RNS Number : 9355L
Sportech PLC
11 September 2023
 

 

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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

 

Year

ended

31 December 2022
(Audited)

 

 

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
30 June
2023
(Unaudited)

 

Six months ended
30 June
2022
(Unaudited)

Year ended

31 December 2022
(Audited)

 

£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
2023 (Unaudited)

 

As at

30 June
2022
(Unaudited)

 

As at

31 December
2022
(Audited)

 

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
30 June
2023
(Unaudited)

 

Six months ended
30 June
2022
(Unaudited)

 

Year

ended

31 December 2022
(Audited)

 

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
30 June
2023
(Unaudited)

 

 

Six months ended
30 June
2022
(Unaudited)

 

 

Year

ended

31 December 2022
(Audited)



£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
30 June
2023
(Unaudited)

 

 

Six months ended
30 June
2022
(Unaudited)

 

 

Year

ended

31 December 2022
(Audited)


£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



Group

 

£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



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                        

 

 

 

(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


Group

 

 

£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
30 June
2023
(Unaudited)

 

Six months ended
30 June
2022
(Unaudited)

 

Year
ended

31 December 2022
(Audited)

 

 

£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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

Year
ended

31 December 2022
(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)

(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
30 June
2023
(Unaudited)

 

Six months ended
30 June
2022
(Unaudited)

 

Year
ended

31 December 2022
(Audited)

 

 

£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
30 June
2023
(Unaudited)

 

Six months ended
30 June
2022
(Unaudited)

 

Year
ended 31 December 2022
(Audited)

 

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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

Year
ended 31 December 2022
(Audited)

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
30 June
2023
(Unaudited)

 

Six months ended
30 June
2022
(Unaudited)

 

Year ended
31 December

2022
(Audited)

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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

Year
ended 31 December 2022
(Audited)

 

 

£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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

Year
ended 31 December 2022
(Audited)

 

£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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

 

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
30 June
2023
(Unaudited)

As at
30 June
2022
(Unaudited)

As at 31 December 2022
(Audited)

 

£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
30 June
2023
(Unaudited)

As at
30 June
2022
(Unaudited)

As at 31 December 2022
(Audited)

 

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
30 June
2023
(Unaudited)

 

As at
30 June
2022
(Unaudited)

 

As at 31 December 2022
(Audited)

 

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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

Year
ended 31 December 2022
(Audited)

 

 

£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
30 June
2023
(Unaudited)

 

Six months ended
30 June
2022
(Unaudited)

 

Year
ended 31 December 2022
(Audited)

 

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
2023
(Unaudited)

As at

30 June
2022
(Unaudited)

As at

31 December
2022
(Audited)

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
2023
(Unaudited)

As at

30 June
2022
(Unaudited)

As at

31 December
2022
(Audited)

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
2023
(Unaudited)

Six months ended

30 June
2022
(Unaudited)

Year ended

31 December
2022
(Audited)

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
30 June
2023
(Unaudited)

Six months ended
30 June
2022
(Unaudited)

Year
ended 31 December 2022
(Audited)

 

 

£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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