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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sportech Plc | LSE:SPO | London | Ordinary Share | GB00BRV2F192 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 84.00 | 82.00 | 86.00 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jan 2023 to Jan 2025
TIDMSPO
RNS Number : 5074W
Sportech PLC
18 April 2023
18 April 2023
SPORTECH PLC
('Sportech', the 'Group' or the 'Company')
Final Results
Sportech, an international betting & technology business, is pleased to announce its final results for the year ended 31 December 2022.
Hot Features
Premium
Actual Reported Constant
Continuing Operations 2022 2021 Currency
GBP'000 GBP'000 2021
GBP'000
Revenue 26,004 22,942 25,608
---------- ---------------- ----------
Gross profit 14,157 11,453 12,792
---------- ---------------- ----------
Adjusted(1) EBITDA 1,599 (1,783) (1,641)
---------- ---------------- ----------
Adjusted loss before
tax (99) (3,358) n/a
---------- ---------------- ----------
Loss before tax(2) (934) (246) n/a
---------- ---------------- ----------
Adjusted cash (3) 7,420 21,912 n/a
---------- ---------------- ----------
1. Adjusted EBITDA excludes expenditure that management believe should be added back (separately disclosed items) and other income. See note 1 of this announcement.
2. Includes separately disclosed items
3. Adjusted cash excludes customer balances at 31 December 2022. Adjusted Cash at 31 March 2023 was GBP 8.5 million
Financial Overview
Continuing operations:
-- Strong operational performance. -- Stable revenue growth +2% to GBP26.0 million. -- Gross profit +11% to GBP14.2 million. -- Adjusted EBITDA returned to positive GBP1.6 million (2021: GBP1.8 million loss).
Group:
-- Year end 2022 cash net of customer balances was GBP7.4 million (2021: GBP21.9 million). -- GBP7 million dividend paid during 2022 (7p per share).
Post Year end:
-- Successful receipt of CN $2 million earn-out related to a 2021 disposal.
-- Following the sale of lottery contracts late in 2021, the remaining Lot.to systems operating assets were sold to Inspired Entertainment in February 2023 for GBP500,000 (plus a GBP500,000 contingent performance earnout).
-- Adjusted cash at 31 March 2023 was GBP8.5 million. -- 2023 Q1 Retail Sports Betting Hold +39% vs. Q1 2022
Group Developments
-- Stable revenue growth + 2% to GBP26.0 million.
-- Strong operational performance, adjusted EBITDA returning to positive territory of GBP1.6 million (2021: a loss of GBP1.8 million).
-- Disposals: Post year end the Group sold further non-core assets as noted above and received an additional GBP1m, net of fees and incentives relating to the 2021 Bump 50:50 sale.
-- Corporate: During 2022 the Company continued to return capital to investors, via a GBP7 million (7p per share) dividend. The 2023 dividend will be announced before the Annual General Meeting, scheduled for 30 May 2023. All Corporate costs continue to be reviewed to improve Group efficiency and capital retention.
-- Venues: The Group's core business line delivered a strong performance, with traditional Pari-Mutuel handle declining only 4.7% on a like-for-like basis despite the introduction of additional competing betting products such as iLottery, iCasino, and Sports Betting. Throughout the year, the Group focused on investing in building a solid foundation to expand opportunities for delivering Sports Betting to retail customers.
-- Sports Betting: In August 2021, Sportech agreed to become a distributor for the Connecticut Lottery Corporation's (CLC) sports betting product at the majority of venues across the state. Through Sportech Venues, the gross retail sports betting handle during the year was an impressive $98.7 million, from which Sportech received a percentage of the net hold.
-- Digital: In recent years the Company has advanced two online pool betting sites in the US, both of which delivered revenue growth in the year. Additional opportunities for these sites are under review.
-- Plc Board: The Board was reshaped following various departures during the year to better align with the Company's evolved strategy.
-- Strategy: The Board are focused on delivering further corporate opportunities; materially reducing the corporate cost base; delivering further capital returns to shareholders, while evaluating significant growth opportunities that build on the core skills withing the Group.
Richard McGuire, Executive Chairman of Sportech, said:
"2022 was a year of consolidation and progress and the team are excited about the potential in 2023. Our investment in the growth of US sports betting has started to deliver results. 2022 Operational leverage was impressive, as modest revenue gains translated to impressive gross profit gains and a return to positive EBITDA during the year. We are reviewing various strategic options for the current business lines while evaluating online betting opportunities that leverage our brand, people and expertise. Cash position is strong and we will update the market regarding potential further shareholder capital returns ahead of the May AGM."
Shareholder briefing:
The summary presentation will be available on the Company website https://www.sportechplc.com/investors/results/ .
Management is available as required for analyst and investor meetings; requests should be made via Peel Hunt.
Contacts:
Sportech PLC Richard McGuire, Executive Chairman ir@sportech.net Clive Whiley, Senior Independent Director Peel Hunt (Corporate Broker and NOMAD to Tel: +44 (0) 20 7418 8900 Sportech)George Sellar / Andrew Clark / Lalit Bose
Forward-looking statements This announcement contains certain statements that are forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, results of our operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. These forward-looking statements include all matters that are not historical facts. By their nature, these statements involve risks and uncertainties since future events and circumstances can cause results and developments to differ materially from those anticipated. Any such forward-looking statements reflect knowledge and information available at the date of preparation of this announcement. Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation (596/2014), as it applies in the UK), the Company undertakes no obligation to update or revise any such forward-looking statements. Nothing in this announcement should be construed as a profit forecast. The Company and its directors accept no liability to third parties in respect of this announcement save as would arise under English law.
Notes to Editors:
About Sportech
Sportech operates in the gaming market and has two main businesses. Firstly, it runs Sports Bars and other betting venues in Connecticut, USA, where it has an exclusive license to offer pari-mutuel wagering, it also has a distribution agreement with the Connecticut Lottery Corporation to provide retail sports betting. Secondly, Sportech provides online gaming through two separate lines of business. Mywinners.com operates under an exclusive license to offer pari-mutuel betting online in Connecticut, while 123bet.com offers pari-mutuel betting online across the wider USA.
Operating Review
2022 was year of consolidation and progress
After selling several business lines and moving to the Alternative Investment Market (AIM), the Group achieved operational stability and growth in 2022.
The introduction of the Sports Betting product suite in late 2021 required significant capital investment, but the Venues business, now including sports betting, is experiencing a period of positive change with busier operations and a new crowd of patrons to service. Despite the Omicron surge affecting early 2022, the food and beverage revenues performed well, and the retail division's focus on delivering sports betting was the major difference in the company's operations.
The company's business relationship with the Connecticut Lottery Corporation (CLC) continues to strengthen, with a more robust agreement progressed to build on the early success of sports betting across the state. One non-performing location was closed, and certain leases were extended to meet demand and secure the profitable estate.
The UK-based digital technology team executed and delivered a contracted digital solution to a major client, and post year-end, the team was transferred to Inspired Entertainment with additional Lot.to Systems assets.
A focus on efficient use of cash and accurately measuring returns on capital deployed remain core metrics. The introduction of the Sports Betting product suite in late 2021, required obvious capital investment to secure our position with the master wagering licensee, the Connecticut Lottery Corporation (CLC). Moreover, the United States as a whole remains a land of new opportunity in the gambling sector as sports betting continues to enter the pantheon of entertainment State by State. Sportech, as a participant with a significant USP in its Venues business, has the ability both to seize the immediate opportunities in Connecticut and demonstrate its skills in doing so to position itself for other opportunities which may arise across the rest of the US. Accordingly, there will be extra focus on operational efficiency and service to ensure that the value of this USP is maximised.
The introduction of Sports Betting to the Connecticut Venues business and the successful rollout across locations demanded a significant amount of management focus and planning and given the opportunity will continue to be a core part of business planning in 2023 and beyond. Adding this additional betting product to our existing pari-mutuel product range has clearly increased consumer traffic driving a higher F&B revenue and proportionally reduced the Pari-Mutuel cost base as costs are allocated proportionally between F&B, pari mutuel and sports betting.
Food and beverage revenues in 2022 performed well despite the Omicron surge negatively affecting the early months: +46% at GBP3.44m (2021: GBP2.37m). Sports betting handle comparisons are not a useful measure as 2022 was the initial year for sports betting. However worth noting early progress in 2023 with Q1 handle +18% and Q1 hold +39%, vs. Q1 2022.
Delivering Sports Betting across our retail division was the major difference to the operational focus during the year. Retail Sports Betting handle was an impressive $98.7 million in this initial year, across our eight approved locations. The core 'hold' metric was a solid 9.4% during the year, significantly better than forecast (hold being the gross profit from wager), primarily driven by 40% of gross handle being accumulator wagers with respective higher risk and therefore higher potential margin.
Major League Baseball topped the handle charts, however the importance of American Football, both NFL and NCAAF remains evident for both sports betting and F&B demand. Soccer, is not a major sport yet in the US however, we noted increasing volume in major European leagues. Our retail clients beat our book in the World Cup as they supported an Argentina victory and France to be top European team resulting in modest loss for the book. That said, the attendance when USA played, across our sports bars was very strong, delivering impressive F&B surges.
Our business relationship with the CLC, continues to strengthen and we have progressed a new agreement with CLC, providing further commitment to build on the early success of Sports Betting across the State.
During 2022, one non-performing location was closed and certain leases extended to meet demand and secure the profitable estate. Whilst the significant New Haven, lease was extended to February 2024, it is expected that the business will move out of this property to a new venue in the vicinity, to maintain betting handle growth. Additionally two new locations are being evaluated that would provide pari-mutuel and sports betting product suite to more Connecticut retail consumers and in doing so will create the blueprint for a future Venue model for the business.
The UK based digital technology team executed and delivered a contracted digital solution to the customer as part of the lottery contract concluded in late 2021. Post year end the team were transferred to Inspired Entertainment with additional assets, for GBP500,000. This transfer will reduce costs and ultimately enhance Group cashflow during 2023.
During the year the Group concluded and exited various legacy litigation claims in California and have now successfully exited that historic endeavour. The tax position in relation to the treatment of the GBP4.6m gain included in the 2016 financial statements for the Spot the Ball VAT refund remains uncertain. The Company has made payment of the amount at issue, in order to freeze the accumulation of interest, although the directors continue to dispute that this amount is ultimately payable. The directors await HMRC's final assessments whereupon they will consider if any further actions are appropriate.
The 2022 dividend reduced the cash position of the Group to a comfortable level to enable the business to explore further organic investment opportunities in broader initiatives within the gaming sector.
As the Group transitions through 2023, revenues and profitability will return to the fore as key metrics. The tail of legacy issues that affected the business are concluded and we have a simpler business with clear strategy aligned to stakeholders' interests. For the first time in many years, we can provide with some accuracy a future outlook for 2023, having emerged from the depths of COVID, and having experience of a full year of Sports Betting in Connecticut.
Management are confident that trade is recovering, Q1 2023 has delivered early encouraging performance and a good rate of handle and growth is being experienced in the new sports product.
DIVISIONAL SPORTECH VENUES
Sportech Venues, ('Venues') operates across the State of Connecticut offering legal betting through two distinct types of operations.
Firstly, Venues offer pari-mutuel betting on horseracing, greyhound racing and jai alai through both online and venue-based operations under an exclusive and perpetual licence. Secondly, they offer sports betting under a distributorship type arrangement with the Connecticut Lottery Corporation.
Their venues operations are of two types: Sports Bar/Restaurants and Off-Track Betting (OTB) shops. The Sports Bar/Restaurants offer a main-stream leisure-based experience where betting is an exciting additional customer attraction. The Off-Track Betting (OTB) shops are dedicated primarily to retail gambling operations, although they do offer some light refreshments and other products.
Constant
currency
GBP'000 2022 2021
Wagering revenue 19,116 21,835
Commission from sports betting 1,974 313
Food and beverage revenue 3,443 2,366
------- ---------
Total revenue 24,533 24,514
------- ---------
Contribution 13,240 12,048
Contribution margin 54.0% 49.1%
Adjusted (1) operating expenses (9,194) (10,453)
------- ---------
Adjusted(1) EBITDA 4,046 1,595
------- ---------
Capex 142 27
1. Adjusted amounts excludes expenditure that management believe should be added back (separately disclosed items) and other income. See note 1&2 of this announcement
Developments during the year
Connecticut has three licensed sports books in operation: Mohegan casino engaged Fan Duel, the Mashantucket Pequot casino engaged Draft Kings, and CLC engaged Rush Street Interactive to provide their Play Sugarhouse sports book, which is delivered across most of the retail outlets.
CLC is the only licensee authorized to provide retail sports betting across the state. The two casinos are limited to within casino property. All three are authorized to provide online sports betting (1 online skin each), and the casinos are also authorized and provide iCasino.
Sports betting was the major feature and focus of 2022, and Sportech Venues increased staffing to manage the additional regulatory, planning, and execution requirements. This was the first full year of sports betting in Connecticut and a learning curve for all state participants.
Sportech Venues provides a sports betting product range across eight venues under a commercial agreement with the CLC, and they also receive a modest share of online sports betting net hold.
Sports betting handle grew during the year to an impressive $98.7 million from the Group's eight sports betting locations, with an equally impressive 9.42% hold. US Sports dominate the 'action' with Baseball, American Football, and Basketball leading the turnover. Post-year-end, the Company continues to note significant increases in sports betting handle with January and February 2023 +33% and +18% respectively vs 2022.
Pari-mutuel handle remained stable in the face of increased competition for discretionary gambling dollars, dropping only 4.7% on a like-for-like basis. The non-retail component (online and tele-betting) represented 25.4% of the total handle in 2022, which is higher than the pre-Covid level of 18.9% in FY 2019.
Sports betting provides a strong vertical that attracts new patronage to the venues. Therefore, it leverages both pre-existing products with new sales and existing cost base with new revenues, enhancing the entire operation.
Looking forward
Plans for 2023 include the delivery of an improved pari-mutuel website, providing additional marketing opportunities and closer management of online clientele. In addition the Group is working with Sports Betting partners to progress a retail client relationship management rewards initiative.
Sport and capturing the wagering revenues of its followers is clearly the opportunity for the Venues business and we continue to reshape the business accordingly.
Management have developed a retail brand and experience format optimising the mix of formats and locations of venues to further enhance and better capture the sports betting market without detraction from the mainstay earnings of pari-mutuel betting.
We see the most promising signs of improvement in bar and restaurant formats, which cater to sports patrons and offer a close-to-live game experience for customers.
To capitalize on the sports betting market without compromising on our main source of earnings from pari-mutuel betting, the management team have developed a retail brand and experience format. This approach optimizes the mix of formats and locations of venues, enhancing our ability to capture the sports betting market opportunity.
SPORTECH DIGITAL
Sportech Digital is comprised of two small, digitally focused businesses.
The first is a US-facing B2C trading operation called 123Bet.com, which was previously a white-label customer of the now-discontinued Racing and Digital business. In 2019, it was brought in-house, and since then, it has operated with experienced management and a tight marketing budget derived from its own profits. Despite its small size, 123Bet.com has achieved success and continues to grow. We believe that it is ready for a refreshed offer and the next stage of growth.
The second business in 2022, was a B2B operation based in Chester, UK, that served markets with a proprietary platform for lottery management.
Constant
currency
GBP'000 2022 2021
Services revenue 1,471 1,094
Contribution 531 409
Contribution margin 36.1% 37.4%
Adjusted(1) operating expenses (838) (1,021)
----------------------------- ---------
Adjusted(1) EBITDA (307) (612)
----------------------------- ---------
Capex 201 169
1. Adjusted amounts excludes expenditure that management believe should be added back (separately disclosed items) and other income. See note 1&2 of this announcement
The team at Lot.to Systems, based in Chester, provided invaluable research and development support to several Sportech businesses, including the Global Tote and the Lotteries division. Their contributions enhanced the capabilities and profile of these business lines, resulting in improved client deliverables, numerous contract extensions, and ultimately, sales of certain business lines in 2021.
In 2022, the team delivered the online lottery product as contracted to do within the late 2021 sale of the LEIDSA lottery contract. Their successful delivery of this product demonstrates their expertise and commitment to providing high-quality solutions that meet client needs.
Developments post year end
After selling significant operational businesses in 2021 and successfully delivering the online platform, Sportech decided to sell certain assets of Lot.to Systems Ltd, and transfer the team to Inspired Entertainment. The sale was for GBP0.5 million (a further GBP0.5m being an unrecognised, contingent performance earnout). This decision was made early in 2023.
Sportech remains optimistic about the future of 123Bet.com. We believe that this business line has a strong future and going forward we will be reporting the results within our retail Venues business.
GROUP OUTLOOK
There is little doubt that the pandemic tested our organisation in recent years, however Sportech employees are professionals who work with incredible passion and purpose and the Board continues to be inspired by their dedication to improve in every area.
2022 marked a year of consolidation and redefining growth opportunities within the Group. Within the Venues business, the attraction of Sports Betting boosted F&B revenue while the team catered to a new clientele eager to find that live game experience.
The emphasis on accountability and an ownership culture that commenced in 2020 thrives as the entire team promote an entrepreneurial attitude to client service and growth opportunities.
A summary of our strategic objectives for 2023 includes:
1. Evaluate and execute further corporate opportunities. 2. Materially reduce the corporate cost base. 3. Evaluate and execute growth opportunities across the gaming sector. 4. Deliver further capital returns to shareholders.
The Board and management remain fully engaged and focused on enhancing shareholder value and effectively managing opportunities.
Richard McGuire
Executive Chairman
18 April 2023
FINANCIAL REVIEW
Income Statement - Detailed View
Constant
Reported Currency
GBP'000 2022 2021(1) 2021
Service revenue 20,587 20,547 22,928
Sports betting commission 1,974 280 313
F&B revenue 3,443 2,115 2,366
Total revenues 26,004 22,942 25,608
Cost of sales (11,847) (11,489) (12,835)
--------- ------------ ----------
Gross profits 14,157 11,453 12,773
Marketing and distribution costs (386) (276) (315)
--------- ------------ ----------
Contribution 13,771 11,177 12,457
Contribution margin % 53.0% 48.7% 48.6%
Adjusted operating expenses(2) (12,172) (12,960) (14,240)
Impact of FX on reported earnings - - 142
--------- ------------ ----------
Adjusted EBITDA 1,599 (1,783) (1,641)
----------
Separately disclosed items (657) (1,101)
Other income 120 4,101
Non-cash items:
Share option charges - (334)
Depreciation (1,366) (982)
Amortisation of software (252) (129)
Amortisation of acquired intangibles (29) (509)
Reversal of impairment of Property, Plant
& Equipment 190 335
Impairment of goodwill (517) -
Total - non-cash items (1,974) (1,619)
--------- ------------
LBIT (912) (402)
Net finance (charges)/income (22) 156
--------- ------------
LBT (934) (246)
Taxation - continuing operations (79) (192)
--------- ------------
Result after taxation - continuing operations (1,013) (438)
Result after taxation - discontinued operations 1,183 35,001
--------- ------------
Profit for the year 170 34,563
--------- ------------
Adjusted loss before tax for the year from
continuing operations (1) (99) (3,358)
--------- ------------
1. Adjusted loss before tax for the year from continuing operations is the aggregate of adjusted EBITDA, share option charges, depreciation, amortisation (excluding amortisation of acquired intangibles), and certain finance charges (see note 1 for reconciliation).
2. Adjusted operating expenses exclude depreciation, amortisation, impairments, share option charges, other income and separately disclosed items.
Revenue - continuing operations
Constant
Reported Currency
GBP'000 2022 2021 2021
Wagering revenue 19,116 19,515 21,835
Sports betting commission 1,974 280 313
F&B revenue 3,443 2,115 2,366
------- ----------- ----------
Total Sportech Venues 24,533 21,910 24,514
------- ----------- ----------
Total Sportech Digital 1,471 1,032 1,094
------- ----------- ----------
Total revenues 26,004 22,942 25,608
------- ----------- ----------
Revenue from continuing operations increased by 2% on a constant currency basis. The growth in F&B and Sports betting helping to offset the wagering revenue decline. A further location was closed during 2022, resulting in the Venues business operating nine current locations. The Digital revenue was principally supported by improved performance from the online pari-mutuel operations.
Adjusted EBITDA - continuing operations
Constant
GBP'000 Reported currency
2022 2021 2021
Sportech Venues 4,046 1,620 1,595
Sportech Digital (307) (579) (612)
Central costs (2,140) (2,824) (2,624)
-------- ----------- ----------
Adjusted EBITDA 1,599 (1,783) (1,641)
-------- ----------- ----------
The significant Adjusted EBITDA improvement from a loss of GBP(1,783)k, which included a GBP260,000 sports betting investment, representing lobbying costs, in 2021. Returning to a profit of GBP1,599k from continuing operations, was delivered through improvements across all divisions. The Venues business more than offset the decline in pari-mutuel revenue through its strong results in its first full year of sports betting commission in addition to the recovery of the F&B product after COVID. The digital division reduced its losses, with growth through CRM in the 123.bet online business. Central costs were also reduced significantly in the year.
Discontinued operations
Further consideration was received from the Bump 50:50 businesses of GBP1,229k , ( GBP1,013k net of fees) as well as retrospective receipt of other income of GBP170k in respect of the CARES Act in relation to the Global Tote business.
Separately disclosed items
2022 2021
Continuing operations Note GBP000 GBP000
Included in operating costs:
Onerous contract provisions and other losses
resulting from exit from Californian operations (120) 91
Redundancy and restructuring costs(1) 414 625
Corporate activity costs 57 21
Costs in relation to the Spot the Ball VAT refund - 10
Settlement of a contract(2) 304 -
Costs in relation to exiting the Group's interests
in India 2 13
Costs in relation to the Group's move from Main
Market to AIM - 341
657 1,101
----------------- -------
Discontinued operations
Included in operating costs 11 - 371
Total included in operating costs 657 1,472
----------------- -------
Included in finance costs - continuing operations:
Interest accrued on corporate tax related to
the STB refund received in 2016 24 150
8 24 150
----------------- -------
Net separately disclosed items 681 1,622
----------------- -------
1. The redundancy and restructuring costs relate to settlements made to former Directors in lieu of notice.
2. Settlement of a contract relates to the Group exiting a royalty arrangement in the period relating to branding at its Connecticut venues. This required a termination fee to be paid and will financially benefit the Group in the long term.
The Group's lease issues in California were finally resolved during the year, avoiding further litigation and bringing those matters to a close, below the previous provisions.
Cash flow
The Group's cash flow for the year is as follows (including discontinued operations):
GBP'000 2022 2021
Adjusted EBITDA - continuing operations 1,599 (1,783)
Adjusted EBITDA - discontinued operations 1,183 6,879
--------- ---------
Total Adjusted EBITDA 2,782 5,096
Payment of lease liabilities including interest (1,357) (1,512)
--------- ---------
EBITDA after lease payments 1,425 3,584
Add: Net proceeds from disposals - 41,040
Less:
Capitalised software (196) (1,012)
Property plant and equipment (net
of proceeds from sales) (147) (582)
Separately disclosed items and
other income (net) (657) 76
Working capital (3,398) (2,418)
Tax and interest (paid)/received (5,083) 438
Dividends paid (7,000) -
Share buy-back including expenses - (35,880)
FX impact 565 (171)
--------- ---------
Net cash flows
in year (14,491) 5,075
Opening cash, excluding customer balances 21,912 16,837
--------- ---------
Closing cash, excluding customer 7,420
balances (*) 21,912
--------- ---------
(* There is a modest rounding adjustment of GBP1,000, within the aggregate table above to match Closing cash.)
Net cash outflow (excluding movement in customer balances) in the year was GBP14,491k.
The significant outflow items related to distributions to shareholders with a GBP7,000k dividend paid during the year and the agreement to place in Escrow an amount related to a potential tax liability, in order to stop interest accruing with no settlement yet reached with HMRC.
The business generated EBITDA on its continuing operations, improving on this measure year-on year.
Following the disposals of major businesses in 2021, the capitalized software and PPE investment were reduced for the continuing 2022 business. The Venues business introduced a significant new product line late 2021 and expanded upon that during 2022, requiring additional working capital during the period.
Consolidated Income Statement
f o r t he y ear end ed 31 December 2022
2022 2021
Note GBP000 GBP000
Revenue 2 26,004 22,942
Cost of sales 3 (11,847) (11,489)
--------- ---------
Gross profit 14,157 11,453
Marketing and distribution costs 3 (386) (276)
--------- ---------
Contribution 13,771 11,177
Operating costs 3 (14,803) (15,680)
Other income 10 120 4,101
Operating loss (912) (402)
Finance costs 8 (254) (305)
Finance income 8 232 461
Loss before tax from continuing operations (934) (246)
Tax - continuing operations 9 (79) (192)
--------- ---------
Loss for the year - continuing operations (1,013) (438)
Profit after taxation from discontinued operations 11(g) 1,183 35,001
--------- ---------
Profit for the year 170 34,563
--------- ---------
Attributable to:
Owners of the Company 170 34,563
Basic (loss)/earnings per share attributable
to owners of the Company
From continuing operations 12(a) (1.0)p (0.3)p
From discontinued operations 12(a) 1.2p 20.6p
--------- ---------
Total 12(a) 0.2p 20.3p
--------- ---------
Diluted (loss)/earnings per share attributable
to owners of the Company
From continuing operations 12(b) (1.0)p (0.3)p
From discontinued operations 12(b) 1.2p 20.6p
--------- ---------
Total 12(b) 0.2p 20.3p
--------- ---------
Adjusted loss per share attributable to owners
of the Company
Basic 12(c) (0.1)p (1.7)p
Diluted 12(c) (0.1)p (1.7)p
--------- ---------
See note 1 for a reconciliation of the above statutory income statement to the adjusted performance measures used by the Board of Directors to assess divisional performance.
Consolidated Statement o f C o m p r e h e n s i ve I n c o me
f o r t he y ear end ed 31 December 2022
2022 2021
Note GBP000 GBP000
Profit for the year 170 34,563
Other comprehensive income:
Items that will not be reclassified to profit
and loss
Actuarial gain/(loss) on retirement benefit liability
- discontinued operations - 186
170 186
Items that may be subsequently reclassified to
profit and loss
Currency translation differences - continuing
operations 1,047 (617)
Currency translation differences - discontinued
operations - (550)
Less: gain reclassified to profit and loss on
disposal of foreign operations 11 (3,373)
------- --------
1,047 (4,540)
Total other comprehensive income/(expense) for
the year, net of tax 1,217 (4,354)
Total comprehensive income for the year 1,217 30,209
------- --------
Attributable to:
Owners of the Company 1,217 30,209
------- --------
Consolidated Balance Sheet
As at 31 December 2022
2022 2021
Note GBP000 GBP000
ASSETS
Non-current assets
Goodwill 13 87 604
Intangible fixed assets 14 6,939 6,357
Property, plant and equipment 15 4,522 4,261
Right-of-use assets 16 5,042 4,657
Trade and other receivables 18 177 158
Deferred tax assets 19 15 -
--------- ---------
Total non-current assets 16,782 16,037
--------- ---------
Current assets
Trade and other receivables 18 1,978 1,750
Inventories 20 146 124
Current tax receivable 9 228 -
Contingent consideration (gross receivable) 11(e) 1,229 -
Cash and cash equivalents 21 7,811 22,367
--------- ---------
Total current assets 11,392 24,241
--------- ---------
TOTAL ASSETS 28,174 40,278
--------- ---------
LIABILITIES
Current liabilities
Trade and other payables 22 (6,564) (7,945)
Provisions 23 - (736)
Contingent consideration (bonuses payable) 11(e) (216) -
Lease liabilities 24 (1,155) (923)
Current tax liabilities 9 - (4,718)
Total current liabilities (7,935) (14,322)
--------- ---------
Net current assets 3,457 9,919
--------- ---------
Non-current liabilities
Lease liabilities 24 (6,200) (6,091)
Deferred tax liabilities 19 - (43)
Total non-current liabilities (6,200) (6,134)
--------- ---------
TOTAL LIABILITIES (14,135) (20,456)
--------- ---------
NET ASSETS 14,039 19,822
--------- ---------
EQUITY
Ordinary shares 28 1,000 1,000
Other reserves 4,574 3,527
Retained earnings 8,465 15,295
--------- ---------
TOTAL EQUITY 14,039 19,822
--------- ---------
Consolidated Statement o f C h a n g es in E q u i ty
for the year ended 31 December 2022
Other reserves
Capital Foreign
Ordinary redemption Other exchange Retained
shares reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2022 1,000 888 314 2,325 15,295 19,822
Comprehensive income -
Profit for the year - - - - 170 170
Other comprehensive items -
Currency translation differences
arising in the year - - - 1,047 - 1,047
Total other comprehensive items - - - 1,047 - 1,047
--------- ------------ --------- ---------- ---------- --------
Total comprehensive items - - - 1,047 170 1,217
--------- ------------ --------- ---------- ---------- --------
Transactions with owners -
Dividend paid - - - - (7,000) (7,000)
Total transactions with owners - - - - (7,000) (7,000)
--------- ------------ --------- ---------- ---------- --------
Total changes in equity - - - 1,047 (6,830) (5,783)
--------- ------------ --------- ---------- ---------- --------
At 31 December 2022 1,000 888 314 3,372 8,465 14,039
--------- ------------ --------- ---------- ---------- --------
for the year ended 31 December 2021
Other reserves
Capital Foreign
Ordinary redemption Other exchange Retained
shares reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2021 37,750 10,312 (638) 6,865 (29,130) 25,159
Comprehensive income
Profit for the year - - - - 34,563 34,563
Other comprehensive items
Actuarial gain on defined benefit
pension liability - - 186 - - 186
Cumulative actuarial loss on
defined benefit
pension liability disposed of,
transferred to retained
earnings - - 766 - (766) -
Currency translation differences
arising in the year - - - (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
--------- ------------ --------- ---------- ---------- ---------
Consolidated Statement o f ca sh f l o ws
for the year ended 31 December 2022
2022 2021
Note GBP000 GBP000
Cash flows from operating activities
Cash (used in)/generated from operations, before
separately disclosed items 29 119 511
Tax refund received 9 - 1,442
Tax paid 9 (5,083) (1,029)
--------- ---------
Net cash (used in)/generated from operating activities
before separately disclosed items (4,964) 924
Cash inflows - other income 10 - 2,483
Cash outflows - separately disclosed items 4 (1,457) (2,407)
--------- ---------
Cash generated from operations (6,421) 1,000
--------- ---------
Cash flows from investing activities
Disposal of Sports Haven (net of transaction costs) - 4,193
Disposal of Bump 50:50 (net of cash disposed of
and transaction costs) - 4,644
Disposal of LEIDSA contract (net of cash disposed
of and transaction costs) - 9,417
Disposal of Global Tote (net of cash disposed of
and transaction costs) - 22,636
Proceeds from sale of intangible assets 14 - 150
Investment in intangible fixed assets 14 (196) (1,012)
Purchase of property, plant and equipment 15 (147) (582)
--------- ---------
Net cash (used in)/generated from investing activities (343) 39,446
--------- ---------
Cash flows used in financing activities
Principal paid on lease liabilities (1,127) (1,333)
Interest paid on lease liabilities (230) (179)
Share buy-back including transaction costs 28 - (35,880)
Dividend paid (7,000) -
Interest received - 27
Interest paid - (2)
Cash used in financing activities (8,357) (37,367)
--------- ---------
Net (decrease)/increase in cash and cash equivalents (15,121) 3,079
Effect of foreign exchange on cash and cash equivalents 565 (171)
Cash and cash equivalents at the beginning of the
year 22,367 11,821
Opening cash included in asset held for sale and
excluded from cash and cash equivalents - 7,638
--------- ---------
Group cash and cash equivalents at the end of the
year 21 7,811 22,367
Represented by:
Cash and cash equivalents 21 7,811 22,367
Less customer funds 21 (391) (455)
Adjusted net cash at the end of the year 21 7,420 21,912
--------- ---------
The financial statements were approved and authorised for issue by the Board of Directors on 17April 2023 and were signed on its behalf by:
Richard McGuire
Director
Company Registration Number: SC069140
Notes to the financial statements
for the year ended 31 December 2022
All accounting policies applied in this Preliminary Statement are consistent with those in the full financial statements which have yet to be published. The preliminary results for the year ended 31 December 2022 were approved by the Board of Directors on 17 April 2023. The financial information set out in this announcement does not constitute statutory financial statements for the years ended 31 December 2022 and 2021 within the meaning of Section 435 of the Companies Act 2006, but is extracted from those financial statements. The auditors have reported on those financial statements and have given an unqualified report which does not contain a statement under Section 498 of the Companies Act 2006.
G ene r a l i nf o r m a t i on
Sportech PLC (the "Company") is a company domiciled in the UK and listed on the London Stock Exchange's Alternative Investment Market ("AIM"). The Company's registered office is Collins House, Rutland Square, Edinburgh, Midlothian, Scotland EH1 2AA. The consolidated financial statements of the Company as at and for the period ended 31 December 2022 comprise the Company, its subsidiaries, joint ventures and associates (together referred to as the "Group"). The principal activities of the Group were the provision of pari-mutuel betting (B2C) and the supply of wagering technology solutions (B2B) up until the disposal of the Group's Global Tote business on 17 June 2021, the disposal of the Group's 50:50 Lottery business (Bump 50:50) on 2 June 2021 and the disposal of the Group's supply contract with LEIDSA in the Dominican Republic on 31 December 2022. Following the disposals the Group continued to provide pari-mutuel betting (B2C) and lottery technology (B2B) .
G oi n g c on c e rn
The Directors have concluded that it is reasonable to adopt a going concern basis in preparing the financial statements. This is based on a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of signing of these accounts. At the 31st December 2022 the Group had unrestricted cash of GBP7.4 million, with no debt in the business.
The Directors have prepared forecasts covering the period to December 2024, built from the detailed Board-approved budget for 2023.
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. The downside case makes far more pessimistic commercial assumptions, for instance that online handle remains flat rather than continue on growth trajectory, and a significant reduction in the contribution from sports betting. It also considers the impact of a weakening dollar.
Both the base plan and downside scenario forecasts led the Directors to have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern basis in preparing the financial statements.
B a s i s of a cc o u n t i ng
All accounting policies applied in this Preliminary Statement are consistent with those in the full financial statements which have yet to be published. The preliminary results for the year ended 31 December 2022 were approved by the Board of Directors on 17 April 2023. The financial information set out in this announcement does not constitute statutory financial statements for the years ended 31 December 2022 and 2021 within the meaning of Section 435 of the Companies Act 2006, but is extracted from those financial statements. The auditors have reported on those financial statements and have given an unqualified report which does not contain a statement under Section 498 of the Companies Act 2006.
1. Adjusted Performance Measures
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted EBITDA which excludes the effects of expenditure that management believe should be added back (separately disclosed items) and other income. The share option expense is also excluded given it is not directly linked to operating performance of the divisions. Interest is not allocated to segments as the Group's cash position is controlled by the central finance team. This measure provides the most reliable indicator of underlying performance of each of the trading divisions as it is the closest approximation to cash generated by underlying trade, excluding the impact of separately disclosed items and working capital movements.
Adjusted EBITDA is not an IFRS measure, nevertheless although it may not be comparable to adjusted figures used elsewhere, it is widely used by both the analyst community to compare with other gaming companies and by management to assess underlying performance.
A reconciliation of the adjusted operating expenses used for statutory reporting and the adjusted performance measures is shown below:
Note 2022 2021
Continuing operations GBP000 GBP000
Operating costs per income statement (14,803) (15,680)
Add back:
Depreciation 15,16 1,216 982
Amortisation, excluding acquired intangible
assets 14 252 129
Amortisation of acquired intangible assets 14 29 509
Impairment of goodwill 13 517 -
Reversal of impairment of property, plant and
equipment 15 (190) (335)
Loss on sale of property, plant and equipment 15,16 150 -
Share option charge 2 - 334
Separately disclosed items (net) 4 657 1,101
--------- ---------
Adjusted operating costs (12,172) (12,960)
--------- ---------
Adjusted EBITDA is calculated as below:
2022 2021
Continuing operations GBP000 GBP000
Revenue 26,004 22,942
Cost of sales (11,847) (11,489)
--------- ---------
Gross profit 14,157 11,453
Marketing and distribution costs (386) (276)
--------- ---------
Contribution 13,771 11,177
Adjusted operating income and costs (12,172) (12,700)
--------- ---------
Adjusted EBITDA 1,599 (1,523)
--------- ---------
The 2021 Adjusted EBITDA reported in 2021, included an amount of GBP260,000 Sports betting investment and therefore a total 2021 Adjusted EBITDA of GBP(1,783). This has been adjusted to provide clarity and consistency and 'like for like' reporting.
Adjusted profit/(loss) is also an adjusted performance measure used by the Group. This uses adjusted EBITDA, as defined above as management's view of the closest proxy to cash generation for underlying divisional performance, and deducting share option charges, depreciation, amortisation of intangible assets (other than those which arise in the acquisition of businesses) and certain finance charges. This provides an adjusted profit before tax measure, which is then taxed by applying an estimated adjusted tax measure. The adjusted tax charge excludes the tax impact of income statement items not included in adjusted profit before tax.
2022 2021
From continuing operations: GBP000 GBP000
Adjusted EBITDA 1,599 (1,783)
Share option charge - (334)
Depreciation (1,216) (982)
Amortisation (excluding amortisation of acquired
intangibles) (252) (129)
Net finance costs (note 8) (230) (130)
-------- --------
Adjusted profit/(loss) before tax (99) (3,358)
Tax (79) 551
-------- --------
Adjusted profit/(loss) after tax (178) (2,807)
-------- --------
Note 2022 2021
From discontinued operations: GBP000 GBP000
Adjusted EBITDA 11 1,183 6,879
Depreciation 11 - (221)
Amortisation 11 - (151)
Net finance costs 11 - 54
------- --------
Adjusted profit before tax 1,183 6,561
Tax - (1,693)
------- --------
Adjusted profit after tax 1,183 4,868
------- --------
2. Segmental reporting
2022 Sportech Sportech Corporate
Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000
Revenue from sports betting services - 1,974 - 1,974
Revenue from food and beverage sales - 3,443 - 3,443
Revenue from rendering of services 1,471 19,116 - 20,587
--------- --------- ---------- ---------
Total revenue 1,471 24,533 - 26,004
Cost of sales (944) (10,903) - (11,847)
--------- --------- ---------- ---------
Gross profit 527 13,630 - 14,157
Marketing and distribution costs 4 (390) - (386)
--------- --------- ---------- ---------
Contribution 531 13,240 - 13,771
Adjusted net operating costs (note 1) (838) (9,194) (2,140) (12,172)
--------- --------- ---------- ---------
Adjusted EBITDA (307) 4,046 (2,140) 1,599
Depreciation (10) (1,192) (14) (1,216)
Amortisation (excluding amortisation of
acquired intangible assets) (162) - (90) (252)
Amortisation of acquired intangibles (29) - - (29)
Loss on sale of property, plant and equipment - (133) (17) (150)
Impairment of goodwill (517) - - (517)
Reversal of impairment - 190 - 190
Other income - 120 - 120
Separately disclosed items - (307) (350) (657)
Operating (loss)/profit (1,025) 2,724 (2,611) (912)
Net finance income (22)
Loss before taxation from continuing operations (934)
Taxation - continuing operations (79)
---------
Loss for the year from continuing operations (1,013)
Net profit from discontinued operations 1,183
---------
Loss for the year 170
---------
Sportech Sportech Corporate
Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000
Segment assets 951 27,055 168 28,174
Segment liabilities (50) (12,831) (1,254) (14,135)
--------- --------- ---------- ---------
Other segment items - capital expenditure
Intangible assets (continuing operations) 196 - - 196
Property, plant and equipment (continuing
operations) 5 142 - 147
--------- --------- ---------- ---------
2021 Sportech Sportech Corporate
Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000
Revenue from sports betting services - 280 - 280
Revenue from food and beverage sales - 2,115 - 2,115
Revenue from rendering of services 1,032 19,515 - 20,547
--------- --------- ---------- ---------
Total revenue 1,032 21,910 - 22,942
Cost of sales (548) (10,941) - (11,489)
--------- --------- ---------- ---------
Gross profit 484 10,969 - 11,453
Marketing and distribution costs (76) (200) - (276)
--------- --------- ---------- ---------
Contribution 408 10,769 - 11,177
Adjusted net operating costs (note 1) (987) (9,149) (2,564) (12,700)
--------- --------- ---------- ---------
Adjusted EBITDA (pre sports betting investment) (579) 1,620 (2,564) (1,523)
Sports betting investment - (260) - (260)
--------- --------- ---------- ---------
Adjusted EBITDA (579) 1,360 (2,564) (1,783)
Share option charge - - (334) (334)
Depreciation (10) (950) (22) (982)
Amortisation (excluding amortisation of
acquired intangible assets) (97) - (32) (129)
--------- --------- ---------- ---------
Segment result before amortisation of acquired
intangibles (686) 410 (2,952) (3,228)
Amortisation of acquired intangibles (509) - - (509)
Reversal of impairment of property, plant
and equipment - 335 - 335
Separately disclosed items (165) (84) (852) (1,101)
Other income 100 4,001 - 4,101
--------- --------- ---------- ---------
Operating (loss)/profit (1,260) 4,662 (3,804) (402)
Net finance income 156
Loss before taxation from continuing operations (246)
Taxation - continuing operations (192)
---------
Loss for the year from continuing operations (438)
Profit after tax from discontinued operations 35,001
--------- --------- ---------- ---------
Profit for the year 34,563
Sportech Sportech Corporate
Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000
Segment assets 1,252 20,288 18,738 40,278
Segment liabilities (208) (12,144) (8,104) (20,456)
--------- --------- ---------- ---------
Other segment items - capital expenditure
Intangible assets (continuing operations) 165 - - 165
Intangible assets (discontinued operations) 847 - - 847
Property, plant and equipment (continuing
operations) 4 27 - 31
Property, plant and equipment (discontinued
operations) 551 - - 551
--------- --------- ---------- ---------
2b Information by geographical area
Revenues from
Revenues from external customers
external customers Discontinued
Continuing operations operations Non-current assets
2022 2021 2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
United Kingdom 93 62 - 1,867 702 1,316
North and South America 25,911 22,880 - 12,534 16,080 14,721
Europe - - - 1,724 - -
Other - - - 294 - -
------------ -----------
Total 26,004 22,942 - 16,419 16,782 16,037
------------ ----------- ---------- ---------- ---------- ---------
3. Expenses by nature
2022 2021
Note GBP000 GBP000
Cost of sales
Tote and track fees 10,208 10,205
F&B consumables 1,144 818
Betting and gaming duties and licences 125 99
Repairs and maintenance cost of sales 28 34
Programs 256 266
Other cost of sales 86 67
------- -------
Total cost of sales 11,847 11,489
------- -------
Marketing and distribution costs
Marketing 368 253
Vehicle costs 18 23
Total marketing and distribution costs 386 276
------- -------
Operating costs
Staff costs - gross, excluding share option
charges 6,323 6,661
Less amounts capitalised (171) (165)
------- -------
Staff costs - net 6,152 6,496
Property costs 2,688 2,581
IT & Communications 628 457
Professional fees and licences 1,524 2,323
Insurance 913 968
Travel and entertaining 94 26
Banking transaction costs and FX 107 109
Other costs 66 -
------- -------
Adjusted operating costs (including sports betting
investment) 12,172 12,960
Share option charge 334
Depreciation 15,16 1,216 982
Loss on sale of property, plant and equipment 150 -
Amortisation, excluding amortisation on acquired
intangibles 14 252 129
Amortisation of acquired intangibles 14 29 509
Impairment of goodwill 13 517 -
Impairment reversal of property, plant and equipment
and right-of-use assets 15,16 (190) (335)
Separately disclosed items 15 657 1,101
Total operating costs 14,803 15,680
------- -------
4. Separately disclosed items
2022 2021
Continuing operations Note GBP000 GBP000
Included in operating costs:
Onerous contract provisions and other losses
resulting from exit from Californian operations (120) 91
Redundancy and restructuring costs(1) 414 625
Corporate activity costs 57 21
Costs in relation to the Spot the Ball VAT refund - 10
Settlement of a contract(2) 304 -
Costs in relation to exiting the Group's interests
in India 2 13
Costs in relation to the Group's move from Main
Market to AIM - 341
657 1,101
----------------- -------
Discontinued operations
Included in operating costs 11 - 371
Total included in operating costs 657 1,472
----------------- -------
Included in finance costs - continuing operations:
Interest accrued on corporate tax relating to
the balance sheet date on STB refund received
in 2016 24 150
8 24 150
----------------- -------
Net separately disclosed items 681 1,622
----------------- -------
1. Redundancy and restructuring costs relate to settlements made to former Directors in lieu of notice.
2. Settlement of a contract relates to the Group exiting a royalty arrangement in the period relating to branding at its Connecticut venues. This required a termination fee to be paid.
Below is a summary of cash outflows from separately disclosed items:
2022 2021
GBP000 GBP000
--------------------------------------------------------------- -------- ---------
Continuing operations - cash outflows from separately
disclosed items:
Onerous contract provisions and other losses resulting (688) -
from exit from Californian operations
Settlement of a contract (304) -
Redundancy and restructuring costs (414) (625)
Costs in relation to the Spot the Ball VAT refund - (37)
Costs in relation to corporate activity (49) (71)
Costs in relation to the Group's move to AIM - (341)
Costs in relation to the Group's lease in Norco,
California - (785)
Costs in relation to exiting the Group's interests
in India (2) (13)
--------------------------------------------------------------- -------- ---------
Cash outflows from separately disclosed items -continuing
operations (net) (1,457) (1,872)
Cash outflows from separately disclosed items - discontinued
operations (net) - (535)
--------------------------------------------------------------- -------- ---------
Cash outflows from separately disclosed items - total (1,457) (2,407)
--------------------------------------------------------------- -------- ---------
5. E m pl o y me nt c o s ts
Average number of monthly employees (full-time equivalents) including Executive Directors comprised:
Continuing Discontinued Total Continuing Discontinued Total
2022 2022 2022 2021 2021 2021
Continuing operations Number Number Number Number Number Number
S a l e s and ma r
k e t i ng 5 - 5 4 13 17
O p e r a t i o n s
and d i s t ri b u
t i on 140 - 140 134 195 329
A d min i s t r a t
i o n and management 12 - 12 12 24 36
----------- ------------- ------- ----------- ------------- -------
T o t a l e m pl oy
e es 157 - 157 150 232 382
----------- ------------- ------- ----------- ------------- -------
T he i r ag g r e g a te r e m u n e r a t i on c omp r i s e d:
Continuing Discontinued
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
Wages and Salaries 5,545 5,933 - 4,145
Social security costs 530 475 - 406
Pension costs - defined contribution scheme
(note 25) 75 88 - 225
Employee remuneration, excluding share option
charges 6,150 6,496 4,776
Share option expense - 334 -
------- ------- ------- -------
Total remuneration 6,150 6,830 4,776
------- ------- ------- -------
6. D i r ec t o rs a nd key mana geme nt r e m u ne r a t i on
Directors &
Key Management
------------------
2022 2021
-------- --------
GBP000 GBP000
Sho rt - t e rm e m pl oy ee b e n e
f i ts 365 1,701
Sha r e - b as e d p a y m e n ts - -
P a y in l i eu of n ot i ce 266 368
Po s t -e m pl o y m e nt b e n e f i - -
ts
-------- --------
T o t a l r e m u n e r a t i on 631 2,069
-------- --------
In the above table, the prior year includes approved bonuses for 2021 and excludes any bonus which was contingent on the completion of the disposal of the held for sale assets at 31 December 2021. Those bonuses which have now been paid in 2021 have been included in the 2021 amounts in the above table.
7. Auditor remuneration
Fees paid to the Auditors of the consolidated financial statements during the period comprise:
2022 2021
GBP000 GBP000
Audit fees 258 264
Corporate finance services - 55
Other assurance services 15 18
------- -------
Total fees 273 337
------- -------
8. Net finance income/(costs)
2022 2021
Continuing operations: GBP000 GBP000
Finance costs:
Interest accrued and paid on tax liabilities (24) (150)
Interest on lease obligations (note 24) (230) (155)
Foreign exchange loss on financial assets and liabilities - -
denominated in foreign currency
Total finance costs (254) (305)
Finance income:
Interest received on bank deposits - 25
Foreign exchange gain on financial assets and liabilities
denominated in foreign currency 232 436
------- -------
Total finance income 232 461
Discontinued operations - 54
Net finance (costs)/income (22) 210
------- -------
Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in note 1.
Continuing operations: 2022 2021
GBP000 GBP000
Foreign exchange gain on financial assets and liabilities
denominated in foreign currency 232 436
Interest accrued and paid on tax liabilities (24) (150)
208 286
-------- --------
9. Taxation
The Group's tax charge from continuing and discontinued operations comprises:
2022 2021
GBP000 GBP000
Current tax:
Current tax on profit for the year 287 1,219
Adjustments in respect of prior years (150) 6
------- ---------
Total current tax 137 1,225
------- ---------
Deferred tax:
Origination and reversal of temporary differences (43) (56)
Change in rates - (4)
Adjustments in respect of prior years (15) 13
Derecognition of previously recognised deferred tax assets - -
------- ---------
Total deferred tax (58) (47)
------- ---------
Total tax charge 79 1,178
------- ---------
2022 2021
Note GBP000 GBP000
Total tax charge in continuing operations 79 192
Total tax charge in discontinued operations 11 - 986
----------- -----------
Total tax charge 79 1,178
----------- -----------
The taxation on the Group's profit/(loss) before taxation differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits and losses of the consolidated entities as follows:
2022 2021
Note GBP000 GBP000
Profit for the year 169 34,563
Total tax charge 79 1,178
------- --------
Profit before tax 248 35,741
Tax calculated at domestic tax rates applicable to
(losses)/profits in the respective countries 44 8,065
Tax effects of:
- income not taxable net of expenses not deductible
for tax purposes 201 (5,282)
- foreign taxes paid not provided for - 689
- adjustments in respect of prior years - current
tax (150) 6
- adjustments in respect of prior years - deferred
tax (15) 13
- effect of change in rates - (4)
- deferred tax not recognised during the year - 319
- deferred tax not previously provided - (2,628)
- derecognition of previously recognised deferred - -
tax assets
------- --------
Total tax charge 79 1,178
------- --------
No deferred tax asset has been recognised in the US businesses as at 31 December 2022 or 2021 as there is not sufficient certainty over the recoverability of these against suitable future profits. There are no changes expected in the US federal income tax rate from the current rate of 21%.
These financial statements account for the change in the UK Corporation Tax rate from 19% to 25% based on enacted legislation..
The tax position in relation to the treatment of the GBP4.6m gain included in the 2016 financial statements for the Spot the Ball VAT refund remains uncertain. The directors continue to consider that this amount is in dispute and await the HMRC final determination of assessments whereupon they will consider if any further actions are appropriate. No contingent asset is provided in this respect.
An analysis of the net current tax (assets)/ liabilities is as follows:
2022 2021
GBP000 GBP000
At 1 January 4,718 3,258
Charged to the income statement - continuing operations 153 239
Charged to the income statement - discontinued
operations* - 791
Paid during the year - continuing operations (5,083) (105)
Received during the year - continuing operations - 1,442
Paid during the year - discontinued operations* - (904)
Transferred to liabilities associated with assets - -
held for sale
Foreign exchange movements (16) (3)
At 31 December (228) 4,718
-------- -------
Included in:
Current assets (228) -
Current liabilities - 4,718
-------- -------
(228) 4,718
-------- -------
* Relating to LEIDSA contract. Tax paid in the other discontinued operations was GBP20k.
10. Other income
Other income recognised in the income statement during the year is as follows:
2022 2021
Note GBP000 GBP000
Settlement for early termination of a contract - 100
CARES Act credits received - continuing operations 120 1,426
Profit on disposal of Sports Haven - 2,575
------- -------
Total - continuing operations 120 4,101
CARES Act credits received - discontinued operations 11c 170 1,057
------- -------
Total 290 5,158
------- -------
CARES Act credits were received given the impact on the Group's operations of the COVID-19 restrictions imposed in the USA. All amounts were received in cash either during the year or in February 2023. Proceeds from the settlement for early termination of a contract are due to be received in early Q2 of 2022.
11. Discontinued operations and assets held for sale
11a) 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 GBP4,346k ($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 GBP153k ($210k). The property was leased back for an initial 18 months to 31 October 2022, then extended to February 2024 at a rental of cGBP36k per month ($50k). On disposal, a lease liability of GBP633k was recognised as well as a right-of-use asset of GBP169k.
11b) On 2 June 2021 the Group completed the disposal its 50:50 lottery division, Bump 50:50. In addition to the consideration received during 2021, further consideration was received by the group in March 2023 following Bump 50:50 achieving the revenue trigger in the financial year ending 31 December 2022. The gross amount received of GBP1,229k has been recognised within discontinued operations in the Income Statement with a net gain of GBP1,013k.
The profit for the period and cashflows from Bump are shown below:
Period
ended 2
2022 June 2021
Bump (Worldwide) Inc.: Note GBP000 GBP000
------------------------------------------------- ----- ------- -----------
Revenue 1,229 810
Cost of sales, marketing and distribution and
adjusted operating expenses (216) (487)
------------------------------------------------- ----- ------- -----------
Adjusted EBITDA 1,013 323
Depreciation and amortisation - -
Separately disclosed items - -
Finance income - 78
-------------------------------------------------
Profit before tax 1,013 401 Tax, excluding tax arising on disposal - - ------------------------------------------------- ----- ------- ----------- Profit after tax - 401 Gain from selling discontinued operations after tax (net of disposal costs) 11e 1,013 3,805 ------------------------------------------------- ----- ------- ----------- Profit for the period 1,013 4,206 ------------------------------------------------- ----- ------- ----------- Net cash flow from operating activities - 462 Net cash flow (used in) investing activities - (37) ------------------------------------------------- ----- ------- ----------- Net cash inflow/(outflow) - 425 ------------------------------------------------- ----- ------- -----------
11c) On 17 June 2021 the Group completed the disposal of its Global Tote division which also formed part of the Sportech Racing division and was classified as held for sale as at 31 December 2020. Gross Consideration amounts to GBP33,906k including a payment for cash transferred to the buyer with the business of GBP3,609k net of debt like items of GBP1,294k, received in July 2021 plus a settlement of net working capital which was in excess of an agreed Target working capital (and other adjustments) of GBP559k also delivered. In addition, the historical underlying tote software code was disposed of by Sportech PLC to BetMakers Technology Group Limited within the same agreement, proceeds of GBP150k resulted in a profit on disposal of GBP68k.
The Group has recognised GBP170k relating to Cares Act claims for the period prior to disposal which were received by the Group in 2023.
The profit for the period and cashflows from Global Tote are shown below:
Period
ended
17 June
2022 2021
Global Tote Group: Note GBP000 GBP000
-------------------------------------------------------- ----- ------- ----------
Revenue - 12,245
Cost of sales, marketing and distribution and adjusted
operating expenses - (8,140)
-------------------------------------------------------- ----- ------- ----------
Adjusted EBITDA - 4,105
Other income 170 1,057
Depreciation and amortisation - -
Profit on disposal of intangible assets - 68
Separately disclosed items - (371)
Finance costs - (24)
--------------------------------------------------------
Profit before tax 170 4,835
Tax, excluding tax arising on disposal - (195)
-------------------------------------------------------- ----- ------- ----------
Profit after tax - 4,640
Gain from selling discontinued operations after tax
(net of disposal costs) 11e 170 17,051
-------------------------------------------------------- ----- ------- ----------
Profit for the period 170 21,691
-------------------------------------------------------- ----- ------- ----------
Net cash flow from operating activities - 1,944
Net cash flow (used in) investing activities - (930)
Net cash flow (used in) financing activities - (160)
-------------------------------------------------------- ----- ------- ----------
Net cash inflow - 854
-------------------------------------------------------- ----- ------- ----------
11d) The profit for the period and cashflows from Sportech Lotteries, LLC are shown below:
Note 2022 2021
Sportech Lotteries, LLC: GBP000 GBP000
----------------------------------------------------- ----- ------- -------
Revenue - 3,364
Cost of sales, marketing and distribution and
adjusted operating expenses - (913)
----------------------------------------------------- ----- ------- -------
Adjusted EBITDA - 2,451
Depreciation and amortisation - (372)
Profit on disposal of property, plant and equipment - 47
-----------------------------------------------------
Profit before tax - 2,126
Tax, excluding tax arising on disposal - (791)
----------------------------------------------------- ----- ------- -------
Profit after tax - 1,335
Gain from selling discontinued operations after
tax (net of disposal costs) 11e - 7,769
----------------------------------------------------- ----- ------- -------
Profit for the period - 9,104
----------------------------------------------------- ----- ------- -------
Net cash flow from operating activities - 1,068
Net cash flow (used in) investing activities - (429)
----------------------------------------------------- ----- ------- -------
Net cash inflow - 639
----------------------------------------------------- ----- ------- -------
11e) A summary of the gain on disposal of each discontinued operation is as follows:
Global Sportech
Tote Group Bump (Worldwide) Lotteries
Inc. LLC Total
Note GBP000 GBP000 GBP000 GBP000
------------------------------------------ ------ ------------ ----------------- ----------- -------
Cash consideration received and
receivable 170 1,229 - 1,399
Cash consideration received and
receivable net of cash disposed
of 170 1,229 - 1,399
-------------------------------------------------- ------------ ----------------- ----------- -------
Costs of disposal - (216) - (216)
Pre-tax gain on disposal of discontinued
operations 170 1,013 - 1,183
Taxation
------------------------------------------ ------ ------------ ----------------- ----------- -------
Gain on disposal of discontinued
operations 170 1,013 - 1,183
-------------------------------------------------- ------------ ----------------- ----------- -------
Costs of disposal include bonuses paid to Group employees and former employees of GBP216k for Bump.
11f) A summary of the cash consideration received and receivable net of cash disposed of is as follows:
Global Sportech
Tote Group Bump (Worldwide) Lotteries
Inc. LLC Total
Note GBP000 GBP000 GBP000 GBP000
----------------------------------- ------ ------------ ----------------- ----------- -------
Cash consideration received and
receivable net of cash disposed
of before disposal costs paid in
the period 170 1,229 - 1,399
------------------------------------------- ------------ ----------------- ----------- -------
11g) Reconciliation to profit/(loss) for the period included in the income statement:
Note 2022 2021
GBP000 GBP000
------------------------- ----- ------- -------
Global Tote 11c 170 21,691
Bump 11b 1,013 4,206
Sportech Lotteries, LLC 11d - 9,104
------------------------- ----- ------- -------
1,183 35,001
------------------------- ----- ------- -------
12. E a rn i n gs/(loss) per s ha re
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Parent Company by the weighted average number of ordinary shares in issue during the year.
Continuing Discontinued Total Continuing Discontinued Total
2022 2022 2022 2021 2021 2021
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
(Loss)/profit attributable
to the owners of the
Company (1,014) 1,183 169 (438) 35,001 34,563
Weighted average number
of ordinary shares in
issue ('000) 100,000 100,000 100,000 169,785 169,785 169,785
----------- ------------- -------- ----------- ------------- --------
Basic (loss)/earnings
per share (1.0)p 1.2p 0.2p (0.3)p 20.6p 20.3p
----------- ------------- -------- ----------- ------------- --------
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Where there is a loss attributable to owners of the Company, the earnings per share is not diluted.
Continuing Discontinued Total Continuing Discontinued Total
2022 2022 2022 2021 2021 2021
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit attributable to the
owners of the Company (1,014) 1,183 169 (438) 35,001 34,563
Weighted average number
of ordinary shares in issue
('000) 100,000 100,000 100,000 169,785 169,785 169,785
Dilutive potential ordinary
shares (1.0)p 1.2p 0.2p N/A N/A N/A
----------- ------------- -------- ----------- ------------- --------
Total potential ordinary
shares 100,000 100,000 100,000 169,785 169,785 169,785
----------- ------------- -------- ----------- ------------- --------
Diluted earnings per share (1.0)p 1.2p 0.2p (0.3)p 20.6p 20.3p
----------- ------------- -------- ----------- ------------- --------
The number of potentially dilutive shares not taken into account in respect of the VCP in prior year was unlimited. The VCP expired on 31 December 2022 and there are no longer any potentially dilutive shares.
c) Adjusted
Adjusted EPS is calculated by dividing the adjusted loss after tax (as defined in note 1) attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year.
2022 2021
--------------------------------
Weighted Weighted
Adjusted average Adjusted average
loss number Per loss number Per
after of shares share after of shares share
Continuing operations tax amount tax amount
GBP000 GBP000 Pence GBP000 GBP000 Pence
Basic adjusted EPS (143) 100,000 (0.1)p (2,807) 169,785 (1.7)p
Diluted adjusted EPS (143) 100,000 (0.1)p (2,807) 169,785 (1.7)p
1 3 . G o o d w ill
Goodwill cost brought forward arose on the acquisition of Lot.to Systems Limited (which is now subsumed into Sportech Digital) in February 2019. The goodwill is attributable to the knowledge and expertise of the workforce.
Movements in the Group's goodwill are shown below:
2022 2021
GBP000 GBP000
Cost
At 1 January 604 604
At 31 December 604 604
Accumulated impairment charges
At 1 January -
Impairment charge 517 -
At 31 December 517 -
Closing net book value 87 604
As required by IAS 36, an impairment test has been carried out as at 31 December 2022.
The recoverable amount of the CGU has been determined based on a value-in-use calculation. The key base case assumptions made in calculating the value-in-use were:
On 3 February, Lot.to Systems Limited received GBP500k cash in initial consideration for the disposal of its trade and assets to Inspired Gaming Ltd. The purchase consideration represented value for the transfer under TUPE of the development team and the intangible assets, being the software they had internally developed with the costs of their time having been capitalised in previous periods.
The carrying value of the acquired goodwill in the Group in respect of Lotto is GBP604k which along with the intangible assets of GBP412k comes to GBP1,016k. This means an impairment loss of GBP517k is required to write down the fixed assets to the value of the purchase consideration.
14. I n t an gi ble f i x ed as s e ts
2022
Software Licences Total
GBP000 GBP000 GBP000
Cost
At 1 January 2022 4,576 5,696 10,272
Additions - continuing operations 196 - 196
Disposals - continuing operations (2) - (2)
At 31 December 2022 4,770 5,696 10,466
Accumulated amortisation
At 1 January 2022 3,592 914 4,506
Charge for year - continuing operations 277 4 281
Disposal - continuing operations 2 - 2
At 31 December 2022 3,871 918 4,789
Exchange differences at 1 January 2022 (247) 838 591
Movement in the year 0 671 671
Exchange differences at 31 December 2022 (247) 1,509 1,262
Net book amount at 31 December 2022 652 6,287 6,939
Of the amounts capitalised in the year in continuing operations, GBP196k arose from capitalising staff costs for development expenditure (2021: GBP165k). Amortisation has been included within operating costs.
Impairment - Licences
The Group holds a licence in perpetuity to offer pari-mutuel off-track betting in the State of Connecticut in the US for its Venues division. This asset has a book value in GBP at the reporting date, prior to any impairment that may be considered necessary, of GBP6,287k ($7,569k, 2021: GBP5,616k, $7,569k). Given this licence is in perpetuity, the book value of the asset is not amortised and the useful economic life allocated to the asset is indefinite.
As required by IAS 36, an impairment test has been carried out as at 31 December 2022. In testing for impairment, other assets used solely to generate cash flows in the Venues CGU are also included, totalling (together with the licence carrying value) GBP15,814k, $19,039k (2021: GBP12,680k, $17,088k).
The recoverable amount of the asset has been determined based on a value-in-use calculation. The key base case assumptions made in calculating the value-in-use were:
- EBITDA forecasts assume year-on-year handle decline in the core operating business of 2.8% in the next 5 years and a 2% decline into perpetuity;
- a significant increase in F&B revenues in 2023 reflecting a full recovery from the overhang of COVID-19 restrictions, thereafter the revenue is held flat into perpetuity;
- Online and Sports betting revenues are forecasted to increase by 2% into perpetuity (is it assumed the 10-year contract with CLC will be renewed in perpetuity);
- capital expenditure was included in the cash flows at management's best estimate of industry norm for reinvestment in retail outlets of the kind under review; and
- a post-tax discount rate of 13.9% (2021: 13.5%) was used representing a market-based weighted average cost of capital appropriate for the Sportech Venues CGU.
The above assumptions are together considered by management to be the most likely trading performance outcome for the CGU, having taken into account past experience and knowledge of the future trading environment.
Following the impairment review, the recoverable amount of those assets was deemed to be GBP17,726k ($21,340k) and accordingly no impairment was identified (2021: no impairment).
The below assumptions represent a reasonable downside case for sensitivity purposes. This would reduce the carrying value of the trading assets in the business to GBP12,946k, being headroom to the carrying value of GBP266k.
- 4% decline for 2023 through 2025 rather than 2% for core wagering handle;
- No growth in the F&B revenue;
- On line and sports betting revenues growth rate halved to 1%
- All other costs remain constant;
2021
Software Licences Total
GBP000 GBP000 GBP000
Cost
At 1 January 2021 5,353 5,696 11,049
Additions - continuing operations 165 - 165
Additions - discontinued operations 23 - 23
Disposal (965) - (965)
At 31 December 2021 4,576 5,696 10,272
Accumulated amortisation
At 1 January 2021 3,594 879 4,473
Charge for year - continuing operations 603 35 638
Charge for year - discontinued operations 151 - 151
Disposal (756) - (756)
At 31 December 2021 3,592 914 4,506
Exchange differences at 1 January 2021 - 767 767
Movement in the year - 71 71
Disposal (247) - (247)
Exchange differences at 31 December 2021 (247) 838 591
Net book amount at 31 December 2021 737 5,620 6,357
15. P r o pe r t y, pl a nt a nd e q ui p me nt
Leasehold
2022 improvements Assets
and owned Plant Fixtures in the course
land and and machinery and fittings of construction Total
buildings GBP000 GBP000 GBP000 GBP000
GBP000
Cost
At 1 January 2022 8,393 502 3,598 1 12,494
Additions - continuing operations - 3 109 35 147
Disposals (193) - (374) - (567)
At 31 December 2022 8,200 505 3,333 36 12,074
Accumulated depreciation
At 1 January 2022 4,640 1 3,508 - 8,149
Charge for year - continuing
operations 231 21 182 - 434
Reversal of impairment (190) - - - (190)
Disposals (119) - (315) - (434)
A t 31 December 2022 4,562 22 3,375 - 7,959
Exchange differences at 1
January 2022 54 (472) 333 1 (84)
Movement in the year 441 3 47 - 491
Disposals - - - - -
Exchange differences at 31
December 2022 495 (469) 380 1 407
N e t b o ok am o u nt at
31 December 2022 4,133 14 338 37 4,522
Depreciation charges and the loss on disposal of PPE have been included in operating costs.
Reversal of impairment
The assets at the Stamford sports bar venue in Connecticut, USA were fully impaired in prior periods. Given the new arrangement for sports betting in the venue which came into force in late October 2021, management have considered whether any of the previous impairment of assets should be reversed based on the venue's trading performance. Modelling was undertaken to calculate the value-in-use of the assets at the venue. The following key assumptions were made in the value-in-use calculation:
- The break clause in May 2025 will not be activated to end the lease in June 2026 and the trade at the venue will continue into perpetuity (this a reversal of the assumption taken in June 2020 that the break would be taken). This has been reflected in the year with the lease liability remeasured resulting in an increase in the lease liability of GBP2,835K and a corresponding increase in the right-of-use asset was made (see note 16 and 24);
- All operating assumptions driving revenues and costs were considered in the same way as the overall venues business;
- Capital expenditure will average at $60k per annum until 2025 and then $40k per annum into perpetuity; and
- a post-tax discount rate of 13.9% (2021: 13.5%) was used representing a market-based weighted average cost of capital appropriate for the Sportech Venues CGU.
As part of the discounted cashflow exercise with the above assumptions the recoverable amount of those assets was deemed to be GBP4,071k Accordingly a reversal of impairment of GBP190k was identified and has been credited to the income statement within operating costs.
No indicators of impairment of other property, plant and equipment arose in the second half of the year.
Leasehold
2021 improvements Assets
and owned Plant Fixtures in the course
land and and machinery and fittings of construction Total
buildings GBP000 GBP000 GBP000 GBP000
GBP000
Cost
At 1 January 2021 8,393 3,022 3,553 31 14,999
Additions - continuing operations - 16 45 (30) 31
Additions - discontinued operations - 343 - 64 407
Disposals - (2,879) - (64) (2,943)
At 31 December 2021 8,393 502 3,598 1 12,494
Accumulated depreciation
At 1 January 2021 4,780 1,513 3,274 - 9,567
Charge for year - continuing
operations 195 19 234 - 448
Charge for year - discontinued
operations - 221 - - 221
Reversal of impairment (335) - - - (335)
Disposals - (1,752) - - (1,752)
A t 31 December 2021 4,640 1 3,508 - 8,149
Exchange differences at 1
January 2021 122 (672) 195 - (355)
Movement in the year (68) 1 138 1 72
Disposals - 199 - - 199
Exchange differences at 31
December 54 (472) 333 1 (84)
N e t b o ok am o u nt at
31 December 2021 3,807 29 423 2 4,261
16. Right-of-use assets
2022
Land and Fixtures
buildings Vehicles and fittings Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 January 2022 8,881 29 53 8,963
Additions 652 - - 652
Disposals (102) - - (102)
At 31 December 2022 9,431 29 53 9,513
Accumulated depreciation
At 1 January 2022 4,217 7 37 4,261
Charge for year 765 5 12 782
Disposals (85) - - (85)
A t 31 December 2022 4,897 12 49 4,958
Exchange differences at 1 January 2022 (42) (1) (2) (45)
Movement in the year 520 4 8 532
Exchange differences at 31 December 2022 478 3 6 487
N e t b o ok am o u nt at 31 December 2022 5,012 20 10 5,042
The addition in year relates to the extension of the existing lease of the Sports Haven venue.
2021
Land and Fixtures
buildings Vehicles and fittings Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 January 2021 6,941 29 53 7,023
Additions 1,240 - - 1,240
Reassessment of lease term 604 - - 604
Transferred from held for sale 96 - - 96
At 31 December 2022 8,881 29 53 8,963
Accumulated depreciation
At 1 January 2021 5,878 2 27 5,907
Charge for year 519 5 10 534
Reassessment of lease term (2,231) - - (2,231)
Transferred from held for sale 51 - - 51
A t 31 December 2022 4,217 7 37 4,261
Exchange differences at 1 January 2021 20 (1) (2) 17
Movement in the year (62) - - (62)
Exchange differences at 31 December 2022 (42) (1) (2) (45)
N e t b o ok am o u nt at 31 December 2022 4,622 21 14 4,657
Depreciation charges have been included in operating costs.
Reassessment of lease assumption - break clause
During the year ended 31 December 2020, management had judged that the break clause in the lease of the Stamford sports bar venue in Connecticut, USA, would be exercised and that the venue would be exited in May 2025.
Following the new arrangement which came into force in late October 2021 and allowed sports betting to commence in the venue, management now consider that the break will not be taken and the Group will continue to operate the venue until at least the end of the lease in May 2035. As a result, during the year ended 31 December 2021, the lease liability was remeasured resulting in an increase of GBP2,835k (see note 24) and a corresponding increase in the right-of-use asset.
This GBP2,835k increase to the right-of-use asset should wholly be recognised as an increase in cost but GBP2,231k was taken against accumulated depreciation with only GBP604k recognised as an increase in cost. This is to ensure that the correct closing cost and accumulated depreciation figures are reported as, during the year ended 31 December 2020, the reassessment of the lease term which led to a decrease in the right of use asset of GBP2,231k was shown as an increase in accumulated depreciation when it should have been recognised as a reduction in cost. This had no impact on the net book amount of the right-of-use asset reported nor on profit for the year. Rather than restate the cost and accumulated depreciation figures for the year ended 31 December 2020 with no overall impact, management have reversed the GBP2,231k adjustment to accumulated depreciation during the year ended 31 December 2021 and correctly recognised the excess of GBP604k as an increase in cost.
Value in use
Management considered that indicators of impairment of the right-of-use assets of the Stamford sports bar lease in Connecticut, USA, following the reassessment of the break clause assumption. The carrying value was considered to be supported by the discounted future cashflows and as a result no further impairment was identified. See note 15 for details of assumptions used in the forecasting.
No indicators of impairment arose in relation to any other right-of-use asset during the period.
Further lease disclosures are given in note 24.
17. N et i nv es t me nt in joi nt v e n t u r e
The Group held a 50% investment in Striders sports bar in San Diego, as part of the joint venture company S&S Venues California, LLC. Striders is a food and beverage venue with on-site wagering facilities in California. It commenced trading in February 2017 and ceased trading in December 2019. The Group's obligations in relation to the joint venture have been settled and the legal process to dissolve the joint venture company was completed in 2022.
18. Trade and other receivables
2022 2021
GBP000 GBP000
N o n -cur r e nt
Other receivables 177 158
N o n -cur r e nt t r ade and o t h er r e c e
i v a bl es 177 158
C ur r e n t
T r ad e r e c e i v a bl es 1,112 781
L e s s p ro vis i on f or i mp air m e nt of - -
r e c e i v a bl es
T r ad e r e c e i v a bl es - n et 1,112 781
O t h e r r e c e i v a bl es 491 480
A c c ru e d i n c ome 231 279
P r e p a y m e n t s 144 210
C ur r e n t t r ade and o t h er r e c e i v
a bl es 1,978 1,750
T o t a l t r ade and o t h er r e c e i v a bl
es 2,155 1,908
The fair value of trade and other receivables is not considered to be different from the carrying value recorded above.
Movements in the provision for impairment of receivables in the year is shown below:
2022 2021
GBP000 GBP000
At 1 January - 111
Charged to the income statement - discontinued operations - -
Utilisation of provision - (111)
Transferred to held for sale - -
Foreign exchange movements - -
At 31 December - -
The carrying amounts of trade and other receivables are denominated in the following currencies:
2022 2021
GBP000 GBP000
Sterling 104 233
US Dollar 1,835 1,675
Total 1,939 1,908
Trade receivables that are not more than three months past due are not considered impaired. As at 31 December 2022, GBP48k (2021: GBP102k) of trade receivables were more than three months past due and not impaired. Management also considers that these receivables are recoverable in full.
19. D e f e r r ed t ax
T h e m ov e m e nt on t he n et d ef e r r ed tax ba l an ce is as f o l l o w s:
Asset Liability Net
2022 2022 2022 2021
Note GBP000 GBP000 GBP000 GBP000
N e t d ef e r r ed tax ass et at 1
Janua ry (43) (43) (90)
Income statement credit - continuing
operations 9 58 58 47
N e t d ef e r r ed tax ass et at 31
De c e mb er - 15 15 (43)
Included in:
Non-current assets - 15 15 -
Current liabilities - - - -
Non-current liabilities - - - (43)
- 15 15 (43)
D eferre d tax liabilities
Other
temporary differences
GBP000 Total
GBP000
A t 1 Janua ry 2021 (90) (90)
In c om e s t a t e m e nt credit
- continuing operations 47 47
A t 1 January 2022 (43) (43)
In c om e s t a t e m e nt credit-
continuing operations 58 58
A t 31 December 2022 15 15
20. Inventories
2022 2021
GBP000 GBP 000
F in i s h e d goo ds 146 124
146 124
The cost of inventories (food and beverage inventory) recognised as an expense and included in cost of sales amounted to GBP1,147k (2021: GBP818k). Food and beverage inventory is included in finished goods. There was no provision for obsolescence held against inventories at 31 December 2022 (2021: GBPnil).
21. Cash and cash equivalents
2022 2021
Note GBP000 GBP000
Cash and short-term deposits 7,420 21,912
Customer funds 22 391 455
7,811 22,367
T h e f air v a l ue of c ash and c ash e q u i v a l e n ts is n ot c o n s i d e r ed to be d i f f e r e nt f r om t he c a r r y i ng v a l ue r e c o r d ed in t he f i nan c i al s t a t e m e n ts.
Cash balances of GBP391k (2021: GBP455k) are held on behalf of customers in respect of certain online and telephone betting activities (amounts deposited by telephone betting customers in Connecticut, USA are held in separate accounts). The corresponding liability is included within trade and other payables (see note 22).
22. Trade and other payables
2022 2021
Note GBP000 GBP 000
T r ad e p a y a bl es 4,588 3,545
O t h e r ta x es and s o c i al s e cur i ty
co s ts 148 178
A c c rua l s 1,437 3,767
Pl ay e r l i a b il i ty 21 391 455
6,564 7,945
T h e r e is no d i f f e r e n ce b e t w een book v a l ues and f air v a l ues of t r ade and o t h er p a y a bl es. A ll amo u n ts a re due wi t hin one y ea r.
23. Provisions
Total
GBP000
A t 1 Janua ry 2021 1,442
Utilised during the year (785)
Transferred to liabilities associated with assets
held for sale 91
Cur r enc y dif f e r en c es (12)
A t 1 January 2022 736
Utilised during the year (677)
Released to the income statement (69)
Cur r enc y dif f e r en c es 10
A t 31 December 2022 -
Of which:
Current provisions -
P ro vis i o n s h ave b een r e c o gn i s ed w h e re t he G r o up h as c o n t r ac t ual o b li g a t i o ns to p ro v i de s e r v i c es w h e re t he es t i m a t ed u n av oi da ble co s ts to c a r ry o ut t he o b li g a t i on e x c eed t he e x p e c t ed f ut u re e c ono mic b e n e f i ts to be r e c e i v e d.
The Group had committed financial obligations arising from onerous leases it had entered into in California. The final liability was settled in March 2022.
24. Lease liabilities
2022 2021
Maturity analysis - contractual undiscounted cash GBP000 GBP000
flows
Less than one year 1,435 1,211
Between 2 and 5 years 2,955 2,615
More than 5 years 4,783 4,824
Total 9,173 8,650
The weighted average incremental borrowing rate applied to the lease liabilities was 4.16%, lowest rate being 4.00% and highest rate of 5.75%.
2022 2021
Lease liabilities included in the balance sheet GBP000 GBP000
Current 1,155 923
Non-current 6,200 6,091
Total 7,355 7,014
Movement in lease liability during the year 2022 2021
Note GBP000 GBP000
At 1 January 7,014 3,882
New leases entered into 652 1,698
Reassessment of lease term 16 - 2,835
Interest charged to the income statement - continuing
operations 8 230 155
Lease rentals paid - continuing operations (1,357) (1,354)
Disposed of on settlement of lease dispute - (169)
Movement as a result of foreign exchange 816 (33)
At 31 December 7,355 7,014
25. Pension schemes
The Group now solely operates a single defined contribution scheme in the UK. Prior to their transfer in February 2023, Lot.to employees contributed to a separate defined contribution scheme to that of Sportech PLC employees. In previous years, the Group operated a funded defined benefit scheme and two defined contribution schemes in the US.
Su m ma ry of p e n s i on c o n t r i but i ons paid:
2022 2021
GBP000 GBP 000
D e f i n e d c o nt ri b u t i on sc h e me c o nt
ri b u t i o ns - continuing operations 75 88
D efi n e d c o n t r i but i on s c h e m es
Continuing and discontinued operations
In the UK, employer contributions for Sportech are set at a maximum of 8% of pensionable salaries.
Pension risks
The Group is no longer subject to risks associated with defined benefit pension schemes having transferred the US scheme with the disposal entities to Betmakers Technology Group Limited.
26. Financial instruments
F i nan c i a l r i sk man a g e m ent p oli c ies and o bje c t i v es
The key financial risks borne by the Group, and the policy of managing those risks, are outlined below:
Li q uid ity risk
The Group is exposed to liquidity risk and has to manage its cash requirements. In managing short term divisional liquidity risks, cash flow forecasting is performed on a weekly basis in the operating entities and is aggregated by Group finance. This weekly forecasting recognises committed short-term payables of the Group which are monitored and managed through regular discussions with suppliers. Group Finance monitors rolling forecasts of the Group's liquidity requirements to ensure each operating entity has sufficient cash to meet operational needs. Cash surpluses are managed centrally by Group finance and cash swept up/pushed down as cash surpluses/requirements arise.
C r e d it risk
The Group's main exposure to credit risk is in accounts receivable and is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry, country in which customers operate. Credit risk is managed locally by assessing the creditworthiness of each new customer before agreeing payment and delivery terms.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on annual revenue and the corresponding historical credit losses experienced over the past five years as annual percentages. On that basis, no loss allowance as at 31 December 2022 (2021: GBPnil) was determined other than specific provisions for bad debts in trade receivables.
The Group does not hold significant amounts of deposits with banks and financial institutions and the cash which is deposited is spread over a few of financial institutions with Moody's ratings of A or above (defined as upper-medium grade and subject to low credit risk). Amounts held in cash for the Sportech Venues division are held in highly secure environments.
Fo r e i gn e x c han ge risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar. Foreign exchange risk arises from transactions undertaken in foreign currencies, the translation of foreign currency monetary assets and liabilities and from the translation into Sterling of the results and net assets of overseas operations.
The Group continually monitors the foreign currency risks and takes steps, where practical, to ensure that the net exposure is kept to an acceptable level. In doing so, the Group considers whether use of foreign exchange forward contracts would be appropriate in fixing the economic impact of forecasted profitability. As at 31 December 2022, there were no outstanding commitments on foreign exchange forward contracts (2021: none). The Group did not enter into any forward contracts during the year (2021: the Group did not enter into any forward contracts).
The functional currencies of the individual entities in the Group is kept under review.
The average rate for the US Dollar and Euro in both the current and previous reporting period are as outlined below.
2022 2021
Average Closing Average Closing
US Dollars 1.23 1.20 1.37 1.35
Euro 1.17 1.13 1.16 1.19
If the exchange rates in 2022 were comparable to those in 2021, profit after tax would have been GBP98,473 and the net assets would have been GBP12,666k at 31 December 2022.
If exchange rates had be 1% higher/lower in 2021 than the prevailing rates during the year, profit for the year would have been GBP1k higher/lower and net assets as at 31 December 2022 would have been GBP154k higher/lower.
C ap it al risk mana gement
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to achieve an efficient capital structure to minimise the cost of capital.
F i nan c i a l a ss e ts and li a bili t ies
A t ea ch r e port i ng d a t e, t he G r o up had t he f o l l o w i ng c a t e go ri es of f i nan c i al ass e ts and l i a b il it i e s:
2022 2021
GBP000 GBP 000
Financial assets measured at amortised cost 9,755 24,065
F i nan c i a l l i a b il it i es me a s u r ed at amort
i s ed co st 13,309 (14,781)
Maturity of financial liabilities
Except for lease obligations (see note 24) all non-derivative financial liabilities are all payable within twelve months.
27. Contingencies and commitments
C a pit a l c o m m i t m en ts
T h e G r o up had no c o nt r ac ts pl a c ed f or c a p i t al e x p e n d i t u re t h at w e re n ot p ro v i d ed f or in t he f i nan c i al s t a t e m e n ts at t he cur r e nt or p ri or y ear e nd d a t es.
O p e r a t in g le a se c o m m i t m en ts
The Group includes all leases on balance sheet as Right-of-use assets with a corresponding lease liability, other than leases which are short leases (terms of 12 months or less) or low value leases, being leases with asset value of less than GBP4,000 ($5,000). Leases that qualify for these exemptions are included within the disclosures below.
The expenditure charged to the income statement was GBP158k (2021: GBP114k).
T h e f ut u re ag g r e g a te mini m um l e ase p a y m e n ts u nd er no n-c an c e l l a ble l e as es not accounted for elsewhere under IFRS 16, a re as f o l l o w s:
2022 2021
GBP000 GBP 000
N o l a t er t han one y ear 13 26
L a t e r t han one y ear and no l a t er t han
f i ve y ea rs - 1
T o t a l 13 27
Contingent items
Bump contingent consideration receivable
In addition to the consideration received during 2021, further consideration was received by the group in March 2023 following Bump 50:50 achieving the revenue trigger in the financial year ending 31 December 2022. The gross amount received of GBP1,229k has been recognised within discontinued operations in the Income Statement with a net gain of GBP1,013k.
Tax
The Group's only remaining open case is in relation to the treatment of the GBP4.6m gain included in the 2016 financial statements for the Spot the Ball VAT refund. The directors continue to consider that this amount is not payable and await the HMRC final determination of assessments whereupon they will consider if any further actions are appropriate.
Certain contingent items exist at the reporting date with respect to tax liabilities as outlined below.
Other contingent items
M&A activity
Both the 2017 sale of the Football Pools division and the 2018 sale of the Group's Venues business in The Netherlands have customary seller tax warranties under the terms of the Sale and Purchase Agreements. The possibility of material claims being made under the seller tax warranties in either deal is considered by management to be remote. In addition, the 2021 sales of the Bump 50:50, the Global Tote business and Sportech Lotteries, LLC have customary seller warranties under the terms of the Sale and Purchase Agreements. Those warranties have been provided in good faith by management in light of the probability of certain events occurring. The possibility of material claims being made under the seller warranties in either deal is considered by management to be remote.
28. Ordinary shares
Authorised, issued and fully paid ordinary 2022 2021
shares of 1p
'000 GBP 000 '000 GBP 000
At 1 January 100,000 1,000 188,751 37,750
Cancellation of 19p nominal value - - - (35,862)
Buy-back and cancellation - - (88,751) (888)
At 31 December 100,000 1,000 100,000 1,000
29. Cash generated from operations
R e c on c ilia t i o n of profit b ef o re ta x a t i on to cash g e n e r ated f r om op e r a t i ons, b ef o re separately disclosed items:
2022 2021
Note GBP 000 GBP 000
Loss before tax - continuing operations 2 (934) (246)
Profit before tax - discontinued operations 11e 1,183 35,987
Total profit before tax 249 35,741
Adjustments for:
Separately disclosed items (included in operating
costs) 4 657 1,472
Other income (excluding profit on disposal of
Sports Haven) 10 (120) (2,583)
Depreciation and amortisation 14,15,16 1,497 1,992
(Profit) on disposal of discontinued operations - (28,625)
(Profit) on disposal of Sports Haven - (2,575)
Profit on sale of property, plant and equipment 15, 16 150 (47)
Profit on sale of intangible assets - (68)
Impairment of goodwill 13 517 -
Impairment of assets(reversal of impairment) 15 (190) (335)
Net finance income/(costs) 8 22 (210)
Share option expense - 334
Changes in working capital:
Decrease in trade and other receivables (1,476) (2,162)
(Increase)/Decrease in inventories (22) 192
Decrease in trade and other payables (1,101) (448)
Decrease in customer funds (64) (2,167)
Cash generated from operating activities, before
separately disclosed items 119 511
30 . R e l a t ed pa r ty t r a n s a c t i o ns
i. The extent of transactions with related parties of Sportech PLC and the nature of the relationships with them are summarised below. Key management compensation is disclosed in note 6.
ii. No cash was invested in and there were no trading transactions between the Group and any of its joint ventures during the year or prior year, and no amounts outstanding at the reporting date (2021: GBPnil).
31. Related undertakings
Subsidiaries, excluding Country of Registered Class of shares Shareholding
dormant companies incorporation address held
Sportech Group Holdings England &
Limited Wales 1 Ordinary 85%
England &
Sportech Gaming Limited Wales 1 Ordinary 100%
England &
Sportech Pools Limited Wales 1 Ordinary 100%
Sportech Pools Games England &
Limited Wales 1 Ordinary 100%
Sportech Holdco 2 England &
Limited Wales 1 Ordinary 100%
England &
Lot.to Systems Limited Wales 1 Ordinary 100%
Sportech Mauritius
Limited Mauritius 2 Ordinary 100%
Sportech, Inc. United States 3 Ordinary 100%
Sportech Venues,
Inc. United States 3 Ordinary 100%
Sportech Venues California,
LLC (2) United States 3 Ordinary 100%
Sportech Venues CA
Holdco, LLC (2) United States 3 Ordinary 100%
Sportech Games Holdco,
LLC United States 3 Ordinary 100%
1891323 Ontario,
Inc. (1) Canada 4 Ordinary 100%
British Virgin
Sportech Racing Limited Islands 5 Ordinary 100%
1. 1891323 Ontario Inc.was dissolved on 6 July 2022.
2. Sportech Venues California, LLC. And Sportech Venues CA Holdco, LLC were dissolved on 28 February 2022.
D uri n g t he y ea r, t he G r o up he ld i nv es t m e n ts in r e l a t ed u nd ert a ki n gs as f o l l o w s:
Joint ventures and Country Registered Class of shares Shareholding
associates of incorporation address held
Sportshub Private
Limited India 6 Ordinary 50%
S&S Venues California,
LLC (1) United States 3 Ordinary 50%
DraftDay Gaming Group,
Inc United States 7 Ordinary 30%
1. S&S Venues California, LLc. was dissolved on 28 February 2022.
Dormant companies Country Registered Class of Shareholding
of incorporation address shares held
England &
Thepools.com Limited(1) Wales 1 Ordinary 100%
England &
C&P Promotions Limited(2) Wales 1 Ordinary 100%
England &
Pools Promotions Limited Wales 1 Ordinary 100%
Sportech Pools Competitions England &
Company Limited Wales 1 Ordinary 100%
England &
Bet 247 Limited Wales 1 Ordinary 100%
England &
Pools Company Limited Wales 1 Ordinary 100%
Sportech Management
Limited(2) Scotland 8 Ordinary 100%
Sportech Pools Trustee
Company Limited(2) Scotland 8 Ordinary 100%
1. Thepools.com Limited, C&P Promotions Limited and Pools Company Limited
were dissolved on 8 March 2022.
2. Sportech Management Limited and Sportech Pools Trustee Company Limited were dissolved on 1 March 2022.
R e g istere d add resses (whilst under Sportech ownership for those entities disposed of during the year)
N u mbe Co u nt r y A d d r e s s
r
1 E n gl an d Icarus House, H a w kf i e ld C l o s e, Hawkfield
& W a l es Business Park, Whitchurch, Bristol, BS14 0BN
2 M a ur it ius I n t e r c o n t i n e n t a l T r u st L im i t
ed, L e v el 3, Al ex and er H o us e, 35 Cy b e r
c i t y, E b e n e, M a ur it ius
3 U n i t e d 6 00 L ong W harf D r i v e, N ew H av e n, CT 0 6
S t a t es 5 11
4 U n i t e d 10 9 5 Wi n d w a rd Ri dge P a rkw a y, S u i te
S t a t es 1 7 0, Al pha r e t t a, GA 30005
5 C anada C S C N orth Am e ri ca Inc., 45 O ' C onnor S t r
e e t, S u i te 1600, O tt a w a, O n t a rio K 1P
1 A4
7 P anam a A ria s , F ab r e ga & F ab r e g a, Pl aza 2000
B u i ldi n g, 50 th S t r e e t, P anama
7 B r it i s h T ri d e n t Chamb e r s, POB 1 46, R oad T o w n,
V i r gin I T ort ol a, B r it i sh V i r gin I s l an ds
s l an ds
8 I r e l and U n i t 3, I DA T e c hn ol o gy P a r k, G a r r
y c a s t l e, A t h l on e, C o. W es t me at h,
I r e l and
9 G e r ma ny N i e nha us e n s t rass e 4 2, 458 83 G e l s e
n ki r c h e n, G e r ma ny
10 G e r ma ny K a t e r nb e r g e r s t rass e 1 0 7, 4 5 3 27
E ss e n, G e r ma ny
11 T ur k e y Ak s u K os u y ol u C a d. K a l ay c i o gluS i
t e si N o: 1 9 /1 B a kir koy Is t anb ul
1 2 F r an c e 8 R ue des F r e r es C aud r o n, 7 8 1 40 V e l
i z y, V il l a c o ubl a y, F r an ce
13 In dia T o w e r 2, 4 th F l oo r, I n t e r n a t i onal
I n fo t e ch P a r k, V ashi R a i lw ay S t a t
i o n, N ew M u mb ai
1 4 U n i t e d C o r po r a t i o n S e r v i ce C ompa n y, 2 7
S t a t es 11 Ce nt re vil le R oa d, S u i te 400, W i lmi n
g t o n, DE 19808
15 S c ot l an C o ll in s H o us e, R u t l and Squa r e, E di nb
d u r g h, M idl o t hi a n, E H1 2AA
16 E n gl an d 3a Cestrian Court, Lightfoot Street, Chester, Cheshire,
& W a l es CH2 3AD
Ends
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