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 |
Constant Currency4 H1 2021 |
Restated Reported Currency4 H1 2021 |
Revenue |
|
12.6 |
12.6 |
11.8 |
Gross Profit |
|
6.5 |
6.4 |
5.8 |
Contribution1 |
|
6.3 |
6.2 |
5.6 |
Adjusted EBITDA2 |
|
0.3 |
(0.8) |
(0.9) |
(Loss)/profit pre-tax from continuing operations |
|
(0.8) |
0.4 |
0.3 |
Adjusted loss before tax3 |
|
(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
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 Continuing operations |
H1 2022 |
H1 20211 |
|
H1 2022 |
H1 20211 |
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 £'000 |
H1 2022 |
|
Constant Currency H1 2021 |
|
Reported Currency2 H1 2021 |
Service revenue |
857 |
|
351 |
|
322 |
|
|
|
|
|
|
Contribution |
355 |
|
127 |
|
115 |
Contribution margin |
41.4% |
|
36.2% |
|
35.7% |
|
|
|
|
|
|
Adjusted operating expenses1 |
(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 £'000 |
H1 2022 |
|
H1 2021 Constant Currency |
|
H1 2021 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 expenses1 |
(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
|
|
Six months ended |
Restated
Six months ended |
Year ended
31 December 2021 |
|
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 |
- |
26,69 9 |
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
|
Six months ended |
Restated
Six months ended |
Year ended
31 December 2021 |
|
£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 |
Capital redemption reserve |
Other reserve |
Foreign exchange reserve |
Retained earnings/ accumulated losses |
Total |
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 |
Capital redemption reserve |
Other reserve |
Foreign exchange reserve |
Retained earnings/ accumulated losses |
Total |
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 pension liability* |
- |
- |
186 |
- |
- |
186 |
Cumulative actuarial loss on defined benefit pension liability Disposed of, transferred to retained earnings |
- |
- |
766 |
- |
(766) |
- |
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 pension liability* |
- |
- |
186 |
- |
- |
186 |
Cumulative actuarial loss on defined benefit pension liability Disposed of, transferred to retained earnings |
- |
- |
766 |
- |
(766) |
- |
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
|
|
As at
30 June |
Restated As at
30 June |
As at
31 December |
|
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
|
|
Six months
ended |
Restated
Six months ended |
Year ended
31 December 2021 |
|
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 disclosed items |
|
(5,387) |
3,556 |
924 |
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 costs) |
20a |
- |
4,193 |
4,193 |
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 |
|
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 |
|
Add cash included in assets held for sale |
|
- |
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:
|
Note |
Six months ended |
Restated
Six months ended |
Year ended
31 December 2021 |
|
|
£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:
|
Six months ended |
Restated
Six months ended |
Year ended
31 December 2021 |
|
£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.
|
Six months ended 30 June 2022 (Unaudited) |
Restated Six months ended 30 June 2021 (Unaudited) |
Year ended 31 December 2021 (Audited) |
From continuing operations: |
|||
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) |
|
Six months ended 30 June 2022 (Unaudited) |
Restated Six months ended 30 June 2021 (Unaudited) |
Year ended 31 December 2021 (Audited) |
From discontinued operations: |
|||
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) |
|||
|
Sportech Digital |
Sportech Venues |
Corporate costs |
|
|
£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 Sportech Digital |
Sportech Venues |
Corporate costs |
|
|
£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 Digital |
Sportech Venues |
Corporate costs |
|
|
£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
|
|
Six months ended |
Restated
Six months ended |
Year
31 December 2021 |
|
|
£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
31 December 2021 |
|
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 sheet date on STB refund received in 2016 |
8 |
24 |
74 |
150 |
|
|
|
|
|
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: |
|
Six months ended |
Restated
Six months ended |
Year
31 December 2021 |
|
|
£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
|
|
|
Restated
Six months ended |
Year |
|
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 foreign currency |
|
232 |
205 |
436 |
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 |
Continuing operations |
£000 |
£000 |
£000 |
Foreign exchange gain on financial assets and liabilities denominated in foreign currency |
232 |
205 |
436 |
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 |
Note |
|
Restated
Six months ended |
Year ended
2021 |
|
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 |
|
|
£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 |
|
£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 |
|
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 |
|
£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 |
|
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
|
|
As at |
Restated
As at |
As at 31 December 2021 |
|
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 |
|
|
£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:
|
|
Six months ended |
Restated
Six months ended |
Year |
|
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 disclosed items |
|
(544) |
2,467 |
511 |
19. Lease liabilities
|
As at
30 June |
As at
30 June |
As at
31 December |
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
30 June |
As at
30 June |
As at
31 December |
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
30 June |
Six months ended
30 June |
Year ended
31 December |
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
30 June |
Six months ended
30 June |
Year ended
31 December |
|
|
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 (Unaudited) |
Restated Period ended 30 June 2021 (Unaudited) |
Year ended 31 December 2021 (Audited) |
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 (Unaudited) |
Restated Six months ended 30 June 2021 (Unaudited) |
Year ended 31 December 2021 (Audited) |
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 (Unaudited) |
Six months ended 30 June 2021 (Unaudited |
Year ended 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 |