REG - Sportech PLC - Final Results
31/03/2022 07:00
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RNS Number : 6752G Sportech PLC 31 March 2022
For immediate release 31 March 2022
SPORTECH PLC
('Sportech', the 'Group' or the 'Company')
Final Results
Sportech, an international betting & technology business, is pleased to
announce its final results for the year ended 31 December 2021.
Continuing operations 2021 2020
£'000 £'000
Revenue 22,942 17,372
Gross Profit 11,453 8,655
Adjusted(1) EBITDA (1,783) (4,035)
Adjusted(1) loss before tax (3,358) (6,533)
Loss before tax (246) (11,923)
Profit/(loss) for the year (including from discontinued operations) 34,563 (12,832)
Adjusted cash(2) 21,912 16,837
1. Adjusted profit measures exclude the effects of expenditure
Management believes should be added back (separately disclosed items), other
income and share option charges (see note D of this announcement).
2. Adjusted cash is cash excluding customer balances but including
cash in entities held for sale (2020 only).
Financial Overview
Continuing operations:
· Revenues recovered by 32% to £22.9 million following strict COVID-19
restrictions on trading in 2020.
· Adjusted EBITDA loss of £1.8 million (2020: £4.0 million), this
excludes income from the LEIDSA(3) contract which was disposed of on 31
December 2021.
· Loss before tax reduced to £0.2 million (2020: £11.9 million).
Discontinued operations:
· Revenues from the LEIDSA contract were £3.4 million (2020: £2.6
million).
· LEIDSA adjusted EBITDA grew to £2.5 million (2020: £1.7 million),
representing a recovery to almost 2019 levels following 2020 COVID-19 impact.
· LEIDSA cash generated in the period from the contract was £0.6
million and net disposal proceeds amounted to £9.4 million (after disposal
costs and including a working capital settlement of £0.4.m received in 2022).
· The Global Tote and Bump 50:50 business disposals agreed in late 2020
and early 2021 were completed in June 2021 following a licensing transfer,
revenues from the discontinued businesses accrued to the Group during the
periods to completion.
Group:
· Statutory profit for the year was £34.6 million (2020: loss of
£12.8 million).
· Cash net of customer balances was £21.9 million (2020: £16.8
million, also including cash held by assets held for sale).
· Capex related to continuing operations was £0.2 million (2020: £0.3
million) and to discontinued operations £1.4 million (2020: £2.1 million).
GROUP DEVELOPMENTS
· Disposals: The Group completed agreements entered into in late 2020
and early 2021, to sell (a) the Global Tote Business to BetMakers Technology
Group Limited; (b) Bump 50:50 to Canadian Bank Note Company Limited, and (c) a
freehold property in New Haven, Connecticut ("CT"). It also entered into and
completed the sale of the terrestrial lottery contract with Lotteria
Electronica Internacionale Dominica S.A ("LEIDSA") in the year. In aggregate
providing a net cash of £47.4 million to the Group.
· Corporate: In August, the Group moved its listing from the Main
Market to the Alternative Investment Market ("AIM"), which the Board believed
was a more appropriate venue for the Group's reduced size. In October, the
Group returned £35.5m of cash to investors through a tender offer, reducing
the shares in issue from 189m to 100m.
· Venues: COVID-19 continued to impact the business through the
majority of 2021 resulting in a 28% decline in total retail betting handle
versus 2019. The focus on cost management to de-risk the business through the
period continued.
· Sports Betting: The Venues business in Connecticut was ultimately
left out of the grant of sports betting licences by the State of Connecticut,
which was a huge disappointment to the Group. The State issued 10-year
licences to the two tribal casinos and the Connecticut Lottery Corporation
("CLC"). The latter being exclusive for retail sports betting on non-tribal
lands. Sportech agreed a deal in August 2021 to become a distributor for CLC,
offering sports wagering at each of its venues, and the first bets were taken
at the end of October 2021.
· Advanced Deposit Wagering: The MyWinners.com site is an element of
the Venues business serving CT residents with online pari-mutuel wagering.
123Bet.com operates under an Oregon licence and is able to provide the same
offering to customers in multiple other States across the USA. Both businesses
saw growth as the COVID-19 restrictions in 2020 limited betting at physical
venues, and that level of trading has been maintained throughout 2021.
· Lottery: Work with LEIDSA to deliver their online retail proposition
in the Dominican Republic, which will eventually be operated by Inspired under
a royalty bearing licence, was started in the third quarter of 2021.
3. Loteria Electrónica Internacional Dominicana S.A.
Andrew Lindley, Chief Executive Officer of Sportech, said:
"2021 was a transitional year for the business with the completion of a
significant amount of M&A and corporate actions to reduce the size of the
business and de-risk our shareholders' investments. The business, although now
small in the context of a plc, is tidy and fit for growth. The two divisions
are right-sized for their operations and 2022 brings with it an attendant
opportunity to garner new value for the Group and its shareholders."
Analyst briefing:
The analyst presentation will be available on the Company website
https://www.sportechplc.com/investors/results/
(https://www.sportechplc.com/investors/results/) . Management is available as
required for analyst and investor meetings; requests should be made via Peel
Hunt.
Contacts:
Sportech PLC
Andrew Lindley, Chief Executive Officer i (mailto:ir@sportech.) r@ (mailto:ir@sportech.) sportech.
(mailto:ir@sportech.) net
Nicola Rowlands, Chief Financial Officer
Peel Hunt (Corporate Broker and NOMAD to Sportech) Tel: +44 (0) 20 7418 8900
George Sellar / Andrew Clark / Lalit Bose
Forward-looking statements This announcement contains certain statements that
are forward-looking statements. They appear in a number of places throughout
this announcement and include statements regarding our intentions, beliefs or
current expectations and those of our officers, directors and employees
concerning, amongst other things, results of our operations, financial
condition, liquidity, prospects, growth, strategies and the business we
operate. These forward-looking statements include all matters that are not
historical facts. By their nature, these statements involve risks and
uncertainties since future events and circumstances can cause results and
developments to differ materially from those anticipated. Any such
forward-looking statements reflect knowledge and information available at the
date of preparation of this announcement. Other than in accordance with its
legal or regulatory obligations (including under the Market Abuse Regulation
(596/2014), as it applies in the UK), the Company undertakes no obligation to
update or revise any such forward-looking statements. Nothing in this
announcement should be construed as a profit forecast. The Company and its
directors accept no liability to third parties in respect of this announcement
save as would arise under English law.
Notes to Editors:
About Sportech
Sportech is a technology supplier and operator in the gambling market with two
core businesses: A digital omni channel platform for gaming verticals
including its own in-house lottery module as its B2B offering. In B2C, the
Company operates Sports Bars and other venues in the State of Connecticut USA
where it deploys its exclusive licence to offer pari-mutuel wagering in the
State and a distribution agreement with the Connecticut Lottery Corporation to
offer sports betting in the State. It also has the exclusive licence to
operate pari-mutuel betting online in Connecticut, which it does under the
MyWinners.com brand, and a general licence for pari-mutuel betting online
across the wider USA under the 123Bet.com brand.
Operating Review
2021 was another difficult year coloured by the long tail of the global
pandemic and challenging trading for businesses operating leisure premises.
At the end of 2020 and in early 2021, the Group had entered into contracts for
the sale of two significant divisions - Sportech Racing & Digital (Global
Tote) and Bump 50:50. Those contracts were contingent upon licences being
granted by the many gambling regulatory bodies that the businesses operated
under and made for a protracted period between signing and closing the deals
in June 2021. Over the period, the Group retained the people and
infrastructure to service those businesses but with the finalisation of the
disposals, was able to resize accordingly. The move from the Main Market to
AIM was made in July and the corporate structure was resized with Richard
McGuire and Tom Hearne both stepping down from their respective leadership
roles. Sportech is very thankful for Richard and Tom's significant
contributions in reshaping the business over their tenures and leaving
Sportech lean and fit for the continuing journey to cash generation.
Following completion of the two deals, the transfers of the businesses were
executed in an orderly fashion with transitional services being carried-on to
support the remaining business through to the end of the year whilst the core
teams in Sportech were reshaped. The Group is consequently now "right-sized"
for the operations going into 2022.
Additionally, in October the Group completed a return of capital back to
shareholders that delivered £35.5m of the tangible value, created by the
disposals in the year.
A focus on maintenance of cash remains a core metric but the Venues business
is, with sports included, in a period of change with busier operations and a
new and additional crowd of patrons to service. Moreover, the United States as
a whole remains a land of new opportunity in the gambling sector as sports
betting continues to enter the pantheon of entertainment State by State.
Sportech, as a participant with a significant USP in its Venues business, has
the ability both to seize the immediate opportunities in Connecticut and
demonstrate its skills in doing so to position itself for other opportunities
which may arise across the rest of the country. Accordingly, there will be
extra focus on operational efficiency and service to ensure that the value of
this USP is maximised.
The Venues business traded below the results of 2019 through the pandemic hit
years of 2020 and 2021, so the first challenge for 2022 will be to recover
that ground as the world recovers. Albeit five venues were permanently closed
through 2020 and 2021, so the overall handle target will be lower than the
full 2019 figure with the correct comparator being the like for like venues
total. In 2019, for the remaining like for like venues, pari-mutuel handle was
$96.1m and in 2021 was $89.7m (2020: $56.1m). Food and beverage revenues were
$5.6m in 2019 and $2.9m in 2021 (2020: $1.9m). Sports betting has no
comparator but handle in December was $6.5m and growing on a trajectory that
could see it mature to levels similar to those of pari-mutuel handle in the
short to medium term. The pari-mutuel and food and beverage sales had begun to
measure up to those of 2019 in the last two months of 2021 and although 2022
did not start well with the Omicron surge hitting America at that time, the
business remains positive for a full recovery in 2022.
Early in the year, Venues also completed the sale of its 'Sports Haven'
property in Connecticut; a 40,000 sq. ft. concrete building of 1960s build
that requires redevelopment. This delivered £4.2m of cash and was another
element of the October return of cash to shareholders. With the leaseback of
the property ending in Q4 2022, it is expected that the business will move out
of the property to a new venue in the vicinity and in doing so will create the
blueprint for a future model for the Venues business.
The online elements of the business traded above the 2019 numbers in 2020 and
continuing in 2021; this being aided by the pandemic as the locked-down
population went online to resume their leisure. The Group continued to invest
in the digital opportunities to drive acquisition and stickiness and in the
coming year will look to improve its platform offer to further capitalise on
the gains made; this part of the overall strategy assisted the profitability
of the Group again during 2021, delivering $22.8m handle, translating to $2.0m
contribution.
The UK based digital technology team worked for the first half of 2021 on the
delivery of a digital pari-mutuel solution for an Asian customer of the now
sold Racing & Digital division and moved on post-sale to create a digital
lottery platform for the Dominican Republic customer. The Dominican Republic
business was sold on the very last day of 2021 to Inspired Entertainment Inc.
("Inspired") and the team will continue to work with Inspired, as a
third-party supplier, to deliver a digital solution to the customer; this will
bring a royalty revenue stream and a strengthened platform offer to the
business once launched.
The disposal of the business in the Dominican Republic also secured £9.4m of
free cash that increased the total cash in hand at the end of the year to
£21.9m (with an additional £0.4m of working capital adjustment to be
received in Q1 2022). Some of that cash is earmarked to clear down legacy
liabilities of the Group including a potential tax liability relating to the
Football Pools business and an onerous lease in California. Free cash then,
will be circa £11m and it is expected that some of the value created by the
disposal will be returned to shareholders in the 2022.
During 2021, capital and net cash position were considered more crucial
metrics than EBITDA due to the uncertain trading position. Capex was kept low
at £1.6m for both the continuing and discontinued business (including
capitalised software costs of internal staff of £1.3m) and one of the
costlier venues located in Bridgeport was closed, improving efficiency in CT.
The return of cash reduced the liquid reserves of the Group, but to a
comfortable level within the context of uncertain trading, with the future of
the pandemic far from clear. Any further return will be made with a sufficient
buffer in mind to counter a resurgence of COVID-19 and continue to optimise
both divisions.
As the Group transitions through 2022, revenues and profitability will return
to the fore as key metrics. The tail of legacy issues that affect the
difference between cash held and 'free cash' on the balance sheet will be
addressed and the liabilities settled to provide a clean company and reduce
needless distraction. Whilst being mindful of events unfolding in Ukraine and
our thoughts are with those affected, Sportech itself is not directly affected
by economic and legal actions being taken in response to the crisis. However,
the Group will monitor the ripple effects on prices and supply chains which
will likely impact the businesses to some degree.
It is difficult to provide accurate guidance on the future outlook given the
uncertainty of speed of recovery and the short history of sports betting in
Connecticut so far. However, management are confident that trade is recovering
and that a good rate of handle and growth is being experienced in the new
sports product and that the business will meet market expectations.
DIVISIONAL SUMMARIES
SPORTECH VENUES
Sportech Venues offers legal betting across the State of Connecticut; (a)
pari-mutuel betting on horseracing, greyhound racing and jai alai through both
online and venue-based operations under an exclusive and perpetual licence
and, (b) sports betting under a distributorship type arrangement with the
Connecticut Lottery Corporation. The venues operations are of two distinct
types; (a) Sports Bar/Restaurants which offer a main-steam leisure-based
experience where betting is an exciting additional customer attraction, and
(b) Off-Track Betting (OTB) shops, which are dedicated primarily to retail
gambling operations albeit with some light refreshments and other products.
Constant currency
£'000 2021 2020
Wagering revenue 19,515 14,796
Commission from sports betting 280 -
Food and beverage revenue 2,115 1,401
Total revenue 21,910 16,197
Contribution 10,769 7,734
Contribution margin 49.2% 47.7%
Adjusted operating expenses (9,149) (8,682)
Adjusted EBITDA 1,620 (948)
Capex 27 27
Developments during the year
COVID-19 continued to affect the business for the entire year with closures of
venues abundant across the year and facemasks being removed in all Connecticut
counties only during December 2021 (immediately prior to the Omicron surge)
impacting footfall generally for the full year.
Staffing and food and beverage stocks were carefully managed to reduce the
impact of wasted cost, but central costs and rents were more difficult to keep
in line with trading, and therefore, the impact of COVID-19 on the overall
profitability of the Venues operation was high.
Internet traffic was increased as a result of COVID-19, albeit not
sufficiently to negate the entire impact on the terrestrial business, however
handle has remained trading at 35.3% above 2019 levels through additional
marketing and closer management of individual customers.
During March 2021, the State of Connecticut approved new laws on gaming for
the state with the inclusion of grants of sports betting licences; something
Sportech had been campaigning to be a part of for a number of years.
Unfortunately, Sportech was not included in the grants, which were secured
only by the two tribal nations in Connecticut (for online betting across the
state and terrestrial betting limited to their tribal lands) and the
Connecticut Lottery Corporation ("CLC"), itself an emanation of the state (for
online betting and terrestrial betting across the state). This was obviously a
massive blow for the business and Sportech was considering its response to its
legitimate expectation to be considered for a licence when the opportunity to
participate in sports betting was offered by CLC. The deal struck delivered
Sportech Venues the right to participate in the new sports betting product
that it had been waiting for as a commission-based distributor for CLC, as
well as a small share of CLC's online revenues to recognise the link between
terrestrial and online participation. Crucially, any need for lengthy, costly
and potentially risky litigation relating to the administrative decision of
the state was averted.
The team readied the venues for launch within a month of the CLC deal, which
was signed in August, and CLC's licences were granted at the end of October
when Sportech took its first sports bets in the Stamford venue. Roll out to
all venues continued into November and by the third week of the month all
venues (except Norwalk, which will not take sports bets due to local
restrictions) were trading sports.
$4.2m of sports betting handle was taken through November 2021, following
which total sports handle increased by over $2m per month through to the end
of January 2022, which marked the end of NFL season. Trading thereafter has
levelled off in line with expectations (as January was the anticipated high
watermark for the initial surge in sports betting). Venues' footfall has
increased considerably, particularly in the bar / restaurants which are
notably busier with a demographic shift toward younger sports betting patrons.
The handle to profit ratio from sports is poorer than those obtained from
pari-mutuel as Sportech are only entitled to a share of CLC's profits as the
distributor, however, it provides another strong vertical and attracts new
patronage to the venues that is not limited to the sports products and
therefore leverages both the existing products with new sales and existing
cost base with new revenues, and thus synergises the entire operation.
Looking forward
Sport and capturing the revenues of its followers is clearly the key mantra
for the future of the Venues business and we expect the shape of the business
to change as this product beds in.
The immediate signs of improvement in the venues are strongest in the bar /
restaurant formats where the sports patron demographic is the primary target
audience. The management team will therefore be assessing the development of
this trend throughout the year and planning for optimisation of the mix of
formats and locations of venues to better capture the sports market without
detraction from the mainstay earnings of pari-mutuel betting.
The freehold property in New Haven Connecticut (known as "Sports Haven") was
sold during the year and a lease through to the last quarter of 2022 has kept
operations there. It is expected that Sports Haven will close in the year and
a new bar/restaurant will be opened locally to replace it (along with offices
to house management and support staff). The result will be the most up to date
iteration of the bar / restaurant in the estate and will capitalise on the
learnings of the others and potentially provide a blueprint for any future
investment in the business.
SPORTECH DIGITAL
Sportech Digital now encompasses the two digitally focused, small, non-CT
based businesses of (a) a US facing B2C trading operation in the form of
123Bet.com, which was previously a white-label customer of the discontinued
Racing and Digital business and was brought in-house in 2019, and (b) a B2B
operation based in Chester, UK, that faces markets worldwide with an
ultra-modern and proprietary platform for lottery management that can also
integrate and manage any other gambling vertical.
123Bet.com continues to grow, operating with thin management and marketing
budgets derived from its own profits. It has had success relative to its size
and is ready for the offer to be refreshed and the business taken to the next
stage of growth.
The Chester team is pursuing opportunities primarily in the lottery space with
private and national lotteries to develop the business, drawing on the
Sportech brand and legacy along with our new range of products and digital
expertise to offer enhanced lottery capabilities.
Constant currency
£'000 2021 2020
Services revenue 1,032 295
Contribution 408 211
Contribution margin 39.5% 71.5%
Adjusted operating expenses (987) (984)
Adjusted EBITDA (579) (773)
Capex 169 230
Developments during the year
The Dominican Republic (LEIDSA) lottery supply contract was sold during the
year. The Chester team has worked in the year to develop an online sales
platform for the LEIDSA client with local capabilities. It continues to do so,
with Inspired Entertainment (the buyer), and will licence the delivered
product to Inspired who will manage it post-delivery and pay a royalty for
doing so.
123Bet.com has maintained significant traction that it enjoyed during the
beginnings of the pandemic when it saw an influx of players from Puerto Rico
whilst the local cash betting venues were closed.
Looking forward
The Board will continue to evaluate both businesses and seek opportunities to
build on their foundations and enhance the products through innovation,
collaboration and/or investment.
GROUP OUTLOOK
Tentatively, the pandemic that so tested our organisation (and the world) may
peter out in 2022 and provide everyone in Sportech with new purpose in a
reinvigorated business.
The Board's core strategies are clear in taking the current opportunities in
Connecticut, looking at corporate and trading opportunities to create value,
reducing costs and returning cash to shareholders.
The way forward is clear and simple, and the Board and management remain fully
engaged and focused on delivering these objectives through 2022.
Financial Review
Income Statement - Detailed View
Restated Constant
Reported Currency
£'000 2021 2020(2) 2020
Service revenue 20,547 15,900 15,091
Sports betting commission 280 - -
F&B revenue 2,115 1,472 1,401
Total revenues 22,942 17,372 16,492
Cost of sales (11,489) (8,717) (8,276)
Gross profits 11,453 8,655 8,216
Marketing and distribution costs (276) (311) (281)
Contribution 11,177 8,344 7,935
Contribution margin % 48.7% 48.0% 48.1%
Adjusted operating expenses(3) (12,960) (12,379) (11,791)
Impact of FX on reported earnings - - (179)
Adjusted EBITDA (1,783) (4,035) (4,035)
Separately disclosed items (1,101) (229)
Other income 4,101 -
Non-cash items:
Share option charges (334) (347)
Depreciation (982) (1,621)
Impairment of property, plant and equipment - (4,349)
Reversal of impairment of property, plant and equipment 335 -
Amortisation (129) (276)
Amortisation of acquired intangibles (509) (509)
Total - non-cash items (1,619) (7,102)
LBIT (402) (11,366)
Net finance income/(charges) 156 (557)
LBT (246) (11,923)
Taxation - continuing operations (192) 1,055
Result after taxation - continuing operations (438) (10,868)
Result after taxation - discontinued operations 35,001 (1,964)
Profit/(loss) for the year 34,563 (12,832)
Adjusted loss before tax for the year from continuing operations(1) (3,358) (6,533)
1. Adjusted loss before tax for the year from continuing operations is
the aggregate of adjusted EBITDA, share option charges, depreciation,
amortisation (excluding amortisation of acquired intangibles), and certain
finance charges (see note D for reconciliation).
2. Prior year comparatives have been restated to exclude the results
of the LEIDSA contract which have been included with the results of the Global
Tote business and Bump 50:50 within profit/(loss) after taxation -
discontinued operations.
3. Adjusted operating expenses exclude depreciation, amortisation,
impairments and reversal of impairments, share option charges, other income
and separately disclosed items.
Revenue - continuing operations
Restated Constant
Reported Currency
£'000 2021 2020 2020
Wagering revenue 19,515 15,596 14,796
Sports betting commission 280 - -
F&B revenue 2,115 1,472 1,401
Total Sportech Venues 21,910 17,068 16,197
Total Sportech Digital 1,032 304 295
Total revenues 22,942 17,372 16,492
Revenue from continuing operations increased by 39% on a constant currency
basis. In Venues, the land-based operation was shuttered for over three months
in the prior year and had venue capacity restrictions imposed from July 2020
through most of 2021, as well as mask mandates and work from home orders in
place in the State of Connecticut. However, despite the restrictions, revenue
recovered to near 2019 levels. The online revenue in Connecticut fell by 5% in
2021 from 2020 but was up 35% on 2019, having maintained customers who
migrated from in person to online wagering during 2020.
Adjusted EBITDA - continuing operations
Restated Constant currency
Reported 2020
£'000 2021 2020
Sportech Venues 1,620 (1,085) (948)
Sportech Digital (579) (762) (773)
Central costs (2,564) (1,927) (1,890)
Adjusted EBITDA before sports betting investment (1,523) (3,774) (3,611)
Sports betting investment (260) (261) (245)
Adjusted EBITDA (1,783) (4,035) (3,856)
Sportech Venues largely recovered in 2021 from the strict restrictions which
were in place in 2020. Cost reductions implemented in 2020 were maintained
wherever possible which also contributed to the EBITDA recovery. Costs were
reduced in the Digital division as well as revenue growing from 123Bet.com,
contributing to the reduced EBITDA loss. Central costs increased due to a
significant increase in Directors and Officers insurance which was experienced
market wide.
Sports Betting investment represents the lobbying costs the Group has incurred
seeking to secure a Sports Betting licence in the State of Connecticut and
also in seeking partnerships across the rest of the US in Sports Betting.
Discontinued operations
In addition to the Global Tote and Bump 50:50 businesses, whose disposals were
agreed on 24 December 2020 and 31 January 2021, respectively and were held for
sale as at 31 December 2020, the Group also agreed and completed the disposal
of its contract with LEIDSA (Dominican lottery) on 31 December 2021.
All three disposals were completed by 31 December 2021 and all consideration
was received apart from the net working capital settlement for LEIDSA (£0.4m,
received in Q1 2022). The disposals signal a departure from major business
lines in which the Group previously operated. Accordingly, they have been
treated as discontinued operations, in accordance with IFRS 5, in these
financial statements.
The table below shows the results of the discontinued operations.
Global Tote Bump 50:50 LEIDSA Total Global Tote Bump 50:50 LEIDSA Total
£'000 2021 2021 2021 2021 2020 2020 2020 2020
Revenue 12,245 810 3,364 16,419 25,052 703 2,594 28,349
Costs (8,140) (487) (913) (9,540) (19,525) (1,598) (857) (21,980)
Adjusted EBITDA 4,105 323 2,451 6,879 5,527 (895) 1,737 6,369
Depreciation and amortisation - - (372) (372) (5,083) (291) (381) (5,755)
Profit on sale of assets 68 - 47 115 - - - -
Other income 1,057 - - 1,057 - - - -
Separately disclosed items (371) - - (371) (1,159) (65) - (1,224)
Finance (costs)/income (24) 78 - 54 (113) 45 - (68)
Profit/(loss) before tax 4,835 401 2,126 7,362 (828) (1,206) 1,356 (678)
Taxation (195) - (791) (986) (528) - (758) (1,286)
Profit/(loss) after tax 4,640 401 1,335 6,376 (1,356) (1,206) 598 (1,964)
The trading from the discontinued operations through to disposal date accrued
to the Group which benefited the Group's cash position. The above disclosures
for Global Tote and Bump 50:50 differ from those disclosed in the half year
accounts following additional information becoming available after the
approval of the Interim Report, a reconciliation will be provided in the 2022
Interim Report.
In addition to the discontinued operations above, the disposal of our New
Haven freehold property in Connecticut, USA for consideration of circa £4.3m
(US$6.0m) was completed on 28 April 2021. The sale and purchase agreement
included a leaseback clause, whereby Sportech shall lease back the property
for a period not to exceed 18 months from the date of closing. The lease has a
monthly rental of circa £36k (US$50k) per month. The profit on disposal of
£2,575k has been recorded within other income in the income statement.
Separately disclosed items
Reported
£'000 2021 2020
Included in operating costs - continuing operations
Onerous contract provisions and other losses resulting from exit from 91 -
Californian operations
Restructuring and redundancy costs 625 -
Corporate activity costs 21 118
Costs in relation to Spot the Ball VAT refund 10 44
Costs in relation to exiting the Group's interests in India 13 65
Costs in relation to the Group's move to AIM 341 -
UK defined pension scheme buy-out - 2
1,101 229
Discontinued operations
Included in operating costs 371 1,224
Included in finance costs - continuing operations
Interest accrued on corporate tax potentially due and unpaid at the balance 150 150
sheet date on STB refund received in 2016
Interest paid on VAT settlement reached in 2020 - 83
150 233
1,622 1,686
The Group continues to focus on resolving legacy issues and reducing ongoing
separately disclosed items. The Group's lease issues in California have been
resolved in the year and in early 2022. The Group has been resized to reflect
the reduced operations following the disposals in the year and in response has
moved its listing from the Main Market to AIM during the year.
Other income
Other income includes the profit on disposal of Sports Haven (£2,575k),
credits received against the US payroll through the CARES Act as amended on 27
December 2020 (£1,426k in continuing operations and £1,057k in discontinued
operations) and a contract settlement (£100k). All have been excluded from
Adjusted EBITDA due to the one-off nature of the credits and the fact the
amounts would distort comparability of the results of 2021 when analysing
underlying performance.
Taxation
The current tax expense for the year in continuing activities was £239k being
mainly state taxes payable in the US. The deferred tax credit for the year was
£47k within continuing activities; relating to the recognition of timing
differences in the US on the Group's former joint venture in California net of
deferred tax liability release on acquired intangibles. The Group continues to
not recognise deferred tax assets on gross timing differences of £14,225k
(2020: £35,745k), £12,016k being in the US and £2,209k being in the UK. A
significant amount of the timing differences were utilised in the year against
profits on disposal in the US meaning no tax was payable of those disposals.
Tax paid in the year of £105k in continuing operations is mainly taxes in the
US both federal and state, a further £924k was paid by discontinued
operations, being mainly withholding taxes in the Dominican Republic. A tax
refund of £1,442k was received in February 2021 in relation of overpaid prior
year UK taxes in relation to the disposal of the Football Pools.
The Group's current tax liability includes a provision for uncertain tax
liabilities of £4.6 million in relation to corporation tax on the 2016 VAT
refund. The Group is working with HMRC to resolve the issue. The balance is US
taxes payable for 2021.
Cash flow
The Group's cash flow for the year is as follows (including discontinued
operations):
£'000 2021 2020
Adjusted EBITDA - continuing operations (1,783) (4,035)
Adjusted EBITDA - discontinued operations 6,879 6,369
Total Adjusted EBITDA 5,096 2,334
Payment of lease liabilities including interest (1,512) (1,655)
EBITDA after lease payments 3,584 679
Add: Net proceeds from disposal of Sports Haven 4,193 -
Net proceeds from disposal of Global Tote 22,786 6,180
Net proceeds from disposal of Bump 50:50 4,644 -
Net proceeds from disposal of LEIDSA contract 9,417 -
Less: Other Acquisition, disposal, and JV items - (500)
Capitalised software (1,012) (1,650)
Property plant and equipment (net of proceeds from sales) (582) (753)
Separately disclosed items and other income (net) 76 (484)
Working capital and other (2,418) 1,552
Tax received net of tax paid and net interest received 438 (1,100)
Share buy-back including expenses (35,880) -
FX impact (171) (72)
Net cash flows in year 5,075 3,852
Opening cash, excluding customer balances 16,837 12,985
Closing cash, excluding customer balances 21,912 16,837
Net cash inflow (excluding movement in customer balances) in the year was
£5,075k. Total proceeds from disposals in the year net of cash disposed of
and disposal costs was £41,040k with £6,180k having been received late in
2020 on account, bringing the total net cash in of £47,220k. Capex in the
year was reduced following the disposal of Global Tote and Bump 50:50. Other
income includes inflows for CARES Act credits of £2,483k after the US Federal
Government amended the legislation from mid-2020 to make it more wide ranging
and enabling the Group to claim credits for 2021 US payroll. Net tax received
of £413k was a tax refund of £1,442k net of tax paid of £1,029k, and net
interest received was £25k.
Finally, a significant amount of the disposal proceeds received in the year
were distributed to shareholders in a tender offer which completed in October
2021, following a Court Approved reduction of capital process to create
distributable reserves in the Sportech PLC company, by cancelling its capital
redemption reserve of £10.3m and reducing the nominal value of each share
from 20p to 1p.
Consolidated Income Statement
for the year ended 31 December 2021
Restated
2021 2020
Note £000 £000
Revenue E 22,942 17,372
Cost of sales E (11,489) (8,717)
Gross profit E 11,453 8,655
Marketing and distribution costs E (276) (311)
Contribution E 11,177 8,344
Operating costs D (15,680) (19,710)
Other income X 4,101 -
Operating loss (402) (11,366)
Finance costs G (305) (568)
Finance income G 461 11
Loss before tax from continuing operations (246) (11,923)
Tax - continuing operations H (192) 1,055
Loss for the year - continuing operations (438) (10,868)
Profit/(loss) after taxation from discontinued operations I(g) 35,001 (1,964)
Profit/(loss) for the year 34,563 (12,832)
Attributable to:
Owners of the Company 34,563 (12,832)
Basic (loss)/earnings per share attributable to owners of the Company
From continuing operations J(a) (0.3)p (5.8)p
From discontinued operations J(a) 20.6p (1.0)p
Total J(a) 20.3p (6.8)p
Diluted (loss)/earnings per share attributable to owners of the Company
From continuing operations J(b) (0.3)p (5.8)p
From discontinued operations J(b) 20.6p (1.0)p
Total J(b) 20.3p (6.8)p
Adjusted loss per share attributable to owners of the Company
Basic J(c) (1.7)p (2.8)p
Diluted J(c) (1.7)p (2.8)p
See note D for a reconciliation of the above statutory income statement to the
adjusted performance measures used by the Board of Directors to assess
divisional performance.
Prior year comparatives have been restated to exclude the results of the
LEIDSA contract which have been included with the results of the Global Tote
business and Bump 50:50 within profit/(loss) after taxation from discontinued
operations.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
2021 2020
£000 £000
Profit/(loss) for the year 34,563 (12,832)
Other comprehensive (expense)/income:
Items that will not be reclassified to profit and loss
Actuarial gain/(loss) on retirement benefit liability - discontinued 186 (344)
operations
Deferred tax on movement on retirement benefit liability - discontinued - 88
operations
186 (256)
Items that may be subsequently reclassified to profit and loss
Currency translation differences - continuing operations (617) 237
Currency translation differences - discontinued operations (550) (314)
Less: gain reclassified to profit and loss on disposal of foreign operations (3,373) -
(4,540) (77)
Total other comprehensive expense for the year, net of tax (4,354) (333)
Total comprehensive income/(expense) for the year 30,209 (13,165)
Attributable to:
Owners of the Company 30,209 (13,165)
Consolidated Balance Sheet
As at 31 December 2021
2021 2020
Note £000 £000
ASSETS
Non-current assets
Goodwill K 604 604
Intangible fixed assets L 6,357 7,343
Property, plant and equipment M 4,261 5,077
Right-of-use assets N 4,657 1,133
Trade and other receivables O 158 156
Deferred tax assets P - 4
Total non-current assets 16,037 14,317
Current assets
Trade and other receivables O 1,750 1,517
Inventories Q 124 120
Current tax receivable H - 1,442
Cash and cash equivalents R 22,367 11,821
24,241 14,900
Assets classified as held for sale - 27,671
Total current assets 24,241 42,571
TOTAL ASSETS 40,278 56,888
LIABILITIES
Current liabilities
Trade and other payables S (7,945) (14,104)
Provisions T (736) (321)
Lease liabilities U (923) (823)
Deferred tax liabilities P - (94)
Current tax liabilities H (4,718) (4,700)
(14,322) (20,042)
Liabilities directly associated with assets classified as held for sale - (7,507)
Total current liabilities (14,322) (27,549)
Net current assets 9,919 15,022
Non-current liabilities
Lease liabilities U (6,091) (3,059)
Deferred tax liabilities P (43) -
Provisions T - (1,121)
Total non-current liabilities (6,134) (4,180)
TOTAL LIABILITIES (20,456) (31,729)
NET ASSETS 19,822 25,159
EQUITY
Ordinary shares V 1,000 37,750
Other reserves 3,527 16,539
Retained earnings 15,295 (29,130)
TOTAL EQUITY 19,822 25,159
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Other reserves
Ordinary shares Capital redemption reserve Other reserve Foreign Retained earnings Total
exchange reserve
£000 £000 £000 £000 £000 £000
At 1 January 2021 37,750 10,312 (638) 6,865 (29,130) 25,159
Comprehensive income
Profit for the year - - - - 34,563 34,563
Other comprehensive items
Actuarial gain on defined benefit - - 186 - - 186
pension liability*
Cumulative actuarial loss on defined benefit -
pension liability disposed of, transferred to - - 766 - (766)
retained earnings
Currency translation differences arising in - - - (4,540) - (4,540)
the year
Total other comprehensive items - - 952 (4,540) (766) (4,354)
Total comprehensive items - - 952 (4,540) 33,797 30,209
Transactions with owners
Share option charge - - - - 334 334
Cancellation of capital redemption reserve - (10,312) - - 10,312 -
Capital reduction (note V) (35,862) - - - 35,862 -
Fees in relation to capital reduction (note V) - - - - (66) (66)
Fees in relation to share buy-back (note V) - - - - (314) (314)
Share buy-back (note V) (888) 888 - - (35,500) (35,500)
Total transactions with owners (36,750) (9,424) - - 10,628 (35,546)
Total changes in equity (36,750) (9,424) 952 (4,540) 44,425 (5,337)
At 31 December 2021 1,000 888 314 2,325 15,295 19,822
Other reserve includes the premium on shares issued of £314k in relation to
the acquisition of Lot.to Systems Limited in 2019, which is recorded as a
merger reserve.
* Net of deferred tax.
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Other reserves
Ordinary shares Capital redemption reserve Other reserve Foreign exchange reserve Retained earnings Total
£000 £000 £000 £000 £000 £000
At 1 January 2020 37,750 10,312 (382) 6,942 (16,645) 37,977
Comprehensive (expense)/income
Loss for the year - - - - (12,832) (12,832)
Other comprehensive items
Actuarial loss on defined benefit (256)
pension liability* - - (256) - -
Currency translation differences - - - (77) - (77)
Total other comprehensive items - - (256) (77) - (333)
Total comprehensive items - - (256) (77) (12,832) (13,165)
Transactions with owners
Share option charge - - - - 347 347
Total transactions with owners - - - - 347 347
Total changes in equity - - (256) (77) (12,485) (12,818)
At 31 December 2020 37,750 10,312 (638) 6,865 (29,130) 25,159
Other reserve includes the premium on shares issued of £314k in relation to
the acquisition of Lot.to Systems Limited in 2019, which is recorded as a
merger reserve and cumulative actuarial movements on defined benefit pension
schemes net of deferred tax.
* Net of deferred tax.
Consolidated Statement of cash flows
for the year ended 31 December 2021
2021 2020
Note £000 £000
Cash flows from operating activities
Cash generated from operations, before separately disclosed items W 511 3,928
Interest received - 13
Interest paid - (84)
Tax refund received H 1,442 -
Tax paid H (1,029) (1,029)
Net cash generated from operating activities before separately disclosed items 924 2,828
Cash inflows - other income X 2,483 -
Cash outflows - separately disclosed items F (2,407) (484)
Cash generated from operations 1,000 2,344
Cash flows from investing activities
Disposal of Sports Haven (net of transaction costs) 4,193 -
Disposal of Bump 50:50 (net of cash disposed of and transaction costs) 4,644 -
Consideration paid for Lot.to Systems Limited, net of cash acquired - (500)
Disposal of LEIDSA contract (net of cash disposed of and transaction costs) 9,417 -
Disposal of Global Tote (net of cash disposed of and transaction costs) 22,636 6,180
Proceeds from sale of intangible assets M 150 -
Investment in intangible fixed assets L (1,012) (1,650)
Purchase of property, plant and equipment M (582) (753)
Net cash generated from investing activities 39,446 3,277
Cash flows used in financing activities
Principal paid on lease liabilities U (1,333) (1,316)
Interest paid on lease liabilities (179) (339)
Share buy-back including transaction costs V (35,880) -
Interest received 27 -
Interest paid (2) -
Cash used in financing activities (37,367) (1,655)
Net increase in cash and cash equivalents 3,079 3,966
Effect of foreign exchange on cash and cash equivalents (171) (72)
Cash and cash equivalents at the beginning of the year R 11,821 15,565
Opening cash included in asset held for sale and excluded from cash and cash 7,638 -
equivalents
Cash and cash equivalents at the end of the year R 22,367 19,459
Less cash held by assets held for sale - (7,638)
Group cash and cash equivalents at the end of the year 22,367 11,821
Represented by:
Cash and cash equivalents R 22,367 11,821
Less customer funds R (455) (465)
Adjusted net cash at the end of the year R 21,912 11,356
Notes to the Final Statement
For the year ended 31 December 2021
All accounting policies applied in this Preliminary Statement are consistent
with those in the full financial statements which have yet to be published.
The preliminary results for the year ended 31 December 2021 were approved by
the Board of Directors on 31 March 2022. The financial information set out in
this announcement does not constitute statutory financial statements for the
years ended 31 December 2021 and 2020 within the meaning of Section 435 of the
Companies Act 2006, but is extracted from those financial statements. The
auditors have reported on those financial statements and have given an
unqualified report which does not contain a statement under Section 498 of the
Companies Act 2006.
A. Reporting entity
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 consolidated financial statements of the
Company as at and for the period ended 31 December 2021 comprise the Company
and its subsidiaries (together referred to as the "Group"). The principal
activities of the Group were the provision of pari-mutuel betting (B2C) and
the supply of wagering technology solutions (B2B) up until the disposal of the
Group's Global Tote business on 17 June 2021, the disposal of the Group's
50:50 Lottery business (Bump 50:50) on 2 June 2021 and the disposal of the
Group's supply contract with LEIDSA in the Dominican Republic on 31 December
2021. Following the disposals, the Group continues to provide pari-mutuel
betting (B2C) and lottery technology (B2B).
B. Going concern
The Directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the financial statements. Following the completion of the
disposal of the LEIDSA Lottery contract on 31 December 2021, the Group has
realised significant cash, the Board will continue to engage with shareholders
to assess the optimal use of capital.
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.
C. Basis of reporting
a. The accounting policies used in preparation of this preliminary
announcement have remained unchanged from those set out in the Group's 2020
financial statements.
b. The consolidated financial statements have been extracted from the
statutory financial statements which have been prepared in accordance with UK
adopted international accounting standards. The financial statements have been
prepared under the historical cost convention, as modified by the revaluation
of certain financial assets and financial liabilities.
c. The preparation of consolidated 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. Details of the critical judgements applied in the preparation of
these financial statements are included in the full statutory financial
statements.
D. 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 believe should be added back (separately disclosed
items) and other income. The share option expense is also excluded given it is
not directly linked to operating performance of the divisions. Interest is not
allocated to segments as the Group's cash position is controlled by the
central finance team. This measure provides the most reliable indicator of
underlying performance of each of the trading divisions as it is the closest
approximation to cash generated by underlying trade, excluding the impact of
separately disclosed items and working capital movements.
Adjusted EBITDA is not an IFRS measure, nevertheless although it may not be
comparable to adjusted figures used elsewhere, it is widely used by both the
analyst community to compare with other gaming companies and by management to
assess underlying performance.
A reconciliation of the adjusted operating expenses used for statutory
reporting and the adjusted performance measures is shown below:
Restated
2021 2020
Note £000 £000
Operating costs per income statement (15,680) (19,710)
Add back:
Sports betting investment 260 261
Depreciation M,N 982 1,621
Amortisation, excluding acquired intangible assets L 129 276
Amortisation of acquired intangible assets L 509 509
Impairment of property, plant and equipment and right-of-use assets - 4,349
Reversal of impairment of property, plant and equipment (335) -
Share option charge 334 347
Separately disclosed items (net) F 1,101 229
Adjusted operating costs, pre sports betting investment (12,700) (12,118)
Adjusted EBITDA is calculated as below.
Restated
2021 2020
Continuing operations £000 £000
Revenue 22,942 17,372
Cost of sales (11,489) (8,717)
Gross profit 11,453 8,655
Marketing and distribution costs (276) (311)
Contribution 11,177 8,344
Adjusted operating income and costs (pre sports betting investment) (12,700) (12,118)
Adjusted EBITDA pre sports betting investment (1,523) (3,774)
Sports betting investment (260) (261)
Adjusted EBITDA (1,783) (4,035)
Prior year comparatives have been adjusted for discontinued operations related
to the LEIDSA contract (prior year comparatives were adjusted in the 2020
financial statements to excluded results of the Global Tote and Bump 50:50
business).
Sports Betting investment represents the time and cost the Group has incurred
on seeking to secure a Sports Betting licence in the State of Connecticut and
also in seeking partnerships across the rest of the US in Sports Betting. It
includes lobbying costs and consultants. In both the current and prior year,
the costs were all wholly externally incurred and included no internal
allocations.
Adjusted profit/(loss) 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.
Restated
2021 2020
From continuing operations: £000 £000
Adjusted EBITDA (1,783) (4,035)
Share option charge (334) (347)
Depreciation (982) (1,621)
Amortisation (excluding amortisation of acquired intangibles) (129) (276)
Net finance costs (excluding certain finance costs - note G) (130) (254)
Adjusted loss before tax (3,358) (6,533)
Tax at 16.4% (2020: 20.3%) 551 1,326
Adjusted loss after tax (2,807) (5,207)
Restated
2021 2020
From discontinued operations: £000 £000
Adjusted EBITDA 6,879 6,369
Depreciation (221) (2,170)
Amortisation (151) (3,585)
Net finance costs 54 (68)
Adjusted profit before tax 6,561 546
Tax at 25.8% (2020: (60.9)%) (1,693) 333
Adjusted profit after tax 4,868 879
E. Segmental reporting
2021 Sportech Digital Group
Sportech Venues Corporate costs
£000 £000 £000 £000
Revenue from sports betting services - 280 - 280
Revenue from food and beverage sales - 2,115 - 2,115
Revenue from rendering of services 1,032 19,515 - 20,547
Total revenue 1,032 21,910 - 22,942
Cost of sales (548) (10,941) - (11,489)
Gross profit 484 10,969 - 11,453
Marketing and distribution costs (76) (200) - (276)
Contribution 408 10,769 - 11,177
Adjusted net operating costs (987) (9,149) (2,564) (12,700)
Adjusted EBITDA (pre sports betting investment) (579) 1,620 (2,564) (1,523)
Sports betting investment - (260) - (260)
Adjusted EBITDA (579) 1,360 (2,564) (1,783)
Share option charge - - (334) (334)
Depreciation (10) (950) (22) (982)
Amortisation (excluding amortisation of acquired intangible assets) (97) - (32) (129)
Segment result before amortisation of acquired intangibles (686) 410 (2,952) (3,228)
Amortisation of acquired intangibles (509) - - (509)
Reversal of impairment of property, plant and equipment - 335 - 335
Separately disclosed items (165) (84) (852) (1,101)
Other income 100 4,001 - 4,101
Operating (loss)/profit (1,260) 4,662 (3,804) (402)
Net finance income 156
Loss before taxation from continuing operations (246)
Taxation - continuing operations (192)
Loss for the year from continuing operations (438)
Profit after tax from discontinued operations 35,001
Profit for the year 34,563
Discontinued operations in relation to the LEIDSA contract were within the
Sportech Digital division, formally known as Sportech lotteries. Those in
relation to Global Tote and Bump 50:50 were classified as discontinued in 2020
also.
Within Sportech Venues' services revenue there is an amount of c£263k which
related to 2020 handle taken from Connecticut residents online by out of state
operators. It was only in 2021 that those operators received sub-licences to
take bets from Connecticut residents and as such that Sportech could collect
as "source market" fee from those operators, including back dating to 2020
handle.
Sportech Digital Group
Sportech Venues Corporate costs
£000 £000 £000 £000
Segment assets 1,252 20,288 18,738 40,278
Segment liabilities (208) (12,144) (8,104) (20,456)
Other segment items - capital expenditure
Intangible assets (continuing operations) 165 - - 165
Intangible assets (discontinued operations) 847 - - 847
Property, plant and equipment (continuing operations) 4 27 - 31
Property, plant and equipment (discontinued operations) 551 - - 551
2020 Sportech Digital Group
Sportech Venues Corporate costs
Restated £000 £000 £000 £000
Revenue from food and beverage sales - 1,472 - 1,472
Revenue from rendering of services 304 15,596 - 15,900
Total revenue 304 17,068 - 17,372
Cost of sales (93) (8,624) - (8,717)
Gross profit 211 8,444 - 8,655
Marketing and distribution costs - (311) - (311)
Contribution 211 8,133 - 8,344
Adjusted net operating costs (973) (9,218) (1,927) (12,118)
Adjusted EBITDA (pre sports betting investment) (762) (1,085) (1,927) (3,774)
Sports betting investment - (261) - (261)
Adjusted EBITDA (762) (1,346) (1,927) (4,035)
Share option charge - - (347) (347)
Depreciation (10) (1,595) (16) (1,621)
Amortisation (excluding amortisation of acquired intangible assets) (26) - (250) (276)
Segment result before amortisation of acquired intangibles (798) (2,941) (2,540) (6,279)
Amortisation of acquired intangibles (509) - - (509)
Impairment of property, plant and equipment and right-of-use assets - (4,349) - (4,349)
Separately disclosed items - (18) (211) (229)
Operating loss (1,307) (7,308) (2,751) (11,366)
Net finance costs (557)
Loss before taxation from continuing operations (11,923)
Taxation - continuing operations 1,055
Loss for the year from continuing operations (10,868)
Loss after tax from discontinued operations (1,964)
Loss for the year (12,832)
Sportech Digital Assets held for sale Group
Sportech Venues Corporate costs
£000 £000 £000 £000 £000
Segment assets (excluding investments and intercompany balances) 2,943 13,681 12,593 27,671 56,888
Segment liabilities (excluding intercompany balances) (472) (8,659) (15,091) (7,507) (31,729)
Other segment items - capital expenditure
Intangible assets (continuing operations) 230 - - - 230
Intangible assets (discontinued operations) - - - 1,420 1,420
Property, plant and equipment (continuing operations) - 29 - - 29
Property, plant and equipment (discontinued operations) 121 - - 603 724
F. Separately disclosed items
2021 2020
Continuing operations Note £000 £000
Included in operating costs:
Onerous contract provisions and other losses resulting from exit from 91 -
Californian operations
Redundancy and restructuring costs 625 -
Corporate activity costs (a) 21 118
Costs in relation to the Spot the Ball VAT refund (b) 10 44
Costs in relation to exiting the Group's interests in India 13 65
Costs in relation to the Group's move from Main Market to AIM 341 -
UK defined benefit pension scheme buy-out - 2
1,101 229
Discontinued operations
Included in operating costs I(c) 371 1,224
Total included in operating costs 1,472 1,453
Included in finance costs - continuing operations:
Interest accrued on corporate tax potentially due and unpaid at the balance 150 150
sheet date on STB refund received in 2016
Interest paid on VAT settlement reached in 2020 - 83
G 150 233
Net separately disclosed items 1,622 1,686
(a) Corporate activity costs
Costs incurred in relation to the approach by Standard General LLP to acquire
the entire equity of Sportech PLC and other corporate activity.
(b) Costs in relation to the Sport the Ball refund
Advice continues to be received in relation to the corporate tax filings in
relation to the Spot the Ball VAT refund in 2016.
(c) Costs in relation to exiting the Group's interests in India
The Group is incurring costs in relation to dissolving the holding company of
the joint venture in Mauritius, the issue is ongoing.
Below is a summary of exceptional cash outflows from separately disclosed
items:
2021 2020
£000 £000
Continuing operations - cash outflows from separately disclosed items:
Redundancy and restructuring costs (625) (18)
Expenses in relation to the UK defined benefit pension scheme "buy-out" - (2)
Costs in relation to the Spot the Ball VAT refund (37) -
Costs in relation to corporate activity (71) (127)
Costs in relation to legacy tax disputes - (17)
Transaction costs - disposal of Global Tote Business - (16)
One off start-up costs of new ventures, including new venue builds and joint - (224)
ventures
Costs in relation to the Group's move to AIM (341) -
Costs in relation to the Group's lease in Norco, California (785) -
Costs in relation to exiting the Group's interests in India (13) (65)
(1,872) (469)
Cash outflows from separately disclosed items - discontinued operations (net) (535) (15)
(2,407) (484)
G. Net finance income/(costs)
2021 2020
Continuing operations £000 £000
Finance costs:
Interest accrued and paid on tax liabilities (150) (233)
Interest on lease obligations (note U) (155) (265)
Foreign exchange loss on financial assets and liabilities denominated in - (70)
foreign currency
Total finance costs (305) (568)
Finance income:
Interest received on bank deposits 25 11
Foreign exchange gain on financial assets and liabilities denominated in 436 -
foreign currency
Total finance income 461 11
Discontinued operations (note I) 54 (68)
Net finance income/(costs) 210 (625)
Of the above amounts the following have been excluded for the purposes of
deriving the alternative performance measures in note D.
Restated
2021 2020
£000 £000
Foreign exchange gain/(loss) on financial assets and liabilities denominated 436 (70)
in foreign currency
Interest accrued and paid tax liabilities (150) (233)
286 (303)
H. Taxation
The Group's tax charge from continuing and discontinuing operations comprises:
2021 2020
£000 £000
Current tax:
Current tax on profit for the year 1,219 1,176
Adjustments in respect of prior years 6 (1,895)
Total current tax 1,225 (719)
Deferred tax:
Origination and reversal of temporary differences (56) 169
Change in rates (4) (1)
Adjustments in respect of prior years 13 (204)
Derecognition of previously recognised deferred tax assets - 986
Total deferred tax (47) 950
Total tax charge 1,178 231
2021 Restated
2020
£000 £000
Total tax charge/(credit) in continuing operations 192 (1,055)
Total tax charge in discontinued operations 986 1,286
Total tax charge 1,178 231
The taxation on the Group's profit/loss) before taxation differs from the
theoretical amount that would arise using the weighted average tax rate
applicable to profits and losses of the consolidated entities as follows:
2021 2020
£000 £000
Profit/(loss) for the year 34,563 (12,832)
Total tax charge 1,178 231
Profit/(loss) before tax 35,741 (12,601)
Tax calculated at domestic tax rates applicable to (losses)/profits in the 8,065 (2,669)
respective countries
Tax effects of:
- expenses not deductible for tax purposes net of income not taxable (5,282) 449
- foreign taxes paid not provided for 689 835
- adjustments in respect of prior years - current tax 6 (1,895)
- adjustments in respect of prior years - deferred tax 13 (204)
- effect of change in rates (4) (1)
- deferred tax not recognised during the year 319 2,730
- deferred tax not previously provided (2,628) -
- derecognition of previously recognised deferred tax assets - 986
Total tax charge 1,178 231
US deferred tax assets were revalued downwards in 2020 by £986k to £nil
carrying value (predominantly foreign taxes paid in the Dominican Republic),
following a review of recoverability. Group cash flow forecasts were used and
any assets not showing as recoverable within five years were considered not
recoverable and a valuation allowance was charged to the income statement. The
same analysis was carried out in 2021 and the review confirmed no
recoverability and therefore no deferred tax asset has been recognised in the
US businesses as at 31 December 2021. There are no changes expected in the US
federal income tax rate from the current rate of 21%.
These financial statements account for the change in the UK Corporation Tax
rate from 19% to 25% based on enacted legislation. Deferred tax in the UK
would be provided at 25%, however deferred tax in the UK is valued at £nil as
losses carried froward are not expected to be recovered.
Included within the Group's current tax liabilities is a provision of £4.6m
for an uncertain tax position in relation to the treatment of the gain
included in the 2016 financial statements for the Spot the Ball VAT refund.
Included in current tax receivable in the prior year is £1.4m in relation to
a refund, which was subsequently received in February 2021, for overpaid tax
in relation to the disposal of The Football Pools trade and assets in June
2017.
An analysis of the current tax liabilities is as follows:
Restated
2021 2020
£000 £000
At 1 January 3,258 4,880
Charged to the income statement - continuing operations 239 (1,770)
Charged to the income statement - discontinued operations* 791 1,051
Paid during the year - continuing operations (105) 41
Received during the year - continuing operations 1,442 -
Paid during the year - discontinued operations* (904) (1,070)
Transferred to liabilities associated with assets held for sale - 117
Foreign exchange movements (3) 9
At 31 December 4,718 3,258
Included in:
Current assets - (1,442)
Current liabilities 4,718 4,700
4,718 3,258
* Relating to LEIDSA contract only. Tax paid in the other discontinued
operations was £20k.
I. Discontinued operations and assets held for sale
Ia) On 28 April 2021 the Group completed the disposal of its freehold property
in New Haven, Connecticut, known as "Sports Haven" for gross consideration of
£4,346k ($6,000k). The asset was classified as held for sale as at 31
December 2020 and was part of the Sportech Venues division. Costs related to
the disposal amounted to £153k ($210k). The property is to be leased back for
18 months to 31 October 2022 at a rental of c£36k per month ($50k). On
disposal, a lease liability of £633k was recognised as well as a right-of-use
asset of £169k. The profit on disposal is analysed as follows:
2021
£000
Cash consideration received 4,346
Net book value disposed of (1,154)
Right-of-use asset recognised 169
Lease liability recognised (633)
Costs of disposal (153)
Profit after tax on disposal net of costs 2,575
Ib) On 2 June 2021 the Group completed the disposal of its 100% interest in
Bump (Worldwide) Inc. ("Bump") for gross consideration of £4,941k
(CAD$8,462k), including a net working capital settlement of £277k. The
division was classified as held for sale as at 31 December 2020 and was part
of the Sportech Racing division. Further deferred contingent consideration is
potentially due of £1,165k (CAD$2,000k). This has not been recognised given
the uncertainty of the revenue hurdle required to be achieved.
The profit/(loss) for the period and cashflows from Bump are shown below:
Note Period ended 2 June 2021 2020
Bump (Worldwide) Inc.: £000 £000
Revenue 810 703
Cost of sales, marketing and distribution and adjusted operating expenses (487) (1,598)
Adjusted EBITDA 323 (895)
Depreciation and amortisation - (291)
Separately disclosed items - (65)
Finance income 78 45
Profit/(loss) before tax 401 (1,206)
Tax, excluding tax arising on disposal - -
Profit/(loss) after tax 401 (1,206)
Gain from selling discontinued operations after tax (net of disposal costs) Ie 3,805 -
Profit/(loss) for the period 4,206 (1,206)
Net cash flow from operating activities 462 (801)
Net cash flow from investing activities (37) (118)
Net decrease in cash generated/(used) 425 (919)
Separately disclosed items within the above table are disposal costs.
Ic) On 17 June 2021 the Group completed the disposal of its Global Tote
division which also formed part of the Sportech Racing division and was
classified as held for sale as at 31 December 2020. Gross Consideration
amounts to £33,906k including a payment for cash transferred to the buyer
with the business of £3,609k net of debt like items of £1,294k, received in
July 2021 plus a settlement of net working capital which was in excess of an
agreed Target working capital (and other adjustments) of £559k also
delivered. In addition, the historical underlying tote software code was
disposed of by Sportech PLC to BetMakers Technology Group Limited within the
same agreement, proceeds of £150k resulted in a profit on disposal of £68k.
The profit/(loss) for the period and cashflows from Global Tote are shown
below:
Note 2020
Period ended 17 June 2021
Global Tote Group: £000 £000
Revenue 12,245 25,052
Cost of sales, marketing and distribution and adjusted operating expenses (8,140) (19,525)
Adjusted EBITDA 4,105 5,527
Other income X 1,057 -
Depreciation and amortisation - (5,083)
Profit on disposal of intangible assets 68 -
Separately disclosed items (371) (1,159)
Finance costs (24) (113)
Profit/(loss) before tax 4,835 (828)
Tax, excluding tax arising on disposal (195) (528)
Profit/(loss) after tax 4,640 (1,356)
Gain from selling discontinued operations after tax (net of disposal costs) Ie 17,051 -
Profit/(loss) for the period 21,691 (1,356)
Net cash flow from operating activities 1,944 6,099
Net cash flow from investing activities (930) (1,905)
Net cash flow from financing activities (160) (436)
Net increase in cash generated 854 3,758
Separately disclosed items incurred in the period were redundancy and
restructuring costs in respect of a rationalisation of this business and a
provision for an employment tax settlement in Ireland (2020: redundancy and
restructuring costs in respect of a rationalisation of this business including
a provision for dilapidation costs on an expiring lease (£155k) and disposal
costs of £1,004k).
Id) On 31 December 2021 the Group completed the disposal of its wholly owned
subsidiary, Sportech Lotteries, LLC which had the legal rights to the service
contract with LEIDSA who operates the Dominican Republic national lottery.
Gross Consideration amounts to £9,854k including an estimate for settlement
of net working capital which was in excess of an agreed Target working capital
of £431k. £9,432k of the consideration was received on 31 December 2021, the
final working capital settlement has been received in Q1 2022, there was no
variance to estimate as at 31 December 2021.
The profit for the period and cashflows from Sportech Lotteries, LLC are shown
below:
Note Period ended 31 December 2021 2020
Sportech Lotteries, LLC: £000 £000
Revenue 3,364 2,594
Cost of sales, marketing and distribution and adjusted operating expenses (913) (857)
Adjusted EBITDA 2,451 1,737
Depreciation and amortisation (372) (381)
Profit on disposal of property, plant and equipment 47 -
Profit before tax 2,126 1,356
Tax, excluding tax arising on disposal (791) (758)
Profit after tax 1,335 598
Gain from selling discontinued operations after tax (net of disposal costs) 7,769 -
Ie
Profit for the period 9,104 598
Net cash flow from operating activities 1,068 568
Net cash flow from investing activities (429) (121)
Net decrease in cash generated/(used) 639 447
Ie) A summary of the gain on disposal of each discontinued operation is as
follows:
Global Tote Group Bump (Worldwide) Inc. Sportech Lotteries LLC Total
Note £000 £000 £000 £000
Cash consideration received and receivable 33,906 4,941 9,854 48,701
Cash disposed of (3,609) (116) - (3,725)
Cash consideration received and receivable net of cash disposed of If 30,297 4,825 9,854 44,976
Add cumulative foreign exchange movements recycled to the income statement 3,234 (101) 240 3,373
Costs of disposal (1,511) (118) (405) (2,034)
Less net assets disposed of:
Intangibles 6,582 274 209 7,065
Property, plant and equipment 5,001 210 180 5,391
Right-of-use assets 761 - - 761
Deferred tax assets 12 - - 12
Trade and other receivables 4,621 380 1,542 6,543
Inventories 2,479 - - 2,479
Income tax payable (44) - - (44)
Trade and other payables (2,660) (63) (11) (2,734)
Lease liabilities (786) - - (786)
Retirement benefit liability (997) - - (997)
14,969 801 1,920 17,690
Pre-tax gain on disposal of discontinued operations 17,051 3,805 7,769 28,625
Taxation - - - -
Gain on disposal of discontinued operations 17,051 3,805 7,769 28,625
Costs of disposal include bonuses paid to Group employees of £1,173k for
Global Tote, £85k for Bump and £375k for Sportech Lotteries, LLC (including
employer's taxes payable).
If) A summary of the cash consideration received and receivable net of cash
disposed of is as follows:
Global Tote Group Bump (Worldwide) Inc. Sportech Lotteries LLC Total
Note £000 £000 £000 £000
Cash consideration received in 2021 net of cash disposed of 24,352 4,825 9,423 38,600
Disposal costs paid in 2021 (1,716) (181) (6) (1,903)
Cash consideration received net of cash disposed of and disposal costs paid in 22,636 4,644 9,417 36,697
the period
Add back cash disposal costs paid in the period 1,716 181 6 1,903
Cash consideration received net of cash disposed of before disposal costs paid 24,352 4,825 9,423 38,600
in the period
Cash consideration received in 2020 (including FX movement) 5,945 - - 5,945
Consideration to be received in 2022 - - 431 431
Cash consideration received and receivable net of cash disposed of before Ie 30,297 4,825 9,854 44,976
disposal costs paid in the period
Cash consideration received in 2020 related to an Initial Payment received
from BetMakers Technology Group Ltd for the disposal of Global Tote, the
deposit was unconditional and non-returnable.
Ig) Reconciliation to profit/(loss) for the period included in the income
statement:
Note 2021 2020
£000 £000
Global Tote Ic 21,691 (1,356)
Bump Ib 4,206 (1,206)
Sportech Lotteries, LLC Id 9,104 598
35,001 (1,964)
J. (Loss)/earnings per share
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
attributable to equity holders of the Parent Company by the weighted average
number of ordinary shares in issue during the year.
2021 Restated
2020
Continuing Discontinued Total Continuing Discontinued Total
£000 £000 £000 £000 £000 £000
(Loss)/profit attributable to the owners of the Company (438) 35,001 34,563 (10,868) (1,964) (12,832)
Weighted average number of ordinary shares in issue ('000) 169,785 169,785 169,785 188,751 188,751 188,751
Basic (loss)/earnings per share (0.3)p 20.6p 20.3p (5.8)p (1.0)p (6.8)p
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. Where there is a loss attributable to owners of the
Company, the earnings per share is not diluted.
2021 Restated
2020
Continuing Discontinued Total Continuing Discontinued Total
£000 £000 £000 £000 £000 £000
Loss)/profit attributable to the owners of the Company (438) 35,001 34,563 (10,868) (1,964) (12,832)
Weighted average number of ordinary shares in issue ('000) 169,785 169,785 169,785 188,751 188,751 188,751
Dilutive potential ordinary shares N/A N/A N/A N/A N/A N/A
Total potential ordinary shares 169,785 169,785 169,785 188,751 188,751 188,751
Diluted (loss)/earnings per share (0.3)p 20.6p 20.3p (5.8)p (1.0)p (6.8)p
The number of potentially dilutive shares not taken into account in respect of
the VCP in prior year was unlimited. The VCP expired on 31 December 2021 and
there are no longer any potentially dilutive shares.
(c) Adjusted
Adjusted EPS is calculated by dividing the adjusted loss after tax (as defined
in note D) attributable to owners of the Company by the weighted average
number of ordinary shares in issue during the year.
Restated
2021 2020
Weighted average number of shares Weighted average number of shares
Adjusted loss after tax Per share amount Adjusted loss after tax Per share amount
Continuing operations £000 £000 Pence £000 £000 Pence
Basic adjusted EPS (2,807) 169,785 (1.7)p (5,207) 188,751 (2.8)p
Diluted adjusted EPS (2,807) 169,785 (1.7)p (5,207) 188,751 (2.8)p
K. Goodwill
Goodwill cost brought forward arose on the acquisition of Lot.to Systems
Limited (which is now subsumed into Sportech Digital) in February 2019. The
goodwill is attributable to the knowledge and expertise of the workforce.
Movements in the Group's goodwill are shown below:
2021 2020
Sportech Total Sportech Total
Digital eBet Digital
£000 £000 £000 £000 £000
Cost
At 1 January 604 604 5,548 604 6,152
Transferred to held for sale - - (5,548) - (5,548)
At 31 December 2021 604 604 - 604 604
Accumulated impairment charges
At 1 January - - (5,548) - (5,548)
Transferred to held for sale - - 5,548 - 5,548
At 31 December 2021 - - - - -
Closing net book value 604 604 - 604 604
L. Intangible fixed assets
2021
Software Licences Total
£000 £000 £000
Cost
At 1 January 2021 5,353 5,696 11,049
Additions - continuing operations 165 - 165
Additions - discontinued operations 23 - 23
Disposal (965) - (965)
At 31 December 2021 4,576 5,696 10,272
Accumulated amortisation
At 1 January 2021 3,594 879 4,473
Charge for year - continuing operations 603 35 638
Charge for year - discontinued operations 151 - 151
Disposal (756) - (756)
At 31 December 2021 3,592 914 4,506
Exchange differences at 1 January 2021 - 767 767
Movement in the year - 71 71
Disposal (247) - (247)
Exchange differences at 31 December 2021 (247) 838 591
Net book amount at 31 December 2021 737 5,620 6,357
Of the amounts capitalised in the year in continuing operations, £165k arose
from capitalising staff costs for development expenditure (2020: £230k). Of
the amounts capitalised in the year in discontinued operations, £nil arose
from capitalising staff costs for development expenditure (2020: £1,420k).
Amortisation has been included within operating costs.
Assets relating to in-house developed proprietary pari-mutuel software serving
racing customers worldwide was sold during the year to Betmakers Technology
Group for proceeds of £150k resulting in a profit on disposal of £68k.
Impairment - Licences
The Group holds a licence in perpetuity to offer pari-mutuel off-track betting
in the State of Connecticut in the US for its Venues division. This asset has
a book value in GBP at the reporting date, prior to any impairment that may be
considered necessary, of £5,616k ($7,569k, 2020: £5,545k, $7,569k). Given
this licence is in perpetuity, the book value of the asset is not amortised
and the useful economic life allocated to the asset is indefinite.
As required by IAS 36, an impairment test has been carried out as at 31
December 2021. In testing for impairment, other assets used solely to generate
cash flows in the Venues CGU are also included, totalling (together with the
licence carrying value) £12,680k, $17,088k (2020: £9,876k, $13,479k).
The recoverable amount of the asset has been determined based on a
value-in-use calculation. The key base case assumptions made in calculating
the value-in-use were:
- EBITDA forecasts assume year-on-year handle decline in the core
operating business of 8% in 2022 and 1% per annum thereafter and 2% decline
into perpetuity;
- 3% increase in online handle in 2022, 5% in 2023, 2% in 2024 and 2025
and into perpetuity;
- 7% increase in handle at the Stamford venue in 2022 and handle is
assumed to decline by 5% thereafter through 2025, and 2% decline into
perpetuity;
- a 44% increase in core F&B revenues, which excludes the Stamford
venue, in 2022 reflecting further recovery from COVID-19 restrictions, a 1%
increase in 2023, 2024 and 2025 and thereafter stable revenues into
perpetuity;
- F&B revenues at the Stamford venue are forecasted to increase by
69% in 2022, again reflecting recovery from COVID-19 restrictions, to increase
a further 10% in 2023, 5% in 2024 and 3% in 2025, and remain flat thereafter
into perpetuity;
- Sports betting revenues are forecasted to increase by 8% from 2022
budget levels in 2023 and by 6% in 2024 and 2025 and to then remain flat into
perpetuity (is it assumed the 10-year contract with CLC will be renewed in
perpetuity);
- capital expenditure was included in the cash flows at management's
best estimate of industry norm for reinvestment in retail outlets of the kind
under review; and
- a post-tax discount rate of 13.5% (2020: 10.5%) was used representing
a market-based weighted average cost of capital appropriate for the Sportech
Venues CGU. The pre-tax discount rate was 18.9% (2020: 14.7%).
The above assumptions are together considered by management to be the most
likely trading performance outcome for the CGU, having taken into account past
experience and knowledge of the future trading environment.
Following the impairment review, the recoverable amount of those assets was
deemed to be £16,792k ($22,630k) and accordingly no impairment was identified
(2020: no impairment).
The below assumptions represent a reasonable downside case for sensitivity
purposes. This would reduce the carrying value of the trading assets in the
business to £12,946k, being headroom to the carrying value of £266k.
- 2% decline for 2023 through 2025 rather than 1% for core wagering
handle;
- 3%, 1% and 1% growth for online handle in 2023 through 2025 rather
than 5%, 2% and 2%;
- Stamford's handle remains at 2022 forecast levels;
- All other costs remain constant;
- Core F&B delivers same EBITDA as 2022 budget - $65k throughout the
period; and
- Stamford F&B delivers same EBITDA as 2022 budget - loss of $219k
throughout the
period.
For information, if a 0.5% increase in the post-tax discount rate to 14.0% was
used in the Base Case model this would lead to a value in use of £14,697k.
Restated Customer contracts and relationships
2020
Software Licences Other Total
£000 £000 £000 £000 £000
Cost
At 1 January 2020 862 37,558 17,024 2,960 58,404
Additions - continuing operations - 230 - - 230
Additions - discontinued operations - 1,366 - 54 1,420
Transferred to held for sale (862) (33,801) (11,328) (3,014) (49,005)
At 31 December 2020 - 5,353 5,696 - 11,049
Accumulated amortisation
At 1 January 2020 862 29,938 13,178 3,715 47,693
Charge for year - continuing operations - 735 50 - 785
Charge for year - discontinued operations - 3,585 - - 3,585
Transferred to held for sale (862) (30,664) (12,349) (3,715) (47,590)
At 31 December 2020 - 3,594 879 - 4,473
Exchange differences at 1 January 2020 - 1,158 1,989 1,077 4,224
Movement in the year - (74) (201) (53) (328)
Transferred to held for sale - (1,084) (1,021) (1,024) (3,129)
Exchange differences at 31 December 2020 - - 767 - 767
Net book amount at 31 December 2020 - 1,759 5,584 - 7,343
M. Property, plant and equipment
2021 Leasehold improvements and owned land and buildings Plant and machinery Fixtures and fittings Assets in the course of construction
£000 £000 £000 £000
Total
£000
Cost
At 1 January 2021 8,393 3,022 3,553 31 14,999
Additions - continuing operations - 16 45 (30) 31
Additions - discontinued operations - 343 - 64 407
Disposals - (2,879) - (64) (2,943)
At 31 December 2021 8,393 502 3,598 1 12,494
Accumulated depreciation
At 1 January 2021 4,780 1,513 3,274 - 9,567
Charge for year - continuing operations 195 19 234 - 448
Charge for year - discontinued operations - 221 - - 221
Reversal of impairment (335) - - - (335)
Disposals - (1,752) - - (1,752)
At 31 December 4,640 1 3,508 - 8,149
2021
Exchange differences at 1 January 2021 122 (672) 195 - (355)
Movement in the year (68) 1 138 1 72
Disposals - 199 - - 199
Exchange differences at 31 December 54 (472) 333 1 (84)
Net book amount at 31 December 2021 3,807 29 423 2 4,261
Depreciation charges have been included in operating costs.
Reversal of impairment
The assets at the Stamford sports bar venue in Connecticut, USA were fully
impaired in prior periods. Given the new arrangement for sports betting in the
venue which came into force in late October 2021, management have considered
whether any of the previous impairment of assets should be reversed based on
the venue's trading performance. Modelling was undertaken to calculate the
value-in-use of the assets at the venue. The following key assumptions were
made in the value-in-use calculation:
- The break clause in May 2025 will not be activated to end the lease in
June 2026 and the trade at the venue will continue into perpetuity (this a
reversal of the assumption taken in June 2020 that the break would be taken).
This has been reflected in the year with the lease liability remeasured
resulting in an increase in the lease liability of £2,835K and a
corresponding increase in the right-of-use asset was made (see note U and M);
- Pari-mutuel handle was assumed to increase by 7% from 2021 to 2022 but
then decrease by 5% per annum until 2025 and by 2% thereafter into
perpetuity;
- F&B revenues are forecasted to increase by 69% in 2022 (recovering
from the depressed 2020 and 2021 levels due to COVID-19 restrictions), by 10%
in 2023 and by 5% in 2024 and 3% in 2025, and to then remain flat into
perpetuity;
- Sports betting revenues are forecasted to increase by 8% from 2022
budget levels in 2023 and by 6% in 2024 and 2025 and to then remain flat into
perpetuity (is it assumed the 10-year contract with CLC will be renewed in
perpetuity);
- Capital expenditure will average at $100k per annum into perpetuity;
and
- a post-tax discount rate of 13.5% (2020: 9.5%) was used representing a
market-based weighted average cost of capital appropriate for the Sportech
Venues CGU.
As part of the discounted cashflow exercise with the above assumptions the
recoverable amount of those assets was deemed to be £3,119k. Accordingly a
reversal of impairment of £335k was identified and has been credited to the
income statement within operating costs.
No indicators of impairment of other property, plant and equipment arose in
the second half of the year.
Leasehold improvements and owned land and buildings
Restated £000 Assets in the course of construction
2020 Plant and machinery Fixtures and fittings £000
£000 £000 Total
£000
Cost
At 1 January 2020 16,573 11,785 5,423 74 33,855
Additions - continuing operations - - - 29 29
Additions - discontinued operations - 710 - 14 724
Transferred to held for (8,180) (9,473) (1,870) (86) (19,609)
sale
At 31 December 2020 8,393 3,022 3,553 31 14,999
Accumulated depreciation
At 1 January 2020 11,320 4,260 4,225 - 19,805
Charge for year - continuing operations 401 31 382 - 814
Charge for year - discontinued operations 40 1,742 8 - 1,790
Transferred to held for sale (8,869) (4,520) (1,974) - (15,363)
Impairment 1,888 - 633 - 2,521
At 31 December 4,780 1,513 3,274 - 9,567
2020
Exchange differences at 1 January 2020 2,003 1,198 425 - 3,626
Movement in the year (27) (24) (126) (2) (179)
Transferred to held for sale (1,854) (1,846) (104) 2 (3,802)
Exchange differences at 31 December 122 (672) 195 - (355)
Net book amount at 31 December 2020 3,735 837 474 31 5,077
The table has been restated to show additions which are in continuing
activities and those which are classed as discontinued.
N. Right-of-use assets
Land and buildings Fixtures and fittings
2021 £000 Vehicles £000
£000
Total
£000
Cost
At 1 January 2021 6,941 29 53 7,023
Additions 1,240 - - 1,240
Reassessment of lease term 604 - - 604
Transferred from held for sale 96 - - 96
At 31 December 2021 8,881 29 53 8,963
Accumulated depreciation
At 1 January 2021 5,878 2 27 5,907
Charge for year 519 5 10 534
Reassessment of lease term (2,231) - - (2,231)
Transferred from held for sale 51 - - 51
At 31 December 4,217 7 37 4,261
2021
Exchange differences at 1 January 2021 20 (1) (2) 17
Movement in the year (62) - - (62)
Exchange differences at 31 December 2021 (42) (1) (2) (45)
Net book amount at 31 December 2021 4,622 21 14 4,657
Depreciation charges have been included in operating costs.
Reassessment of lease assumption - break clause
During the year ended 31 December 2020, management had judged that the break
clause in the lease of the Stamford sports bar venue in Connecticut, USA,
would be exercised and that the venue would be exited in May 2025. Following
the new arrangement which came into force in late October 2021 and allowed
sports betting to commence in the venue, management now consider that the
break will not be taken and the Group will continue to operate the venue until
at least the end of the lease in May 2035. As a result, during the year ended
31 December 2021, the lease liability was remeasured resulting in an increase
of £2,835k (see note U) and a corresponding increase in the right-of-use
asset.
This £2,835k increase to the right-of-use asset should wholly be recognised
as an increase in cost but £2,231k has been taken against accumulated
depreciation with only £604k recognised as an increase in cost. This is to
ensure that the correct closing cost and accumulated depreciation figures are
reported as, during the year ended 31 December 2020, the reassessment of the
lease term which led to a decrease in the right of use asset of £2,231k was
shown as an increase in accumulated depreciation when it should have been
recognised as a reduction in cost. This had no impact on the net book amount
of the right-of-use asset reported nor on profit for the year. Rather than
restate the cost and accumulated depreciation figures for the year ended 31
December 2020 with no overall impact, management have reversed the £2,231k
adjustment to accumulated depreciation during the year ended 31 December 2021
and correctly recognised the excess of £604k as an increase in cost.
Value in use
Management considered that indicators of impairment of the right-of-use assets
of the Stamford sports bar lease in Connecticut, USA, following the
reassessment of the break clause assumption. The carrying value was considered
to be supported by the discounted future cashflows and as a result no further
impairment was identified. See note M for details of assumptions used in the
forecasting.
No indicators of impairment arose in relation to any other right-of-use asset
during the period.
Land and buildings Fixtures and fittings
2020 £000 Vehicles Plant & machinery £000
£000 £000 Total
£000
Cost
At 1 January 2020 7,698 237 - 40 7,975
Additions - continuing operations 304 29 - 13 346
Additions - discontinued operations 73 30 205 - 308
Transferred to held for sale (1,134) (267) (205) - (1,606)
At 31 December 2020 6,941 29 - 53 7,023
Accumulated depreciation
At 1 January 2020 1,282 97 - 13 1,392
Charge for year - continuing operations 791 2 - 14 807
Charge for year - discontinued operations 225 97 58 - 380
Reassessment of lease term 2,231 - - - 2,231
Impairment 1,828 - - - 1,828
Transferred to held for sale (479) (194) (58) - (731)
At 31 December 5,878 2 - 27 5,907
2020
Exchange differences at 1 January 2020 (263) (6) - (2) (271)
Movement in the year 250 (1) (3) - 246
Transferred to held or sale 33 6 3 - 42
Exchange differences at 31 December 2020 20 (1) - (2) 17
Net book amount at 31 December 2020 1,083 26 - 24 1,133
O. Trade and other receivables
2021 2020
£000 £000
Non-current
Other receivables 158 156
Non-current trade and other receivables 158 156
Current
Trade receivables 781 778
Less provision for impairment of receivables - (111)
Trade receivables - net 781 667
Other receivables 480 62
Accrued income 279 292
Prepayments 210 496
Current trade and other receivables 1,750 1,517
Total trade and other receivables 1,908 1,673
The fair value of trade and other receivables is not considered to be
different from the carrying value recorded above. Other receivables includes
£423k due from Inspired Entertainment Inc. for final working capital
settlement on disposal of LEIDSA.
P. Deferred tax
The movement on the net deferred tax balance is as follows:
Asset Liability Net 2020
2021 2021 2021 £000
£000 £000 £000
Net deferred tax asset at 1 January 4 (94) (90) 808
Income statement (charge)/credit - continuing operations (4) 51 47 (715)
Income statement charge - discontinued operations - - - (235)
Tax credited directly to other comprehensive income - - - 88
Deferred tax transferred to assets held for sale - - - (27)
Exchange differences - - - (9)
Net deferred tax asset at 31 December - (43) (43) (90)
Included in:
Non-current assets - - - 4
Current liabilities - - - (94)
Non-current liabilities - (43) (43) -
- (43) (43) (90)
Deferred tax assets
Other
Capital allowances temporary differences
Pension £000 £000 Total
£000 £000
At 1 January 2020 - 33 957 990
Income statement charge - continuing operations - 4 (807) (803)
Income statement charge - discontinued operations (88) (5) (142) (235)
Tax credited directly to other comprehensive income 88 - - 88
Transferred to assets held for sale - (27) - (27)
Currency translation differences - (1) (8) (9)
At 31 December 2020 - 4 - 4
Income statement charge - continuing operations - (4) - (4)
At 31 December 2021 - - - -
The Group has not recognised further deferred tax assets on gross timing
differences in continuing operations of: £6,804k in the US (2020: £21,637k)
arising from unutilised trading losses and carried forward foreign tax
credits; £nil (2020: £6,123k) from capital tax allowances versus accounting
charges; and £5,212k (2020: £7,985k) from other short term timing
differences. In the UK, £2,177k gross timing differences exist arising from
trading losses and £32k on depreciation charged in excess of capital
allowances claimed, which have not been provided for.
The Directors reviewed the recoverability of the deferred tax assets in the US
and the UK during the year and did not consider there is sufficient certainty
of future profits against which these losses/credits which could be offset due
to expected future profit generation levels in the respective business units.
A significant proportion of the tax losses unprovided for last year end in the
US were utilised against profits on disposal of the discontinued operations in
the US (as was expected at 31 December 2020, however accounting prevented the
anticipation of such utilisation in the recognition of deferred tax assets.)
Deferred tax assets are recognised when it is probable that future
taxable profits will be generated against which assets can be utilised.
Deferred tax liabilities
Other
temporary differences
£000 Total
£000
At 1 January 2020 (182) (182)
Income statement credit - continuing operations 88 88
At 1 January 2021 (94) (94)
Income statement credit- continuing operations 51 51
At 31 December 2021 (43) (43)
Of the deferred tax liability, £5k is the remaining balance from that which
was recognised on the acquisition of Lot.to Systems Limited, in relation to
intangible assets identified. The balance is in relation to the S&S Venues
partnership. All of the deferred tax liability is recorded in non-current
liabilities (2020: current liabilities).
Q. Inventories
2021 2020
£000 £000
Finished goods 124 120
124 120
R. Cash and cash equivalents
2021 2020
£000 £000
Cash and short-term deposits 21,912 11,356
Customer funds 455 465
22,367 11,821
S. Trade and other payables
2021 2020
£000 £000
Trade payables 3,545 3,581
Other taxes and social security costs 178 141
Accruals 3,767 3,737
Deferred income - 6,180
Player liability 455 465
7,945 14,104
There is no difference between book values and fair values of trade and other payables. All amounts are due within
one year. Deferred income in 2020 is consideration received in advance not
yet recorded in income related to an Initial Payment received from BetMakers
Technology Group Ltd for the acquisition of certain parts of the Racing and
Digital division.
T. Provisions
Onerous contracts Other
£000 Provisions Total
£000 £000
At 1 January 2020 1,597 8 1,605
Utilised during the year (105) - (105)
Expense discount interest to the income statement - (7) (7)
Currency differences (50) (1) (51)
At 1 January 2021 1,442 - 1,442
Utilised during the year (785) - (785)
Transferred to liabilities associated with assets held for sale 91 - 91
Currency differences (12) - (12)
At 31 December 2021 736 - 736
Of which:
Current provisions 736 - 736
736 - 736
Provisions have been recognised where the Group has contractual obligations to provide services where the estimated
unavoidable costs to carry out the obligation exceed the expected future economic benefits to be received.
The Group had committed financial obligations arising from leases associated
with its joint venture in California. The amounts provided for in prior year
represented management's best estimate based on scenario analysis of what the
Group was expecting to pay to settle the liabilities. During the period one
lease dispute was settled resulting in a cash outflow of £785k (including
legal fees). The second lease dispute was settled subsequent to the period end
but prior to approving these financial statements, for £736k (including
estimated legal fees to completion of the legal process). The estimated legal
fees amount to £45k and could differ from management's expectations. The cash
was paid in March 2022.
U. Lease liabilities
2021 2020
Maturity analysis - contractual undiscounted cash flows £000 £000
Less than one year 1,211 1,085
Between 2 and 5 years 2,615 3,241
More than 5 years 4,824 -
Total 8,650 4,326
The weighted average incremental borrowing rate applied to the lease
liabilities was 4.16%, lowest rate being 4.00% and highest rate of 5.75%.
2021 2020
Lease liabilities included in the balance sheet £000 £000
Current 923 823
Non-current 6,091 3,059
Total 7,014 3,882
Movement on lease liability during the year 2021 2020
£000 £000
At 1 January 3,882 7,724
New leases entered into 1,698 654
Reassessment of lease term 2,835 (2,231)
Interest charged to the income statement - continuing operations 155 265
Interest charged to the income statement - discontinued operations - 74
Lease rentals paid - continuing operations (1,354) (1,219)
Lease rentals paid - discontinued operations - (436)
Disposed of on settlement of lease dispute (169) -
Transferred to held for sale - (998)
Movement as a result of foreign exchange (33) 49
At 31 December 7,014 3,882
V. Ordinary shares
Authorised, issued and fully paid ordinary shares of 1p 2021 2020
(2020: 20p) each '000 £000 '000 £000
At 1 January 188,751 37,750 188,751 37,750
Cancellation of 19p nominal value - (35,862) - -
Buy-back and cancellation (88,751) (888) - -
At 31 December 100,000 1,000 188,751 37,750
On 28 September 2021. The Scottish Court approved the reduction of the
Company's nominal share value from 20p to 1p per share and also the
cancellation in full of the Capital redemption reserve (£10,312k). Costs
associated with the process were expensed to retained earnings (£66k).
On 21 October 2021 the Company completed a tender offer to buy back 88,751,257
shares for consideration of £35,500k (40p per share). The shares repurchased
were cancelled reducing the number of shares in issue to 100 million. Fees
associated with the buy-back were £314k and were expensed to retained
earnings.
W. Cash generated from operations
Reconciliation of loss before taxation to cash generated from operations, before separately
disclosed items:
2021 2020
Note £000 £000
Loss before tax - continuing operations (246) (11,923)
Profit/(loss) before tax - discontinued operations I 35,987 (678)
Total profit/(loss) before tax 35,741 (12,601)
Adjustments for:
Separately disclosed items (included in operating costs) F 1,472 1,453
Other income (2,583)
Depreciation and amortisation L,M,N 1,992 8,161
Profit on disposal of discontinued operations (28,625) -
Profit on disposal of Sports Haven (2,575) -
Profit on sale of property, plant and equipment M (47) -
Profit on sale of intangible assets (68) -
(Reversal of impairment)/impairment of assets M,N (335) 4,349
Net finance costs G (210) 625
Share option expense 334 347
Changes in working capital:
(Increase)/decrease in trade and other receivables (2,162) 2,791
Decrease/(increase) in inventories 192 (179)
Decrease in trade and other payables (448) (1,060)
(Decrease)/increase in customer funds (2,167) 42
Cash generated from operating activities, before separately disclosed items 511 3,928
X. Other income
Other income recognised in the income statement during the year is as follows:
2021
Note £000
Settlement for early termination of a contract 100
CARES Act credits received - continuing operations 1,426
Profit on disposal of Sports Haven I(a) 2,575
Total - continuing operations 4,101
CARES Act credits received - discontinued operations I(c) 1,057
Total 5,158
CARES Act credits were received given the impact on the Group's operations of
the COVID-19 restrictions imposed in the USA. All amounts were received in
cash during the year. Proceeds from the settlement for early termination of a
contract are due to be received in early Q2 of 2022.
- Ends -
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