REG - Sportech PLC - Interim Results
9 September 2021
Sportech PLC
("Sportech" or the "Group" or the "Company")
Interim Results
Sportech (AIM:SPO), an international betting technology business and retail gaming operator, announces its interim results for the six months ended 30 June 2021 ("H1 2021" or the "period").
Summary
The Group continued to operate all business lines through most of the period before announcing the completion of the disposals of the Global Tote business to BetMakers Technology; the sale of Bump 50:50 to Canadian Banknote and the sale of a freehold property in New Haven, Connecticut in June 2021. Those disposals supported a resulting stronger balance sheet, with shareholder equity increasing by £23.3 million to £48.5 million (31 December 2020: £25.2 million), including an impressive cash position excluding customer cash of £48.6 million at the end of the period (31 December 2020: £16.8 million, which included £6.12 million deposit on a corporate sale and cash in disposal entities, and excluded customer cash balances).
Post the period end the Group announced and completed a move to AIM, an Exchange which is more suited to the Company's current size and strategy and, in August 2021, shareholders approved a proposed share capital reduction and a subsequent significant capital return to shareholders.
COVID related challenges persist within the Group's retail food and beverage operations in Connecticut, however wagering handle increased significantly versus the challenged 2020 period and in aggregate only declined 1.2% versus the 2019 comparable period. Online wagering handle which recorded solid gains through 2020 continued during the period +16% versus 2020 and +45% versus the 2019 comparable period.
The Lotteries unit delivered +75.1% revenue growth versus the challenged 2020 comparable period, unfortunately with domestic and international travel remaining difficult, this corresponded to 9% lower revenues than the H1 2019 period. However, in recent months revenues have returned to comparable 2019 levels. Post the period end, the Group announced discussions had commenced relating to a potential sale of a terrestrial lottery contract and will update the market in due course.
£m's
Versus H1 2020 constant currency
H1 2021
Constant
Currency
H1 2020
Reported
Currency5
H1 2020
Revenue
+70.3%
13.4
7.9
8.4
Gross Profit
+59.4%
7.1
4.4
4.0
Contribution1
+62.6%
6.9
4.2
3.7
Adjusted EBITDA pre-Sports Betting Investment2
0.5
(2.3)
(2.4)
Adjusted EBITDA3
0.3
(2.4)
(2.5)
Profit/(loss) pre-tax from continuing operations
1.2
(9.2)
(9.0)
Adjusted loss before tax4
(0.7)
(4.3)
(4.1)
1. Contribution is defined as gross profit, less marketing and distribution costs.
2. Excludes Sports Betting Investment during the period, amounting to £0.2 million (2020: £0.1 million), see note 4.
3. Adjusted EBITDA is earnings from continuing operations before interest, taxation, depreciation and amortisation, share option charges, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.
4. Adjusted loss is the aggregate of Adjusted EBITDA, share option charges, depreciation, amortisation (excluding amortisation of acquired intangibles) and certain finance charges.
5. Prior year comparatives have been adjusted for discontinued operations.
As the Group moves through the rest of the financial year, the corporate focus will be on completing the proposed share capital reduction and shareholder capital return; operationally executing the delivery of sports betting across Connecticut, as announced in August 2021, and escalating the Group's digital lottery opportunities.
In spite of current encouraging trading, the uncertainty on the timing of when Connecticut Sports Betting will commence plus the potential impact of any further lockdowns means the Board cannot give meaningful guidance on H2 2021 outlook, at this precise time. The Board remain confident in the quality of the Group's innovative products, management strategy and in the stability of the significantly stronger balance sheet to support future investment and growth.
During the period the Group delivered the following notable strategic achievements:
• Completed key corporate transactions.
• Successfully managed discontinued operations to conclusion.
• Aligned business to focus on substantial growth opportunities.
• Significantly enhanced Group cash position and balance sheet.
• Initiated substantial capital return plan.
• Set out move to AIM market, completed in July.
• Progressed role in Connecticut expanded gaming.
• Built on recent developments to deliver a less capital-intensive business going forward.
The business transformation continues with the following objectives:
• Deliver significant capital return to investors.
• Deliver a less capital-intensive business and significantly reduce future corporate cost base.
• Develop and deliver meaningful returns from expanded opportunities in Connecticut.
• Execute further licensing opportunities within digital lottery.
• Evaluate and execute material corporate opportunities, delivering tangible investor returns.
Richard McGuire, Chief Executive Officer of Sportech, said: "The first half of 2021 marked a notably successful period of restructuring as Sportech completed business disposals, secured the move to the AIM market and built further on the online revenue gains from 2020. In recent weeks we also secured shareholder support for a proposed capital reduction and a significant capital return to shareholders and were delighted to announce a 10-year business relationship with the Connecticut Lottery Corporation to support their sports betting initiative."
"Shareholder funds during H1 almost doubled to £48.5 million, we have no debt and significant cash to deliver on our shareholder and investment commitments."
"In August, the Group also announced senior management changes and after several years of restructuring the business and pursuing a clear goal of realising shareholder value where possible, that objective now being mostly achieved, that our CFO Tom Hearne and I would hand over the leadership reins to the very experienced Andrew Lindley and Nicola Rowlands who know the business and its markets well. The business is in a strong position and it has been my privilege to work with so many dedicated professionals, business partners and supportive shareholders and I know the future of Sportech is in extremely capable hands."
For further information, please contact:
Sportech PLC enquiries@sportechplc.com
Giles Vardey, Chairman
Richard McGuire, Chief Executive Officer
Thomas Hearne, Chief Financial Officer
Peel Hunt Tel: +44 (0) 20 7418 8900
(Corporate Broker to Sportech)
George Sellar / Andrew Clark
Buchanan Tel: +44 (0) 20 7466 5000
(Financial PR adviser to Sportech)
Henry Harrison-Topham / Jamie Hooper / George Beale
Group Overview
The Group underwent significant restructuring during the period, completed the sale of operational divisions, strengthened its balance sheet and increased net cash for a potential combination of growth investment and investor returns. Recently the Group has moved its market listing to AIM, a market more appropriate for its scale and potential corporate transactions. In recent weeks shareholders approved a reduction of share capital and following certain required consents, a share buyback of approximately 47% of the outstanding shares in issue.
Group Overview
Revenue
EBITDA
£'000
Continuing operations
H1 2021
H1 20201
H1 2021
H1 20201
Venues
11,505
6,785
1,192
(1,135)
Lotteries
1,940
1,108
781
63
Corporate costs
-
-
(1,516)
(1,173)
13,445
7,893
457
(2,245)
Sports Betting Investment
-
-
(191)
(146)
Total at constant currency
13,445
7,893
266
(2,391)
Exchange rate impact
-
484
-
(146)
Total reported
13,445
8,377
266
(2,537)
1. 2020 numbers are at constant currency.
Discontinued Operations
The Group concluded the disposals of Global Tote, Bump 50:50 and a freehold property in Connecticut during the period and announced the completions on 18 June 2021.
Management continued to operate and oversee the operational business during the period as buyers sought the extensive regulatory gaming consents to complete. Although discontinued operations do not feature in certain financial metrics these business lines required continued management resource ensuring operational progress through the transition period.
These included key Global Tote business contract renewals and extensions preceding the completion of the sale to BetMakers Technology Group, including long-term extensions with Monmouth Park and Kentucky Downs.
Sustained momentum in the Bump 50:50 raffle business included new client acquisitions preceding the completion of the sale to Canadian Bank Note, including new contracts with the Miami Marlins and Arizona Diamondbacks, both Major League Baseball, MLB®.
Sportech maintains a strong supportive business relationship with the acquirers of each business unit and wishes them continued success under their respective banners and our thanks to the hundreds of employees for their dedication and professionalism.
Sportech Lotteries
Sportech is a member of the World Lottery Association (WLA) and the North American Association of State and Provincial Lotteries (NASPL). The acquisition of the technology platforms and talent of Lot.to Systems and the integration of these assets into Sportech's organisation was completed in 2019, resulting in further expansion of the Group's B2B lottery capabilities with a key mobile component and robust administrative, CRM and marketing tools.
Continued COVID challenges impacted sales for several months in 2021, however sales have recovered in recent months against 2019 comparisons. Revenues increased 75.1% versus H1 2020 and reported EBITDA was £0.8 million (H1 2020: £0.1 million).
The team advanced digital lottery capabilities further and post the period engaged in discussions which may lead to a potential sale of a terrestrial lottery contract.
Core focus for the lottery team remains pursuing licensing opportunities drawing on the Sportech brand, legacy and digital expertise to deliver an enhanced consumer experience.
Lotteries
£'000
H1 2021
Constant Currency
H1 2020
Reported
Currency
H1 2020
Service revenue
1,940
1,108
1,146
Contribution
1,342
441
451
Contribution margin
69.2%
39.8%
39.4%
Adjusted operating expenses1
(561)
(378)
(371)
Adjusted EBITDA
781
63
80
Intangible assets capex
95
-
-
Tangible assets capex
2
-
-
Total capex
97
-
-
1. Adjusted operating expenses exclude depreciation and amortisation, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.
Sportech Venues
Sportech Venues operates eleven gaming venues, providing betting on horse racing, greyhound racing and jai alai in the State of Connecticut under an exclusive and in-perpetuity licence for retail, online, and telephone betting.
COVID related travel and hospitality restrictions within retail outlets continue to challenge food and beverage contribution, however wagering handle increased significantly versus 2020 (87.2%); whilst comparison against a more appropriate 2019 was a decline of 1.2%. Yet, online handle continued to build on the growth of last year, H1 2021 +15.6% versus H1 2020 and +44.8% versus comparable period in 2019. The Group continues to develop its online pari-mutuel betting presence with a rebranded MyWinners.com to support new customer acquisition campaigns in Connecticut, delivering growth opportunities.
Management addressed the global hospitality challenge, advancing the execution of estate planning, and a variety of strategic initiatives. The number of leased outlets were reduced from 12 to 10 including the sale and leaseback of one freehold asset completed during the period, realising net cash proceeds of £4.2 million. At the end of the period, the division operated 10 leasehold premises and one freehold premises in Connecticut, USA.
In May 2018, the US Supreme Court struck down the Professional and Amateur Sports Protection Act ("PASPA"), subsequently providing each US State with the option to introduce Sports Betting legislation. Since that time Sportech has been engaged in pursuing various opportunities and specifically a Sports Betting licence in Connecticut, where Sportech Venues Inc. has an exclusive pari-mutuel (tote) betting licence. In May 2021, the Connecticut General Assembly passed legislation to authorise sports betting in Connecticut. Governor Ned Lamont signed the Bill on 27 May 2021.
As previously announced, unfortunately Sportech was not awarded a Sports Betting licence. The Group considered two options: to legally challenge the decision or construct a mutually beneficial relationship with one of the three parties awarded a Sports Betting licence.
Sportech was delighted to announce in August 2021 a 10-year commercial arrangement with the Connecticut Lottery Corporation ("CLC") which, subject to required regulatory consents, provides Sportech Venues Inc., in conjunction with CLC's sports book provider Rush Street Interactive ("RSI"), an ability to deliver Sports Betting across its retail estate and promote CLC's online and mobile channels.
Venues
£'000
H1 2021
H1 2020
Constant Currency
H1 2020
Reported
Currency
F&B
824
765
807
Wagering revenue
10,681
6,020
6,424
Total revenue
11,505
6,785
7,231
Contribution
5,506
3,347
3,244
Contribution margin
47.9%
49.3%
44.9%
Adjusted operating expenses1
(4,314)
(4,482)
(4,510)
Adjusted EBITDA
1,192
(1,135)
(1,266)
Total capex
-
29
29
1. Adjusted operating expenses exclude depreciation and amortisation and separately disclosed items as reported in note 1 of the Interim Financial Statements.
Corporate Costs
Corporate costs and Sports Betting Investment expenditure, together, increased by £0.4 million due to staff costs savings in 2020 during the peak of the COVID-19 pandemic when staff were furloughed/took voluntary reductions, which then reverted back to normal cost levels from H2 2020, as well as higher corporate insurance costs in 2021.
Depreciation and Amortisation
Capital expenditure and depreciation/amortisation is much reduced in the continuing group from that of the Group prior to the disposals. Depreciation and amortisation in the period reduced from £1.5 million to £0.9 million as a result of the impairments taken at the end of H1 2020. No further impairments were considered to be required at 30 June 2021.
Separately Disclosed Items
The Group incurred administration costs in continuing operations during the period of £0.5 million (H1 2020: £0.1 million) which are shown as separately disclosed items. H1 2021 items include redundancy payments and corporate activity, namely costs incurred for the Company to delist from the Main Market and list on AIM. The Company expects further costs will be incurred in H2 2021 as the business completes restructuring for 2022 which will be separately disclosed.
Net Finance Costs
The Group has no debt. The Group had a net finance income of £0.1 million (H1 2020: cost of £0.4 million), including £0.1 million (H1 2020: £0.2 million) interest accrued on potential tax liabilities payable, £0.1 million (H1 2020: £0.2 million) interest on lease liabilities and £0.2 million (H1 2020: £0.1 million loss) foreign exchange gain on financial assets and liabilities denominated in foreign currency.
Taxation
Taxation is provided based on management's best estimate of the expected weighted average annual taxation rate for the full year. The estimated weighted average annual tax rate for the year ended 31 December 2021 is 49.0% (2020: (0.9)%). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates and the non-recognition of deferred tax on losses in certain jurisdictions due to expectation of non-recovery.
The Group continues to hold a tax provision of £4.6 million (30 June 2020: £5.0 million, 31 December 2020: £4.6 million) for tax potentially due on the 2016 Spot the Ball refund (excluding interest). Further provisions are held totaling £nil (30 June 2020: £0.5 million, 31 December 2020: £nil) for other uncertain tax positions. The remaining current tax liability on the balance sheet is for estimated tax payable on profits generated in the six months to 30 June 2021.
Net Cash
The Group held cash balances of £48.6 million, excluding customer balances (31 December 2020: £16.8 million, including cash in assets held for sale).
A further amount of consideration was received in August 2021 from BetMakers Technology Group Limited for the settlement of estimated closing cash less debt like items of £2.6 million. The final settlement for net working capital is due to be agreed between parties in H2 2021.
Capital Expenditure
Capital expenditure investment in the period was £1.1 million (H1 2020: £1.3 million). £0.1 million (H1 2020: £nil) related to the continuing Group and the remainder was mainly staff costs capitalised or expenditure agreed to be reimbursed by the buyer of the operation. Capital expenditure will increase into H2 2021 and 2022 as venues are improved ready for Sports Betting to commence.
Shareholders' Funds
Shareholders' funds increased by £23.3 million from 31 December 2020 to £48.5 million (31 December 2020: £25.2 million) following the completion of the corporate disposals and the profit on disposal recognised therefrom.
Going Concern
After making reasonable enquiries and forecasting the Group's cash flows with reasonable downside assumptions applied, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements. The Directors have not included in the downside model any assumption of a further local or more widespread "lockdown" as a result of COVID-19 cases or a new pandemic arising. Under this scenario the Directors will take all actions necessary (as evidenced in 2020) and make use of all government support available to ensure the Company and the Group continues in operational existence.
Outlook
Developing the sports betting opportunity in Connecticut with our partners, driving further growth opportunities and effective cost management remain priorities for management. Enhancing Group value remains the Board's key focus and the Group strategy is structured accordingly with regard to this central measure.
Timing around the commencement of Sports Betting in Connecticut is unclear at the time of writing, resulting in fluid financial forecasting. As timing becomes clearer, the Board will update the market accordingly.
Finally, following the restructuring of the Group, the move to AIM and the proposed significant return of capital to shareholders, the Group announced senior management changes in line with focus on reducing corporate overheads. The Board extends its sincere thanks to Richard McGuire and Tom Hearne for leading the Company in recent years and welcomes Andrew Lindley and Nicola Rowlands to their new positions as CEO and CFO respectively.
Interim consolidated income statement
For the six months ended 30 June 2021
Six months ended
30 June
2021
(Unaudited)Restated
Six months ended
30 June
2020
(Unaudited)
Year
ended
31 December 2020
(Audited)
Note
£000
£000
£000
Revenue
13,445
8,377
19,966
Cost of sales
6
(6,370)
(4,387)
(9,432)
Gross profit
7,075
3,990
10,534
Marketing and distribution costs
6
(227)
(295)
(319)
Contribution
6,848
3,695
10,215
Other income
20a
2,575
-
-
Operating costs
6
(8,259)
(12,278)
(20,225)
Operating profit/(loss)
1,164
(8,583)
(10,010)
Finance costs
8
(154)
(429)
(568)
Finance income
8
230
16
11
Profit/(loss) before taxation from continuing operations
1,240
(8,996)
(10,567)
Taxation - continuing operations
9
(608)
77
297
Profit/(loss) for the period from continuing operations
632
(8,919)
(10,270)
Profit/(loss) after taxation from discontinued operations
20f
23,331
(1,801)
(2,562)
Profit/(loss) for the period
23,963
(10,720)
(12,832)
Attributable to:
Attributable to:
Owners of the Company
23,963
(10,720)
(12,832)
Basic profit/(loss) per share attributable to owners of the Company
From continuing operations
10
0.3p
(4.7)p
(5.4)p
From discontinued operations
10
12.4p
(1.0)p
(1.4)p
Total
10
12.7p
(5.7)p
(6.8)p
Diluted profit/(loss) per share attributable to owners of the Company
From continuing operations
10
0.3p
(4.7)p
(5.4)p
From discontinued operations
10
12.4p
(1.0)p
(1.4)p
Total
10
12.7p
(5.7)p
(6.8)p
Adjusted loss per share attributable to owners of the Company
Basic
10
(0.3)p
(2.3)p
(2.2)p
Diluted
10
(0.3)p
(2.3)p
(2.2)p
See note 4 for a reconciliation of the above interim consolidated income statement to the adjusted performance measures used by the Board of Directors to assess divisional performance.
Prior period comparatives have been adjusted for discontinued activities.
Interim consolidated statement of comprehensive income
For the six months ended 30 June 2021
Six months ended
30 June
2021
(Unaudited)Six months ended
30 June
2020
(Unaudited)Year ended 31 December 2020
(Audited)
£000
£000
£000
Profit/(loss) for the period
23,963
(10,720)
(12,832)
Other comprehensive expense:
Items that will not be reclassified to profit and loss
Actuarial loss on retirement benefit liability
-
-
(344)
Deferred tax on movement on retirement benefit liability
-
-
88
-
-
(256)
Items that may be subsequently reclassified to profit and loss
Currency translation differences
(892)
2,444
(77)
Total other comprehensive (expense)/income for the period, net of tax
(892)
2,444
(333)
Total comprehensive income/(expense) for the period
23,071
(8,276)
(13,165)
Attributable to:
Owners of the Company
23,071
(8,276)
(13,165)
Interim consolidated statement of changes in equity
For the six months ended 30 June 2021
Other reserves
Ordinary shares
Capital
redemption reserve
Other reserve
Foreign exchange reserve
Retained earnings
Total
Six months ended 30 June 2021
£000
£000
£000
£000
£000
£000
At 1 January 2021 (audited)
37,750
10,312
(638)
6,865
(29,130)
25,159
Comprehensive income/(expense)
Profit for the period
-
-
-
-
23,963
23,963
Other comprehensive items
Transfer cumulative actuarial losses to retained earnings
-
-
952
-
(952)
-
Currency translation differences
-
-
-
(892)
-
(892)
Currency translation differences moved to retained earnings
-
-
-
(2,994)
2,994
-
Total other comprehensive items
-
-
952
(3,886)
2,042
(892)
Total comprehensive items
-
-
952
(3,886)
26,005
23,071
Transactions with owners
Share option charge
-
-
-
-
261
261
Total transactions with owners
-
-
-
-
261
261
Total changes in equity
-
-
952
(3,886)
26,266
23,332
At 30 June 2021 (unaudited)
37,750
10,312
314
2,979
(2,864)
48,491
Other reserves
Ordinary shares
Capital
redemption reserve
Other reserve
Foreign exchange reserve
Retained earnings
Total
Six months ended 30 June 2020
£000
£000
£000
£000
£000
£000
At 1 January 2020 (audited)
37,750
10,312
(382)
6,942
(16,645)
37,977
Comprehensive income/(expense)
Loss for the period
-
-
-
-
(10,720)
(10,720)
Other comprehensive items
Currency translation differences
-
-
-
2,444
-
2,444
Total other comprehensive items
-
-
-
2,444
-
2,444
Total comprehensive items
-
-
-
2,444
(10,720)
(8,276)
Transactions with owners
Share option charge
-
-
-
-
112
112
Total transactions with owners
-
-
-
-
112
112
Total changes in equity
-
-
-
2,444
(10,608)
(8,164)
At 30 June 2020 (unaudited)
37,750
10,312
(382)
9,386
(27,253)
29,813
* Net of deferred tax.
Other reserves
Ordinary shares
Capital redemption reserve
Other reserve
Foreign exchange reserve
Retained earnings
Total
Year ended 31 December 2020
£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
pension liability*
-
-
(256)
-
-
(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
* Net of deferred tax
Interim consolidated balance sheet
As at 30 June 2021
As at 30
June
2021 (Unaudited)As at 30 June
2020
(Unaudited)As at 31 December
2020
(Audited)
Note
£000
£000
£000
ASSETS
Non-current assets
Goodwill
604
604
604
Intangible fixed assets
11
6,657
14,665
7,343
Property, plant and equipment
12
4,932
15,184
5,077
Right-of-use assets
13
1,079
2,187
1,133
Trade and other receivables
14
154
465
156
Deferred tax assets
-
1,198
4
Total non-current assets
13,426
34,303
14,317
Current assets
Trade and other receivables
14
5,694
5,699
1,517
Inventories
128
2,694
120
Current tax receivable
-
-
1,442
Cash and cash equivalents
15
49,139
12,977
11,821
54,961
21,370
14,900
Assets classified as held for sale
-
-
27,671
Total current assets
54,961
21,370
42,571
TOTAL ASSETS
68,387
55,673
56,888
LIABILITIES
Current liabilities
Trade and other payables
16
(9,626)
(12,352)
(14,104)
Provisions
17
(1,402)
(466)
(321)
Lease liabilities
19
(1,099)
(1,132)
(823)
Current tax liabilities
(4,871)
(4,895)
(4,700)
Deferred tax liabilities
(46)
(89)
(94)
(17,044)
(18,934)
(20,042)
Liabilities directly associated with assets classified as held for sale
-
-
(7,507)
Total current liabilities
(17,044)
(18,934)
(27,549)
Net current assets
37,917
2,436
15,022
Non-current liabilities
Retirement benefit liability
-
(1,151)
-
Lease liabilities
19
(2,852)
(4,495)
(3,059)
Deferred tax liabilities
-
(48)
-
Provisions
17
-
(1,232)
(1,121)
(2,852)
(6,926)
(4,180)
TOTAL LIABILITIES
(19,896)
(25,860)
(31,729)
NET ASSETS
48,491
29,813
25,159
EQUITY
Ordinary shares
37,750
37,750
37,750
Other reserves
13,605
19,316
16,539
Accumulated losses
(2,864)
(27,253)
(29,130)
TOTAL EQUITY
48,491
29,813
25,159
Interim consolidated statement of cash flows
For the six months ended 30 June 2021
Six monthsended
30 June
2021
(Unaudited)
Six months ended
30 June
2020
(Unaudited)
Yearended 31 December 2020
(Audited)
Note
£000
£000
£000
Cash flows from operating activities
Cash generated from operations, before separately disclosed items
18
3,524
102
3,928
Interest received
27
13
13
Interest paid
(2)
(83)
(84)
Tax refund received
1,442
-
-
Tax paid
(378)
(263)
(1,029)
Net cash generated from/(used in) operating activities before separately disclosed items
4,613
(231)
2,828
Cash outflows - separately disclosed items
7
(634)
(283)
(484)
Cash generated from/(used in) operations
3,979
(514)
2,344
Cash flows from investing activities
Disposal of freehold property in New Haven, Connecticut (net of disposal costs)
20a
4,193
-
-
Consideration paid for Lot.to Systems Limited, net of cash acquired
-
(500)
(500)
Receipt of Initial Payment for disposal of Global Tote
20e
-
-
6,180
Proceeds net of cash disposed of and disposal costs - Global Tote
20e
18,664
-
-
Proceeds net of cash disposed of and disposal costs - Bump 50:50
20e
4,732
-
-
Proceeds from sale of other intangible assets
20c
150
-
-
Investment in intangible fixed assets
11,20
(920)
(798)
(1,650)
Purchase of property, plant and equipment
12,20
(146)
(525)
(753)
Net cash generated from/(used in) investing activities
26,673
(1,823)
3,277
Cash flows used in financing activities
Principal paid on lease liabilities
19,20
(675)
(575)
(1,316)
Interest paid on lease liabilities
19,20
(103)
(184)
(339)
Cash used in financing activities
(778)
(759)
(1,655)
Net increase/(decrease) in cash and cash equivalents
29,874
(3,096)
3,966
Effect of foreign exchange on cash and cash equivalents
(194)
508
(72)
Cash and cash equivalents at the beginning of the year
11,821
15,565
15,565
Add cash included in assets held for sale
7,638
-
-
Cash and cash equivalents at the end of the period
49,139
12,977
19,459
Less cash held by assets held for sale
-
-
(7,638)
Group cash and cash equivalents at the end of the period
15
49,139
12,977
11,821
Represented by:
Cash and cash equivalents
15
49,139
12,977
11,821
Less customer funds
15
(530)
(3,399)
(465)
Adjusted net cash at the end of the period
15
48,609
9,578
11,356
Notes to the consolidated interim financial statements
For the six months ended 30 June 2021
1. General information
Sportech PLC (the "Company") is a company domiciled in the UK and listed on the London Stock Exchange's Alternative Investment Market ("AIM"). The Company's registered office is Collins House, Rutland Square, Edinburgh, Midlothian, Scotland EH1 2AA. The condensed consolidated interim financial statements of the Company as at and for the period ended 30 June 2021 comprise the Company, its subsidiaries, joint ventures and associates (together referred to as the "Group"). The Company's accounting interim reference date is 30 June 2021. 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 and the disposal of the Group's 50:50 Lottery division (Bump 50:50) on 2 June 2021. Following the disposals the Group continues to provide pari-mutuel betting (B2C) and lottery technology (B2B).
The condensed consolidated interim financial statements were approved for issue on 9 September 2021.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2020 were approved by the Board of Directors on 31 March 2021 and delivered to the Registrar of Companies. The Report of the Auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
2. Basis of preparation
a. These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' and also in accordance with the measurement and recognition principles of UK adopted international accounting standards. They do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2020 which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
b. After making reasonable enquiries and forecasting the Group's cash flows with reasonable downside assumptions applied, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements. The Directors have not included in the downside model any assumption of a further local or more widespread "lockdown" as a result of COVID-19 cases or a new pandemic arising. Under this scenario the Directors will take all actions necessary (as evidenced in 2020) and make use of all government support available to ensure the Company and the Group continues in operational existence.
c. The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, significant judgements have been made by management with respect to the assumptions underpinning the Group's tax liabilities and the carrying value of intangible fixed assets.
d. The principal risks and uncertainties for the Group remain the same as those detailed on pages 24 to 26 of the 2020 Sportech PLC Annual Report and Accounts, where descriptions of mitigating activities carried out by the Group are also outlined. Those risks are regulation, product popularity, technological changes, client concentration and industry competition, foreign exchange, failure to implement Sports Betting strategy and global pandemics.
3. Accounting policies
There are no new standards or amendments to standards or interpretations that are mandatory for the first time for the financial year beginning 1 January 2021 that would impact the Group financial statements. Therefore, all accounting policies applied in these condensed consolidated interim financial statements are consistent with those of the annual financial statements for the year ended 31 December 2020, as described in those annual financial statements.
The standards, amendments and interpretations that are not yet effective and have not been adopted early by the Group are listed in the 2020 Annual Report and accounts.
4. Adjusted performance measures
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted EBITDA which excludes the effects of expenditure management believe should be added back (separately disclosed items). 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. This is considered the most reliable indicator as it is the closest approximation to cash generated by underlying trade, excluding the impact of separately disclosed items and working capital movements.
Adjusted EBITDA is not an IFRS measure, nevertheless although it may not be comparable to adjusted figures used elsewhere, it is widely used by both the analyst community to compare with other gaming companies and by management to assess underlying performance.
A reconciliation of the adjusted operating expenses used for statutory reporting and the adjusted performance measures is shown below:
Note
Six months ended
30 June
2021
(Unaudited)
Restated
Six months ended
30 June
2020
(Unaudited)
Year
ended
31 December 2020
(Audited)
£000
£000
£000
Operating costs per income statement
(8,259)
(12,278)
(20,225)
Add back:
Sports Betting investment
5
191
157
261
Depreciation
12,13
479
1,114
1,793
Amortisation, excluding acquired intangible assets
11
206
145
485
Amortisation of acquired intangible assets
11
254
254
509
Impairment of property, plant and equipment
12
-
2,521
4,349
Impairment of right-of-use asset
13
-
1,827
-
Share option charge
5
261
112
347
Separately disclosed items
7
477
73
229
Total adjusted net operating costs (pre Sports Betting investment)
(6,391)
(6,075)
(12,252)
Adjusted EBITDA is calculated as follows:
Six months ended
30 June
2021
(Unaudited)
Restated
Six months ended
30 June
2020
(Unaudited)
Year
ended
31 December 2020
(Audited)
£000
£000
£000
Revenue
13,445
8,377
19,966
Cost of sales
(6,370)
(4,387)
(9,432)
Gross profit
7,075
3,990
10,534
Marketing and distribution costs
(227)
(295)
(319)
Contribution
6,848
3,695
10,215
Adjusted operating income and costs (pre Sports Betting investment)
(6,391)
(6,075)
(12,252)
Adjusted EBITDA pre Sports Betting investment
457
(2,380)
(2,037)
Sports Betting investment
(191)
(157)
(261)
Adjusted EBITDA
266
(2,537)
(2,298)
Sports Betting investment represents the time and cost the Group has incurred in 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. Of these costs, £191k were external costs and £nil were internal (six months ended 30 June 2020: £157k were external and £nil were internal, year ended 31 December 2020: £261k were external costs and £nil were internal).
Adjusted profit is also an adjusted performance measure used by the Group. This uses adjusted EBITDA, as defined above as management's view of the closest proxy to cash generation for underlying divisional performance, and deducting share option charges, depreciation, amortisation of intangible assets (other than those which arise in the acquisition of businesses) and certain finance charges. This provides an adjusted profit before tax measure, which is then taxed by applying an estimated adjusted tax measure. The adjusted tax charge excludes the tax impact of income statement items not included in adjusted profit before tax.
Six months ended
30 June 2021
(Unaudited)
Restated
Six months ended
30 June 2020
(Unaudited)
Year ended
31 December 2020
(Audited)
From continuing operations:
£000
£000
£000
Adjusted EBITDA
266
(2,537)
(2,298)
Share option charge
(261)
(112)
(347)
Depreciation
(479)
(1,114)
(1,793)
Amortisation (excluding amortisation of acquired intangibles)
(206)
(145)
(485)
Net finance costs (excluding certain finance costs - note 8)
(55)
(168)
(254)
Adjusted loss before tax
(735)
(4,076)
(5,177)
Tax at 12.2% (30 June 2020: (4.8)%, 31 December 2020: 20.2%)
89
(195)
1,045
Adjusted loss after tax
(646)
(4,271)
(4,132)
Six months ended
30 June 2021
(Unaudited)
Restated
Six months ended
30 June 2020
(Unaudited)
Year ended
31 December 2020
(Audited)
From discontinued operations:
£000
£000
£000
Adjusted EBITDA
5,366
1,315
4,632
Depreciation
-
(1,039)
(1,998)
Amortisation (excluding amortisation of acquired intangibles)
-
(1,796)
(3,376)
Net finance costs (excluding certain finance costs - note 7)
(24)
(53)
(68)
Adjusted profit/(loss) before tax
5,342
(1,573)
(810)
Tax at 22.3% (30 June 2020: (3.9)%, 31 December 2020: 71.3%)
(1,191)
(61)
577
Adjusted profit/(loss) after tax
4,151
(1,634)
(233)
5. Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, which makes strategic and operational decisions.
The Group has identified its operating segments as outlined below:
- Sportech Lotteries - provision of lottery services and systems worldwide;
- Sportech Venues - off-track betting venue management; and
- Corporate costs - central costs relating to the overall management of the Group.
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted EBITDA as defined in note 4. The share option expense is also excluded. Interest is not allocated to segments as the Group's cash position is controlled by the central finance team. Sales between segments are at arm's length.
Six months ended 30 June 2021 (Unaudited)
Sportech Lotteries
Sportech
Venues
Corporate costs
Group
£000
£000
£000
£000
Revenue from food and beverage sales
-
824
-
824
Revenue from rendering of services
1,940
10,681
-
12,621
Total revenue
1,940
11,505
-
13,445
Cost of sales
(576)
(5,794)
-
(6,370)
Gross profit
1,364
5,711
-
7,075
Marketing and distribution costs
(22)
(205)
-
(227)
Contribution
1,342
5,506
-
6,848
Adjusted operating costs
(561)
(4,314)
(1,516)
(6,391)
Adjusted EBITDA (pre Sports Betting investment)
781
1,192
(1,516)
457
Sport betting investment
-
(191)
-
(191)
Adjusted EBITDA
781
1,001
(1,516)
266
Share option charge
-
-
(261)
(261)
Depreciation
(105)
(366)
(8)
(479)
Amortisation (excluding amortisation of acquired intangibles)
(116)
-
(90)
(206)
Segment result
560
635
(1,875)
(680)
Amortisation of acquired intangibles
(254)
-
-
(254)
Profit on disposal of Sports Haven
-
2,575
-
2,575
Separately disclosed items
(173)
(8)
(296)
(477)
Operating profit/(loss)
133
3,202
(2,171)
1,164
Net finance income
76
Profit before taxation from continuing operations
1,240
Taxation - continuing operations
(608)
Profit for the period from continuing operations
632
Profit after taxation from discontinued operations
23,331
Profit for the period
23,963
Other segment items
Capital expenditure - intangible fixed assets
95
-
-
95
Capital expenditure - property, plant and equipment
2
-
-
2
Six months ended 30 June 2020 (Unaudited)
Restated
Sportech
Lotteries
Sportech
Venues
Corporate costs
Group
£000
£000
£000
£000
Revenue from food and beverage sales
-
807
-
807
Revenue from rendering of services
1,146
6,424
-
7,570
Total revenue
1,146
7,231
-
8,377
Cost of sales
(689)
(3,698)
-
(4,387)
Gross profit
457
3,533
-
3,990
Marketing and distribution costs
(6)
(289)
-
(295)
Contribution
451
3,244
-
3,695
Adjusted operating costs
(371)
(4,510)
(1,194)
(6,075)
Adjusted EBITDA (pre Sports Betting investment)
80
(1,266)
(1,194)
(2,380)
Sport betting investment
-
(157)
-
(157)
Adjusted EBITDA
80
(1,423)
(1,194)
(2,537)
Share option charge
-
-
(112)
(112)
Depreciation
(102)
(1,005)
(7)
(1,114)
Amortisation (excluding amortisation of acquired intangibles)
(13)
-
(132)
(145)
Segment result
(35)
(2,428)
(1,445)
(3,908)
Amortisation of acquired intangibles
(254)
-
-
(254)
Impairment of property, plant and equipment
-
(2,521)
-
(2,521)
Impairment of right-of-use asset
-
(1,827)
-
(1,827)
Separately disclosed items
-
(18)
(55)
(73)
Operating loss
(289)
(6,794)
(1,500)
(8,583)
Net finance costs
(413)
Loss before taxation - continuing operations
(8,996)
Taxation - continuing operations
77
Loss after taxation - continuing operations
(8,919)
Loss after taxation - discontinued operations
(1,801)
Loss for the period
(10,720)
Other segment items
Capital expenditure - intangible fixed assets
-
-
1
1
Capital expenditure - property, plant and equipment
-
29
-
29
The above table has been restated to exclude discontinued activities.
Year ended 31 December 2020 (Audited)
Sportech
Lotteries
Sportech
Venues
Corporate costs
Group
£000
£000
£000
£000
Revenue from food and beverage sales
-
1,472
-
1,472
Revenue from rendering of services
2,898
15,596
-
18,494
Total revenue
2,898
17,068
-
19,966
Cost of sales
(808)
(8,624)
-
(9,432)
Gross profit
2,090
8,444
-
10,534
Marketing and distribution costs
(8)
(311)
-
(319)
Contribution
2,082
8,133
-
10,215
Adjusted net operating costs (note 1)
(1,107)
(9,218)
(1,927)
(12,252)
Adjusted EBITDA (pre sports betting investment)
975
(1,085)
(1,927)
(2,037)
Sports betting investment
-
(261)
-
(261)
Adjusted EBITDA
975
(1,346)
(1,927)
(2,298)
Share option charge
-
-
(347)
(347)
Depreciation
(182)
(1,595)
(16)
(1,793)
Amortisation (excluding amortisation of acquired intangible assets)
(235)
-
(250)
(485)
Segment result before amortisation of acquired intangibles
558
(2,941)
(2,540)
(4,923)
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 profit/(loss)
49
(7,308)
(2,751)
(10,010)
Net finance costs
(557)
Loss before taxation from continuing operations
(10,567)
Taxation
297
Loss for the year from continuing operations
(10,270)
Loss after tax from discontinued operations
(2,562)
Loss for the year
(12,832)
Discontinued operations were within the Sportech Racing and Digital division which existed in prior years and to 31 December 2020 prior to classification as discontinued. The remaining businesses in the former Racing and Digital division now form a new division "Sportech Lotteries".
Sportech
Lotteries
Sportech
Venues
Corporate costs
Group
£000
£000
£000
£000
Other segment items - capital expenditure
Capital expenditure - intangible fixed assets
230
-
-
230
Capital expenditure - property, plant and equipment
121
29
-
150
6. Expenses by nature
Six months ended
30 June
2021
(Unaudited)
Restated
Six months ended
30 June
2020
(Unaudited)
Year
ended31 December 2020
(Audited)
£000
£000
£000
Cost of sales
Tote and track fees
5,426
3,186
7,821
F&B consumables
305
285
528
Betting and gaming duties
48
157
79
Repairs and maintenance cost of sales
18
45
48
Ticket paper
53
42
148
Programs
147
69
196
Outsourced service costs
334
603
561
Cost of sales
39
-
51
Total cost of sales
6,370
4,387
9,432
Marketing and distribution costs
Marketing
210
286
294
Vehicle costs
14
-
16
Freight
3
9
9
Total marketing and distribution costs
227
295
319
Operating costs
Staff costs - gross, excluding share option charges
3,415
3,337
7,015
Less amounts capitalised
(95)
-
(230)
Staff costs - net
3,320
3,337
6,785
Property costs
1,434
1,189
2,865
IT & communications
224
241
499
Professional fees and licences
1,445
1,215
2,160
Travel and entertaining
72
71
66
Banking transaction costs and FX
35
64
114
Other costs
52
115
24
Adjusted operating costs
6,582
6,232
12,513
Share option charge
261
112
347
Depreciation
479
1,114
1,793
Amortisation, excluding amortisation of acquired intangibles
206
145
485
Amortisation of acquired intangibles
254
254
509
Impairment of property, plant and equipment and right-of-use asset
-
4,348
4,349
Separately disclosed items
477
73
229
Total operating costs
8,259
12,278
20,225
7. Separately disclosed items
Six months ended
30 June
2021
(Unaudited)
Restated
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
Note
£000
£000
£000
Continuing operations
Included in operating costs:
Redundancy and restructuring costs in respect of the rationalisation and
modernisation of the business
179
25
-
Corporate activity
290
4
118
Costs in relation to the Spot the Ball VAT refund
-
-
44
Costs in relation to exiting the Group's interests in India
8
44
65
UK defined benefit pension scheme buy-out
-
-
2
477
73
229
Discontinued operations
Included in operating costs
20b,20c
371
147
1,224
Total included in operating costs
848
220
1,453
Included in finance costs:
Interest accrued on corporate tax potentially due and unpaid at the balance sheet date on STB refund received in 2016
8
74
183
150
Interest paid on VAT settlement reached in 2018
-
-
83
74
183
233
Total Separately disclosed items
922
403
1,686
Below is a summary of cash outflows from separately disclosed items:
Six months ended
30 June
2021
(Unaudited)
Restated
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
£000
£000
£000
Continuing operations - cash outflows from separately disclosed items:
Redundancy and restructuring costs in respect of the rationalisation and
modernisation of the business
(44)
(3)
(18)
Expenses in relation to the UK defined benefit pension scheme "buy-in"
-
-
(2)
Costs in relation to the Spot the Ball VAT refund
(27)
-
-
Costs in relation to corporate activity
(48)
-
(127)
Costs in relation to legacy tax disputes
-
-
(17)
Transaction costs - disposal of Global Tote Business
-
-
(16)
Costs in relation to the Group's lease in Norco, California
(1)
(32)
-
Costs in relation to exiting the Group's interests in India
(8)
(44)
(65)
Corporate activity
-
(7)
(224)
One off start-up costs of new ventures, including new venue builds and joint ventures
-
(197)
-
(128)
(283)
(469)
Cash outflows from separately disclosed items - discontinued operations
(506)
-
(15)
(634)
(283)
(484)
8. Net finance costs
Six months ended
30 June
2021
(Unaudited)
RestatedSix months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
Note
£000
£000
£000
Continuing operations:
Finance costs:
Interest accrued and paid on tax liabilities
(74)
(183)
(233)
Interest on lease liabilities
(80)
(184)
(265)
Foreign exchange loss on financial assets and liabilities denominated in foreign currency
-
(62)
(70)
Total finance costs
(154)
(429)
(568)
Finance income:
Foreign exchange gain on financial assets and liabilities denominated in foreign currency
205
-
-
Interest received on overpaid tax
25
-
-
Interest received on bank deposits
-
16
11
Total finance income
230
16
11
Discontinued operations
20b,20c
54
(53)
(68)
Net finance costs
130
(466)
(625)
Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in note 4.
Six months ended
30 June
2021
(Unaudited)
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)Continuing operations
£000
£000
£000
Foreign exchange gain/(loss) on financial assets and liabilities denominated in foreign currency
205
(62)
(70)
Interest accrued and paid on tax liabilities
(74)
(183)
(233)
131
(245)
(303)
9. Taxation
Taxation is provided based on management's best estimate of the expected weighted average annual taxation rate for the full year. The estimated weighted average annual tax rate for the year ended 31 December 2021 is 49.0% (2020: (0.9)%). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates and the non-recognition of deferred tax on losses in certain jurisdictions due to expectation of non-recovery.
The Group continues to hold a tax provision of £4,600k (30 June 2020: £5,047k, 31 December 2020: £4,600k) for tax potentially due on the 2016 Spot the Ball refund (excluding interest). Further provisions are held totalling £nil (30 June 2020: £469k, 31 December 2020: £nil) for other uncertain tax positions. The remaining current tax liability is for estimated tax payable on profits generated in the six months to 30 June 2021.
10. Earnings per share
2021
2020 (restated)
Six months ended 30 June (Unaudited)
Continuing
Discontinued
Total
Continuing
Discontinued
Total
Basic EPS
Profit/(loss) for the period (£000)
632
23,331
23,963
(8,919)
(1,801)
(10,720)
Weighted average no of shares ('000)
188,751
188,751
188,751
188,751
188,751
188,751
Basic EPS
0.3p
12.4p
12.7p
(4.7)p
(1.0)p
(5.7)p
2020
Year ended 31 December (Audited)
Continuing
Discontinued
Total
Basic EPS
Loss for the year (£000)
(10,270)
(2,562)
(12,832)
Weighted average no of shares ('000)
188,751
188,751
188,751
Basic EPS
(5.4)p
(1.4)p
(6.8)p
2021
2020 (restated)
Six months ended 30 June (Unaudited)
Continuing
Discontinued
Total
Continuing
Discontinued
Total
Diluted EPS
Profit/(loss) for the period (£000)
632
23,331
23,963
(8,919)
(1,801)
(10,720)
Weighted average no of shares ('000)
188,751
188,751
188,751
188,751
188,751
188,751
Dilutive potential ordinary shares ('000)
N/A
N/A
N/A
N/A
N/A
N/A
Total potential ordinary shares ('000)
188,751
188,751
188,751
188,751
188,751
188,751
Diluted EPS
0.3p
12.4p
12.7p
(4.7)p
(1.0)p
(5.7)p
2020
Year ended 31 December (Audited)
Continuing
Discontinued
Total
Diluted EPS
Loss for the year (£000)
(10,270)
(2,562)
(12,832)
Weighted average no of shares ('000)
188,751
188,751
188,751
Dilutive potential ordinary shares ('000)
N/A
N/A
N/A
Total potential ordinary shares ('000)
188,751
188,751
188,751
Diluted EPS
(5.4)p
(1.4)p
(6.8)p
Adjusted EPS
Adjusted EPS is calculated by dividing the adjusted profit after tax attributable to owners of the Company, as defined in note 4, by the weighted average number of ordinary shares in issue during the year.
Continuing operations
Note
Six months ended
30 June
2021
(Unaudited)Restated
Six months ended
30 June
2020
(Unaudited)
Year ended
31 December2020
(Audited)Adjusted loss after tax (£000)
4
(646)
(4,271)
(4,132)
Basic Adjusted EPS (pence)
(0.3)p
(2.3)p
(2.2)p
Diluted Adjusted EPS (pence)
(0.3)p
(2.3)p
(2.2)p
11. Intangible fixed assets
Six months ended
30 June
2021
(Unaudited)
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
£000
£000
£000
At 1 January
7,343
14,935
14,935
Additions
95
798
1,650
Transferred to held for sale
-
-
(4,544)
Amortisation charge for period
(460)
(2,195)
(4,370)
Disposal
(82)
-
-
Movement as a result of foreign exchange
(239)
1,127
(328)
Net book amount at end of period
6,657
14,665
7,343
12. Property, plant and equipment
Six months ended
30 June
2021
(Unaudited)
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
£000
£000
£000
At 1 January
5,077
17,676
17,676
Additions
2
525
753
Transferred to held for sale
-
-
(8,048)
Depreciation charge for period
(225)
(1,495)
(2,604)
Impairment
-
(2,521)
(2,521)
Movement as a result of foreign exchange
78
999
(179)
Net book amount at end of period
4,932
15,184
5,077
13. Right-of-use assets
Six months ended
30 June
2021
(Unaudited)
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
Note
£000
£000
£000
At 1 January (2020 - on transition to IFRS 16)
1,133
6,312
6,312
Additions
19
169
148
654
Depreciation charge for period
(254)
(658)
(1,187)
Reassessment of lease assumptions - break clause
19
-
(2,232)
(2,231)
Impairment
-
(1,827)
(1,828)
Transferred to held for sale
-
-
(833)
Movement as a result of foreign exchange
31
444
246
Net book amount at end of period
1,079
2,187
1,133
14. Trade and other receivables
As at
30 June
2021
(Unaudited)
As at
30 June
2020
(Unaudited)
As at 31 December 2020
(Audited)
£000
£000
£000
Non-current
Trade and other receivables
154
465
156
Current
Trade and other receivables
5,694
5,699
1,517
Total trade and other receivables
5,848
6,164
1,673
Included in current trade and other receivables is £3,377k consideration to be received for the disposal of the Global Tote division (note 20e).
15. Cash and cash equivalents
As at
30 June
2021
(Unaudited)As at
30 June
2020
(Unaudited)As at 31 December 2020
(Audited)
Note
£000
£000
£000
Cash and short-term deposits
48,609
9,578
11,356
Customer funds
16
530
3,399
465
Total cash and cash equivalents
49,139
12,977
11,821
Customer funds are matched by liabilities of an equal value within trade and other payables (see note 16).
16. Trade and other payables
As at
30 June
2021
(Unaudited)As at
30 June
2020
(Unaudited)As at 31 December 2020
(Audited)
Note
£000
£000
£000
Trade payables
3,806
1,948
3,581
Other taxes and social security costs
575
495
141
Accruals and other payables
4,695
5,610
3,737
Deferred income
20
900
6,180
Player liability
15
530
3,399
465
Total trade and other payables
9,626
12,352
14,104
17. Provisions
Six months ended
30 June
2021
(Unaudited)Six months ended
30 June
2020
(Unaudited)Year
ended 31 December 2020
(Audited)
£000
£000
£000
At beginning of period
1,442
1,605
1,605
Utilised during the period
-
(31)
(105)
Transferred to assets held for sale
-
-
(7)
Currency movements
(40)
124
(51)
Total provisions
1,402
1,698
1,442
Provisions are in relation to:
Current provisions
Onerous contracts
1,402
466
321
Non-current provisions
Onerous contracts
-
1,226
1,121
Other
-
6
-
Total non-current provisions
-
1,232
1,121
Total provisions
1,402
1,698
1,442
The Group agreed a settlement for one of its committed leases in California, USA following the period end. The settlement amounted to £899k ($1,242k) with related legal fees incurred of c£72k. A provision of £1,184k is included in the above table in relation to this liability as well as a lease liability of £214k shown within lease liabilities in note 19. The provision in excess of the agreed settlement will be released to the income statement in H2 2021. The settlement was paid in August 2021. The remaining provision relates to a second committed lease dispute and settlement discussions are ongoing.
18. Cash flow from operating activities before separately disclosed items
Reconciliation of profit/(loss) before taxation to cash flows from operating activities before separately disclosed items:
Six months ended
30 June
2021
(Unaudited)
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
Note
£000
£000
£000
Profit/(loss) before taxation from continuing operations
1,240
(8,996)
(10,567)
Profit/(loss) before taxation from discontinued operations
20b,20c
23,505
(1,720)
(2,034)
Total profit/(loss) before tax
24,745
(10,716)
(12,601)
Adjustments for:
Net Separately disclosed items (included in operating costs)
7
848
220
1,453
Depreciation and amortisation
11,12,13
939
4,348
8,161
Profit on disposal of Sports Haven
20a
(2,575)
-
-
Profit on disposal of discontinued operations
20d
(18,327)
-
-
Profit on disposal of software
(65)
-
-
Impairment of assets
12,13
-
4,348
4,349
Net finance charges
8
(130)
466
625
Share option expense
261
112
347
Changes in working capital:
(Increase)/decrease/in trade and other receivables
(5,716)
1,938
2,791
Decrease/(increase) in inventories
205
78
(179)
Increase/(decrease) in trade and other payables, excluding player liabilities
2,776
(1,511)
(1,060)
Increase/(decrease) in player liabilities
15
563
819
42
Cash generated from operating activities, before Separately disclosed items
3,524
102
3,928
19. Lease liabilities
As at
30 June
2021
(Unaudited)As at
30 June
2020
(Unaudited)As at
31 December
2020
(Unaudited)Maturity analysis - contractual undiscounted cashflows
£000
£000
£000
Less than one year
1,416
1,591
1,085
Between 2 and 5 years
2,880
4,416
3,241
More than 5 years
1
279
-
Total
4,297
6,286
4,326
The weighted average incremental borrowing rate applied to the lease liabilities was 5.75%, lowest rate being 2.75% and the highest being 8.45%.
As at
30 June
2021
(Unaudited)As at
30 June
2020
(Unaudited)As at
31 December
2020
(Unaudited)Lease liabilities included in the balance sheet
£000
£000
£000
Current
1,099
1,132
823
Non-current
2,852
4,495
3,059
Total
3,951
5,627
3,882
Six months ended
30 June
2021
(Unaudited)Six months ended
30 June
2020
(Unaudited)Year ended
31 December
2020
(Unaudited)Movement in lease liability during the period
Note
£000
£000
£000
At 1 January
3,882
7,724
7,724
Interest charged to the income statement
8
80
218
339
New leases entered into
13
633
148
654
Reassessment of lease assumptions - break clause
13
-
(2,232)
(2,231)
Lease rentals paid
(621)
(759)
(1,655)
Transferred to held for sale
-
-
(998)
Movement as a result of foreign exchange
(223)
528
49
At period end
3,751
5,627
3,882
20. Discontinued operations and profit on disposal
20a) On 28 April 2021 the Group completed the disposal of its freehold property in New Haven, Connecticut, known as "Sports Haven" for gross consideration of £4,346k ($6,000k). The asset was classified as held for sale as at 31 December 2020 and was part of the Sportech Venues division. Costs related to the disposal amounted to £153k ($210k). The property is to be leased back for 18 months to 31 October 2022 at a rental of c£36k per month ($50k). On disposal, a lease liability of £633k was recognised as well as a right-of-use asset of £169k. The profit on disposal is analysed as follows:
Note
£000
Cash consideration received
4,346
Net book value disposed of
(1,154)
Right-of-use asset recognised
13
169
Lease liability recognised
19
(633)
Costs of disposal
(153)
Profit after tax on disposal net of costs
2,575
20b) On 2 June 2021 the Group completed the disposal of its 100% interest in Bump (Worldwide) Inc. ("Bump") for gross consideration of £4,972k ($8,556k). An estimate for net working capital settlement has been included of £307k (which was received in the period), final settlement could be more or less than management's estimate. The division was classified as held for sale as at 31 December 2020 and was part of the Sportech Racing division.
The profit/(loss) for the period and cashflows from Bump are shown below:
Note
Period ended 2 June 2021
(Unaudited)
Six months ended 30 June 2020
(Unaudited)
Year ended 31 December 2020 (Audited)
Bump (Worldwide) Inc.:
£000
£000
£000
Revenue
810
395
703
Cost of sales, marketing and distribution and adjusted operating expenses
(487)
(697)
(1,598)
Adjusted EBITDA
323
(302)
(895)
Depreciation and amortisation
-
(148)
(291)
Separately disclosed items
-
-
(65)
Finance income/(costs)
78
(90)
45
Profit/(loss) before tax
401
(540)
(1,206)
Tax, excluding tax arising on disposal
-
-
-
Profit/(loss) after tax
401
(540)
(1,206)
Gain from selling discontinued operations after tax (net of disposal costs)
20d
3,843
-
-
Profit/(loss) for the period
4,244
(540)
(1,206)
Net cash flow from operating activities
134
(192)
(801)
Net cash flow from investing activities
(37)
(79)
(118)
Net decrease in cash generated/(used)
97
(271)
(919)
Separately disclosed items within the above table are disposal costs.
20c) On 17 June 2021 the Group completed the disposal of its Global Tote division which also formed part of the Sportech Racing division and was classified as held for sale as at 31 December 2020. Gross Consideration amounts to £34,127k including a payment for cash transferred to the buyer with the business of £3,890k net of debt like items of £1,294k, received in July 2021 plus an estimate for settlement of net working capital which was in excess of an agreed Target working capital (and other adjustments) of £781k also delivered. The estimate may be higher or lower than management's estimate when settled. 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
Period ended 17 June 2021
(Unaudited)
Six months ended 30 June 2020
(Unaudited)
Year ended 31 December 2020 (Audited)
Global Tote Group:
£000
£000
£000
Revenue
12,175
11,400
25,052
Cost of sales, marketing and distribution and adjusted operating expenses
(7,003)
(9,783)
(19,525)
Adjusted EBITDA
5,172
1,617
5,527
Depreciation and amortisation
-
(2,687)
(5,083)
Separately disclosed items
(371)
(147)
(1,159)
Finance (costs)/income
(24)
37
(113)
Profit/(loss) before tax
4,777
(1,180)
(828)
Tax, excluding tax arising on disposal
(174)
(81)
(528)
Profit/(loss) after tax
4,603
(1,261)
(1,356)
Gain from selling discontinued operations after tax (net of disposal costs)
20d
14,484
-
-
Profit/(loss) for the period
19,087
(1,261)
(1,356)
Net cash flow from operating activities
1,780
3,861
6,099
Net cash flow from investing activities
(932)
(1,214)
(1,905)
Net cash flow from financing activities
(158)
(221)
(436)
Net increase in cash generated
690
2,426
3,758
Separately disclosed items incurred in the period were redundancy and restructuring costs in respect of a rationalisation of this business (period ended 30 June 2020: provision for dilapidation costs on an expiring lease (£147k), year ended 31 December 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).
20d) A summary of the gain on disposal of each discontinued operation is as follows:
Global Tote Group
Bump (Worldwide) Inc.
Total
Note
£000
£000
£000
Cash consideration received and receivable
34,127
4,972
39,099
Cash disposed of
(3,609)
(116)
(3,725)
Cash consideration received and receivable net of cash disposed of
20e
30,518
4,856
35,374
Less:
Costs of disposal
1,086
201
1,287
Net assets disposed of:
Intangibles
6,570
274
6,844
Property, plant and equipment
4,991
210
5,201
Right-of-use assets
761
-
761
Deferred tax assets
26
-
26
Trade and other receivables
4,621
380
5,001
Inventories
2,479
-
2,479
Income tax receivable
(38)
-
(38)
Trade and other payables
(2,493)
(52)
(2,545)
Lease liabilities
(786)
-
(786)
Retirement benefit liability
(1,183)
-
(1,183)
14,948
812
15,760
Pre-tax gain on disposal of discontinued operations
14,484
3,843
18,327
Taxation
-
-
-
Gain on disposal of discontinued operations
14,484
3,843
18,327
Costs of disposal include bonuses paid to Group employees of £1,068k for Global Tote and £167k for Bump.
20e) A summary of the cash consideration received and receivable net of cash disposed of is as follows:
Global Tote Group
Bump (Worldwide) Inc.
Total
Note
£000
£000
£000
Cash consideration received in 2020
6,180
-
6,180
Cash consideration received in H1 2021 net of cash disposed of
20,961
4,856
25,817
Disposal costs paid in H1 2021
(2,297)
(124)
(2,421)
Net cash received in H1 2021
18,664
4,732
23,396
Cash consideration receivable in H2 2021
3,377
-
3,377
Cash consideration received and receivable net of cash disposed of and disposal costs paid in the period
28,221
4,732
32,953
Add back cash disposal costs paid in the period
2,297
124
2,421
Cash consideration received and receivable net of cash disposed of before disposal costs paid in the period
20d
30,518
4,856
35,374
20f) Reconciliation to profit/(loss) for the period included in the income statement:
Note
Six months ended 30 June 2021
(Unaudited)
Six months ended 30 June 2020
(Unaudited)
Year ended 31 December 2020 (Audited)
£000
£000
£000
Global Tote
20c
19,087
(1,261)
(1,356)
Bump
20b
4,244
(540)
(1,206)
23,331
(1,801)
(2,562)
21. Related party transactions
The extent of transactions with related parties of the Group and the nature of the relationship with them are summarised below.
a. Key management compensation is disclosed below:
Six months ended
30 June
2021
(Unaudited)
Six months ended
30 June
2020
(Unaudited)
Year
ended 31 December 2020
(Audited)
£000
£000
£000
Short-term employee benefits
722
285
796
Share-based payments
51
51
103
Post-employment benefits
9
-
20
Total
782
336
919
22. Contingencies
Contingent items
Tax
The Group's activities in recent periods have resulted in material tax liabilities crystallising. The ultimate tax liability due, in all instances, is subject to a degree of management judgement. The judgements which are made are done so in good faith, with the aim of always paying the correct amount of tax at the appropriate time. Management work diligently with the Group's external financial advisors in quantifying the anticipated accurate and fair tax liability which arises from material one-off events such as the Spot the Ball legal case and the disposal of the Football Pools. Management has an open, transparent and constructive relationship with tax regulators, and engage positively when discussing any difference in legal interpretation between that of the Group and the regulators.
Penalties could potentially be imposed on the Group's corporation tax filing position for the STB VAT refund, however Management consider this possibility to be remote and therefore are not disclosing a contingent liability in relation to this item.
Contingent items are summarised as follows:
M&A activity
Both the 2017 sale of the Football Pools division and the 2018 sale of the Group's Venues business in The Netherlands have customary seller tax warranties under the terms of the Sale and Purchase Agreements. The possibility of material claims being made under the seller tax warranties in either deal is considered by management to be remote. In addition, the 2021 sales of the Bump 50:50 and the Global Tote business have customary seller warranties under the terms of the Sale and Purchase Agreements. Those warranties have been provided in good faith by management in light of the probability of certain events occurring. The possibility of material claims being made under the seller warranties (other than the Irish Subsistence Claim referred to above) in either deal is considered by management to be remote.
Legal
The Group is engaged in certain disputes in the ordinary course of business which could potentially lead to outflows greater than those provided for on the balance sheet. The maximum possible exposure considered to exist, in view of advice received from the Group's professional advisors, is up to £0.1m (30 June 2020: £0.4m, 31 December 2020: £0.5m). Management is of the view that the risk of those outflows arising is not probable and accordingly they are considered contingent items.
23. Post balance sheet events
The following table summarises events which have occurred since the balance sheet date all of which are reference previously in this statement.
Event
Date of announcement via RNS
Description
Admission of Ordinary Shares to trading on AIM
28 July 2021
Further to the Company's announcement on 4 June 2021, the General Meeting held on 29 June 2021 and the Schedule 1 and Schedule 1 Appendix announcements made on 30 June 2021, the Board confirmed that the admission of the Company's Ordinary Shares to trading on AIM occurred at 08.00 a.m. on 28 July 2021. Simultaneously, the admission of the Company's Ordinary Shares on the Official List of the Financial Conduct Authority and to trading on the Main Market of London Stock Exchange plc had been cancelled
Proposed Capital Reduction & Tender Offer
6 August 2021
Proposed Tender Offer to return up to approximately £35.5 million to Shareholders and a Capital Reduction (required in order to create the distributable reserves necessary to implement the Tender Offer).
Connecticut Sports Betting
13 August 2021
Announcement of an exclusive 10-year commercial arrangement with the Connecticut Lottery Corporation ("CLC") which, subject to required regulatory consents, provides Sportech Venues Inc., in conjunction with CLC's sports book provider Rush Street Interactive (RSI), an ability to deliver Sports Betting across its retail estate and promotes CLC's online and mobile channel.
Settlement of lease dispute in California
n/a
See note 17
Director Changes
27 August 2021
Richard McGuire (CEO) and Tom Hearne (CFO) will step down from their current roles, following the release of the Company interim results on 9 September 2021. Andrew Lindley, formerly the Group's COO, will become CEO (and Executive Director) and Nicola Rowlands will be appointed to CFO (and Executive Director) from her current position as Group Financial Controller.
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