REG - Sportech PLC - Interim Results
01/09/2022 07:01
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RNS Number : 8196X Sportech PLC 01 September 2022
1 September 2022
Sportech PLC
("Sportech" or the "Group" or the "Company")
Interim Results
Sportech (AIM:SPO), an international betting technology business, is pleased
to announce its interim results for the six months ended 30 June 2022 ("H1
2022" or the "period").
Summary
The Group stabilised revenue, improved EBITDA and returned £7 million to
shareholders during the period as a result of online retail marketing
projects, lower costs, the development of sports betting initiatives in
Connecticut and the proceeds from an asset sale announced on 4 January 2022.
Group Adjusted EBITDA improved markedly during the period to £0.3 million (H1
2021: loss of £0.9 million). The commencement of Sports Betting in
Connecticut in late 2021, where the Group has a commercial retail sports
betting arrangement with the State via the Connecticut Lottery Corporation;
stronger food and beverage revenues, digital business growth and lower
corporate costs supported the improvement.
Following a return to pre-COVID revenues, a significant part of the former
Sportech Lotteries division was sold to Inspired Entertainment Inc, as
announced on 4 January 2022 (LEIDSA disposal). This enabled the Group to
return a further £7 million to shareholders by means of a 7p per share
dividend, announced on 27 April 2022, taking shareholder repayments to £42.5
million during the last 12 months and £117.5 million since 2017. Comparatives
for H1 2021 have been restated to classify LEIDSA operating results to
discontinued operations.
£m's H1 2022 Restated
Constant Reported
Currency(4) Currency(4)
H1 2021 H1 2021
Revenue 12.6 12.6 11.8
Gross Profit 6.5 6.4 5.8
Contribution(1) 6.3 6.2 5.6
Adjusted EBITDA(2) 0.3 (0.8) (0.9)
(Loss)/profit pre-tax from continuing operations (0.8) 0.4 0.3
Adjusted loss before tax(3) (0.4) (1.7) (1.7)
Distributions to shareholders 7.0 35.5 35.5
1. Contribution is defined as gross profit, less marketing and
distribution costs.
2. Adjusted EBITDA is earnings from continuing operations before
interest, taxation, depreciation and amortisation, share option charges,
impairments and separately disclosed items as reported in note 1 of the
Interim Financial Statements.
3. Adjusted loss is the aggregate of Adjusted EBITDA, share
option charges, depreciation, amortisation (excluding amortisation of acquired
intangibles) and certain finance charges.
4. Prior year comparatives have been adjusted for discontinued
operations (LEIDSA contract).
As the Group moves through the rest of the financial year, the corporate focus
remains on delivering positive shareholder returns, operationally executing
the delivery of sports betting across key locations and escalating the Group's
digital wagering opportunities. The Board remain positive in the quality of
the Group's innovative products, management strategy and continuing commercial
relationships and are confident of achieving full year 2022 forecasts. There
remains deferred contingent consideration potentially due to the Group in Q1
2023 of c£1.1 million (CAD$2 million) in connection with the Bump disposal,
however this has not been recognised on the Group's balance sheet as a
receivable due to the uncertainty over the revenue hurdle being achieved.
The business transformation continues with the following objectives:
• Secure position within Connecticut expanded gaming.
• Deliver a less capital-intensive business and significantly
reduce the future corporate cost base.
• Execute further licensing opportunities within digital lottery.
• Evaluate and execute material corporate opportunities,
delivering tangible investor returns.
Richard McGuire, Executive Chairman of Sportech, said: "The first half of 2022
recorded the successful execution of Group strategic objectives. Online
revenue growth; non-core asset disposals; further shareholder capital returns
and a US team focused on developing sports betting initiatives, all positive
hallmarks of 2021, continued during the period. As previously announced,
Nicola Rowlands, our outgoing CFO, will be leaving at the end of September, we
wish her continued success. We also welcome Paul Humphreys to the Board as of
today, as an Independent Non-executive Director. Paul's appointment further
strengthens the Board, and he brings with him significant experience that is
highly relevant to the strategy of the Group. Paul will chair the Group's
Audit Committee.
The Group has a clear vision, a strong Board, a variety of attractive
operating assets, no debt, and cash to meet strategic objectives in the second
half of 2022 and beyond."
For further information, please contact:
Sportech
PLC
enquiries@sportechplc.com (mailto:enquiries@sportechplc.com)
Richard McGuire, Executive Chairman
Nicola Rowlands, Chief Financial Officer
Peel
Hunt
Tel: +44 (0) 20 7418 8900
(NOMAD and Corporate Broker to Sportech)
George Sellar / Andrew Clark / Lalit Bose
Group Overview
The Group underwent significant restructuring during 2021, completing the sale
of various operational divisions, returning significant capital to investors
and retaining sufficient net cash for a potential combination of growth
investment and future investor returns. That momentum continued in H1 2022,
following the sale of Sportech Lotteries LLC on 31 December 2021 and the
payment of a 7p dividend per share. Positive marketing initiatives, lower
costs and sports betting resulted in positive EBITDA despite a modest
reduction in gross revenues, on a constant currency basis.
Revenue EBITDA
£'000 H1 2022 H1 2021(1) H1 2022 H1 2021(1)
Continuing operations
Venues 11,714 12,235 1,525 1,097
Digital 857 351 (107) (375)
Corporate costs - - (1,107) (1,497)
Total at constant currency 12,571 12,586 311 (775)
Exchange rate impact - (759) - (121)
Total reported 12,571 11,827 311 (896)
1. 2021 numbers are at constant currency.
Sportech Digital
The acquisition of the technology platforms and talent of Lot.to Systems and
the integration of these assets into Sportech's organisation completed in
early 2019, resulting in further expansion of the Group's B2B lottery
capabilities with a key mobile component and robust administrative, CRM and
marketing tools. The team advanced digital lottery capabilities facilitating
the sale of Sportech Lotteries LLC and the agreement to provide a digital
lottery platform to Inspired Entertainment Inc.
The continuing digital business revenues increased versus H1 2021, and
expenses were reduced resulting in an improved EBITDA for the period. The core
focus for the Digital team, based in Chester, UK, remains pursuing licensing
opportunities drawing on the Sportech brand, legacy, and digital expertise to
deliver an enhanced consumer experience.
Digital H1 2022 Constant Currency Reported
£'000 H1 2021 Currency(2)
H1 2021
Service revenue 857 351 322
Contribution 355 127 115
Contribution margin 41.4% 36.2% 35.7%
Adjusted operating expenses(1) (462) (502) (496)
Adjusted EBITDA (107) (375) (381)
Intangible assets capex 97 95 95
Tangible assets capex 22 2 2
Total capex 119 97 97
1. Adjusted operating expenses exclude
depreciation and amortisation, impairments and separately disclosed items as
reported in note 1 of the Interim Financial Statements.
2. Prior year comparatives have been adjusted for
discontinued operations (LEIDSA contract).
Sportech Venues
Sportech Venues operates ten 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. In 2021,
an agreement was concluded whereby Sportech can offer betting on all other
sports across a number of Venue locations under licence of the Connecticut
Lottery Corporation, (CLC). Management have worked tirelessly with the CLC to
introduce retail sports betting across the State since Q4 2021 and have
comprehensive marketing plans in place ahead of the 2022/23 American football
season, commencing September 2022.
COVID related travel and hospitality restrictions within retail outlets eased
during the period resulting in an 80.6% increase in food and beverage
("F&B") revenue. However, the H1 F&B revenue of £1.6 million remains
below the £2.5 million H1 2018 high, indicating upward potential when office
workers return to 'normal occupancy'.
Sportech was delighted to announce in August 2021 a commercial arrangement
with the Connecticut Lottery Corporation ("CLC") which, subject to required
regulatory consents, provided Sportech Venues Inc., in conjunction with CLC's
sports book provider Rush Street Interactive Inc. ("RSI"), an ability to
deliver sports betting across certain locations and promote CLC's online and
mobile channels.
Contribution margin of 50.7% (H1 2021: 49.7%) was marginally better despite
the costs of introducing sports betting capabilities during the period. At the
end of the period, the division operated nine leasehold premises and one
freehold premise in Connecticut, USA.
Venues H1 2022 H1 2021 H1 2021
£'000 Constant Currency Reported
Currency
Wagering revenue 9,412 11,358 10,681
F&B 1,584 877 824
Sports betting commission 718 - -
Total revenue 11,714 12,235 11,505
Contribution 5,939 5,864 5,506
Contribution margin 50.7% 47.9% 47.9%
Adjusted operating expenses(1) (4,414) (4,767) (4,505)
Adjusted EBITDA 1,525 1,097 1,001
Total capex 15 - -
1. Adjusted operating expenses exclude depreciation and
amortisation and separately disclosed items as reported in note 1 of the
Interim Financial Statements.
Corporate Costs
Corporate costs reduced by £0.4 million to £1.1 million due to staff costs
savings, having restructured in H2 2021, as well as a general drive to reduce
costs of the PLC. Costs are expected to continue to be reduced though H2 2022
as we aim to align the costs as close as possible to the reduced size of the
Group.
Depreciation and Amortisation
Capital expenditure and depreciation/amortisation is much reduced in the
continuing group from that of the Group prior to the 2021 disposals.
Depreciation and amortisation in the period reduced from £0.8 million to
£0.7 million. This is despite 2022 depreciation increasing following the
change in assumption on the lease term of the Stamford venue as at 31 December
2021 and the upward revaluation of certain assets at the same venue.
Separately Disclosed Items
The Group incurred administration costs in continuing operations during the
period of £0.6 million (H1 2021: £0.5 million) which are shown as separately
disclosed items. H1 2022 items include pay in lieu of notice payments to
former Directors and settlement of contract liabilities. The Company does not
expect further costs in H2 2022 as the business has mostly completed
restructuring.
Net Finance Income
The Group has no debt. The Group had a net finance income in continuing
operations of £0.1 million (H1 2021: £0.1 million), including £nil (H1
2021: £0.1 million) interest accrued on potential tax liabilities payable,
£0.1 million (H1 2021: £0.1 million) interest payable on lease liabilities
and £0.2 million (H1 2021: £0.2 million) 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 2022 is (3.7)%
(2021: 49%). The movement is a result of a change in mix of profits/(losses)
in jurisdictions with varying tax rates, the non-recognition of deferred tax
on losses in the UK due to uncertainty of non-recovery as well as the
utilization of previously unprovided tax assets in the US.
The Group paid tax on account during the period of £4.6 million to HMRC for
tax potentially due on the 2016 Spot the Ball VAT refund (excluding interest).
The payment was in line with the tax provision held on the balance sheet of
£4.6 million at both 30 June 2021 and 31 December 2021. The current tax asset
on the balance sheet as at 30 June 2022 is an estimated overpayment of
preliminary taxes in the US on profits generated in the six months to 30 June
2022.
Net Cash
The Group held cash balances of £8.1 million, excluding customer balances (31
December 2021: £21.9 million). The reduction is due to the payment of a £7.0
million dividend, settling lease and other legacy liabilities as well as
paying tax on account of £4.6 million relating to the Spot the Ball tax
dispute with HMRC. Legacy liabilities are now substantially settled.
Capital Expenditure
Capital expenditure was controlled again in the period and amounted to £0.1
million (H1 2021: £1.1 million). £1.0 million in the prior year related to
the discontinued operations and was mainly staff costs capitalised or
expenditure agreed to be reimbursed by the buyer of the operation. Capital
expenditure will increase into H2 2022 and 2023 as venues are improved to
support continued sports betting growth and with the move of Sports Haven to a
new building.
Shareholders' Funds
Shareholders' funds decreased by £6.8 million from 31 December 2021 to £13.0
million (31 December 2021: £19.8 million) following the dividend paid in the
period. The loss made in the period of £0.8 million is offset in reserves by
a foreign exchange gain on translation of net assets denominated in US dollar
of £1.0 million, given the weakening of Sterling over the period.
Going Concern
After making reasonable enquiries and forecasting the Group's cash flows with
reasonable downside assumptions applied, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the interim condensed consolidated financial
statements. 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 2021) and make use
of all government support available to ensure the Company and the Group
continues in operational existence.
Outlook
Enhancing Group value remains the Board's key focus and the Group strategy is
structured accordingly with regard to this central measure.
Interim consolidated income statement
For the six months ended 30 June 2022
Restated
Six months ended Six months ended Year
30 June
30 June
2022
2021 ended
(Unaudited)
(Unaudited)
31 December 2021
(Audited)
Note £000 £000 £000
Revenue 12,571 11,827 22,942
Cost of sales 6 (6,043) (5,982) (11,489)
Gross profit 6,528 5,845 11,453
Marketing and distribution costs 6 (234) (224) (276)
Contribution 6,294 5,621 11,177
Other income 20a&23 155 2,575 4,101
Operating costs 6 (7,390) (8,019) (15,680)
Operating (loss)/profit (941) 177 (402)
Finance costs 8 (93) (154) (305)
Finance income 8 232 230 461
(Loss)/profit before taxation from continuing operations (802) 253 (246)
Taxation - continuing operations 9 (29) (170) (192)
(Loss)/profit for the period from continuing operations (831) 83 (438)
Profit after taxation from discontinued operations 20g - 26,699 35,001
(Loss)/profit for the period (831) 26,782 34,563
Attributable to:
Owners of the Company (831) 26,782 34,563
Basic (loss)/profit per share attributable to owners of the Company
From continuing operations 10 (0.8)p - (0.3)p
From discontinued operations 10 - 14.1p 20.6p
Total 10 (0.8)p 14.1p 20.3p
Diluted (loss)/profit per share attributable to owners of the Company
From continuing operations 10 (0.8)p - (0.3)p
From discontinued operations 10 - 14.1p 20.6p
Total 10 (0.8)p 14.1p 20.3p
Adjusted loss per share attributable to owners of the Company
Basic 10 (0.4)p (0.7)p (1.7)p
Diluted 10 (0.4)p (0.7)p (1.7)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 half year comparatives have been restated to exclude the results of the
LEIDSA contract which have been included with the results of the Global Tote
and Bump 50:50 within profit after taxation from discontinued operations.
Interim consolidated statement of comprehensive income
For the six months ended 30 June 2022
Restated Year ended
Six months ended Six months ended 31 December 2021
30 June
30 June
(Audited)
2022
2021
(Unaudited)
(Unaudited)
£000 £000 £000
(Loss)/profit for the period (831) 26,782 34,563
Other comprehensive expense:
Items that will not be reclassified to profit and loss
Actuarial gain on retirement benefit liability - 186 186
- 186 186
Items that may be subsequently reclassified to profit and loss
Currency translation differences - continuing operations 983 (1,324) (617)
Currency translation differences - discontinued operations - 432 (550)
Less: gain reclassified to profit and loss on disposal of foreign operations - (3,133) (3,373)
983 (4,025) (4,540)
Total other comprehensive income/(expense) for the period, net of tax 983 (3,839) (4,354)
Total comprehensive income for the period 152 22,943 30,209
Attributable to:
Owners of the Company 152 22,943 30,209
The prior half year comparatives have been restated to show the
reclassification of the cumulative foreign exchange gain on disposal of
foreign operations to the profit and loss account, as well as splitting the
currency translation differences in the period to 30 June 2021 between
continuing operations and discontinued operations.
Interim consolidated statement of changes in equity
For the six months ended 30 June 2022
Other reserves
Ordinary shares Other reserve Retained earnings/ accumulated losses Total
Capital Foreign exchange reserve
redemption reserve
Six months ended 30 June 2022 £000 £000 £000 £000 £000 £000
At 1 January 2022 (audited) 1,000 888 314 2,325 15,295 19,822
Comprehensive expense
Loss for the period - - - - (831) (831)
Other comprehensive items
Currency translation differences - - - 983 - 983
Total other comprehensive items - - - 983 - 983
Total comprehensive items - - - 983 (831) 152
Transactions with owners
Dividend paid - - - - (7,000) (7,000)
Total transactions with owners - - - - (7,000) (7,000)
Total changes in equity - - - 983 (7,831) (6,848)
At 30 June 2022 (unaudited) 1,000 888 314 3,308 7,464 12,974
Other reserves
Ordinary shares Other reserve Retained earnings/ accumulated losses Total
Capital Foreign exchange reserve
redemption reserve
Six months ended 30 June 2021 (Restated) £000 £000 £000 £000 £000 £000
At 1 January 2021 (audited) 37,750 10,312 (638) 6,865 (29,130) 25,159
Comprehensive income
Profit for the period - - - - 26,782 26,782
Other comprehensive items
Actuarial gain on defined benefit 186
pension liability* - - 186 - -
Cumulative actuarial loss on defined benefit pension liability - - 766 - (766) -
Disposed of, transferred to retained earnings
Currency translation differences - - - (4,025) - (4,025)
Total other comprehensive items - - 952 (4,025) (766) (3,839)
Total comprehensive items - - 952 (4,025) 26,016 22,943
Transactions with owners
Share option charge - - - - 261 261
Total transactions with owners - - - - 261 261
Total changes in equity - - 952 (4,025) 26,277 23,204
At 30 June 2021 (unaudited) 37,750 10,312 314 2,840 (2,853) 48,363
* Net of deferred tax.
Other reserves
Ordinary shares Capital redemption reserve Other reserve Foreign exchange reserve Retained earnings/ accumulated losses Total
Year ended 31 December 2021 (Audited) £000 £000 £000 £000 £000 £000
At 1 January 2021 37,750 10,312 (638) 6,865 (29,130) 25,159
Comprehensive (expense)/income
Profit for the year - - - - 34,563 34,563
Other comprehensive items
Actuarial gain on defined benefit 186
pension liability* - - 186 - -
Cumulative actuarial loss on defined benefit pension liability - - 766 - (766) -
Disposed of, transferred to retained earnings
Currency translation differences - - - (4,540) - (4,540)
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 (35,862) - - - 35,862 -
Fees in relation to capital reduction - - - - (66) (66)
Fees in relation to share buy-back - - - - (314) (314)
Share buy-back (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
* Net of deferred tax
Interim consolidated balance sheet
As at 30 June 2022
Restated
As at As at As at
30 June 30 June 31 December
2022 (Unaudited)
2021
2021
(Unaudited)
(Audited)
Note £000 £000 £000
ASSETS
Non-current assets
Goodwill 604 604 604
Intangible fixed assets 11 6,939 6,657 6,357
Property, plant and equipment 12 4,409 4,932 4,261
Right-of-use assets 13 4,813 1,079 4,657
Trade and other receivables 14 176 154 158
Total non-current assets 16,941 13,426 16,037
Current assets
Trade and other receivables 14 1,393 5,694 1,750
Inventories 140 128 124
Current tax receivable 54 - -
Cash and cash equivalents 15 8,588 49,139 22,367
Total current assets 10,175 54,961 24,241
TOTAL ASSETS 27,116 68,387 40,278
LIABILITIES
Current liabilities
Trade and other payables 16 (6,959) (9,754) (7,945)
Provisions 17 (17) (1,402) (736)
Lease liabilities 19 (678) (1,099) (923)
Current tax liabilities - (4,871) (4,718)
Deferred tax liabilities - (46) -
Total current liabilities (7,654) (17,172) (14,322)
Net current assets 2,521 37,789 9,919
Non-current liabilities
Lease liabilities 19 (6,477) (2,852) (6,091)
Deferred tax liabilities (11) - (43)
(6,488) (2,852) (6,134)
TOTAL LIABILITIES (14,142) (20,024) (20,456)
NET ASSETS 12,974 48,363 19,822
EQUITY
Ordinary shares 1,000 37,750 1,000
Other reserves 4,510 13,466 3,527
Retained earnings/(accumulated losses) 7,464 (2,853) 15,295
TOTAL EQUITY 12,974 48,363 19,822
Interim consolidated statement of cash flows
For the six months ended 30 June 2022
Restated
Six months Six months ended Year
30 June
ended
2021 ended
30 June
(Unaudited)
2022 31 December 2021
(Unaudited)
(Audited)
Note £000 £000 £000
Cash flows (used in)/from operating activities
Cash (used in)/generated from operations, before separately disclosed items 18 (544) 2,467 511
Interest received - 27 -
Interest paid - (2) -
Tax refund received - 1,442 1,442
Tax paid (4,843) (378) (1,029)
Net cash generated (used in)/from operating activities before separately (5,387) 3,556 924
disclosed items
Cash inflows - other income 23 100 1,057 2,483
Cash outflows - separately disclosed items 7 (1,219) (634) (2,407)
Cash generated (used in)/from operations (6,506) 3,979 1,000
Cash flows (used in)/from investing activities
Disposal of freehold property in New Haven, Connecticut (net of disposal 20a - 4,193 4,193
costs)
Disposal of LEIDSA contract (net of cash disposed of and transactions costs) 20f 26 - 9,417
Proceeds net of cash disposed of and disposal costs - Global Tote 20f - 18,664 22,636
Proceeds net of cash disposed of and disposal costs - Bump 50:50 20f - 4,732 4,644
Proceeds from sale of other intangible assets 20c - 150 150
Investment in intangible fixed assets 11,20 (97) (920) (1,012)
Purchase of property, plant and equipment 12,20 (38) (146) (582)
Net cash generated from/(used in) investing activities (109) 26,673 39,446
Cash flows used in financing activities
Principal paid on lease liabilities 19,20 (622) (675) (1,333)
Interest paid on lease liabilities 19,20 (69) (103) (179)
Share buy-back including transaction costs - - (35,880)
Dividend paid (7,000) - -
Interest received - - 27
Interest paid - - (2)
Cash used in financing activities (7,691) (778) (37,367)
Net (decrease)/increase in cash and cash equivalents (14,306) 29,874 3,079
Effect of foreign exchange on cash and cash equivalents 527 (194) (171)
Cash and cash equivalents at the beginning of the year 22,367 11,821 11,821
Add cash included in assets held for sale - 7,638 7,638
Group cash and cash equivalents at the end of the period 15 8,588 49,139 22,367
Represented by:
Cash and cash equivalents 15 8,588 49,139 22,367
Less customer funds 15 (450) (530) (455)
Adjusted net cash at the end of the period 15 8,138 48,609 21,912
Notes to the consolidated interim financial statements
For the six months ended 30 June 2022
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 2022 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 2022. 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 division (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 now
operates ten retail venues and MyWinners.com offering pari-mutuel betting (and
also betting through an arrangement with the Connecticut Lottery Corporation)
as well as a pari-mutuel betting site, 123Bet.com and a has a lottery
technology development arm (B2B).
The condensed consolidated interim financial statements were approved for
issue on 31 August 2022.
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 2021 were approved by
the Board of Directors on 31 March 2022 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 2021 which have been prepared in accordance with UK adopted
international accounting standards.
b. After making reasonable enquiries and forecasting the Group's
cash flows with reasonable downside assumptions applied, the Directors have a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the condensed
consolidated interim financial statements. The forecasts used in the analysis
of the Group's ability to continue in operational existence for the
foreseeable future include both the base plan and downside scenarios which
although Sportech has no connections with Russia or Ukraine through its
operations (no employees located there nor any customers or suppliers in the
region), include assumptions taking into account macro-economic potential
indirect impacts of the events unfolding including impacts of prices rising
globally.
c. The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may differ from
these estimates. In preparing these condensed consolidated interim financial
statements, significant judgements have been made by management with respect
to the assumptions underpinning the Group's tax liabilities, the valuation of
contingent consideration receivable and the carrying value of intangible fixed
assets.
d. The principal risks and uncertainties for the Group remain the
same as those detailed on pages 17 to 19 of the 2021 Sportech PLC Annual
Report and Accounts, where descriptions of mitigating activities carried out
by the Group are also outlined. Those risks are regulation, product
popularity, third party technology, foreign exchange, political
marginalisation in Connecticut and global pandemics.
3. Accounting policies
There are no new standards or amendments to standards or interpretations that
are mandatory for the first time for the financial year beginning 1 January
2022 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 2021, 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 2021 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) 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
Six months ended Six months ended Year
30 June
30 June
Note
2022
2021 ended
(Unaudited)
(Unaudited)
31 December 2021
(Audited)
£000 £000 £000
Operating costs per income statement (7,390) (8,019) (15,680)
Add back:
Depreciation 12,13,20d 537 379 982
Amortisation, excluding acquired intangible assets 11 132 131 129
Amortisation of acquired intangible assets 11 29 254 509
Reversal of impairment of property, plant and equipment 12 - - (335)
Loss on disposal of property, plant and equipment 12 131 - -
Share option charge 5 - 261 334
Separately disclosed items 7 578 477 1,101
Total adjusted net operating costs (5,983) (6,517) (12,960)
Adjusted EBITDA is calculated as follows:
Restated
Six months ended Six months ended Year
30 June
30 June
2022
2021 ended
(Unaudited)
(Unaudited)
31 December 2021
(Audited)
£000 £000 £000
Revenue 12,571 11,827 22,942
Cost of sales (6,043) (5,982) (11,489)
Gross profit 6,528 5,845 11,453
Marketing and distribution costs (234) (224) (276)
Contribution 6,294 5,621 11,177
Adjusted net operating costs (5,983) (6,517) (12,960)
Adjusted EBITDA 311 (896) (1,783)
Prior year comparatives for the period ended 30 June 2021 have been adjusted
for discontinued operations related to the LEIDSA contract (prior full year
comparatives were adjusted in the 2021 financial statements to exclude results
of the Global Tote, Bump 50:50 business and LEIDSA).
Adjusted profit is also an adjusted performance measure used by the Group.
This uses adjusted EBITDA, as defined above as 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
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(Unaudited) (Unaudited) (Audited)
From continuing operations: £000 £000 £000
Adjusted EBITDA 311 (896) (1,783)
Share option charge - (261) (334)
Depreciation (537) (379) (982)
Amortisation (excluding amortisation of acquired intangibles) (132) (131) (129)
Net finance costs (excluding certain finance costs - note 8) (69) (55) (130)
Adjusted loss before tax (427) (1,722) (3,358)
Tax at 6.0% (30 June 2021: 20.1%, 31 December 2021: 16.4%) 26 346 551
Adjusted loss after tax (401) (1,376) (2,807)
Restated
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(Unaudited) (Unaudited) (Audited)
From discontinued operations: £000 £000 £000
Adjusted EBITDA - 5,590 6,879
Depreciation - (100) (221)
Amortisation (excluding amortisation of acquired intangibles) - (75) (151)
Net finance costs (excluding certain finance costs - note 8) - (24) 54
Adjusted profit before tax - 5,391 6,561
Tax at n/a% (30 June 2021: 22.9%, 31 December 2021: 25.8%) - (1,234) (1,693)
Adjusted profit after tax - 4,157 4,868
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 Digital - a pari-mutuel betting website and provision of
lottery software and services 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 2022 (Unaudited)
Group
Sportech Digital Sportech Corporate costs
Venues
£000 £000 £000 £000
Revenue from rendering of services 857 9,412 - 10,269
Revenue from food and beverage sales - 1,584 - 1,584
Revenue from sports betting services - 718 - 718
Total revenue 857 11,714 - 12,571
Cost of sales (452) (5,591) - (6,043)
Gross profit 405 6,123 - 6,528
Marketing and distribution costs (50) (184) - (234)
Contribution 355 5,939 - 6,294
Adjusted operating costs (462) (4,414) (1,107) (5,983)
Adjusted EBITDA (107) 1,525 (1,107) 311
Depreciation (6) (518) (13) (537)
Amortisation (excluding amortisation of acquired intangibles) (69) (1) (62) (132)
Segment result (182) 1,006 (1,182) (358)
Amortisation of acquired intangibles (29) - - (29)
Loss on disposal of Property, plant and equipment - (131) - (131)
Separately disclosed items - (307) (271) (578)
Other income - 155 - 155
Operating (loss)/profit (211) 723 (1,453) (941)
Net finance income 139
Loss before taxation from continuing operations (802)
Taxation - continuing operations (29)
Loss for the period from continuing operations (831)
Profit after taxation from discontinued operations -
Loss for the period (831)
Other segment items - capital expenditure
Intangible fixed assets 97 - - 97
Property, plant and equipment 22 15 1 38
Six months ended 30 June 2021 (Unaudited)
Restated Restated
Group
Sportech Digital Sportech Corporate costs
Venues
£000 £000 £000 £000
Revenue from rendering of services 322 10,681 - 11,003
Revenue from food and beverage sales - 824 - 824
Total revenue 322 11,505 - 11,827
Cost of sales (188) (5,794) - (5,982)
Gross profit 134 5,711 - 5,845
Marketing and distribution costs (19) (205) - (224)
Contribution 115 5,506 - 5,621
Adjusted operating costs (496) (4,505) (1,516) (6,517)
Adjusted EBITDA (381) 1,001 (1,516) (896)
Share option charge - - (261) (261)
Depreciation (5) (366) (8) (379)
Amortisation (excluding amortisation of acquired intangibles) (41) - (90) (131)
Segment result (427) 635 (1,875) (1,667)
Amortisation of acquired intangibles (254) - - (254)
Profit on disposal of Sports Haven - 2,575 - 2,575
Separately disclosed items (173) (8) (296) (477)
Operating (loss)/profit (854) 3,202 (2,171) 177
Net finance income 76
Profit before taxation from continuing operations 253
Taxation - continuing operations (170)
Profit for the period from continuing operations 83
Profit after taxation from discontinued operations 26,699
Profit for the period 26,782
Other segment items - capital expenditure
Intangible fixed assets 95 - - 95
Property, plant and equipment 2 - - 2
The above table has been restated to exclude discontinued activities in
relation to the LEIDSA contract. Results from the LEIDSA contract were within
the Sportech Digital division in 2021, formally known as Sportech lotteries.
Those in relation to Global Tote and Bump 50:50 were classified as
discontinued in 2021 also.
Year ended 31 December 2021 (Audited)
Sportech Sportech Corporate costs Group
Digital Venues
£000 £000 £000 £000
Revenue from rendering of services 1,032 19,515 - 20,547
Revenue from food and beverage sales - 2,115 - 2,115
Revenue from sports betting services - 280 - 280
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 (note 1) (987) (9,409) (2,564) (12,960)
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 costs 156
Loss before taxation from continuing operations (246)
Taxation (192)
Loss for the year from continuing operations (438)
Profit after tax from discontinued operations 35,001
Profit for the year 34,563
Other segment items - capital expenditure
Intangible fixed assets (continuing operations) 165 - - 165
Intangible fixed assets (discontinued operations) 847 - - 847
Property, plant and equipment (continuing operations) 4 27 - 31
Property, plant and equipment (discontinued operations) 551 - - 551
6. Expenses by nature
Restated
Six months ended Six months ended Year
30 June
30 June
ended
2022
2021
(Unaudited)
(Unaudited) 31 December 2021
(Audited)
£000 £000 £000
Cost of sales
Tote and track fees 5,266 5,426 10,205
F&B consumables 536 305 818
Betting and gaming duties 54 48 99
Repairs and maintenance cost of sales 15 18 34
Programs 127 147 266
Cost of sales 45 38 67
Total cost of sales 6,043 5,982 11,489
Marketing and distribution costs
Marketing 224 210 253
Vehicle costs 10 14 23
Total marketing and distribution costs 234 224 276
Operating costs
Staff costs - gross, excluding share option charges 3,161 3,415 6,661
Less amounts capitalised (89) (95) (165)
Staff costs - net 3,072 3,320 6,496
Property costs 1,201 1,378 2,581
IT & communications 301 224 457
Professional fees and licences 765 959 2,323
Insurance 500 475 968
Travel and entertaining 41 72 26
Banking transaction costs and FX 48 37 109
Other costs 55 52 -
Adjusted operating costs 5,983 6,517 12,960
Share option charge - 261 334
Depreciation 537 379 982
Amortisation, excluding amortisation of acquired intangibles 132 131 129
Amortisation of acquired intangibles 29 254 509
Loss on disposal of property, plant and equipment 131 - -
Reversal of impairment of property, plant and equipment - - (335)
Separately disclosed items 578 477 1,101
Total operating costs 7,390 8,019 15,680
7. Separately disclosed items
Six months ended Six months ended Year
30 June
30 June
ended
2022
2021
(Unaudited)
(Unaudited) 31 December 2021
(Audited)
Note £000 £000 £000
Continuing operations
Included in operating costs:
Onerous contract provisions and other losses resulting from
exit from California operations 17 (69) - 91
Redundancy and restructuring costs i 330 179 625
Corporate activity 8 290 21
Costs in relation to the Spot the Ball VAT refund - - 10
Settlement of a contract ii 304 - -
Costs in relation to exiting the Group's interests in India 5 8 13
Costs in relation to the Group's move from Main Market to AIM - - 341
578 477 1,101
Discontinued operations
Included in operating costs 20b,20c - 371 371
Total included in operating costs 578 848 1,472
Included in finance costs:
Interest accrued on corporate tax potentially due and unpaid at the balance 8 24 74 150
sheet date on STB refund received in 2016
Total Separately disclosed items 602 922 1,622
i) Redundancy and restructuring costs relate to
settlements made to former Directors in lieu of notice.
ii) The Group exited a royalty arrangement in the
period relating to branding at its Connecticut venues. This required a
termination fee to be paid amounting to £304k.
Below is a summary of cash outflows from separately disclosed items: Restated
Six months ended Six months ended Year
30 June
30 June
ended
2022
2021
(Unaudited)
(Unaudited) 31 December 2021
(Audited)
£000 £000 £000
Continuing operations - cash outflows from separately disclosed items:
Redundancy and restructuring costs (242) (44) (625)
Costs in relation to the Spot the Ball VAT refund - (27) (37)
Costs in relation to corporate activity (8) (48) (71)
Costs in relation to the Group's onerous leases in California (660) (1) (785)
Costs in relation to exiting the Group's interests in India (5) (8) (13)
Costs in relation to the Group's move from Main Market to AIM - - (341)
Settlement of a contract (304) - -
(1,219) (128) (1,872)
Cash outflows from separately disclosed items - discontinued operations - (506) (535)
(1,219) (634) (2,407)
8. Net finance costs
Six months ended Restated
30 June
2022 Six months ended Year
(Unaudited)
30 June
ended 31 December 2021
2021
(Audited)
(Unaudited)
Note £000 £000 £000
Continuing operations:
Finance costs:
Interest accrued and paid on tax liabilities (24) (74) (150)
Interest on lease liabilities 19 (69) (80) (155)
Total finance costs (93) (154) (305)
Finance income:
Foreign exchange gain on financial assets and liabilities denominated in 232 205 436
foreign currency
Interest received on overpaid tax - 25 -
Interest received on bank deposits - - 25
Total finance income 232 230 461
Discontinued operations 20b,20c - 54 54
Net finance income 139 130 210
Of the above amounts the following have been excluded for the purposes of
deriving the alternative performance measures in note 4.
Six months ended Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
Continuing operations £000 £000 £000
Foreign exchange gain on financial assets and liabilities denominated in 232 205 436
foreign currency
Interest accrued and paid on tax liabilities (24) (74) (150)
208 131 286
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 2022 is (3.7)%
(2021: 49.0%). The movement is a result of a change in mix of profits/(losses)
in jurisdictions with varying tax rates, the non-recognition of deferred tax
on losses in UK due to uncertainty of recovery as well as the utilisation of
previously unprovided deferred tax assets in the US.
At the prior period ends the Group held a tax provision of £4,600k for tax
potentially due on the 2016 Spot the Ball refund (excluding interest). During
the current reporting period the Group paid £4,600k into its UK corporate tax
account to stop interest potentially payable accruing further. Management
continues to remain of the view that the 2016 Sportech Pools Limited tax
return was accurately filed, and no further tax is due. If this is ultimately
found to be correct, the £4,600k is repayable to the Group plus interest from
15 March 2022. The remaining current tax asset is an estimated overpayment of
preliminary taxes in the US on profits generated in the six months to 30 June
2022.
10. Earnings per share
2022 2021 (restated)
Six months ended 30 June (Unaudited) Continuing Discontinued Total Continuing Discontinued Total
Basic EPS
(Loss)/profit for the period (£000) (831) - (831) 83 26,699 26,782
Weighted average no of shares ('000) 100,000 100,000 100,000 188,751 188,751 188,751
Basic EPS (0.8)p - (0.8)p - 14.1p 14.1p
2021
Year ended 31 December (Audited) Continuing Discontinued Total
Basic EPS
(Loss)/profit for the year (£000) (438) 35,001 34,563
Weighted average no of shares ('000) 169,785 169,785 169,785
Basic EPS (0.3)p 20.6p 20.3p
2022 2021 (restated)
Six months ended 30 June (Unaudited) Continuing Discontinued Total Continuing Discontinued Total
Diluted EPS
(Loss)/profit for the period (£000) (831) - (831) 83 26,699 26,782
Weighted average no of shares ('000) 100,000 100,000 100,000 188,751 188,751 188,751
Dilutive potential ordinary shares ('000) N/A N/A N/A N/A N/A N/A
Total potential ordinary shares ('000) 100,000 100,000 100,000 188,751 188,751 188,751
Diluted EPS (0.8)p - (0.8)p - 14.1p 14.1p
2021
Year ended 31 December (Audited) Continuing Discontinued Total
Diluted EPS
(Loss)/profit for the year (£000) (438) 35,001 34,563
Weighted average no of shares ('000) 169,785 169,785 169,785
Dilutive potential ordinary shares ('000) N/A N/A N/A
Total potential ordinary shares ('000) 169,785 169,785 169,785
Diluted EPS (0.3)p 20.6p 20.3p
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 Six months ended Restated
30 June
2022 Six months ended Year ended
(Unaudited)
30 June
31 December
2021
(Unaudited) 2021
(Audited)
Note
Adjusted loss after tax (£000) 4 (401) (1,376) (2,807)
Basic Adjusted EPS (pence) (0.4)p (0.7)p (1.7)p
Diluted Adjusted EPS (pence) (0.4)p (0.7)p (1.7)p
11. Intangible fixed assets
Six months ended Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
£000 £000 £000
At 1 January 6,357 7,343 7,343
Additions 97 95 188
Amortisation charge for period (161) (460) (789)
Disposal - (82) (456)
Movement as a result of foreign exchange 646 (239) 71
Net book amount at end of period 6,939 6,657 6,357
12. Property, plant and equipment
Six months ended Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
£000 £000 £000
At 1 January 4,261 5,077 5,077
Additions 38 2 438
Disposal - - (992)
Depreciation charge for period (215) (225) (669)
Loss on disposal (131) - -
Reversal of impairment - - 335
Movement as a result of foreign exchange 456 78 72
Net book amount at end of period 4,409 4,932 4,261
13. Right-of-use assets
Six months ended Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
Note £000 £000 £000
At 1 January 4,657 1,133 1,133
Additions - 169 1,240
Depreciation charge for period (322) (254) (534)
Disposed of - exited lease early (17) - -
Reassessment of lease assumptions - break clause 19 - - 2,835
Transferred from held for sale - - 45
Movement as a result of foreign exchange 495 31 (62)
Net book amount at end of period 4,813 1,079 4,657
14. Trade and other receivables
As at As at As at 31 December 2021
30 June
30 June
(Audited)
2022
2021
(Unaudited)
(Unaudited)
£000 £000 £000
Non-current
Trade and other receivables 176 154 158
Current
Trade and other receivables 1,393 5,694 1,750
Total trade and other receivables 1,569 5,848 1,908
Included in current trade and other receivables in the prior half year is
£3,377k consideration to be received for the disposal of the Global Tote
division (note 20e).
15. Cash and cash equivalents
As at As at As at 31 December 2021
30 June
30 June
(Audited)
2022
2021
(Unaudited)
(Unaudited)
Note £000 £000 £000
Cash and short-term deposits 8,138 48,609 21,912
Customer funds 16 450 530 455
Total cash and cash equivalents 8,588 49,139 22,367
Customer funds are matched by liabilities of an equal value within trade and
other payables (see note 16).
16. Trade and other payables
Restated
As at As at As at 31 December 2021
30 June
30 June
(Audited)
2022
2021
(Unaudited)
(Unaudited)
Note £000 £000 £000
Trade payables 3,769 3,806 3,545
Other taxes and social security costs 307 575 178
Accruals and other payables 2,433 4,823 3,767
Deferred income - 20 -
Player liability 15 450 530 455
Total trade and other payables 6,959 9,754 7,945
17. Provisions
Six months ended Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
£000 £000 £000
At beginning of period 736 1,442 1,442
Utilised during the period (660) - (785)
(Released)/charged to the income statement (69) - 91
Currency movements 10 (40) (12)
Total provisions 17 1,402 736
Provisions are in relation to:
Current provisions
Onerous contracts 17 1,402 736
The Group had committed financial obligations arising from leases it entered
into in California. The amounts provided for in the 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 prior year one lease
dispute was settled resulting in a cash outflow of £785k (including legal
fees). The second lease dispute was settled in early 2022, for £660k
(including legal fees to date). Legal fees estimated as at 31 December 2021
were higher than actual fees incurred and therefore £69k of provision has
been released to the income statement in operation expenses and shown as a
negative separately disclosed item given the original expense was disclosed
here. The estimated remaining legal fees to finalise the Group's exit from
California amount to £17k, actual legal fees incurred to complete the process
may differ from management's estimate.
18. Cash flow from operating activities before separately disclosed items
Reconciliation of (loss)/profit before taxation to cash flows from operating
activities before separately disclosed items:
Restated
Six months ended Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
Note £000 £000 £000
(Loss)/profit before taxation from continuing operations (802) 253 (246)
Profit before taxation from discontinued operations 20b,c&d - 27,332 35,987
Total (loss)/profit before tax (802) 27,585 35,741
Adjustments for:
Net Separately disclosed items (included in operating costs) 7 578 848 1,472
Other income (excluding profit on disposal of Sports Haven) 23 (155) (1,057) (2,583)
Depreciation and amortisation 11,12,13 698 939 1,992
Loss on disposal of property, plant and equipment 12 131 - -
Profit on disposal of Sports Haven 20a - (2,575) (2,575)
Profit on disposal of discontinued operations 20e - (21,109) (28,625)
Profit on disposal of software - (65) (68)
Profit on disposal property, plant and equipment - - (47)
Reversal of impairment of assets 12,13 - - (335)
Net finance charges 8 (139) (130) (210)
Share option expense - 261 334
Changes in working capital:
Increase in trade and other receivables (84) (5,774) (2,162)
(Increase)/decrease in inventories (16) 205 192
(Decrease)/increase in trade and other payables, excluding player liabilities (750) 2,776 (448)
(Decrease)/increase in player liabilities 15 (5) 563 (2,167)
Cash (used in)/generated from operating activities, before separately (544) 2,467 511
disclosed items
19. Lease liabilities
As at As at As at
30 June 30 June 31 December
2022
2021
2021
(Unaudited)
(Unaudited)
(Audited)
Maturity analysis - contractual undiscounted cashflows £000 £000 £000
Less than one year 810 1,416 1,211
Between 2 and 5 years 3,000 2,880 2,615
More than 5 years 5,093 1 4,824
Total 8,903 4,297 8,650
The weighted average incremental borrowing rate applied to the lease
liabilities was 4.16%, lowest rate being 4.00% and the highest being 5.75%.
As at As at As at
30 June 30 June 31 December
2022
2021
2021
(Unaudited)
(Unaudited)
(Audited)
Lease liabilities included in the balance sheet £000 £000 £000
Current 678 1,099 923
Non-current 6,477 2,852 6,091
Total 7,155 3,951 7,014
Six months ended Six months ended Year ended
30 June 30 June 31 December
2022
2021
2021
(Unaudited)
(Unaudited)
(Audited)
Movement in lease liability during the period Note £000 £000 £000
At 1 January 7,014 3,882 3,882
Interest charged to the income statement 8 69 80 155
New leases entered into 13 - 633 1,698
Reassessment of lease assumptions - break clause 13 - - 2,835
Lease rentals paid (691) (621) (1,354)
Disposed of on settlement of lease dispute - - (169)
Disposal - early exit of lease (23) - -
Movement as a result of foreign exchange 786 (23) (33)
At period end 7,155 3,951 7,014
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:
Six months ended Six months ended
30 June 30 June Year ended
2022
2021
(Unaudited)
(Unaudited) 31 December
2021
(Audited)
Note £000 £000 £000
Cash consideration received - 4,346 4,346
Net book value disposed of - (1,154) (1,154)
Right-of-use asset recognised 13 - 169 169
Lease liability recognised 19 - (633) (633)
Costs of disposal - (153) (153)
Profit after tax on disposal net of costs - 2,575 2,575
20b) On 2 June 2021 the Group completed the disposal of its 100% interest in
Bump (Worldwide) Inc. ("Bump") for gross final consideration of £4,941k
($8,462k), including a working capital settlement of £277k which differed
slightly from the estimate which had been included in the 2021 Interim
Financial Statements of £307k (which was received in the period to 30 June
2021). Final settlement was less than management's estimate and as a result
£30k was repaid to the buyer in H2 2021. The division was classified as held
for sale as at 31 December 2020 and was part of the Sportech Racing division.
The profit for the period and cashflows from Bump are shown below:
Note Period ended 30 June 2022 Restated Year ended 31 December 2021 (Audited)
(Unaudited) Period ended 30 June 2021
(Unaudited)
Bump (Worldwide) Inc.: £000 £000 £000
Revenue - 810 810
Cost of sales, marketing and distribution and adjusted operating expenses - (487) (487)
Adjusted EBITDA - 323 323
Finance income - 78 78
Profit before tax - 401 401
Tax, excluding tax arising on disposal - - -
Profit after tax - 401 401
Gain from selling discontinued operations after tax (net of disposal costs) 20e - 3,836 3,805
Profit for the period - 4,237 4,206
Net cash flow from operating activities - 462 462
Net cash flow used in investing activities - (37) (37)
Net cash generated - 425 425
The difference in gain from selling discontinued operations after tax (net of
disposal costs) between the prior year half year numbers and the full year is
the adjustment to the estimated working capital settlement and the amount
agreed as final settlement.
Restatements:
i) Gain on disposal has been restated to recycle the
cumulative foreign exchange loss to the gain on disposal from P&L reserve
as well as some corrections to disclosure of disposal costs which were
incorrectly allocated to the gain on disposal of Global Tote.
ii) Net cash flow from operating activities was
misstated in the prior year interim statements (£134k), and has been restated
to the correct amount of £462k in the above table.
Deferred contingent consideration
There remains deferred contingent consideration potentially due to Sportech of
c£1.1m (CAD$2.0m) which is receivable if Bump achieves revenues in 2022
calendar year of CAD$6.5m or more (net of employee incentives of c£150k). The
receivable and incentives payable thereon have not been recognised in the
Group Consolidated accounts as at 30 June 2022 due to uncertainty over
achievement of the target, see note 22.
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. Final Gross Consideration
amounted 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 and a settlement of net working capital which was in excess of an
agreed Target working capital (and other adjustments) of £559k. The estimate
was lower than management's estimate of £781k which was accrued for at 30
June 2021. 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 for the period and cashflows from Global Tote are shown below:
Note Six months ended 30 June 2022 Restated Year ended 31 December 2021 (Audited)
(Unaudited) Six months ended 30 June 2021
(Unaudited)
Global Tote Group: £000 £000 £000
Revenue - 12,245 12,245
Cost of sales, marketing and distribution and adjusted operating expenses - (8,140) (8,140)
Adjusted EBITDA - 4,105 4,105
Other income - 1,057 1,057
Profit on disposal of intangible assets - 68 68
Separately disclosed items - (371) (371)
Finance costs - (24) (24)
Profit before tax - 4,835 4,835
Tax, excluding tax arising on disposal - (195) (195)
Profit after tax - 4,640 4,640
Gain from selling discontinued operations after tax (net of disposal costs) 20e - 17,273 17,051
Profit for the period - 21,913 21,691
Net cash flow from operating activities - 1,944 1,944
Net cash flow used in investing activities - (930) (930)
Net cash flow used in financing activities - (160) (160)
Net increase in cash generated - 854 854
Separately disclosed items incurred in 2021 were redundancy and restructuring
costs in respect of a rationalisation of this business. The difference in gain
from selling discontinued operations after tax (net of disposal costs) between
the prior year half year numbers and the full year is the adjustment to the
estimated working capital settlement and the amount agreed as final
settlement.
Restatements:
i) Gain on disposal has been restated to recycle the
cumulative foreign exchange loss to the gain on disposal from P&L reserve
as well as certain corrections to disclosure of disposal costs which were
incorrectly allocated to the gain on disposal of Bump and under accruals of
disposal costs.
ii) Net cash flow from operating activities was
misstated in the prior year interim financial statements (£1,780k), and has
been restated to the correct amount of £1,944k in the above table.
20d) 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 amounted to £9,854k including an estimate for settlement
of net working capital which was in excess of an agreed Target working capital
of £431k. Of the consideration, £9,423k 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.
In addition, the Group's lottery software provider, Lot.to Systems Limited has
signed a five-year contract with the buyer of Sportech Lotteries, LLC to
provide an online lottery platform for LEIDSA in return for commission revenue
up to c£1.5m ($2.0m) over the period.
The profit for the period and cashflows from Sportech Lotteries, LLC are shown
below:
Note Six months ended 30 June 2022 Six months ended 30 June 2021 Year ended
(Unaudited) (Unaudited 31 December 2021
(Audited)
Sportech Lotteries, LLC: £000 £000 £000
Revenue - 1,618 3,364
Cost of sales, marketing and distribution and adjusted operating expenses - (456) (913)
Adjusted EBITDA - 1,162 2,451
Depreciation and amortisation - (175) (372)
Profit on disposal of property, plant and equipment - - 47
Profit before tax - 987 2,126
Tax, excluding tax arising on disposal - (438) (791)
Profit after tax - 549 1,335
Gain from selling discontinued operations after tax (net of disposal costs) 20e - - 7,769
Profit for the period - 549 9,104
Net cash flow from operating activities - 327 1,068
Net cash flow used in investing activities - - (429)
Net cash inflow - 327 639
20e) A summary of the gain on disposal for the year ended 31 December 2021 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 20f 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).
A summary of the gain on disposal for the year ended 30 June 2021 of each
discontinued operation is as follows:
Restated 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 20f 30,518 4,856 35,374
Add cumulative foreign exchange movements recycled to the income statement 3,234 (101) 3,133
Costs of disposal (1,510) (118) (1,628)
Net assets disposed of:
Intangibles 6,582 274 6,856
Property, plant and equipment 5,001 210 5,211
Right-of-use assets 761 - 761
Deferred tax assets 12 - 12
Trade and other receivables 4,621 380 5,001
Inventories 2,479 - 2,479
Income tax receivable (44) - (44)
Trade and other payables (2,660) (63) (2,723)
Lease liabilities (786) - (786)
Retirement benefit liability (997) - (997)
14,969 801 15,770
Pre-tax gain on disposal of discontinued operations 17,273 3,836 21,109
Taxation - - -
Gain on disposal of discontinued operations 17,273 3,836 21,109
Costs of disposal include bonuses paid to Group employees of £1,068k for
Global Tote and £167k for Bump.
20f) A summary of the cash consideration at the prior year end 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 20e 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.
A working capital settlement of £425k was received for the disposal of
Sportech Lotteries LLC in H1 2022, costs of disposal were also settled
relating to bonuses, including employer taxes (£376k) and legal fees (£23).
Net inflow of £26k is shown in investing activities in the cashflow
statement.
A summary of the cash consideration at the prior half year end 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 28,221 4,732 32,953
disposal costs paid in the period
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 20e 30,518 4,856 35,374
disposal costs paid in the period
20g) Reconciliation to profit for the period included in the income statement:
Note Restated Year ended 31 December 2021 (Audited)
Six months ended 30 June 2022 Six months ended 30 June 2021
(Unaudited) (Unaudited)
£000 £000 £000
Global Tote 20c - 21,913 21,691
Bump 20b - 4,237 4,206
Sportech Lotteries, LLC 20d - 549 9,104
- 26,699 35,001
The differences between the prior half year numbers and the full year is true
up of estimates in working capital settlements to actual, the half year
included estimates for both Global Tote and Bump.
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 Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
£000 £000 £000
Short-term employee benefits 294 722 1,236
Share-based payments - 51 45
Pay in lieu of notice 245 - 391
Post-employment benefits 11 9 18
Total 550 782 1,690
22. Contingencies
Contingent items
Bump deferred contingent consideration receivable
On 2 June 2021 the Group completed the disposal of its 50:50 lottery division,
Bump 50:50. In addition to the consideration received during the year, there
is potential further consideration due to the Group of CAD$2m if Bump 50:50
achieves revenues in the financial year ending 31 December 2022 of CAD$6.5m or
more. The Group has received information from the buyer indicating that they
believe Bump is likely to achieve revenue marginally in excess of CAD$6.5m,
however insufficient information was provided for the Directors to conclude
that it is virtually certain that the amount will be received. It is therefore
concluded there is not sufficient evidence of virtual certainty to recognise
the asset, as such it is being disclosed as a contingent asset. Employee
incentives are also payable of c£150k if the contingent consideration is
received by the Group.
The recoverability of the receivable is binary (as are the incentives) i.e. it
is either paid in 2023 if 2022 revenue is CAD$6.5m or more, or it is not
payable if this level of revenue is not reached. The Directors will reassess
the recoverability at each period end.
Tax
The Group's activities in recent periods have resulted in material tax
liabilities crystallising. The ultimate tax liability due, in all instances,
is subject to a degree of management judgement. The judgements which are made
are done so in good faith, with the aim of always paying the correct amount of
tax at the appropriate time. Management work diligently with the Group's
external financial advisors in quantifying the anticipated accurate and fair
tax liability which arises from material one-off events such as the Spot the
Ball legal case and the disposal of the Football Pools. Management has an
open, transparent and constructive relationship with tax regulators, and
engage positively when discussing any difference in legal interpretation
between that of the Group and the regulators.
Penalties could potentially be imposed on the Group's corporation tax filing
position for the STB VAT refund, however Management consider this possibility
to be remote and therefore are not disclosing a contingent liability in
relation to this item. The Group has paid on account £4.6m into its corporate
tax account in order to cease the accruing of interest, which would be payable
if the Group were to accept a restatement of the Sportech Pool's Limited 2016
tax return to tax £23.0m of the STB VAT refund as income not capital.
Management believes that the filing position taken was the correct one,
however HMRC currently have an open investigation into the return.
Other contingent items are summarised as follows:
M&A activity
Both the 2017 sale of the Football Pools division, the 2018 sale of the
Group's Venues business in The Netherlands, the 2021 sale of the Bump 50:50
and the 2021 sale of the Global Tote business have customary seller tax
warranties under the terms of the Sale and Purchase Agreements. The
possibility of material claims being made under the seller tax warranties in
any of the deals is considered by management to be remote. In addition, the
sale of Sportech Lotteries, LLC on 31 December 2021 has customary seller
warranties under the terms of the Sale and Purchase Agreements. Those
warranties have been provided in good faith by management in light of the
probability of certain events occurring. The possibility of material claims
being made under the seller warranties in the deal is considered by management
to be remote.
Legal
The Group has been engaged in certain disputes in the ordinary course of
business which could have potentially led to outflows greater than those
provided for on the balance sheet. The maximum possible exposure which was
considered to exist, in view of advice received from the Group's professional
advisors, was up to £0.1m at 30 June 2021 and £0.1m at 31 December 2021, the
exposure at 30 June 2022 is nil. Management was of the view that the risk of
those outflows arising was not probable and accordingly they were considered
contingent items.
23. Other income
Other income recognised in the income statement is as follows:
Six months ended Six months ended Year
30 June
30 June
ended 31 December 2021
2022
2021
(Audited)
(Unaudited)
(Unaudited)
Note
£000 £000 £000
Settlement for early termination of a contract - - 100
CARES Act credits received - continuing operations 155 - 1,426
Profit on disposal of Sports Haven 20a - 2,575 2,575
Total - continuing operations 155 2,575 4,101
CARES Act credits received - discontinued operations 20c - 1,057 1,057
Total 155 3,632 5,158
CARES Act credits were received given the impact on the Group's operations of
the COVID-19 restrictions imposed in the USA. 2021 amounts from continuing
operations were received in cash during H2 2021, those from discontinued
operations were received in H1 2021. 2022 amounts relate to amended returns
submitted for 2020 and were received in cash in August 2022. Proceeds from the
settlement for early termination of a contract (£100k) were received in H1
2022.
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