Sportech: Not Such a Gamble
Overview:
The company currently has three divisions:
- Football Pools (2013 H1: c.£20m revenue and £8.2m EBITDA)
- Sportech Racing (2013 H1: £34.4m revenue and £6.1m EBITDA)
- e-Gaming (2013 H1: £2.8m revenues, loss making £0.7m)
Football Pools:
'Doing the pools' was once an integral part of working class life in Britain. Nowadays, I think we’d all agree that the football pools is a declining past time. That being said, Sportech had 40k active customers in 2012. The majority (c.70%) of these have been moved to an online (direct debit) platform.
The management has managed margins effectively, resulting in relatively flat EBITDA levels over the last few years. Although in modest decline, this division should continue to generate strong cash flows to fund expansion in the Group’s US opportunity.
Sportech Racing:
Tote Services and equipment sales, Revenue - £15m (H1 2013): Having licensed in 26 states representing 70% of the US population, Sportech Racing is a market leader. The potential to acquire one of the two market competitors (United Tote or AmTote) has been suggested at a recent site visit to the US. With the consolidation of operations, there should be considerable synergies for the Group.
Interactive Products and Services, Revenue - £2m (H1 2013): Sportech Racing has the exclusive right in perpetuity to offer interactive wagering in Connecticut and the roll out is expected soon. The management will most likely have regretted the decision to go with Playtech, so it’s good to see a considered thought process, slide 84. Given that this presentation was delivered three weeks ago – we can reasonable expect a deal to be announced at any moment. Margin improvements are expected to be delivered as further technology driven cost advantages are employed.
Venues business in Connecticut/California/Netherlands, Revenue - £17.3m (H1 2013). In the state of Connecticut, Sportech Venues operates all betting on horseracing under an exclusive and in perpetuity licence for retail, telephone and internet wagering. Management has invested heavily in this area and it will soon announce the completion of a significant flagship redevelopment of its venue by the airport in Bradley and it is also looking to progress with the development of a potential new site close to the New York border. Sportech currently operates in only…
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