Interim Results
Sportech PLC
16 September 2002
Sportech PLC
Interim Results for six months ended 30 June 2002
Highlights
• Turnover up 6% to £96.7m (2001: £91.3m).
• Profit before tax, amortisation of goodwill and restructuring costs
increased 44% to £5.6m (2001:£3.9m).
• Earnings per share before amortisation of goodwill 46% ahead at 0.63 pence
(2001: 0.43 pence).
• Significant achievements in core business areas:
• Football Pools profits 4% higher than 2001.
• Acquisition of Zetters Football Pools business increases customer base,
whilst providing opportunities to cross sell products and achieve cost
synergies.
• Sports betting revenues 69% higher than 2001.
• On line casino, www.Littlewoodscasino.com, launched in August 2002.
• Good progress in implementation of interactive television strategy to
drive future growth and shareholder value:
• ITV partnership progressing well, aiming at early 2003 launch for
programme linked gaming.
• Interactive betting on Attheraces channel expected to launch last quarter
2002.
• Increased investment in products, technology and resource to support
interactive television strategy.
Colin McGill, Managing Director, Sportech said:
'In the six months ended June 2002, we have achieved a strong financial
performance whilst continuing to invest for the future. There has been a
continued improvement in the net margins on football pools and we have
experienced the benefits of further growth in sports betting revenues. We have
substantially enhanced our new media capability to support our interactive
television strategy, and we look forward to launching new innovative gaming
products on television in the next six months.
'We are well ahead of last year and our overall progress reaffirms that our
strategy of building on the strength of the Littlewoods brand and developing new
products and channels to market is the right route to delivering shareholder
value.'
Enquiries
Sportech
Suzanne Judge 0151 288 3059
Bell Pottinger Financial 020 7861 3232
Jonathon Brill / Charlotte Kirkham
High-resolution images are available for the media to view and download from
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SPORTECH PLC
Unaudited Interim Results for six months ended 30 June 2002
Financial Review
I am delighted to report that Sportech's financial performance over the first
six months of the year shows considerable improvement over the same period last
year, together with increased investment, for the longer term, in new products,
technology and resource to support the interactive gaming strategy.
• Turnover is up 6% to £96.7m, reflecting strong growth in sports betting
revenues.
• Operating profits have benefited from changes in both pool betting duty in
April 2002 and general betting duty from October 2001. Pool betting duty has
effectively reduced by 6% points whilst the abolition of general betting
duty in favour of a tax on gross profits has helped to stimulate sports
betting revenues.
• Operating profit before amortisation of goodwill and restructuring costs
is up 13% at £9.7m.
• Restructuring costs of £0.9m reflect redundancies arising from the
introduction of scanning technology, which will deliver operating cost
savings from the second half of the year. It is expected that profits
arising from the disposal of surplus property in the second half of the year
will offset restructuring costs.
• Profit before tax and amortisation of goodwill increased by 21% to £4.7m
(up 44% excluding restructuring costs).
• Earnings per share before amortisation of goodwill is 46% ahead at 0.63
pence.
• Net cash inflow from operating activities was stronger at £6m (2001:
£5.1m) after development expenditure of £2.8m relating to the interactive
gaming strategy.
• Capital investment in the six months at £1.7m was £0.9m higher than 2001,
again mainly due to investment in technology infrastructure to support the
interactive strategy.
• Gross debt was further reduced by £6m to £127.8m.
The capital reduction agreed by the passing of a special resolution at the
Annual General Meeting is being progressed by the Court of Session in Scotland.
In accordance with the court procedures, the Company expects the reduction to be
confirmed shortly. This will enable the Company's share premium account to be
cancelled in order to reduce the historic accumulated deficit on the Company's
profit and loss account by £47m. This will accelerate our ability to pay
dividends in the future.
Operating Review
Football Pools
Profits were up 4% at £11.7m on turnover of £50.9m, due to continual improvement
in operational efficiencies and the reduction in the duty burden from April
2002. The annualised rate of decline in turnover was down to 16% for the six
months ended 30 June, a two percentage point improvement on the previous year.
The Board has previously reported its confidence that operating profitability
could be maintained, despite the continuing decline in turnover, and this
remains its view as the trend of improving attrition rates and lower costs is
expected to continue.
On 14 August 2002, the company announced the acquisition of Zetters Football
Pools business for £1.35m, which has taken effect from 29 August 2002. Net cash
payable for the business is expected to be £0.55m, due to the level of advance
football pools stakes. The acquisition is being funded from existing bank
facilities. In the year to April 2002, Zetters football pools generated
operating profit of £0.6m on turnover of £6.1m.
The acquisition of the Zetters Football Pools business further consolidates
Sportech's position as the dominant football pools company in the UK with more
than 85 per cent of the market. Sportech is retaining the Zetters brand
offering, providing a greater choice of complementary products to customers and
the opportunity to cross-sell Sportech's portfolio of gaming products to an
additional 60,000 customers. With the opportunity to rationalise the operational
and overhead base of the business, we would expect to improve net margins on the
Zetters business towards the levels currently achieved by our existing Pools
business.
Sports Betting
Our strategy is to provide customers with a wide range of betting opportunities
across the television, telephone and internet channels. The Littlewoods
Betdirect telephone and internet channels are now well established, and we were
delighted to be selected as one of three fixed odds betting providers to the
Attheraces interactive television channel earlier this year. Attheraces has
experienced delays in launching these fixed odds betting services, however our
offering is now expected to launch towards the end of this year.
Despite this delay turnover was up 69% to £39.9m across the telephone and
internet betting channels. Customer numbers have increased through organic
growth, with the total registered base now 260,000 (230,000 at 31 December
2001). The first half of the year saw an increase in average stakes, with
average stakes per telephone call up 23% to £33, and the average Internet bet up
25% to £15.
Gross win margin remained a satisfactory 11% across both telephone and internet,
however after allowing for the impact of the gross profits tax and levies, net
margins were reduced from 10.1% in 2001 to 8.3%.
The combination of significant volume improvements and satisfactory margin
performance helped to halve the operating losses to £1m. We expect the sports
betting business to continue to reduce its operating losses during the second
half of 2002.
We believe that the convenience of telephone betting will continue to be
attractive to customers and is an important part of our interactive betting
offering. We are therefore expecting telephone revenue growth to continue and
are implementing automated telephone voice response in order to reduce costs and
improve our ability to handle calls during exceptionally busy periods.
Our overall interactive betting proposition is achieving increased exposure as a
result of the sponsorship of Arena Leisure's All Weather race-courses, which
commenced in early 2002, profiling the Littlewoods Betdirect brand at over 20%
of the UK's televised racing fixtures over a three year period.
Games and Lotteries
Profits from Sportech's portfolio of games, competitions and lotteries was
£0.1m, in line with last year, despite a 16% fall in revenues. This decline is
expected to reverse in the second half of the year, reflecting the good progress
that has been made in extending the distribution and range of these 'soft
gaming' products.
Littlewoodscasino.com, our online casino, which was granted one of the first
interactive gaming licences issued by the Isle of Man authorities, received full
regulatory certification and launched in August 2002. This both extends our
comprehensive range of entertaining gaming products and demonstrates our
commitment to operating within highly reputable regulatory environments.
We are finalising agreements with prominent UK retailers, to sell and promote
their own branded scratchcards in conjunction with Littlewoods and national
charities of their choice. Our regulatory experience and reputation positions us
as the first choice lottery partner for both large corporates and charities.
Interactive Developments
In line with our strategy to provide home based gaming opportunities to the
widest audiences available, we announced our ground breaking strategic gaming
partnership with ITV in March 2002. Programme linked gaming across the ITV
network will attract digital and analogue viewers alike, utilising the
interactive return path and established methods of play, including telephone,
internet and our UK wide collector network. We expect to launch in early 2003.
Joint working teams are established and we have made good progress in the
development of gaming concepts and the supporting technology, to ensure
provision of an engaging consumer proposition that will complement the wide
range of ITV programmes.
To support these specific ventures and our broad interactive strategy, we have
also continued to build our interactive design and production team, and
technical infrastructure. Overall capital and revenue investments on interactive
developments totalled £3.3m during the period.
Current Trading & Outlook
In the last eleven weeks we have experienced the benefits of continued year on
year improvement in the net margins on football pools and growth in sports
betting revenues. Gross win margins on sports betting during this period have
also remained very satisfactory. We are also looking forward to the benefits of
new product and distribution developments and the business is well positioned to
deliver a step change in interactive performance in 2003.
The Board approved this Interim statement on Monday 16 September 2002.
David Mathewson
Chairman
16 September 2002
Sportech PLC
Consolidated Profit & Loss Account
6 months to 6 months to Year to 31
30 June 30 June December
2002 2001 2001
(Unaudited) (Restated - (Restated-
unaudited) audited)
Notes £m £m £m
Group turnover 3 96.7 91.3 183.3
Cost of sales (68.5) (64.1) (129.3)
------------ ------------ ------------
Gross profit 28.2 27.2 54.0
Net operating expenses 4 (23.7) (22.9) (45.4)
------------ ------------ ------------
Operating profit before restructuring costs and
amortisation of goodwill 9.7 8.6 17.5
Restructuring costs 4 (0.9) - -
Amortisation of goodwill (4.3) (4.3) (8.9)
Operating profit 4.5 4.3 8.6
Net interest payable 5 (4.1) (4.7) (9.2)
------------ ------------ ------------
Profit/(loss) on ordinary activities before taxation 3 0.4 (0.4) (0.6)
Tax on profit on ordinary activities 6 (1.0) (1.3) (2.1)
------------ ------------ ------------
Loss for the financial period (0.6) (1.7) (2.7)
============ ============ ============
Earnings per share 7
Basic and diluted (0.10)p (0.29)p (0.45p)
======== ======== ========
Pre amortisation of goodwill 0.63p 0.43p 1.05p
======== ======== ========
All results are from continuing businesses
The restatement of the prior year figures relates to the adoption of FRS 19,
Accounting for Deferred Tax.
Reconciliation of movement in group shareholders' funds
6 months to 6 months to Year to 31
Note 30 June 30 June December
2002 2001 2001
(Unaudited) (Restated - (Restated-
unaudited) audited)
£m £m £m
Shareholders' funds at start of period as
previously reported 27.3 29.6 29.6
Prior period adjustment 1 1.3 1.7 1.7
============ ============ ============
Beginning of the year as restated 28.6 31.3 31.3
(Loss) for the financial period (0.6) (1.7) (2.7)
------------ ------------ ------------
Shareholders' funds at end of period 28.0 29.6 28.6
============ ============ ============
Statement of total recognised gains and losses
6 months to 6 months to Year to 31
Note 30 June 30 June December
2002 2001 2001
(Unaudited) (Restated - (Restated-
unaudited) audited)
£m £m £m
Total recognised gains and losses relating to the
period (0.6) (1.7) (2.7)
Prior period adjustment 1 1.3 1.7 1.7
Total recognised gains and losses since the last ======== ======== ========
annual report 0.7 - (1.0)
======== ======== ========
Consolidated Balance Sheet as at 30 June 2002
30 June 30 June 31 December
Notes 2002 2001 2001
(Unaudited) (Restated - (Restated-
unaudited) audited)
£m £m £m
FIXED ASSETS
Intangible assets - goodwill 157.5 164.6 161.8
Tangible assets 7.7 7.8 7.2
------------ ------------ ------------
165.2 172.4 169.0
CURRENT ASSETS
Stocks 0.2 0.2 0.2
Debtors 9.7 9.4 7.3
Cash at bank and in hand 8 7.4 6.9 12.9
17.3 16.5 20.4
CREDITORS
Amounts falling due within one year (46.6) (31.3) (42.9)
------------ ------------ ------------
NET CURRENT LIABILITIES (29.3) (14.8) (22.5)
------------ ------------ ------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 135.9 157.6 146.5
CREDITORS
Amounts falling due after more than one year (107.9) (127.8) (117.9)
PROVISIONS FOR LIABILITIES AND
CHARGES - (0.2) -
------------ ------------ ------------
NET ASSETS 28.0 29.6 28.6
============ ============ ============
CAPITAL AND RESERVES
Called up share capital 30.5 30.5 30.5
Share premium account 47.1 47.1 47.1
Profit & loss account (49.6) (48.0) (49.0)
------------ ------------ ------------
TOTAL SHAREHOLDERS' FUNDS
(including non-equity interests) 28.0 29.6 28.6
============ ============ ============
The interim accounts on pages 5 to 12 were approved by the board of directors on
16 September 2002 and were signed on its behalf by
Gary Speakman
Director
Sportech PLC
Consolidated Cash Flow Statement
6 months to 6 months to Year to 31
30 June 30 June December
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
Notes £m £m £m
Net cash inflow from operating activities 9 6.0 5.1 15.7
Returns on investments and servicing of finance:
Interest received 0.2 0.3 0.4
Interest paid (4.2) (5.0) (10.2)
Purchase of interest rate cap - (0.9) (0.9)
Net cash outflow from returns on investments
and servicing of finance (4.0) (5.6) (10.7)
Taxation (0.2) (3.0) (4.3)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1.7) (0.8) (2.0)
Sale of tangible fixed assets - - 0.2
Net cash outflow from capital expenditure and
financial investment (1.7) (0.8) (1.8)
------------ ------------ ------------
Cash inflow/(outflow) before managing of liquid
resources and finance 0.1 (4.3) (1.1)
Financing:
Net loans repaid (6.0) (6.0) (6.0)
Net cash outflow from financing (6.0) (6.0) (6.0)
------------ ------------ ------------
(Decrease) in net cash 10 (5.9) (10.3) (7.1)
============ ============ ============
Notes to the interim report
1. Accounting Policies
The results for the half year ended 30 June 2002 have been prepared on the
basis of the accounting policies set out in the Report and accounts for the
year ended 31 December 2001, with the exception that FRS 19, Accounting for
Deferred Tax, has now been implemented. Accordingly full provision has been
made for deferred tax. Corresponding figures for 2001 have been restated to
reflect this accounting policy change. The effect of this change has been to
increase losses for the financial year to 31 December 2001 by £0.4m; the
impact on the half year to 30 June 2001 has been to increase losses by
£0.2m. A summary of the impact of this on the reported results is as
follows;
Interim results:
6 months to 6 months to 6 months to 6 months to
30 June 30 June 30 June 30 June
2001 2001 2001 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Restated As reported Change Effect
£m £m £m £m
Loss on ordinary activities before
tax (0.4) (0.4) - -
Loss on ordinary activities after tax (1.7) (1.5) (0.2) (0.1)
Earnings per share (0.29)p (0.26)p (0.03)p -
Full year results:
Year to 31 Year to 31 Year to 31
December December December
2001 2001 2001
(Audited) (Audited)
Restated As reported Change
£m £m £m
Loss on ordinary activities before tax (0.6) (0.6) -
Loss on ordinary activities after tax (2.7) (2.3) (0.4)
Earnings per share (0.45)p (0.39)p (0.06)p
2. Non-statutory accounts
The results for the half-year to 30 June are neither audited nor reviewed by
the auditors.
The financial information on pages 5 to 12 does not amount to full accounts
within the meaning of Section 240 of the Companies Act 1985 (as amended)
The comparative figures for the year ended 31 December 2001 do not
constitute statutory accounts. These figures have been extracted from the
audited accounts (restated as noted above) for that period which have been
delivered to the registrar of companies and on which the auditors issued an
unqualified report which did not contain a statement under either section
237 (2) or (3) of the Companies act 1985.
3. Segmental reporting
6 months to 6 months to Year to 31
30 June 30 June December
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
£m £m £m
Turnover
Football Pools 50.9 60.7 119.0
Sports Betting 39.9 23.6 51.8
Games & Lotteries 5.9 7.0 12.5
On-line development - - -
------------ ------------ ------------
Total Littlewoods Leisure 96.7 91.3 183.3
Technology Patents - - -
------------ ------------ ------------
96.7 91.3 183.3
============ ============ ============
Profit/(loss) before tax
Football Pools 11.7 11.3 23.2
Sports Betting (1.0) (1.9) (4.0)
Games & Lotteries 0.1 0.1 0.5
On-line development (1.1) (0.6) (1.6)
------------ ------------ ------------
Total Littlewoods Leisure 9.7 8.9 18.1
Technology Patents - (0.3) (0.6)
------------ ------------ ------------
Operating profit before restructuring costs
and amortisation of goodwill 9.7 8.6 17.5
Restructuring costs
(principally football pools) (0.9) - -
Amortisation of goodwill
(principally football pools) (4.3) (4.3) (8.9)
------------ ------------ ------------
4.5 4.3 8.6
Net interest (4.1) (4.7) (9.2)
------------ ------------ ------------
0.4 (0.4) (0.6)
============ ============ ============
All turnover and profits arise in the United Kingdom
4. Net operating expenses
6 months to 6 months to Year to 31
30 June 30 June December
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
£m £m £m
Distribution costs 0.1 0.1 0.1
------------ ------------ ------------
Other administrative expenses 18.4 18.5 36.4
Restructuring costs 0.9 - -
Amortisation of goodwill 4.3 4.3 8.9
------------ ------------ ------------
Administration expenses 23.6 22.8 45.3
------------ ------------ ------------
23.7 22.9 45.4
============ ============ ============
Restructuring costs relate principally to the implementation of improved
operational processes within the football pools business.
5. Interest and Similar Items
6 months to 6 months to Year to 31
30 June 30 June December
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
£m £m £m
Interest payable on bank loans and overdrafts (4.3) (5.0) (9.6)
Interest receivable 0.2 0.3 0.4
------------ ------------ ------------
Net interest payable (4.1) (4.7) (9.2)
============ ============ ============
6. Taxation
Taxation is provided on taxable profits at 21.0% being the anticipated rate
of taxation for the group's current financial year.
7. Earnings per share
The calculation of earnings per share is based on the net loss attributable
to ordinary shareholders of £0.6 million divided by the weighted average
number of shares in issue during the period - 592.1 million (6 months to 30
June 2001 - 592.1 million; year to 31 December 2001 - 592.1 million). Basic
and diluted EPS are identical as the market price is below that at which
options are exercisable.
8. Cash
£2.8 million of the cash and bank balances are committed security against
deferred payments due under a contractual obligation of a subsidiary
company.
9. Reconciliation of operating profit to operating cash flows
6 months to 6 months to Year to 31
30 June 30 June December
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
£m £m £m
Operating profit 4.5 4.3 8.6
(Decrease) in provisions - (1.6) (1.8)
Depreciation on tangible fixed assets 1.2 1.7 2.2
Amortisation of goodwill 4.3 4.3 8.9
Amortisation of loan arrangement fee - - 0.1
Surplus on disposal of tangible fixed assets - - (0.1)
(Increase)/decrease in trade debtors (0.3) (0.2) 0.6
Decrease in other debtors - 0.1 0.9
(Increase)/decrease in prepayments (2.2) 2.5 2.2
(Decrease)/increase in trade creditors - (1.0) 0.8
Increase in other creditors - 3.3 -
(Decrease) in other taxes (2.1) (1.6) (0.3)
Increase/(decrease) in accruals and deferred
income 0.6 (6.7) (6.4)
------------ ------------ ------------
Net cash inflow from operating activities 6.0 5.1 15.7
============ ============ ============
10. Analysis and reconciliation of net debt
At 31 Cash Non-cash At 30 June
December 2001 flow changes 2002
£m £m £m £m
Cash at bank and in hand
excluding charity cash balances 11.7 (5.9) - 5.8
Bank overdrafts (2.9) (0.4) - (3.3)
----------- ----------- ----------- -----------
8.8 (6.3) - 2.5
----------- ----------- ----------- -----------
Debt due within one year (15.9) 6.0 (10.0) (19.9)
Debt due after one year (117.9) - 10.0 (107.9)
----------- ----------- ----------- -----------
(133.8) 6.0 - (127.8)
----------- ----------- ----------- -----------
(125.0) (0.3) - (125.3)
=========== =========== =========== ===========
6 months to 6 months to Year to 31
30 June 30 June December
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
£m £m £m
(Decrease) in cash in period (5.9) (10.3) (7.1)
Movement in charity cash (0.4) 0.3 0.4
----------- ----------- -----------
Change in net debt resulting from cash flows (6.3) (10.0) (6.7)
Cash outflow from reduction in loans 6.0 6.0 6.0
Amortisation of deferred loan arrangement fee - - (0.1)
----------- ----------- -----------
Movement in net debt for the period (0.3) (4.0) (0.8)
At start of period (125.0) (124.2) (124.2)
----------- ----------- -----------
At end of period (125.3) (128.2) (125.0)
=========== =========== ===========
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