Directors to conclude that it is virtually certain that the amount will be received. It is therefore concluded there is not sufficient evidence of virtual certainty to recognise the asset, as such it is being disclosed as a contingent asset. Employee incentives are also payable of c£150k if the contingent consideration is received by the Group.

 

The recoverability of the receivable is binary (as are the incentives) i.e. it is either paid in 2023 if 2022 revenue is CAD$6.5m or more, or it is not payable if this level of revenue is not reached. The Directors will reassess the recoverability at each period end.

 

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 has 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.

 

Penalties could potentially be imposed on the Group's corporation tax filing position for the STB VAT refund, however Management consider this possibility to be remote and therefore are not disclosing a contingent liability in relation to this item. The Group has paid on account £4.6m into its corporate tax account in order to cease the accruing of interest, which would be payable if the Group were to accept a restatement of the Sportech Pool's Limited 2016 tax return to tax £23.0m of the STB VAT refund as income not capital. Management believes that the filing position taken was the correct one, however HMRC currently have an open investigation into the return.

 

Other contingent items are summarised as follows:

 

M&A activity

Both the 2017 sale of the Football Pools division, the 2018 sale of the Group's Venues business in The Netherlands, the 2021 sale of the Bump 50:50 and the 2021 sale of the Global Tote business have customary seller tax warranties under the terms of the Sale and Purchase Agreements. The possibility of material claims being made under the seller tax warranties in any of the deals is considered by management to be remote. In addition, the sale of Sportech Lotteries, LLC on 31 December 2021 has 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 the deal is considered by management to be remote.

 

Legal

The Group has been engaged in certain disputes in the ordinary course of business which could have potentially led to outflows greater than those provided for on the balance sheet. The maximum possible exposure which was considered to exist, in view of advice received from the Group's professional advisors, was up to £0.1m at 30 June 2021 and £0.1m at 31 December 2021, the exposure at 30 June 2022 is nil. Management was of the view that the risk of those outflows arising was not probable and accordingly they were considered contingent items.

 

23.  Other income

 

Other income recognised in the income statement is as follows:

 


 

 

 

 

Note

Six months ended
30 June
2022
(Unaudited)

Six months ended
30 June
2021
(Unaudited)

Year
ended 31 December 2021
(Audited)

 

 

£000

£000

£000

Settlement for early termination of a contract


-

-

100

CARES Act credits received - continuing operations


155

-

1,426

Profit on disposal of Sports Haven

20a

-

2,575

2,575

Total - continuing operations


155

2,575

4,101

CARES Act credits received - discontinued operations

20c

-

1,057

1,057

Total


155

3,632

5,158

 

CARES Act credits were received given the impact on the Group's operations of the COVID-19 restrictions imposed in the USA. 2021 amounts from continuing operations were received in cash during H2 2021, those from discontinued operations were received in H1 2021. 2022 amounts relate to amended returns submitted for 2020 and were received in cash in August 2022. Proceeds from the settlement for early termination of a contract (£100k) were received in H1 2022.

 

 

 

 

 

 

 

 

 

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