11 September 2023
Sportech PLC
("Sportech" or the "Group" or the "Company")
Interim Results & Proposed Delisting
Sportech (AIM:SPO), an international betting technology business, is pleased to announce its interim results for the six months ended 30 June 2023 ("H1 2023" or the "period").
Summary
The Group has continued to deliver solid operational performance, marked by stable revenue growth and a renewed emphasis on margin enhancement. This strategic approach has led to a 7.2% increase in gross profit and a notably improved Adjusted EBITDA performance, in comparison to the same period of the previous year.
The Group's Adjusted EBITDA demonstrated positive momentum, reaching £0.9 million (£0.4 million in H1 2022). This improvement was fuelled by several key factors, most notably growth in contributions from US gaming and a sustained focus on optimizing operational and corporate costs.
In July 2023, the Group completed a share capital restructuring that helped to provide approximately 3,600 smaller shareholders with a cost effective exit. Additionally, the Company announced a meaningful return of capital to shareholders totalling £3.5 million, paid in August 2023, bringing the cumulative shareholder repayments to c.£46 million over the past two years and c.£121 million since 2017. Group cash (excluding customer balances) at the end of H1 2023 was £7.8 million and at the end of August 2023 was £3.6 million.
However, it is important to acknowledge the significant financial burden associated with maintaining a listing on the public markets, particularly given the Company's reduced size, following the successful implementation of the strategic drive to return capital to investors. In light of this, the Board will today also announce, subject to shareholder approval, a proposed cancellation of its ordinary shares to trading on AIM (the "Proposed Cancellation"). The background to and reasons for the Proposed Cancellation will be set out in a separate announcement, and if approved by shareholders, is expected to deliver significant future cost savings and strengthen the Company's financial position.
Key Financials (£ million) |
| H1 2023 |
Constant Currency H1 2022 | Actual Reported H1 2022 |
Revenue | | 13.5 | 13.4 | 12.6 |
Gross Profit | | 7.4 | 6.9 | 6.5 |
Contribution1 | | 7.1 | 6.7 | 6.3 |
Adjusted EBITDA2 | | 0.9 | 0.4 | 0.3 |
Loss before tax from continuing operations | | (0.3) | (0.9) | (0.8) |
Adjusted loss before tax3 | | (0.3) | (0.4) | (0.4) |
Distributions to shareholders | | - | 7.0 | 7.0 |
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.
Richard McGuire, Executive Chairman of Sportech, said: "Despite delivering improving operational results announced today, the substantial financial cost associated with maintaining a public listing, given our current scale, and the increasing volatility in the market valuation is adversely impacting net returns and future prospects. Regrettably, in light of these circumstances, we find it necessary to take the difficult but pragmatic step of proposing delisting from the AIM market today."
For further information, please contact:
Sportech PLC enquiries@sportechplc.com
Richard McGuire, Executive Chairman
Clive Whiley, Senior Independent Director
Peel Hunt Tel: +44 (0) 20 7418 8900
(NOMAD and Corporate Broker to Sportech)
George Sellar / Andrew Clark / Lalit Bose
Group Operational Overview
Navigating Challenges and Seizing Opportunities: A Solid Performance in H1 2023
Amidst the intricacies of a predominantly physical retail business within a heavily regulated industry, the Group's performance in H1 2023 stands as a testament to resilience and strategic prowess. Overcoming the challenges inherent to delivering scalable growth in such an environment, the Company managed to deliver enhanced results in H1.
The Board has remained proactive in charting the path forward. Management continue to address the operational cost structure of the Group and expand operations beyond its historic major dependence on pari-mutuel wagering. In January 2023 the Company unveiled the divestiture of certain non-core assets. This strategic move coupled with the receipt of contingent proceeds resulting from a prior year disposal, resulted in both streamlining future operating costs and bolstering Group cash by a net amount of £1.5 million.
The dedication to positive initiatives, coupled with the cultivation of an efficient operational cost base, yielded a commendable outcome. Despite a modest yet steady revenue growth, the Group was pleased to achieve positive Adjusted EBITDA, a testament to the Group's prudent financial management.
Looking ahead to the latter half of 2023, operational focus remains resolute. Strengthening Company affiliations with betting partners, seizing scalable growth opportunities, and realigning non-operational costs to harmonize with the Group's scale stand out as pivotal objectives for the management team. We are committed to capitalizing on our strengths, adjusting the operational cost to manage growth prospects, and optimizing our performance within this intricate and opportunistic landscape.
| Revenue |
| EBITDA1 | ||
£'000 Continuing operations | H1 2023 | H1 20221 |
| H1 2023 | H1 20222 |
Venues | 12,651 | 12,442 | | 1,923 | 1,612 |
Digital | 894 | 912 | | (24) | (101) |
Corporate costs | - | - | | (1,030) | (1,125) |
Total at constant currency | 13,544 | 13,354 | | 869 | 386 |
Exchange rate impact | - | (783) | | - | (75) |
Total reported | 13,544 | 12,571 | | 869 | 311 |
1.Adjusted EBITDA
2. 2022 numbers are at constant currency.
Sportech Digital
Following the 2021 sale of the core lottery contract and delivery of the contractual obligations the decision was taken to sell the remaining non-core lottery related assets in January 2023.
Digital £'000 | H1 2023 |
| Constant Currency H1 2022 |
| Reported Currency H1 2022 |
Service revenue | 857 | | 912 | | 857 |
| | | | | |
Contribution | 354 | | 378 | | 355 |
Contribution margin | 41.4% | | 41.5% | | 41.4% |
| | | | | |
Adjusted operating expenses1 | (379) | | (479) | | (462) |
Adjusted EBITDA | (24) |
| (101) | | (107) |
| | | | | |
Intangible assets capex | - | | 97 | | 97 |
Tangible assets capex | - | | 22 | | 22 |
Total capex | - |
| 119 |
| 119 |
1. Adjusted operating expenses exclude depreciation and amortisation, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.
Sportech Venues
Sportech Venues operates nine gaming locations/venues in the State of Connecticut under an exclusive and in-perpetuity license for pari-mutuel betting and under agreement with the state lottery for sports betting. This section outlines the company's performance in key areas and highlights its strategies for growth.
Financial Performance:
Food and Beverage (F&B) Revenue:
In H1 2023, F&B revenue increased +10%, reaching £1.85 million, (H1 2022 £1.68m) demonstrating stability, until the anticipated return to normal office occupancy occurs.
Betting Handle:
The overall betting handle within venues increased by 2.2% to $101.8 million. This growth was primarily driven by a $5.1 million increase in gross sports betting handle, effectively offsetting the $2.9 million decline in pari-mutuel.
Betting handle represents the gross wagering by the Group retail customers in Pari-Mutuel (Tote) and Sports Betting. It is an essential Key Performance Indicator, however is not recorded as revenue within the Group. The Revenue recorded from pari-mutuel (pool betting) handle is the gross take out. Essentially the 'take out' is removed from the pool, and the remaining money returned to winning wagers. For Sports Betting the revenue contribution is precisely the 'commission' received from our sports betting arrangement with the Connecticut Lottery Corporation. Sports Betting handle is a core KPI, there is no direct relationship to profitability however as its risk-based fixed odds and the clear KPI remains the hold on the handle or simply the gross profit (Gross Gaming Revenue) which ultimately defines the Group sports betting commission/revenue.
Sports Betting:
Sportech offers sports betting in collaboration with the Connecticut Lottery Corporation (CLC). The net commission generated supports the Group's operational cost base. H1 2023 saw significant growth in retail sports betting handle (+10.6%) and gross profit (+39.5%). This achievement is notable, especially in the face of competition from neighbouring Massachusetts.
Risk Management:
Sportech reminds investors of the inherent risk in fixed odds sports betting compared to traditional pool betting (pari-mutuel). During the period, the Group managed approximately $50.1 million in retail sports betting handle, with a Sportech risk exposure of around $12.5 million. Despite challenges and a tough June when customers certainly enjoyed better Baseball results, the gross profit ('hold') stood at an impressive 10.2% of handle. The American Football season, which is the Group's busiest season, has now commenced bringing additional opportunity and risks to the Group.
Pari-Mutuel Betting:
While pari-mutuel betting across the estate handled $51.7 million, there was a decline of 5.3% compared to H1 2022. Physical locations remained stable, but Telebetting and online products faced increased competition from iCasino gaming and sports betting for the consumer discretionary betting dollar.
Strategic Outlook:
1. Contribution Margin: The contribution margin improved to 53.4% (compared to 50.8% in H1 2022). This positive trajectory is commendable, considering the costs associated with meeting sports betting requirements and enhancing infrastructure.
2. Operational Footprint: Sportech operates across eight leasehold premises and one freehold property in Connecticut, USA. The company is actively exploring opportunities to expand its product range and enhance promotion efforts.
Conclusion:
Sportech Venues' performance in H1 2023 demonstrates resilience and growth potential. The company's focus on sports betting, despite its inherent risks, has yielded support to date, offsetting the higher cost of operating a physical retail business. As the gaming landscape in Connecticut evolves with changes in sportsbook providers and competitive pressures, the Group remains committed to managing relationships and optimizing its operational and financial performance.
Venues £'000 | H1 2023 |
| Constant Currency H1 2022 |
| Reported Currency H1 2022 |
Wagering revenue | 9,786 | | 9,997 | | 9,412 |
F&B | 1,852 | | 1,682 | | 1,584 |
Sports betting commission | 1,012 | | 763 | | 718 |
Total revenue | 12,651 | | 12,442 | | 11,714 |
|
| | | | |
Contribution | 6,751 | | 6,315 | | 5,939 |
Contribution margin | 53.4% | | 50.8% | | 50.7% |
|
| | | | |
Adjusted operating expenses1 | (4,827) | | (4,703) | | (4,414) |
Adjusted EBITDA | 1,923 |
| 1,612 | | 1,525 |
|
|
| | | |
Total capex | 120 |
| 15 | | 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 a further £0.1 million during the period. However the Board is acutely aware of the cost of maintaining a public company listing and has proposed today a delisting from AIM, which would significantly reduce corporate costs going forward if approved by shareholders and align costs as close as possible to the reduced size of the Group.
Separately Disclosed Items
The Group incurred costs of £0.1 million (H1 2022: £0.5 million) during the period, which are shown as separately disclosed items. H1 2023 items are associated with corporate activity, as the Group continues to assess and explore its strategic options.
Net Finance Costs
The Group has no debt. The Group had a net finance expense in continuing operations of £(0.2) million (H1 2022: £0.1 million), this was primarily the interest payable on lease liabilities.
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 2023 is (10)% (2022: (8.5%)). 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 has submitted an appeal to HMRC to contest the treatment of £4.6 million of taxation potentially due on the 2016 Spot the Ball refund. This amount was paid to HMRC, however in the event the Company is unsuccessful in its appeal there remains a potential c £0.7 million interest due. There is nothing held on the balance sheet in respect of the tax itself, the interest is accrued and if payable will be a cash outflow.
Net Cash
The Group held cash balances of £7.8 million, excluding customer balances (31 December 2022: £7.4 million) as of 30th June 2023. Post the period end the Group has repurchased c.£0.5 million of shares as part of the share restructuring and returned £3.5 million to shareholders in August 2023 via a capital return distribution. The updated cash balance at the end of August 2023 was c £3.6 million
Capital Expenditure
Capital expenditure ("Capex"), was controlled again in the period and amounted to £0.1 million (H1 2022: £0.1 million), whilst management anticipate higher Capex in H2 2023 due to upgrading security recording equipment and general heating and ventilation system improvements.
Shareholders' Funds
Shareholders' funds decreased by £0.8 million from 31 December 2022 to £13.2 million (31 December 2021: £14.0 million). The loss made in the period of £0.3 million is coupled with a reduction in reserves due to foreign exchange loss on translation of net assets denominated in 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.
Interim consolidated income statement
For the six months ended 30 June 2023
|
|
Six months ended | Six months ended |
Year ended 31 December 2022 |
| ||
| Note | £000 | £000 | £000 |
| ||
Revenue | | 13,544 | 12,571 | 26,004 |
| ||
Cost of sales | 6 | (6,183) | (6,043) | (11,847) |
| ||
Gross profit | | 7,361 | 6,528 | 14,157 |
| ||
Marketing and distribution costs | 6 | (256) | (234) | (386) |
| ||
Contribution | | 7,105 | 6,294 | 13,771 |
| ||
Other income | | - | 155 | (14,803) |
| ||
Operating costs | 6 | (7,231) | (7,390) | 120 |
| ||
Operating loss | | (126) | (941) | (912) |
| ||
Finance costs | 8 | (178) | (93) | (254) |
| ||
Finance income | 8 | - | 232 | 232 |
| ||
Loss before taxation from continuing operations | | (304) | (802) | (934) |
| ||
Taxation - continuing operations | | (30) | (29) | (79) |
| ||
Loss for the period from continuing operations | | (334) | (831) | (1,013) |
| ||
Profit after taxation from discontinued operations | | - | - | 1,183 |
| ||
(Loss)/ profit for the period | | (334) | (831) | 170 |
| ||
| |
| | |
| ||
Attributable to: | | | | ||||
Owners of the Company |
| (334) | (831) | 170 |
| ||
| |
| | |
| ||
Basic (loss)/profit per share attributable to owners of the Company | |
| | |
| ||
Total | 10 | (0.3)p | (0.8)p | 0.2p |
| ||
| |
| | |
| ||
Diluted (loss)/profit per share attributable to owners of the Company | |
| | |
| ||
Total | 10 | (0.3)p | (0.8)p | 0.2p |
| ||
| |
| | |
| ||
Adjusted loss per share attributable to owners of the Company | |
| | |
| ||
Basic | 10 | (0.2)p | (0.4)p | 0.2p |
| ||
Diluted | 10 | (0.2)p | (0.4)p | 0.2p |
|
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.
Interim consolidated statement of comprehensive income
For the six months ended 30 June 2023
|
Six months ended |
Six months ended | Year ended 31 December 2022 |
| £000 | £000 | £000 |
(Loss)/profit for the period | (334) | (831) | 170 |
Other comprehensive expense: |
| | |
Items that will not be reclassified to profit and loss |
| | |
Actuarial gain on retirement benefit liability | - | - | - |
| (334) | (831) | 170 |
Items that may be subsequently reclassified to profit and loss |
| | |
Currency translation differences - continuing operations | (529) | 983 | 1,047 |
|
| | |
Total other comprehensive income/(expense) for the period, net of tax | (529) | 983 | 1,047 |
Total comprehensive income for the period | (863) | 152 | 1,217 |
|
| | |
Attributable to: |
| | |
Owners of the Company | (863) | 152 | 1,217 |
|
| Other reserves |
|
| ||
|
Ordinary shares |
Capital redemption reserve |
Other reserve |
Foreign exchange reserve |
Retained earnings |
Total |
Six months ended 30 June 2023 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 January 2023 (audited) | 1,000 | 888 | 314 | 3,372 | 8,465 | 14,039 |
Comprehensive income/(expense) | | | | | | |
Loss for the period | - | - | - | - | (334) | (334) |
Other comprehensive items | | | | | | |
Currency translation differences | - | - | - | (529) | - | (529) |
Total other comprehensive items | - | - | - | (529) | - | (529) |
Total comprehensive items | - | - | - | (529) | (334) | (863) |
Transactions with owners |
|
|
|
|
|
|
Dividend paid | - | - | - | - | - | - |
Total changes in equity | - | - | - | (526) | (334) | (863) |
At 30 June 2023 (unaudited) | 1,000 | 888 | 314 | 2,823 | 8,151 | 13,176 |
|
|
|
|
|
|
|
Interim consolidated statement of changes in equity
For the six months ended 30 June 2023
|
| 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 |
* 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 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 | - | - | - | - | 170 | 170 |
Other comprehensive items | | | | | | |
Currency translation differences | - | - | - | 1,047 | - | 1,047 |
Total other comprehensive items | - | - | - | 1,047 | - | 1,047 |
Total comprehensive items | - | - | - | 1,047 | 170 | 1,047 |
Transactions with owners | | | | | | |
Dividend paid | - | - | - | - | (7,000) | (7,000) |
Total transactions with owners | - | - | - | - | (7,000) | (7,000) |
Total changes in equity | - | - | - | 1,047 | (6,830) | (5,783) |
At 31 December 2022 (audited) | 1,000 | 888 | 314 | 3,372 | 8,465 | 14,039 |
* Net of deferred tax
Interim consolidated balance sheet
As at 30 June 2023
|
|
As at 30 June |
As at 30 June |
As at 31 December |
| Note | £000 | £000 | £000 |
ASSETS | |
| | |
Non-current assets | |
| | |
Goodwill | | - | 604 | 87 |
Intangible fixed assets | 11 | 6,166 | 6,939 | 6,939 |
Property, plant and equipment | 12 | 4,165 | 4,409 | 4,522 |
Right-of-use assets | 13 | 4,315 | 4,813 | 5,042 |
Trade and other receivables | 14 | 167 | 176 | 177 |
Deferred tax asset | | 15 | - | 15 |
Total non-current assets | | 14,829 | 16,941 | 16,782 |
Current assets | |
| | |
Trade and other receivables | 14 | 1,685 | 1,393 | 1,978 |
Inventories | | 146 | 140 | 146 |
Current tax receivable | | 2 | 54 | 228 |
Contingent consideration (gross receivable) | | - | - | 1,229 |
Cash and cash equivalents | 15 | 8,240 | 8,588 | 7,811 |
Total current assets | | 10,073 | 10,175 | 11,392 |
TOTAL ASSETS | | 24,902 | 27,116 | 28,174 |
LIABILITIES | |
| | |
Current liabilities | |
| | |
Trade and other payables | 16 | (5,243) | (6,959) | (6,564) |
Provisions | 17 | - | (17) | - |
Lease liabilities | 19 | (927) | (678) | (1,155) |
Current tax liabilities | | 43 | - | - |
Deferred tax liabilities | | - | - | - |
Total current liabilities | | (6,127) | (7,654) | (7,935) |
Net current assets | | 3.946 | 2,521 | 3,457 |
Non-current liabilities | |
| | |
Lease liabilities | 19 | (5,620) | (6,477) | (6,200) |
Deferred tax liabilities | | 21 | (11) | - |
| | (5,559) | (6,488) | (6.200) |
TOTAL LIABILITIES | | (11,276) | (14,142) | (14,135) |
NET ASSETS | | 13,176 | 12,974 | 14,039 |
| |
| | |
EQUITY | |
| | |
Ordinary shares | | 1,000 | 1,000 | 1,000 |
Other reserves | | 4,022 | 4,510 | 4,574 |
Retained earnings | | 8,154 | 7,464 | 8,465 |
TOTAL EQUITY | | 13,176 | 12,974 | 14,039 |
| |
| | |
Interim consolidated statement of cash flows
For the six months ended 30 June 2023
|
|
Six months ended |
Six months ended |
Year ended 31 December 2022 | ||||
| Note | £000 | £000 | £000 | ||||
From operating activities | |
| | | ||||
Cash (used in)/generated from operations, before separately disclosed items | 18 | (141) | (544) | 119 | ||||
Interest received | | - | - | - | ||||
Interest paid | | - | - | - | ||||
Tax refund received | | 150 | - | - | ||||
Tax paid | | (43) | (4,843) | (5,083) | ||||
Net cash generated from/(used in) operating activities before separately disclosed items | | (34) | (5,387) | (4,964) | ||||
Cash inflows - other income | | - | 100 | - | ||||
Cash outflows - separately disclosed items | 7 | (99) | (1,219) | (1,457) | ||||
Cash used in operations | | (133) | (6,506) | (6,421) | ||||
From investing activities | |
| | | ||||
Disposal of LEIDSA contract (net of cash disposed of and transactions costs) | | - | 26 | - | ||||
Contingent consideration in relation to sale of Bump 50:50 | | 1,012 | - | - | ||||
Proceeds from sale of other intangible assets | | 500 | - | - | ||||
Investment in intangible fixed assets | 11 | - | (97) | (196) | ||||
Purchase of property, plant and equipment | 12 | (120) | (38) | (147) | ||||
Cash generated from/(used in) investing activities | | 1,392 | (109) | (343) | ||||
From financing activities | |
| | | ||||
Principal paid on lease liabilities | 19 | (579) | (622) | (1,127) | ||||
Interest paid on lease liabilities | 19 | (162) | (69) | (230) | ||||
Dividend paid | | - | (7,000) | (7,000) | ||||
Cash used in financing activities | | (741) | (7,691) | (8,357) | ||||
|
|
| | | ||||
Net increase/ (decrease) in cash and cash equivalents | | 519 | (14,306) | (15,121) | ||||
Effect of foreign exchange on cash and cash equivalents | | (90) | 527 | 565 | ||||
Cash and Cash equivalents at beginning of year | | 7,811 | 22,367 | 22,367 | ||||
Group cash and cash equivalents at the end of the period | 15 | 8,240 | 8,588 | 7,811 | ||||
|
|
| | | ||||
Represented by: | |
| | | ||||
Cash and cash equivalents | 15 | 8,240 | 8,588 | 7,811 | ||||
Less customer funds | 15 | (448) | (450) | (391) | ||||
Group cash and cash equivalents at the end of the period | 15 | 7,792 | 8,138 | 7,420 | ||||
|
|
| | | ||||
Notes to the consolidated interim financial statements
For the six months ended 30 June 2023
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 2023 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 2023. The principal activities of the Group were the provision of pari-mutuel betting (B2C), the Group now operates nine 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.
The condensed consolidated interim financial statements were approved for issue on 9th September 2023.
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 2022 were approved by the Board of Directors on 17 April 2023 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 2022 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 15 to 18 of the 2022 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 2023 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 2022, 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 2022 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 that management believes 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 |
Six months ended |
Year ended 31 December 2022 |
| | £000 | £000 | £000 |
Operating costs per income statement | | (7,231) | (7,390) | (14,803) |
Add back: | |
| | |
Depreciation | 12,13 | 862 | 537 | 1,216 |
Amortisation, excluding acquired intangible assets | 11 | 48 | 132 | 252 |
Amortisation of acquired intangible assets | 11 | - | 29 | 29 |
Impairment of goodwill | | 88 | - | 517 |
Reversal of impairment of property, plant and equipment | 12 | - | - | (190) |
Loss on disposal of property, plant and equipment | 12 | (103) | 131 | 150 |
Separately disclosed items | 7 | 99 | 578 | 657 |
Total adjusted net operating costs | | (6,236) | (5,983) | (12,172) |
Adjusted EBITDA is calculated as follows:
|
Six months ended |
Six months ended |
Year ended 31 December 2022 |
| £000 | £000 | £000 |
Revenue | 13,544 | 12,571 | 26,004 |
Cost of sales | (6,183) | (6,043) | (11,847) |
Gross profit | 7,361 | 6,528 | 14,157 |
Marketing and distribution costs | (256) | (234) | (386) |
Contribution | 7,105 | 6,294 | 13,771 |
Adjusted net operating costs | (6,236) | (5,983) | (12,172) |
Adjusted EBITDA | 869 | 311 | 1,599 |
Prior year comparatives for the period ended 30 June 2023 have been adjusted for discontinued operations related to the LEIDSA contract (prior full year comparatives were adjusted in the 2022 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 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 2023 (Unaudited) |
Six months ended 30 June 2022 (Unaudited) |
Year ended 31 December 2022 (Audited) |
From continuing operations: | £000 | £000 | £000 |
Adjusted EBITDA | 869 | 311 | 1,599 |
Depreciation | (862) | (537) | (1,216) |
Amortisation (excluding amortisation of acquired intangibles) | (48) | (132) | (252) |
Net finance costs (excluding certain finance costs - note 8) | (162) | (69) | (230) |
Adjusted loss before tax | (203) | (427) | (99) |
Taxation | (30) | 26 | (79) |
Adjusted loss after tax | (233) | (401) | (178) |
|
Six months ended 30 June 2023 (Unaudited) |
Six months ended 30 June 2022 (Unaudited) |
Year ended 31 December 2022 (Audited) |
From discontinued operations: | £000 | £000 | £000 |
Adjusted EBITDA | - | 5,590 | 1,183 |
Depreciation | - | (100) | - |
Amortisation (excluding amortisation of acquired intangibles) | - | (75) | - |
Net finance costs (excluding certain finance costs - note 8) | - | (24) | - |
Adjusted profit before tax | - | 5,391 | 1,183 |
Taxation | - | (1,234) | - |
Adjusted profit after tax | - | 4,157 | 1,183 |
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 Venues - off-track betting venue management; and
- Sportech Digital - a pari-mutuel betting website and provision of lottery software and services;
- Corporate costs - central costs relating to the overall management of the Group and listing costs
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 2023 (Unaudited) | |||
|
Sportech Digital |
Sportech Venues |
Corporate costs |
|
| £000 | £000 | £000 | £000 |
Revenue from rendering of services | 894 | 9,786 | - | 10,680 |
Revenue from food and beverage sales | - | 1,852 | - | 1,852 |
Revenue from sports betting services | - | 1,012 | - | 1,012 |
Total revenue | 894 | 12,651 | - | 13,544 |
Cost of sales | (486) | (5,697) | - | (6,183) |
Gross profit | 407 | 6,954 | - | 7,361 |
Marketing and distribution costs | (53) | (203) | - | (256) |
Contribution | 354 | 6,751 | - | 7,105 |
Adjusted operating costs | (379) | (4,787) | (1,071) | (6,236) |
Adjusted EBITDA | (24) | 1,964 | (1,071) | 869 |
Depreciation | - | (862) | - | (862) |
Amortisation (excluding amortisation of acquired intangibles) | (15) | - | (33) | (48) |
Segment result | (39) | 1,102 | (1,105) | (42) |
Loss on disposal of Property, plant and equipment | 103 | - | - | 103 |
Amortisation of goodwill | (88) | - | - | (88) |
Separately disclosed items | - | (10) | (89) | (99) |
Operating (loss)/profit | (24) | 1,093 | (1,194) | (126) |
Net finance income |
|
|
| (178) |
Loss before taxation from continuing operations |
|
|
| (304) |
Taxation - continuing operations |
|
|
| (30) |
Loss for the period |
|
|
| (334) |
Other segment items - capital expenditure |
|
|
|
|
Property, plant and equipment | - | 120 | - | 120 |
| Six months ended 30 June 2022 (Unaudited) | |||
|
Sportech Digital |
Sportech Venues |
Corporate costs |
|
| £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 |
|
|
| (831) |
Other segment items - capital expenditure |
|
|
|
|
Intangible fixed assets | 97 | - | - | 97 |
Property, plant and equipment | 22 | 15 | 1 | 38 |
| Year ended 31 December 2022 (Audited) |
| ||||||||
| Sportech Digital | Sportech Venues | Corporate costs |
|
| |||||
| £000 | £000 | £000 | £000 |
| |||||
Revenue from rendering of services | - | 1,974 | - | 1,974 |
| |||||
Revenue from food and beverage sales | - | 3,443 | - | 3,443 |
| |||||
Revenue from sports betting services | 1,471 | 19,116 | - | 20,587 |
| |||||
Total revenue | 1,471 | 24,533 | - | 26,004 |
| |||||
Cost of sales | (944) | (10,903) | - | (11,847) |
| |||||
Gross profit | 527 | 13,630 | - | 14,157 |
| |||||
Marketing and distribution costs | 4 | (390) | - | (386) |
| |||||
Contribution | 531 | 13,240 | - | 13,771 |
| |||||
Adjusted net operating costs (note 1) | (838) | (9,194) | (2,140) | (12,172) |
| |||||
Adjusted EBITDA | (307) | 4,046 | (2,140) | 1,599 |
| |||||
Depreciation | (10) | (1,192) | (14) | (1,216) |
| |||||
Amortisation (excluding amortisation of acquired intangible assets) | (162) | - | (90) | (252) |
| |||||
Segment result before amortisation of acquired intangibles | (479) | 2,854 | (2,244) | 131 |
| |||||
Amortisation of acquired intangibles | (29) | - | - | (29) |
| |||||
Reversal of impairment of property, plant and equipment | - | 190 | - | 190 |
| |||||
Loss on sale of property, plant and equipment | - | (133) | (17) | (150) |
| |||||
Impairment of goodwill | (517) | - | - | (517) |
| |||||
Separately disclosed items | - | (307) | (350) | (657) |
| |||||
Other income | - | 120 | - | 120 |
| |||||
Operating (loss)/profit | (1,025) | 2,724 | (2,611) | (912) |
| |||||
Net finance costs | | | | (22) |
| |||||
Loss before taxation from continuing operations | | | | (934) |
| |||||
Taxation | | | | (79) |
| |||||
Loss for the year from continuing operations | | | | (1,013) |
| |||||
Profit after tax from discontinued operations | | | | 1,183 |
| |||||
Profit for the year |
|
|
| 170 |
| |||||
Other segment items - capital expenditure | | | | | ||||||
Intangible fixed assets (continuing operations) | 951 | 27,055 | 168 | 28,174 | ||||||
Intangible fixed assets (discontinued operations) | (50) | (12,831) | (1,254) | (14,135) | ||||||
Property, plant and equipment (continuing operations) | 196 | - | - | 196 | ||||||
Property, plant and equipment (discontinued operations) | 5 | 142 | - | 147 | ||||||
6. Expenses by nature
|
|
Six months ended |
Six months ended |
Year 31 December 2022 |
|
| £000 | £000 | £000 |
Cost of sales | | |
| |
Tote and track fees | | 5,248 | 5,266 | 10,208 |
F&B consumables | | 586 | 536 | 1,144 |
Betting and gaming duties | | 48 | 54 | 125 |
Repairs and maintenance cost of sales | | 6 | 15 | 28 |
Programs | | 121 | 127 | 256 |
Cost of sales | | 174 | 45 | 86 |
Total cost of sales | | 6,183 | 6,043 | 11,847 |
| |
| | |
Marketing and distribution costs | |
| | |
Marketing | | 250 | 224 | 368 |
Vehicle costs | | 6 | 10 | 18 |
Total marketing and distribution costs | | 256 | 234 | 386 |
| |
| | |
Operating costs | |
| | |
Staff costs - gross, excluding share option charges | | 3,210 | 3,161 | 6,323 |
Less amounts capitalised | | - | (89) | (171) |
Staff costs - net | | 3,210 | 3,072 | 6,152 |
Property costs | | 1,420 | 1,201 | 2,688 |
IT & communications | | 240 | 301 | 628 |
Professional fees and licences | | 860 | 765 | 1,524 |
Insurance | | 451 | 500 | 913 |
Travel and entertaining | | 32 | 41 | 94 |
Banking transaction costs and FX | | 38 | 48 | 107 |
Other costs | | (15) | 55 | 66 |
Adjusted operating costs |
| 6,236 | 5,983 | 12,172 |
Depreciation |
| 862 | 537 | 1,216 |
Amortisation, excluding amortisation of acquired intangibles |
| 48 | 132 | 252 |
Amortisation of acquired intangibles |
| - | 29 | 29 |
Impairment of goodwill |
| 88 | - | 517 |
Loss on disposal of property, plant and equipment |
| - | 131 | 150 |
Reversal of impairment of property, plant and equipment |
| (103) | - | (190) |
Separately disclosed items |
| 99 | 578 | 657 |
Total operating costs |
| 7,231 | 7,390 | 14,803 |
7. Separately disclosed items
|
| Six months ended | Six months ended | Year 31 December 2022 |
| Note | £000 | £000 | £000 |
Continuing operations | |
| | |
Included in operating costs: | |
| | |
Onerous contract provisions and other losses resulting from | |
| | |
exit from California operations | 17 | - | (69) | (120) |
Redundancy and restructuring costs | | - | 330 | 414 |
Corporate activity | | 86 | 8 | 57 |
Settlement of a contract | | - | 304 | 304 |
Costs in relation to exiting the Group's interests in India | | 13 | 5 | 2 |
Total included in operating costs | | 99 | 578 | 657 |
| |
| | |
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 | 24 |
| |
| | |
Total Separately disclosed items | | 99 | 602 | 681 |
Below is a summary of cash outflows from separately disclosed items: |
|
Six months ended |
Six months ended |
Year 31 December 2022 |
|
| £000 | £000 | £000 |
Cash outflows from separately disclosed items: | |
| | |
Redundancy and restructuring costs | | - | (242) | (414) |
Costs in relation to corporate activity | | (86) | (8) | (49) |
Costs in relation to the Group's onerous leases in California | | - | (660) | (688) |
Costs in relation to exiting the Group's interests in India | | (13) | (5) | (2) |
| |
| | |
Settlement of a contract | | - | (304) | (304) |
Cash outflows from separately disclosed items (all Continuing operations) | | (99) | (1,219) | (1,457) |
| |
| - | |
| |
| | |
8. Net finance costs
|
|
|
Six months ended |
Year |
| Note | £000 | £000 | £000 |
Continuing operations: |
|
| | |
Finance costs: |
|
| | |
Interest accrued and paid on tax liabilities |
| - | (24) | (24) |
Interest on lease liabilities | 19 | (162) | (69) | (230) |
Total finance costs |
| (162) | (93) | (254) |
Finance income: |
|
| | |
Foreign exchange gain on financial assets and liabilities denominated in foreign currency |
| (16) | 232 | 232 |
Total finance income |
| (16) | 232 | 232 |
|
|
| | |
| |
| | |
|
|
| | |
Net finance income |
| (178) | 139 | (22) |
Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in note 4.
| Six months ended | Six months ended | Year |
Continuing operations | £000 | £000 | £000 |
Foreign exchange gain on financial assets and liabilities denominated in foreign currency | (16) | 232 | 232 |
Interest accrued and paid on tax liabilities | - | (24) | (24) |
| (16) | 208 | 208 |
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 2023 is (10)% (2022: (8.5%)). 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 has submitted an appeal to HMRC to contest the treatment of £4.6 million of taxation potentially due on the 2016 Spot the Ball refund. This amount was paid to HMRC, however in the event the Company is unsuccessful in its appeal there remains a potential c £0.7 million interest due. There is nothing held on the balance sheet in respect of the tax itself, the interest is accrued and if payable will be a cash outflow.
10. Earnings per share
| 2023 | 2022 | ||||
Six months ended 30 June (Unaudited) | Continuing | Discontinued | Total | Continuing | Discontinued | Total |
Basic EPS |
|
|
|
|
|
|
(Loss)/profit for the period (£000) | (334) | - | (334) | (831) | - | (831) |
Weighted average no of shares ('000) | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
Basic EPS | (0.3)p | - | (0.3)p | (0.8)p | - | (0.8)p |
| 2022 | ||
Year ended 31 December 2022 (Audited) | Continuing | Discontinued | Total |
Basic EPS |
|
|
|
(Loss)/profit attributable to owners of the Company (£000) | (1,014) | 1,183 | 169 |
Weighted average no of shares ('000) | 100,000 | 100,000 | 100,000 |
Basic EPS | (1.0)p | 1.2p | 0.2p |
| 2023 | 2022 () | ||||
Six months ended 30 June (Unaudited) | Continuing | Discontinued | Total | Continuing | Discontinued | Total |
Diluted EPS |
|
|
|
|
|
|
(Loss)/profit for the period (£000) | (334) | - | (334) | (831) | - | (831) |
Weighted average no of shares ('000) | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
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 | 100,000 | 100,000 | 100,000 |
Diluted EPS | (0.3)p | - | (0.3)p | (0.8)p | - | (0.8)p |
|
| 2022 | ||||
Year ended 31 December 2022 (Audited) |
|
|
| Continuing | Discontinued | Total |
Diluted EPS |
|
|
|
|
|
|
(Loss)/profit for the year (£000) |
|
|
| (1,014) | 1,183 | 169 |
Weighted average no of shares ('000) |
|
|
| 100,000 | 100,000 | 100,000 |
Dilutive potential ordinary shares ('000) |
|
|
| N/A | N/A | N/A |
Total potential ordinary shares ('000) |
|
|
| 100,000 | 100,000 | 100,000 |
Diluted EPS |
|
|
| (1.0)p | 1.2p | 0.2p |
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 |
Year ended 2022 | |
Adjusted loss after tax (£000) | 4 | (233) | (401) | (143) | |
Basic Adjusted EPS (pence) |
| (0.2)p | (0.4)p | (0.1)p | |
Diluted Adjusted EPS (pence) |
| (0.2)p | (0.4)p | (0.1)p | |
11. Intangible fixed assets
|
| Six months ended | Six months ended | Year |
|
| £000 | £000 | £000 |
At 1 January |
| 6,943 | 6,357 | 6,357 |
Additions |
| - | 97 | 196 |
Amortisation charge for period |
| (48) | (161) | (281) |
Disposal |
| (393) | - | (5) |
Movement as a result of foreign exchange |
| (335) | 646 | 671 |
Net book amount at end of period |
| 6,166 | 6,939 | 6,939 |
12. Property, plant and equipment
| Six months ended | Six months ended | Year |
| £000 | £000 | £000 |
At 1 January | 4,521 | 4,261 | 4,261 |
Additions | 120 | 38 | 147 |
Disposal | (4) | - | - |
Depreciation charge for period | (239) | (215) | (433) |
Loss on disposal | - | (131) | (133) |
Reversal of impairment | - | - | 190 |
Movement as a result of foreign exchange | (233) | 456 | 490 |
Net book amount at end of period | 4,165 | 4,409 | 4,522 |
13. Right-of-use assets
|
| Six months ended | Six months ended | Year |
| Note | £000 | £000 | £000 |
At 1 January |
| 5,041 | 4,657 | 4,657 |
Additions |
| 134 | - | 652 |
Depreciation charge for period |
| (623) | (322) | (782) |
Disposed of - exited lease early |
| - | (17) | (17) |
Movement as a result of foreign exchange |
| (237) | 495 | 533 |
Net book amount at end of period |
| 4,315 | 4,813 | 5,042 |
14. Trade and other receivables
| As at | As at | As at 31 December 2022 |
| £000 | £000 | £000 |
Non-current |
| | |
Trade and other receivables | 167 | 176 | 177 |
Current |
| | |
Trade and other receivables | 1,685 | 1,393 | 1,978 |
Total trade and other receivables | 1,852 | 1,569 | 2,155 |
15. Cash and cash equivalents
|
| As at | As at | As at 31 December 2022 |
| Note | £000 | £000 | £000 |
Cash and short-term deposits | | 7,792 | 8,138 | 7,421 |
Customer funds | 16 | 448 | 450 | 391 |
Total cash and cash equivalents |
| 8,240 | 8,588 | 7,811 |
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 |
As at |
As at 31 December 2022 |
| Note | £000 | £000 | £000 |
Trade payables | | 3,203 | 3,769 | 4,588 |
Other taxes and social security costs |
| 187 | 307 | 148 |
Accruals and other payables |
| 956 | 2,433 | 1,437 |
Player liability | 15 | 448 | 450 | 391 |
Total trade and other payables |
| 4,795 | 6,959 | 6,564 |
17. Provisions
|
| Six months ended | Six months ended | Year |
|
| £000 | £000 | £000 |
At beginning of period | | - | 736 | 736 |
Utilised during the period |
| - | (660) | (677) |
Released to the income statement |
| - | (69) | (69) |
Currency movements |
| - | 10 | 11 |
Total provisions |
| - | 17 | - |
Provisions are in relation to: |
|
| | |
Current provisions |
| - | - | - |
Onerous contracts |
| - | 17 | - |
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 |
Six months ended |
Year |
| Note | £000 | £000 | £000 |
Total (loss)/profit before tax |
| (304) | (802) | 249 |
Adjustments for: |
|
| | |
Net Separately disclosed items (included in operating costs) | 7 | 99 | 578 | 657 |
Other income (excluding profit on disposal of Sports Haven) | | - | - | (120) |
Depreciation and amortisation | 11,12,13 | 910 | 698 | 1,497 |
(Profit)/loss on disposal of property, plant and equipment | 12 | (103) | 131 | 150 |
Impairment/ (reversal of impairment) of assets | 12,13 | 88 | - | 327 |
Net finance charges | 8 | 162 | (139) | 22 |
Changes in working capital: | |
| | |
Increase in trade and other receivables | | 205 | (180) | (1,476) |
Increase in inventories | | (8) | (16) | (22) |
Decrease in trade and other payables, excluding player liabilities | | (1,274) | (809) | (1,101) |
Increase/(decrease in player liabilities | 15 | 83 | (5) | (64) |
Cash (used in)/generated from operating activities, before separately disclosed items |
| (141) | (544) | 119 |
19. Lease liabilities
| As at 30 June | As at 30 June | As at 31 December |
Maturity analysis - contractual undiscounted cashflows | £000 | £000 | £000 |
Less than one year | 1,168 | 810 | 1,211 |
Between 2 and 5 years | 2,660 | 3,000 | 2,615 |
More than 5 years | 4,201 | 5,093 | 4,824 |
Total | 8,030 | 8,903 | 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 | As at 30 June | As at 31 December |
Lease liabilities included in the balance sheet | £000 | £000 | £000 |
Current | 927 | 678 | 923 |
Non-current | 5,620 | 6,477 | 6,091 |
Total | 6,547 | 7,155 | 7,014 |
|
| Six months ended 30 June | Six months ended 30 June | Year ended 31 December |
Movement in lease liability during the period | Note | £000 | £000 | £000 |
At 1 January |
| 7,355 | 7,014 | 7,014 |
Interest charged to the income statement | 8 | 162 | 69 | 230 |
New leases entered into | 13 | 134 | - | 652 |
Lease rentals paid |
| (741) | (691) | (1,357) |
Disposed of on settlement of lease dispute |
| - | - | - |
Disposal - early exit of lease |
| - | (23) | - |
Movement as a result of foreign exchange |
| (363) | 786 | 816 |
At period end |
| 6,547 | 7,155 | 7,355 |
20. 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 | Six months ended | Year |
|
| £000 | £000 | £000 |
Short-term employee benefits | | 110 | 294 | 365 |
Pay in lieu of notice | | - | 245 | 266 |
Post-employment benefits | | - | 11 | - |
Total | | 110 | 550 | 631 |
21. 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 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. Post the period end, the Group appealed a 'closure notice' and lodged an appeal with HMRC.
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. Management was of the view that the risk of those outflows arising was not probable and accordingly they were considered contingent items.
22. Statement on Rounding
The financial information presented in this report has been rounded to either whole numbers or the nearest decimal place. Rounding is employed for the purpose of simplifying complex numerical data and enhancing readability, while ensuring consistency and adherence to generally accepted accounting principles.
We believe that the rounded figures accurately represent the financial position and performance the Group and subsidiaries in accordance with applicable accounting standards. Materiality considerations have been taken into account, and rounding has not been used to obscure any significant financial information. It is important to note that the use of rounded figures may result in minor discrepancies when summing subtotals or totals.
For a complete understanding of the financial data presented herein, including the exact unrounded figures, interested parties are encouraged to refer to the underlying financial records and detailed notes to the financial statements.
Sportech is committed to maintaining transparency and compliance with relevant accounting standards, and we are available to provide additional information or clarification upon request.
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