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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 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMSPO
RNS Number : 8477J
Sportech PLC
22 August 2019
22 August 2019
Sportech PLC
("Sportech" or the "Group")
Interim results for the six months ended 30 June 2019
Sportech (LSE: SPO), the international betting technology business, is pleased to announce its interim results for the six months ended 30 June 2019.
Highlights
-- Appointed new Chairman and CEO and strengthened senior management team by appointing new CTO and adding new COO and CCO roles, with focus on accountability and tangible long-term growth delivery.
-- Total Group revenue of GBP32.6 million (2018: GBP33.2 million using constant currency).
-- EBITDA before Sports Betting investments of GBP4.3 million and Adjusted EBITDA of GBP3.4 million (2018: GBP4.4 million and GBP3.9 million using constant currency). The 2019 Adjusted EBITDA includes GBP0.9 million of costs related to Sports Betting (2018: GBP0.5 million).
-- Business turnaround driving efficiencies as transformation of business continues at pace. -- Corporate costs further reduced by 22 percent.
-- 'Challenge Everything' drive delivering future operational efficiencies, including cost reductions executed in H1 that will generate efficiencies in H2 and beyond.
-- Digital transformation initiated across Group, supported by acquisition of additional platform and talent.
-- Revenue growth in Racing, Bump 50:50 and Lottery offset by Venues' challenges.
-- Delivered growth in core pari-mutuel ('Tote') business, with key initiatives such as the World Pool successfully launched; Global Pool also secured and new contracts secured in the US and Europe.
-- Bump 50:50: Strengthened market position with a record number of client acquisitions during the period.
-- Venues: Challenging wagering handle being tackled via cost management, asset review and strategic initiatives.
-- Developed proprietary Sports Betting platform, certified integration with Sportradar and commenced marketing to potential clients.
-- Positive decisions taken to restructure the business in H1 resulted in Exceptional cash outflows of GBP1.5m (2018: GBP1.7m). Management are focussed on extricating the Group in 2019 from historical expensive strategies and delivering an efficient lower operational cost base going forward.
-- Group net cash of GBP11.8 million at 30 June 2019 (31 December 2018: GBP14.7 million). -- The Board's current outlook for the full year remains in line with expectations.
Financial Summary
Hot Features
Premium
H1 2018 H1 2018
Constant Reported
GBPm's H1 2019 Currency(6,7) Currency(7)
-------------------------------------------------- -------- --------------- -------------
Revenue 32.6 33.2 31.4
Gross Profit 22.8 24.0 22.8
Contribution(1) 22.1 23.0 21.9
Adjusted EBITDA pre-Sports Betting Investment(2) 4.3 4.4 3.3
Adjusted EBITDA(3) 3.4 3.9 2.8
Loss before tax from continuing operations(4) (2.4) (0.6) (0.6)
Adjusted loss before tax from continuing
operations(5) (0.5) (0.2) (0.2)
1. Contribution is defined as gross profit, less marketing and distribution costs.
2. Excludes Sports Betting Investment during the period, amounting to GBP0.9 million (2018: GBP0.5 million).
3. Adjusted EBITDA is earnings before interest, taxation, depreciation and amortisation, share option charges and exceptional items as reported in note 7 of the Interim Financial Statements.
4. Decrease from 2018 mainly due to fall in Adjusted EBITDA, higher depreciation and amortisation (GBP0.4m), amortisation of the acquired intangible with Lot.to (GBP0.3m), increased share option charge (GBP0.4), higher exceptional costs (GBP0.2m) and higher finance costs (GBP0.2m), mainly foreign exchange).--
5. Adjusted loss from continuing operations is the aggregate of Adjusted EBITDA, normalised share option charges, depreciation, amortisation (excluding amortisation of acquired intangibles) and finance charges.
6. Prior year comparatives have been adjusted for estimated impact of IFRS 16 (increase in 2018 EBITDA of GBP0.9m). IFRS 16 allows reported comparatives not to be restated for the change in accounting policy for leases.
7. 2018 numbers have been corrected for a presentational reclassification of reward points from marketing expense to net off from revenue in the Venues division (six months ended 30 June 2018 reported: GBP155k, six months ended 30 June 2018 constant currency: GBP166k).
Richard McGuire, Chief Executive Officer of Sportech PLC, said:
"2019 marks a year of transition for Sportech with a clear focus on challenging the predominantly "industrial" culture, whilst driving efficiencies and delivering a range of products that enhance user experience. Sportech has made good progress in the period, with the Group's senior management team bolstered to help ensure accountability and increased effectiveness across every business line. Rigorous cost management remains a core focus for the Group and the Board expects to see further benefits going forward from the measures already taken.
"Further digitisation across existing and new business lines, the elimination of certain expensive strategies, the implementation of a lower operational cost base, and an enhanced global suite of products form the roadmap for H2, positioning the Group for 2020 and beyond. Management remain committed to delivering a superior product range to our global clients and remain confident about the Group's future potential."
For further information, please contact:
Sportech PLC Tel: + 44 (0) 117 902 9000
Giles Vardey, Chairman
Richard McGuire, Chief Executive Officer
Thomas Hearne, Chief Financial Officer
Peel Hunt Tel: +44 (0) 20 7418 8900
(Corporate Broker to Sportech)
Dan Webster / George Sellar
Buchanan Tel: +44 (0) 20 7466 5000
(Financial PR adviser to Sportech)
Henry Harrison-Topham / Mark Court / Jamie Hooper
Notes to Editors:
About Sportech
Sportech PLC, the international betting technology business, provides and operates betting technology solutions for some of the world's best-known gaming companies, sports teams, lotteries and horse and greyhound racetracks, as well as owning and operating its own gaming venues in Connecticut under exclusive licences.
The Group focuses on highly regulated markets worldwide. It has more than 29,000 betting terminals deployed to over 400 clients in 37 countries. Its global systems process US$12 billion in betting handle annually. In the US, it operates under 35 licences across 37 states. The Group has invested over US$60 million in the last five years in the successful expansion of its US gaming Venues and in developing its technology services, resulting in its proprietary Quantum(TM) System being the most widely deployed pari-mutuel betting system globally.
Group Overview
Sportech PLC, the international betting technology business, provides and operates betting technology solutions for some of the world's best-known gaming companies, sports teams, racetracks, casinos and lottery clients, as well as owning and operating its own gaming venues in Connecticut under exclusive licences.
The Group focuses on highly regulated markets worldwide. It has 29,000 betting terminals deployed to over 400 clients in 37 countries. Its global systems process US$12 billion in betting handle annually. In the US, it operates under 35 licences across 37 states. The Group has invested over US$60 million in the last five years in the successful expansion of its US gaming Venues and in developing its technology services, resulting in its proprietary Quantum(TM) System being the most widely deployed pari-mutuel betting system globally.
Revenue EBITDA
GBP'000 H1 2019 H1 2018(1,2) H1 2019 H1 2018(1,3)
-------- ------------- -------- -------------
Racing and Digital 17,937 16,888 3,726 3,562
Venues 14,990 16,652 1,409 1,871
Intercompany elimination / corporate
costs (294) (321) (829) (1,063)
-------- ------------- -------- -------------
32,633 33,219 4,306 4,370
Sports Betting investment - - (905) (513)
-------- ------------- -------- -------------
Total at constant currency 32,633 33,219 3,401 3,857
Exchange rate impact - (1,794) - (181)
IFRS 16 adjustment added back - - - (879)
-------- ------------- -------- -------------
Total reported 32,633 31,425 3,401 2,797
-------- ------------- -------- -------------
1. 2018 numbers are at constant currency.
2. 2018 revenue has been corrected for a presentational reclassification of reward points from marketing expense to net off from revenue in the Venues division.
3. The Group has adopted IFRS 16 Leases at 1 January 2019. The Group has selected the modified retrospective transition method which allows prior year reported numbers to not be restated in the financial statements. The above prior year figures have been adjusted for IFRS 16 for comparability purposes only. The adjustment represents the 2019 lease rentals which would have been operating costs in 2019 if IFRS 16 had not been adopted, translated at 2019 exchange rates. GBP673k is related to Venues and GBP206k is related to Racing and Digital.
Sportech Racing and Digital
Sportech Racing and Digital provides betting technologies and services to 295 racetrack, off-track betting network, casino, lottery and online pari-mutuel operator clients, plus an additional 145 commingling clients, in 37 countries and 37 US states. We have an estimated 29,000 betting terminals, 27 white-label betting websites and 25 white-label mobile apps deployed worldwide and our systems annually process US$12 billion in betting handle.
The increase of 6.2% in Sportech Racing and Digital's revenues resulted from growth across all products. Lottery, Bump and our international businesses led the growth against a modest decline in our US business. We continue to leverage our core global Tote wagering platform whilst developing a digital product suite to complement our global capability to deliver a robust modern platform to our B2B international client-base. The success of the inaugural World Pool event at Royal Ascot with our clients Ascot Racecourse and Betfred Totepool, and in association with the Hong Kong Jockey Club, highlighted many strengths of our international Tote systems and services, delivering key global commingling initiatives such as this. Shortly thereafter, the agreement to deliver a Global Pool for Sports Information Services ("SIS") further emphasises our clients' belief in the strengths of our systems. In addition, we seamlessly processed over 100 million transactions during the Kentucky Derby. We continue to strengthen our web and mobile platforms and to pursue financial efficiencies and user enhancements with a new wagering hardware strategy.
H1 2018 H1 2018
Constant Reported
GBP'000 H1 2019 Currency* Currency
--------- ----------- ----------
Sales revenue 1,007 645 637
Service revenue 16,930 16,243 15,928
--------- ----------- ----------
Total revenue 17,937 16,888 16,565
--------- ----------- ----------
Contribution 14,834 14,535 14,247
Contribution margin 83% 86% 86%
Adjusted operating expenses (11,108) (10,973) (10,973)
--------- ----------- ----------
Adjusted EBITDA 3,726 3,562 3,274
--------- ----------- ----------
Intangible assets capex 1,389 1,669 1,569
Tangible assets capex 810 683 646
--------- ----------- ----------
Total capex 2,199 2,352 2,215
--------- ----------- ----------
*Operating expenses are adjusted by GBP206k for IFRS 16 Leases.
In January 2019, the Group completed the acquisition of Lot.to Systems Limited and commenced the integration of Lot.to talent and technologies, in the areas of Tote digital development, Sports Betting and iLottery. Key executives have been appointed to senior management positions within Sportech to help execute the Group's strategic initiatives with an emphasis on accountability, while the "Challenge Everything" culture introduced at the beginning of the year has been used to underpin Sportech's approach to efficiency, innovation and the user experience across all divisions and at all levels of the organisation.
Sportech's Quantum(TM) System software and our global service delivery network delivered a seamless inaugural World Pool, an international commingling project designed to maximise liquidity by combining tote betting from global outlets. The division also signed new commingling client SIS for which Sportech is creating and disseminating a worldwide racing pool.
In total, the Racing team signed eight contract extensions, including one with Boyd Gaming for continued servicing of their two racetracks in Louisiana, US. New clients include Belterra Park - also a Boyd Gaming property - and SIS.
The division's digital transformation is underway, with the appointment of a new Chief of Digital Development, investment in our digital infrastructure and the delivery of the latest G4 betting website to online clients. In addition to the G4 upgrades rolled out to existing clients, digital deployments include new white label G4 websites and Digital Link(R) Mobile apps for Parx Racing in Pennsylvania and for Camarero Park in Puerto Rico.
The division also progressed its terminal hardware project, identifying a new terminal line that will be introduced in H1 2020 to streamline capex, improve efficiency and provide an innovative and engaging end user experience.
Bump 50:50
Sportech's Bump 50:50 sports raffle business provides the technologies and services that allow charitable foundations associated with professional and college sports teams and entertainment venues to sell and fulfil 50/50 raffles to generate funds for their charitable missions. Jackpots are divided equally between the foundation and the winner.
Revenues grew 17% at constant currency versus the prior period, from GBP691k to GBP808k. In H1 2019, the Bump 50:50 business added clients at an unprecedented rate, with an additional 18 clients signed year to date. An additional 18 clients renewed their contracts. Of the 18 new clients, seven were non-sports or entertainment affiliated charities such as the Special Olympics. This is an early result of a strategy to open up a significant new potential client base for Bump 50:50's proven package of technology and raffle sales strategies that help charities maximise fundraising for their good causes.
Bump 50:50 is seeking to continue expansion into non-sports markets while continuing to enhance technology, develop new raffle variations and pursue new team clients. A new Bump 50:50 CTO was appointed in the period to drive technology initiatives. The Group also held its second annual client relations event, Bump Academy Vegas, hosting representatives from 50 clients and prospective clients to learn how to maximise fundraising using Bump 50:50's proven tools for growth.
Critical investment was made during the period to enable the business to execute its growth strategy, which seeks to deliver enhanced performance from 2020 onwards. These include new licences, new progressive product design, technology for mobile and online growth and investment in the Bump Academy client event. This has caused a reduction in EBITDA which was GBP7k for H1 2019, versus GBP141k in H1 2018.
Lottery
We increased sales agent distribution capability to a key client with the delivery of additional terminals and launched a progressive lottery. Sportech enters the Lottery marketplace in earnest with the acquisition of the technology platforms and talent of Lot.to Systems and the blending of these assets into Sportech's organisation. Sportech is combining lottery games resident on Sportech's Quantum(TM) System, its POS terminal hardware and software technology and enhanced iLottery product suite from Lot.to to offer a comprehensive lottery solution with a key mobile component and robust administrative, CRM and marketing tools.
Sportech Venues
Sportech Venues operates all betting on horse racing, greyhound racing and jai alai in the state of Connecticut under an exclusive and in-perpetuity licence for retail, online and telephone betting.
Our Connecticut retail operation experienced handle softness in H1, down 10% on the previous period, which illustrated the high operational leverage concerns. The attraction of Sports Betting in neighbouring states, some issues with the quality of racing product during the period and a lack of potential Triple Crown winner were main deficiencies. We are tackling this with immediate cost management actions, detailed analysis of our estate and a variety of strategic initiatives.
We closed one venue during the period with the expiration of a high-cost lease, resulting in no discernible loss of revenue as customers shifted to other regional outlets and to online platforms. We have also placed one of our freehold assets on the market for sale, as it's in a beneficial tax development zone for developers, and will appraise the market as events develop.
Sportech Venues now anticipates enforcement of the protections of Sportech's exclusive off-track betting licence in the State of Connecticut through legislation passed in June 2019, coming into effect October 2019, and are developing a strategy to enhance returns as the only legal and licensed operator in the State for pari-mutuel betting. To support this acquisition campaign and the anticipated addition of legal Sports Betting in the State, we launched a redesigned MyWinners.com website under a new brand unveiled with the launch.
The Group engaged in a comprehensive and sustained campaign and made significant progress elevating Sportech's profile as a key participant in any comprehensive gaming solution which Connecticut lawmakers design. Sportech continues to be a proactive supporter of legislation to regulate Sports Betting, deliver licensing to current in-state gaming operators and provide a competitive consumer product to minimise the attraction of the illegal market.
H1 2018 H1 2018
Constant Reported
GBP'000 H1 2019 Currency(1,2) Currency(2)
-------- --------------- -------------
F&B - Stamford 961 1,153 1,081
F&B - Other 1,294 1,350 1,265
-------- --------------- -------------
F&B - Total 2,255 2,503 2,346
Wagering revenue 12,735 14,149 13,273
Total revenue 14,990 16,652 15,619
Contribution 7,275 8,158 7,651
Contribution margin 49% 49% 49%
Adjusted operating expenses (5,866) (6,287) (6,565)
-------- --------------- -------------
Adjusted EBITDA 1,409 1,871 1,086
-------- --------------- -------------
Total capex 153 292 274
-------- --------------- -------------
1. Operating expenses are adjusted by GBP673k for IFRS 16 Leases.
2. 2018 numbers have been corrected for a presentational reclassification of reward points from marketing expense to net off from revenue (six months ended 30 June 2018 reported: GBP155k, six months ended 30 June 2018 constant currency: GBP166k).
US Sports Betting
The B2B Sports Betting opportunity in the US is highly competitive with a B2B gold rush continuing as states adopt legislation. Sportech is engaged with targeted sales and marketing efforts during the period and continue to pursue opportunities.
In 2018, Sportech entered into an agreement with Sportradar to deliver Sports Betting solutions to US operators with Sportradar's data, trading and risk management services and a third-party technology platform. In early H1, Sportech opted to develop a proprietary Sports Betting platform in-house to integrate with the Sportradar managed trading system. This proprietary solution, development of which is nearing completion, offers Sportech greater control and flexibility and will produce greater economic efficiency as and when we deploy it at our B2C Venues in Connecticut and for B2B clients elsewhere.
Sports Betting remains a complex issue both in the State of Connecticut and in other states. Sustained government relations work in Connecticut helped keep Sportech in the forefront for a state-wide gaming solution but Connecticut lawmakers did not legalise Sports Betting in the 2019 legislative session. We remain fully cooperative with the State and all stakeholders in seeking to deliver a solution that protects Sportech's investments and the interests of Sportech staff across the State.
With the development of our proprietary Sports Betting platform, integrated with Sportradar data and risk management, we believe that Sportech remains in a good position to offer a competitive integrated sports and race betting solution in other US states and will update the market as events develop.
Corporate Costs
The focus on efficiency drive throughout the business extended to our corporate cost base where costs dropped 22% during the period to GBP829k (2018: GBP1,063k).
Depreciation and Amortisation
The Group's normal depreciation and amortisation charge increased from GBP2.4 million (constant currency) to GBP3.4 million. The increase is mainly due to adopting IFRS 16 (GBP731k).
Exceptional Costs
The Group had exceptional administration costs of GBP0.7 million (2018: GBP0.5 million). H1 2019 items include redundancy payments and staff exits in line with employment contracts, legal and actuarial costs in relation to the UK defined benefit scheme buy-in, ongoing litigation costs, professional tax advisory work and the closure of certain non-core and expensive business.
As noted below, management is focussed on extricating the Group in 2019 from historical expensive strategies and therefore anticipates a significant reduction in "Exceptional Costs" in 2020.
Net Finance (Costs)/Income
The Group has no debt. The Group has net finance costs of GBP0.4 million (2018: income of GBP0.1 million). The increase in costs is a result of adopting IFRS 16 and foreign exchange movements.
Taxation
A tax credit for the period of GBP0.5 million represents the expected weighted average annual taxation rate on profits and losses in the jurisdictions in which the Group operates of 19.7% (2018: GBP28k, 1.2%). Tax paid in the period was GBP0.4 million, being withholding taxes (2018: GBP0.8 million).
Net Cash/Net Current Assets
The Group held cash balances of GBP11.8 million, excluding customer balances (31 December 2018: GBP14.7 million). The decrease in cash is mostly attributable to working capital movements, the acquisition of Lot.to and payments of exceptional costs.
Capital Expenditure
Capital expenditure in the period was GBP2.4 million (2018: GBP2.5 million). The decrease is due to a GBP168k reduction in the capitalisation of intangible assets offset by an increase of GBP43k spend of tangible assets, mostly related to new servers to enhance our digital offering.
Shareholders' Funds
Total equity and the Group's net assets at 30 June 2019 are GBP50.8 million (31 December 2018: GBP52.4 million). The reduction being; GBP1.0 million IFRS 16 transition adjustment, GBP2.0 million loss after tax, GBP0.2 million currency movements, GBP0.2 million defined benefit buy-in cost, net of GBP1.1 million share option reserve movement and GBP0.7m increase in equity from the issue of shares in consideration for the acquisition of Lo.to Systems Limited.
Auditor change
The Company undertook a competitive tender process for the position of statutory auditor during the period. It was mutually agreed with PricewaterhouseCoopers LLP ("PwC") that PwC would not participate in the tender as the length of their possible tenure would have only allowed one more year before mandatory rotation rules applied. Also, the current PwC engagement leader had served his maximum five year term on the Sportech audit. There were no other matters connected with PwC ceasing to hold office as auditors of the Company and a letter stating such, which was received from PwC on 20 August 2019, will be sent to every person who under s423 of the Companies Act 2006 is entitled to be sent copies of the accounts by 3 September 2019 as required by s520(2) of the Companies Act 2006.
BDO LLP were selected through the tender process and will be appointed as auditor of the Company for the year ending 31 December 2019. The appointment of BDO as auditor will be subject to confirmation by the shareholders at the 2020 Annual General Meeting of the Company.
Outlook
Effective cost management, whilst assessing and delivering innovative products across the businesses, remains the core focus for the Group. Digitisation across existing and new business lines forms the roadmap for the second half and management is determined to extricate the Group from historical expensive strategies and investment plans by the end of 2019 to position Sportech appropriately, with a clear vision and growth strategy. The Board's current outlook for the full year remains in line with expectations.
Venues
The delivery of an appropriate Sports Betting licence is critical to the growth of the Connecticut venues business and will continue to be a key focus for senior management. We shall update the market with developments in the Group's real estate portfolio and will seek to execute a revenue growth model capitalising on the exclusive pari-mutuel licence. There are certain commercially sensitive partnership plans under review and Sportech shall appraise the market at an appropriate time.
Racing and Digital
Digitisation of the Group's core Quantum(TM) System Tote will continue in the second half, leading to an expansion of our global footprint and elevation of service to our core Tote clients, as we simultaneously explore new avenues for digital growth and streamlined capex. Acquired CRM, administrative and reporting tools are being integrated with our Tote and Digital platforms to deliver enhanced capabilities to clients.
The H1 investment in Bump has created the capacity to extend our range of services to a wider range of clients with an enhanced product suite, including new progressive jackpots and additional proprietary functionality.
Lottery
We will leverage our combined Sportech lottery and acquired iLottery platforms to expand our client base and enhance our product suite through digitisation and innovation.
Sports Betting
--
The Group changed tactics and developed a proprietary Sports Betting platform during H1 2019 and has commenced marketing our B2B capabilities to US clients. We believe we have a strong product offering, supported by Sportradar media agreements announced this year with the NFL and NBA leagues. The position in Connecticut, where we have our B2C business, is more complex with uncertainty around State licensing. However we are focused on seeking a solution that could provide an engaging Sports Betting product to our consumers across the State in venue and online, similar to our current pari-mutuel licence.
Tax matters
As previously announced, the Company is in ongoing discussions with tax regulators in respect of certain historical tax liabilities.
Following the Spot the Ball VAT reclaim in 2016, the Group filed tax returns and paid corporation tax on the income, some of which was treated as a capital gain and offset against capital losses in the Group of GBP23 million, reducing the corporation tax bill on the refund by GBP4.6 million. HMRC have challenged the tax treatment adopted and the Company remains in discussions with them to resolve the matter. The Board took extensive professional advice on the treatment in the tax returns and believe the tax paid was appropriate. We will continue to update as progress is made.
In addition, the Group made an 'in escrow' payment to HMRC of GBP1.3 million in Q1 2018 in order to progress an appeal the Group is making against HMRC for VAT on head office costs going back a number of years, assessments on which amount to GBP3.3 million (including the GBP1.3m already paid). The Board continues to follow professional advice on this matter and will update as progress is made.
Richard McGuire
Chief Executive Officer
21 August 2019
Interim consolidated income statement
For the six months ended 30 June 2019
Six months Six months Year
ended ended
30 June 30 June ended
2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
---------------------------------------------------- ----- -------------- -------------- -------------
Revenue 32,633 31,425 63,462
Cost of sales 6 (9,798) (8,656) (17,619)
---------------------------------------------------- ----- -------------- -------------- -------------
Gross profit 22,835 22,769 45,843
Marketing and distribution costs 6 (726) (871) (1,732)
---------------------------------------------------- ----- -------------- -------------- -------------
Contribution 22,109 21,898 44,111
4,
Operating costs 6 (24,186) (22,553) (47,196)
Other income - - 173
Operating loss (2,077) (655) (2,912)
Finance costs 8 (247) - (67)
Finance income 8 34 40 85
Other financial (costs)/income 8 (151) 13 455
Loss before taxation from continuing operations (2,441) (602) (2,439)
Taxation - continuing operations 9 482 28 (2,019)
---------------------------------------------------- ----- -------------- -------------- -------------
Loss for the period from continuing operations (1,959) (574) (4,458)
Net (loss)/profit from discontinued operations 11 - (355) 1,822
---------------------------------------------------- ----- -------------- -------------- -------------
Loss for the period (1,959) (929) (2,636)
---------------------------------------------------- ----- -------------- -------------- -------------
Attributable to:
Owners of the Company (1,959) (929) (2,636)
---------------------------------------------------- ----- -------------- -------------- -------------
Basic earnings per share attributable to owners
of the Company
From continuing operations 12 (1.0)p (0.3)p (2.4)p
From discontinued operations 12 - (0.2)p 1.0p
---------------------------------------------------- ----- -------------- -------------- -------------
Total 12 (1.0)p (0.5)p (1.4)p
---------------------------------------------------- ----- -------------- -------------- -------------
Diluted earnings per share attributable to owners
of the Company
From continuing operations 12 (1.0)p (0.3)p (2.4)p
From discontinued operations 12 - (0.2)p 1.0p
---------------------------------------------------- ----- -------------- -------------- -------------
Total 12 (1.0)p (0.5)p (1.4)p
Adjusted earnings per share attributable to owners
of the Company
Basic 12 (0.2)p (0.1)p 0.3p
Diluted 12 (0.2)p (0.1)p 0.3p
---------------------------------------------------- ----- -------------- -------------- -------------
Interim consolidated statement of comprehensive income
For the six months ended 30 June 2019
Six months Six
ended months
ended
30 June 30
June
2019 2018 Year ended
31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
------------------------------------------------------- -------------- -------------- -------------
Loss for the period (1,959) (929) (2,636)
------------------------------------------------------- -------------- -------------- -------------
Other comprehensive (expense)/income:
Items that will not be reclassified to profit and
loss
Actuarial gain on retirement benefit liability - - 315
UK defined benefit pension scheme "buy-in" insurance (234) - -
contract purchased
Deferred tax on movement on retirement benefit
liability - - (83)
------------------------------------------------------- -------------- -------------- -------------
(234) - 232
Items that may be subsequently reclassified to
profit and loss
Currency translation differences (211) 766 2,411
------------------------------------------------------- -------------- -------------- -------------
Total other comprehensive (expense)/income for
the period, net of tax (445) 766 2,643
------------------------------------------------------- -------------- -------------- -------------
Total comprehensive (expense)/income for the period (2,404) (163) 7
------------------------------------------------------- -------------- -------------- -------------
Attributable to:
Owners of the Company (2,404) (163) 7
------------------------------------------------------- -------------- -------------- -------------
Interim consolidated statement of changes in equity
For the six months ended 30 June 2019
Other reserves
-------------------------------------
Capital Share Foreign
Ordinary redemption option Pension exchange Retained
shares reserve reserve reserve reserve earnings Total
Six months ended 30 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
June 2019
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
At 1 January 2019
(audited) 37,350 10,312 7,536 (414) 8,537 (10,949) 52,372
Adjustment for
adoption of IFRS
16* - - - - - (985) (985)
-------------------- ----------- ------------- ---------- ---------- ----------- ----------- -------- Restated at 1 January 2019 37,350 10,312 7,536 (414) 8,537 (11,934) 51,387 Comprehensive expense Loss for the period - - - - - (1,959) (1,959) Other comprehensive expense Currency translation differences - - - - (211) - (211) UK defined benefit pension scheme "buy-in" insurance contract purchased - - - (234) - - (234) -------------------- ----------- ------------- ---------- ---------- ----------- ----------- -------- Total comprehensive expense - - - (234) (211) (1,959) (2,404) -------------------- ----------- ------------- ---------- ---------- ----------- ----------- -------- Transactions with owners Share option charge - - 1,073 - - - 1,073 Shares issued in relation to the acquisition of Lot.to Systems Limited 400 - - - - 314 714 Total transactions with owners 400 - 1,073 - - 314 1,787 -------------------- ----------- ------------- ---------- ---------- ----------- ----------- -------- Total changes in equity 400 - 1,073 (234) (211) (1,645) (617) -------------------- ----------- ------------- ---------- ---------- ----------- ----------- -------- At 30 June 2019 (unaudited) 37,750 10,312 8,609 (648) 8,326 (13,579) 50,770 -------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
* Net of deferred tax
Other reserves
--------------------------------------------------
Capital Share Foreign
Ordinary redemption option Pension exchange Retained
shares reserve reserve reserve reserve earnings Total
Six months ended 30 June 2018 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
At 1 January 2018 (audited) 37,123 10,312 6,608 (646) 6,126 (8,313) 51,210
Comprehensive expense
Loss for the period - - - - - (929) (929)
Other comprehensive
income/(expense)
Currency translation
differences - - - 42 724 - 766
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
income/(expense) - - - 42 724 (929) (163)
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Transactions with owners
Share option charge - - 660 - - - 660
Employment taxes paid on
vesting
of options - - (67) - - - (67)
Shares issued in relation to
PSP 227 - (227) - - - -
Total transactions with
owners 227 - 366 - - - 593
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Total changes in equity 227 - 366 42 724 (929) 430
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
At 30 June 2018 (unaudited) 37,350 10,312 6,974 (604) 6,850 (9,242) 51,640
------------------------------ ----------- ------------- ---------- ---------- ----------- ----------- --------
Other reserves
---------------------------------------------------------------
Capital Share Foreign
Ordinary redemption option Pension exchange Retained
shares Reserve reserve reserve reserve earnings Total
Year ended 31 December 2018 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
At 1 January 2018 (audited) 37,123 10,312 6,608 (646) 6,126 (8,313) 51,210
Comprehensive
income/(expense)
Loss for the year - - - - - (2,636) (2,636)
Other comprehensive income
Actuarial gain on defined
benefit
pension liability * - - - 232 - - 232
Currency translation
differences - - - - 2,411 - 2,411
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total other comprehensive
income - - - 232 2,411 - 2,643
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
income/(expense) - - - 232 2,411 (2,636) 7
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Transactions with owners
Share option charge - - 1,222 - - - 1,222
Employer taxes paid on
vesting
of options - - (67) - - - (67)
Shares issues in relation
to
the PSP 227 - (227) - - - -
Total transactions with
owners 227 - 928 - - - 1,155
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
Total changes in equity 227 - 928 232 2,411 (2,636) 1,162
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
At 31 December 2018
(audited) 37,350 10,312 7,536 (414) 8,537 (10,949) 52,372
---------------------------- ----------- ------------- ---------- ---------- ----------- ----------- --------
* Net of deferred tax
Interim consolidated balance sheet
As at 30 June 2019
As at As at As at
30 30 June 31 December
June 2018 2018
2019 (Unaudited) (Audited)
(Unaudited)
Note GBP000 GBP000 GBP000
------------------------------- ----- --------------- --------------- --------------
ASSETS
Non-current assets
Intangible fixed assets 13 15,846 12,550 13,551
Property, plant and equipment 14 25,533 25,766 26,337
Right-of-use assets 15 7,162 - -
Trade and other receivables 16 601 2,289 667
Deferred tax assets 6,563 7,259 5,979
------------------------------- ----- --------------- --------------- --------------
55,705 47,864 46,534
------------------------------- ----- --------------- --------------- --------------
Current assets
Trade and other receivables 16 10,637 11,479 8,169
Inventories 2,864 2,609 2,576
Assets held for sale - 270 -
Cash and cash equivalents 17 14,888 16,437 17,915
------------------------------- ----- --------------- --------------- --------------
28,389 30,795 28,660
------------------------------- ----- --------------- --------------- --------------
TOTAL ASSETS 84,094 78,659 75,194
------------------------------- ----- --------------- --------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 18 (14,647) (16,164) (12,946)
Provisions 19 (737) (1,050) (977)
Lease liabilities 21 (1,234) - -
Financial liabilities 22 (500) - -
Current tax liabilities (6,516) (7,008) (6,563)
------------------------------- ----- --------------- --------------- --------------
(23,634) (24,222) (20,486)
------------------------------- ----- --------------- --------------- --------------
Net current assets 4,755 6,573 8,174
------------------------------- ----- --------------- --------------- --------------
Non-current liabilities
Retirement benefit liability (898) (1,345) (902)
Lease liabilities 21 (7,297) - -
Provisions 19 (1,495) (1,452) (1,434)
(9,690) (2,797) (2,336)
------------------------------- ----- --------------- --------------- --------------
TOTAL LIABILITIES (33,324) (27,019) (22,822)
------------------------------- ----- --------------- --------------- --------------
NET ASSETS 50,770 51,640 52,372
------------------------------- ----- --------------- --------------- --------------
EQUITY
Ordinary shares 37,750 37,350 37,350
Other reserves 26,599 23,532 25,971
Retained earnings (13,579) (9,242) (10,949)
------------------------------- ----- --------------- --------------- --------------
TOTAL EQUITY 50,770 51,640 52,372
------------------------------- ----- --------------- --------------- --------------
Interim consolidated statement of cash flows
For the six months ended 30 June 2019
Six months Six months Year
ended
ended 30 June ended
31 December
2018
30 June 2018 (Audited)
2019 (Unaudited)
(Unaudited)
Note GBP000 GBP000 GBP000
---------------------------------------------------- ----- -------------- --------------- --------------
Cash flows from operating activities
Net cash generated from operations, before
exceptional items 20 2,819 2,560 5,890
Interest received 34 41 85
Interest paid - - (22)
Tax paid (393) (772) (2,029)
Net cash generated from operating activities
before exceptional items 2,460 1,829 3,924
Exceptional cash inflows - 487 487
Exceptional cash outflows 7 (1,469) (1,697) (2,320)
Cash generated from operations - continuing
operations 991 619 2,091
Cash used in operations - discontinued operations - (83) (37)
---------------------------------------------------- ----- -------------- --------------- --------------
Net cash flows from operating activities 991 536 2,054
---------------------------------------------------- ----- -------------- --------------- --------------
Cash flows from investing activities
Investment in joint ventures and associates 23 (230) (187) (291)
Disposal of Football Pools division - - 275
Disposal of Sportech Racing BV (net of transaction
costs) 235 - 2,411
Contingent consideration paid for Bump (Worldwide)
Inc. - (167) (167)
Purchase of Lot.to Systems Limited, net of
cash acquired 10 (729) - -
Investment in intangible fixed assets 13 (1,401) (1,569) (3,106)
Purchase of property, plant and equipment 14 (963) (920) (1,927)
---------------------------------------------------- ----- -------------- --------------- --------------
Cash used in investing activities - continuing
operations (3,088) (2,843) (2,805)
Cash used in investing activities - discontinued - (54) -
operations
---------------------------------------------------- ----- -------------- --------------- --------------
Net cash used in investing activities (3,088) (2,897) (2,805)
---------------------------------------------------- ----- -------------- --------------- --------------
Cash flows from financing activities
Payment of lease liabilities (889) - -
Net cash used in financing activities (889) - -
---------------------------------------------------- ----- -------------- --------------- --------------
Net decrease in cash and cash equivalents (2,986) (2,361) (751)
Effect of foreign exchange on cash and cash
equivalents (41) (96) (91)
Net cash and cash equivalents at the beginning
of the period 17,915 19,170 18,757
Net cash and cash equivalents at the end of
the period 14,888 16,713 17,915
Less cash held by asset held for sale - (276) -
---------------------------------------------------- ----- -------------- --------------- --------------
Group cash and cash equivalents at the end
of the period 14,888 16,437 17,915
Represented by:
Cash and cash equivalents 17 14,888 16,437 17,915
Less customer funds 17 (3,093) (3,960) (3,187)
Adjusted net cash at the end of the period 17 11,795 12,477 14,728
---------------------------------------------------- ----- -------------- --------------- --------------
Notes to the consolidated interim financial statements
For the six months ended 30 June 2019
1. General information
Sportech PLC (the "Company") is a company domiciled in the UK and listed on the London Stock Exchange. The Company's registered office is Collins House, Rutland Square, Edinburgh, Midlothian, Scotland EH1 2AA. The condensed consolidated interim financial statements of the Company as at and for the period ended 30 June 2019 comprise the Company, its subsidiaries, joint ventures and associates (together referred to as the "Group"). The Company's accounting interim reference date is 30 June. Consistent with the normal monthly reporting process, the actual date to which the balance sheet has been drawn up is to 30 June 2019 (2018: 1 July 2018). For ease of reference in these condensed interim financial statements, all references to the results for the period are for the period ended 30 June 2019 (2018: 30 June 2018) and the financial position at the same date. The principal activities of the Group are the provision of pari-mutuel betting (B2C) and the supply of wagering technology solutions (B2B).
The condensed consolidated interim financial statements were approved for issue on 21 August 2019.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2018 were approved by the Board of Directors on 20 March 2019 and delivered to the Registrar of Companies. The Report of the Auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have not been reviewed or audited.
2. Basis of preparation
a. These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union. They do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2018 which have been prepared in accordance with IFRSs as adopted by the European Union.
b. After making reasonable enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
c. The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, significant judgements have been made by management with respect to the assumptions underpinning the Group's tax liabilities and the carrying value of intangible fixed assets.
d. The principal risks and uncertainties for the Group remain the same as those detailed on pages 30 and 31 of the 2018 Sportech PLC Annual Report and Accounts, where descriptions of mitigating activities carried out by the Group are also outlined. Those risks are regulation, product popularity, technological changes, customer concentration and industry competition, foreign exchange and failure to implement a Sports Betting strategy.
e. Management have corrected the accounting for award points granted to players in the Sportech Venues Segment, these awards were previously charged to the income statement within marketing and distribution costs. The value of the awards are now debited to revenue. The prior year presentation has been corrected for comparability purposes. The effect on prior year revenue in the six month period to 30 June 2018 was a reduction of GBP155k (year ended 31 December 2018: GBP256k), there is a corresponding reduction in marketing and distribution costs.
3. Accounting policies
The following standards, amendments and interpretations that are not yet effective and have not been adopted early by the Group are as follows:
Applicable
for financial
year beginning
Standard or interpretation on or after
---------------------------- ----------------
IFRS 17 Insurance Contracts 1 January 2021
---------------------------- ----------------
IFRS 17 is not relevant to the Group.
The following standards, have been adopted by the Group with effect from 1 January 2019:
Applicable
for financial
year beginning
Standard or interpretation on or after
--------------------------------------------------------------- ----------------
IFRS 16 1 January 2019
IFRS 9 (2014) Financial Instruments (Amendment - Prepayment 1 January 2019
Features with Negative Compensation and Modifications
of Financial Liabilities
IAS 28 - Investments in Associate and Joint Ventures 1 January 2019
(Amendment - Long-term Interests in Associates and Joint
Ventures)
Annual Improvements to IFRSs 2015 - 2017 Cycle (IFRS 1 January 2019
3 Business Combinations and IFRS 11 Joint Arrangements,
IAS 12 Income Taxes and IAS 23 Borrowing Costs)
IFRIC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019
Amendments to IAS 19 Employee Benefits 1 January 2019
--------------------------------------------------------------- ----------------
Of the above, only IFRS 9 and IFRS 17 are not relevant to the Group. All of the other pronouncements are relevant, but only the application of IFRS 16 has had an impact on the Group's accounting.
Except as described below, the accounting policies applied in these condensed interim financial statements are the same as those applied in the last annual financial statements (the policy for recognising and measuring income taxes in the interim period is described in note 9).
The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements for the year ended 31 December 2019.
The Group has initially adopted IFRS 16 Leases from 1 January 2019. IFRS 16 introduced a single, on-balance sheet accounting model for leases. As a result, the Group, as a lessee, has recognised right-of-use assets recognising its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting is not applicable to the Group but would have remained the same under IFRS 16 if it were.
The Group has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings on 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated - i.e. it is presented as previously reported, under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below:
A) Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining whether an arrangement contains a lease. The Group now assesses whether a contract is or contains a lease based on a new definition of a lease. Under IFRS 16, a contract is, or contains a lease if a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not re-assessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019.
At inception or reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone process.
B) As a lessee
The Group leases many assets including property, vehicles and IT equipment.
As a lessee the Group previously classified leases based on its assessment of whether a lease transferred substantially all the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases i.e. these leases are on-balance sheet.
However, the Group has elected to not recognise right-of-use assets and lease liabilities for leases of low-value assets (<GBP4,000 asset values) and leases with terms of less than 12 months.
The Group presents right-of-use assets separate to tangible fixed assets that it owns. The carrying amounts of right-of-use assets, by nature of asset, are as per below:
Tangible fixed assets
------------------------------------------------------------------------------- -------
Short leasehold Long leasehold
land and land and Plant Fixtures
buildings buildings Vehicles and machinery and Fittings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ---------------- --------------- ----------- --------------- -------------- -------
Balance at 1 January
2019 2,668 4,987 237 - 26 7,918
Balance at 30 June
2019 2,158 4,798 186 - 20 7,162
---------------------- ---------------- --------------- ----------- --------------- -------------- -------
The Group presents lease liabilities separately on the face of the balance sheet.
i) Significant accounting policies
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate in the jurisdiction in which the asset resides as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in the future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options and break clauses. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised.
ii) Transition
Previously, the Group classified leases as operating leases under IAS 17. These included betting venues, offices, vehicles and IT equipment. The leases typically run for periods of 3 to 5 years, but some property leases exist with significantly longer terms. Some property leases include an option to extend the lease for periods of typically 3 years and some of the longer leases have termination options, "break clauses", (some with penalties). Some leases also provide for rent changes based on local price indices.
At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate (in the jurisdiction the lease resides) as at 1 January 2019. Right-of-use assets are measured at an amount equal to the lease liability at the inception of the lease.
The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17.
- Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term.
- Excluded initial direct costs from measuring the right-of-use asset at the date of initial applications.
- Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
C) Impacts on the financial statements i) Impacts on transition
On transition to IFRS 16, the Group recognises additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings, net of deferred tax. The impact on transition is summarised below.
At
1 January 2019
GBP000
----------------------------------------------------- ----------------
Right-of-use asset presented in property, plant and
equipment 7,918
Lease liabilities 9,196
Deferred tax asset 293
Retained earnings (985)
----------------------------------------------------- ----------------
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rates in the jurisdictions in which the leases are located. The weighted average rate applied was 5.75%.
Deferred tax has been provided as the initial reduction in reserves on transition to IFRS 16 is spread over the remaining lease term for tax relief purposes.
At
1 January 2019
GBP000
-------------------------------------------------------------- ----------------
Operating lease commitment at 31 December 2018 as disclosed
in the Group's consolidated financial statements 12,226
Exclude rentals in JV company included in the above
commitments (474)
-------------------------------------------------------------- ----------------
Restated commitments excluding JV rentals 11,752
Less:
Discounted using the incremental borrowing rates at
1 January 2019 (3,526)
Recognition exemption for leases of low value assets (9)
Recognition exemptions for leases with less than 12
months lease term at transition (30)
Correction of rental amounts to accurately reflect liability (238)
Add:
Extension options reasonably certain to be exercised 1,247
-------------------------------------------------------------- ----------------
Lease liabilities recognised at 1 January 2019 9,196
-------------------------------------------------------------- ----------------
ii) Impacts for the period
In relation to those leases under IFRS 16, the Group has recognised depreciation and interest costs, instead of operating lease expense. During the six months ended 30 June 2019, the Group recognised GBP731,000 of depreciation charges and GBP247,000 of interest costs from these leases.
4. Adjusted performance measures
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted EBITDA which excludes the effects of non-recurring expenditure such as exceptional items and asset impairment charges. The share option expense is also excluded. Interest is not allocated to segments as the Group's cash position is controlled by the central finance team. This is considered the most reliable indicator as it is the closest approximation to cash generated by underlying trade, excluding the impact of one-off items of a material nature, adoption of IFRS 16 and working capital movements.
Adjusted EBITDA is not an IFRS measure, nevertheless 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:
Six months Six months Year
ended ended
30 June 30 June ended
Note 2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
---------------------------------------------- ------ --------------- --------------- --------------
Operating costs per income statement (24,186) (22,553) (47,196)
Add back:
Sports Betting investment 905 490 1,428
Depreciation 14,15 2,344 1,388 2,860
Amortisation, excluding acquired intangible
assets 13 1,065 953 1,917
Amortisation of acquired intangible assets 13 314 - -
Share option charge, excluding acceleration
of charge for departing management 324 660 1,222
Accelerated IFRS 2 charge for departing - -
management 749
Exceptional items 7 682 451 3,453
--------------- --------------- --------------
Adjusted operating costs (17,803) (18,611) (36,316)
Other operating income* - - 173
--------------- --------------- --------------
Total adjusted net operating costs (pre
Sports Betting investment) (17,803) (18,611) (36,143)
--------------- --------------- --------------
*Other operating income of GBP173k in 2018 was an insurance payout for business interruption following hurricane Maria and is considered to be non-exceptional operating income and is included in adjusted net operating costs.
Adjusted EBITDA is calculated as follows:
Six months Six months Year
ended ended
30 June 30 June ended
2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
---------------------------------------------------- --------------- --------------- --------------
Revenue 32,633 31,425 63,462
Cost of sales (9,798) (8,656) (17,619)
---------------------------------------------------- --------------- --------------- --------------
Gross profit 22,835 22,769 45,843
Marketing and distribution costs (726) (871) (1,732)
---------------------------------------------------- --------------- --------------- --------------
Contribution 22,109 21,898 44,111
Adjusted operating income and costs (pre Sports
Betting investment) (17,803) (18,611) (36,143)
---------------------------------------------------- --------------- --------------- --------------
Adjusted EBITDA pre Sports Betting investment 4,306 3,287 7,968
Sports Betting investment (905) (490) (1,428)
---------------------------------------------------- --------------- --------------- --------------
Adjusted EBITDA 3,401 2,797 6,540
Adjustment to prior year for IFRS 16 comparability
purposes* - 879 1,748
---------------------------------------------------- --------------- --------------- --------------
3,401 3,676 8,288
---------------------------------------------------- --------------- --------------- --------------
*IFRS 16 transition requires that prior year numbers are not restated. The above figures for IFRS adjustments are for comparability purposes only. They represent the 2019 lease rentals which would have been operating costs in 2019 if IFRS 16 had not been adopted, translated at 2018 exchange rates.
Sports Betting investment includes lobbying costs, additional staff costs and travel and consultants, and also includes an allocation of senior management time. Of these costs, GBP335k were external costs and GBP570k were internal (year ended 31 December 2018: GBP508k were external costs and GBP920k were internal).
Contribution is also an adjusted performance measure disclosed in the financial statements, being the revenue less directly variable costs of trade. This is presented to explain the underlying profit margins earned by the Group from its trade.
Adjusted profit is also an adjusted performance measure used by the Group. This uses adjusted EBITDA, as defined above as management's view of the closest proxy to cash generation for underlying divisional performance, and deducting share option charges, depreciation, amortisation of intangible assets (other than those which arise in the acquisition of businesses) and finance charges. This provides an adjusted profit before tax measure, which is then taxed by applying an estimated adjusted tax measure. The adjusted tax charge excludes the tax impact of income statement items not included in adjusted profit before tax.
Six months
ended
30 June
2019
(Unaudited)
-------------
Total
Continuing operations GBP000
----------------------------------------------------------- -------------
Adjusted EBITDA 3,401
Share option charge, excluding acceleration of charge for
departing management (324)
Depreciation (2,344)
Amortisation (1,065)
Finance income 34
Finance costs (247)
----------------------------------------------------------- -------------
Adjusted loss before tax (545)
-----------------------------------------------------------
Tax at 31.0% 169
-------------
Adjusted loss after tax (376)
-------------
Six months ended 30 June Year ended 31 December
2018 2018
(Unaudited) (Audited)
------------------------------------ ------------------------------------
Continuing Discontinued Total Continuing Discontinued Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ----------- ------------- -------- --- ----------- ------------- --------
Adjusted EBITDA 2,797 114 2,911 6,540 175 6,715
Share option charge (660) - (660) (1,222) - (1,222)
Depreciation (1,388) (48) (1,436) (2,860) (93) (2,953)
Amortisation (excluding
amortisation of
acquired intangibles) (953) (34) (987) (1,917) - (1,917)
Finance income/(charges) 40 - 40 18 (18) -
-------------------------- ----------- ------------- -------- ----------- ------------- --------
Adjusted (loss)/profit
before tax (164) 32 (132) 559 64 623
-------------------------- ----------- ------------- ----------- -------------
Tax* 8 (139)
-------- --------
Adjusted (loss)/profit after
tax (124) 484
-------- --------
* The adjusted tax rate for the six months ended 30 June 2018 is 6.0% and for the year ended 31 December 2018 is 22.7%.
5. Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, which makes strategic and operational decisions.
The Group has identified its operating segments as outlined below:
- Sportech Racing and Digital - provision of pari-mutuel wagering services and systems worldwide principally to the horseracing industry;
- Sportech Venues - off-track betting venue management; and - Corporate costs - central costs relating to the overall management of the Group.
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted EBITDA as defined in note 4. The share option expense is also excluded. Interest is not allocated to segments as the Group's cash position is controlled by the central finance team. Sales between segments are at arm's length.
Six months ended 30 June
2019 (Unaudited)
-----------------------------------------------------------------
Inter-segment
Racing Corporate elimination
and Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ------------------------ --------- ------------ -------------- -------------
Revenue from sale of
goods 1,007 - - - 1,007
Revenue from food and
beverage sales - 2,255 - - 2,255
Revenue from rendering of
services 16,930 12,735 - (294) 29,371
-------------------------- ------------------------ --------- ------------ -------------- -------------
Total revenue 17,937 14,990 - (294) 32,633
Cost of sales (2,793) (7,299) - 294 (9,798)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Gross profit 15,144 7,691 - - 22,835
Marketing and
distribution costs (310) (416) - - (726)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Contribution 14,834 7,275 - - 22,109
Adjusted operating costs (11,108) (5,866) (829) - (17,803)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Adjusted EBITDA (pre
Sports Betting
investment) 3,726 1,409 (829) - 4,306
Sport betting investment - (905) - - (905)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Adjusted EBITDA 3,726 504 (829) - 3,401
Share option charge,
excluding acceleration
of charge for departing
management - - (324) - (324)
Depreciation (1,206) (1,128) (10) - (2,344)
Amortisation (excluding
amortisation
of acquired intangibles) (1,001) - (64) - (1,065)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Segment result 1,519 (624) (1,227) - (332)
Acceleration of IFRS 2
charge for
departing management - - (749) (749)
Amortisation of acquired
intangibles (314) - - - (314)
Exceptional costs (352) (52) (278) - (682)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Operating profit/(loss) 853 (676) (2,254) - (2,077)
Net finance costs (364)
Loss before taxation (2,441)
Taxation 482
-------------
Loss for the period from
continuing
operations (1,959)
-------------------------- ------------------------ --------- ------------ -------------- -------------
Other segment items
Capital expenditure -
intangible
fixed assets 1,389 - 12 - 1,401
Capital expenditure -
property, plant
and equipment 810 153 - - 963
-------------------------- ------------------------ --------- ------------ -------------- -------------
Six months ended 30 June
2018 (Unaudited)
------------------------------------------------------------------------------------------------
Inter-segment
Racing Corporate elimination
and Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- -------------- --------- ------------ -------------- ---------
Revenue from sale of goods 637 - - - 637
Revenue from food and beverage sales - 2,346 - - 2,346
Revenue from rendering of services 15,928 13,273 - (759) 28,442
---------------------------------------- -------------- --------- ------------ -------------- ---------
Total revenue 16,565 15,619 - (759) 31,425
Cost of sales (1,930) (7,485) - 759 (8,656)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Gross profit 14,635 8,134 - - 22,769
Marketing and distribution costs (388) (483) - - (871)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Contribution 14,247 7,651 - - 21,898
Adjusted operating expenses (10,973) (6,565) (1,073) - (18,611)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA (pre Sports Betting
investment) 3,274 1,086 (1,073) - 3,287
Sport betting investment - (490) - - (490)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA 3,274 596 (1,073) - 2,797
Share option charge - - (660) - (660)
Depreciation (838) (537) (13) - (1,388)
Amortisation (837) - (116) - (953)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Segment result 1,599 59 (1,862) - (204)
Exceptional costs (48) (40) (363) - (451)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Operating profit/(loss) 1,551 19 (2,225) - (655)
---------------------------------------- -------------- --------- ------------ --------------
Net finance income 53
Loss before taxation (602)
Taxation 28
---------
Loss for the period - continuing
operations (574)
Net loss from discontinued operations (355)
---------
Loss for the period (929)
---------------------------------------- -------------- --------- ------------ -------------- ---------
Other segment items
Capital expenditure - intangible
fixed assets 1,569 - - - 1,569
Capital expenditure - property,
plant and equipment 646 274 - - 920
---------------------------------------- -------------- --------- ------------ -------------- ---------
Year ended 31 December 2018
(Audited)
-------------------------------------------------------
Inter-segment
Racing Corporate elimination
and Digital Venues costs Group
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- -------------- --------- ------------ -------------- ---------
Revenue from sale of goods 1,770 - - (44) 1,726
Revenue from food and beverage
sales - 4,724 - - 4,724
Revenue from rendering of services 32,234 25,399 - (621) 57,012
----------------------------------------- -------------- --------- ------------ -------------- ---------
Total revenue 34,004 30,123 - (665) 63,462
Cost of sales (3,991) (14,241) - 613 (17,619)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Gross profit 30,013 15,882 - (52) 45,843
Marketing and distribution costs (736) (996) - - (1,732)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Contribution 29,277 14,886 - (52) 44,111
Adjusted net operating expenses (20,634) (13,473) (2,088) 52 (36,143)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA (pre Sports Betting
investment) 8,643 1,413 (2,088) - 7,968
Sport betting investment - (1,428) - - (1,428)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Adjusted EBITDA 8,643 (15) (2,088) - 6,540
Share option charge - - (1,222) - (1,222)
Depreciation (1,715) (1,115) (30) - (2,860)
Amortisation (1,743) - (174) - (1,917)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Segment result 5,185 (1,130) (3,514) - 541
Exceptional costs (2,214) (65) (1,174) - (3,453)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Operating profit/(loss) 2,971 (1,195) (4,688) - (2,912)
Net finance income 473
Share of loss after tax of joint
ventures -
---------
Loss before taxation (2,439)
Taxation (2,019)
---------
Loss for the year - continuing
operations (4,458)
Net profit from discontinued operations 1,822
---------
Loss for the period (2,636)
----------------------------------------- -------------- --------- ------------ -------------- ---------
Other segment items
Capital expenditure - intangible
fixed assets 3,095 - 11 - 3,106
Capital expenditure - property,
plant and equipment 1,529 398 - - 1,927
----------------------------------------- -------------- --------- ------------ -------------- ---------
6. Expenses by nature
Six months Six months Year
ended ended
30 June 30 June ended
2019 2018 31 December
2018
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
----------------------------------------------- ---- --------------- --------------- -------------
Cost of sales
Tote and track fees 5,856 5,526 11,261
F&B consumables 665 705 1,405
Betting and gaming duties 400 363 738
Repairs and maintenance cost of sales 196 169 335
Ticket paper 467 392 888
Programs 259 275 498
Outsourced service costs 1,000 885 1,684
Cost of inventories sold, including provision
for obsolete inventory 955 341 810
Total cost of sales 9,798 8,656 17,619
----------------------------------------------------- --------------- --------------- -------------
Marketing and distribution costs
Marketing 525 629 1,261
Vehicle costs 65 112 232
Freight 136 130 239
----------------------------------------------------- --------------- --------------- -------------
Total marketing and distribution costs 726 871 1,732
----------------------------------------------------- --------------- --------------- -------------
Operating costs
Staff costs - gross, excluding share option
charges 14,155 13,639 27,532
Less amounts capitalised (1,389) (1,047) (2,923)
----------------------------------------------------- --------------- --------------- -------------
Staff costs - net 12,766 12,592 24,609
Property costs 1,930 2,562 5,314
IT & communications 671 657 1,355
Professional fees 2,356 2,040 4,391
Travel and entertaining 624 679 1,353
Banking transaction costs and FX 154 163 310
Provision for doubtful debts - - (76)
Other costs 207 408 488
----------------------------------------------------- --------------- --------------- -------------
Adjusted operating costs 18,708 19,101 37,744
Share option charge, excluding exceptional
accelerated charges 324 660 1,222
Acceleration of IFRS 2 charge for departing
management 749 - -
Depreciation 2,344 1,388 2,860
Amortisation, excluding amortisation of
acquired intangibles 1,065 953 1,917
Amortisation of acquired intangibles 314 - -
Exceptional costs 682 451 3,453
----------------------------------------------------- --------------- --------------- -------------
Total operating costs 24,186 22,553 47,196
----------------------------------------------------- --------------- --------------- -------------
7. Exceptional items
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
----------------------------------------------------- ---- --------------- --------------- ---------------
Exceptional costs:
Redundancy and restructuring costs in respect of
the rationalisation and
modernisation of the business 287 251 1,178
Expenses in relation to the UK defined benefit
pension scheme "buy-in" 105 - -
Acquisition costs in relation to Lot.to Systems
Limited 52 - -
Investment in S&S JV (immediately impaired) 230 187 291
Release of onerous contract provisions provided
in relation to exit from California operations
- offsetting investment above (179) (187) (291)
Costs in relation to the Spot the Ball VAT refund - 160 205
Costs in relation to legacy tax disputes 37 - 111
One off start-up costs of new ventures, including
new venue builds and joint ventures - 40 29
Costs in relation to exiting the Group's interests
in India 18 - 51
Impairment of contingent consideration in relation
to NYX Gaming - - 1,729
Legal costs in relation to intellectual property
infringement lawsuit 132 - 150
Total exceptional costs 682 451 3,453
----------------------------------------------------------- --------------- --------------- ---------------
Below is a summary of exceptional cash (outflows)/inflows:
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
------------------------------------------------------------ ---- --------------- --------------- ---------------
Exceptional cash outflows:
Redundancy and restructuring costs in respect of
the rationalisation and
modernisation of the business (846) (999) (1,332)
Expenses in relation to the UK defined benefit -
pension scheme "buy-in" (105) -
UK defined benefit pension scheme "buy-in" insurance -
contract purchased (234) -
Staff bonuses paid in relation to Football Pools
disposal plus final costs paid - (301) (307)
Acquisition costs in relation to Lot.to Systems
Limited (52) -
Spot the Ball bonus paid to former Director and
associated legal fees - (292) (315)
Costs in relation to the Spot the Ball VAT refund (45) (73) (73)
Costs in relation to legacy tax disputes (37) - (111)
One off start-up costs of new ventures, including
new venue builds and joint ventures - (32) (32)
Costs in relation to exiting the Group's interests
in India (18) - -
Legal costs in relation to intellectual property
infringement lawsuit (132) - (150)
------------------------------------------------------------------ --------------- --------------- ---------------
Total exceptional cash outflows (1,469) (1,697) (2,320)
------------------------------------------------------------------ --------------- --------------- ---------------
Exceptional cash inflows:
Cost settlement received from HMRC regarding Spot
the Ball VAT refund - 487 487
Total exceptional cash inflows - 487 487
------------------------------------------------------------------ --------------- --------------- ---------------
The Trustees of the Sportech Pension Scheme entered into a contract with Just Retirement Limited ("Just") on 28 March 2019 to insure the liabilities of the scheme. The Trustees and Just are working through due diligence and under-writing in order for an anticipated full buy-out and winding up of the scheme to be completed prior to the year end. The policy cost was GBP2,450,000 which was paid utilising the assets in the scheme, which were valued at GBP2,216,000 and an additional cash payment from the Company of GBP234,000. The Company is also paying all administrative, actuarial and legal costs the Scheme is incurring in the process.
8. Net finance (costs)/income
Six months Six Year
ended months
ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
----------------------------------------------------------- -------------- -------------- --------------
Finance costs:
Interest payable on bank loans and overdrafts - - (22)
Interest on lease liabilities (247) - -
Interest on defined benefit pension obligation - - (45)
----------------------------------------------------------- -------------- -------------- --------------
Total finance costs (247) - (67)
----------------------------------------------------------- -------------- -------------- --------------
Finance income 34 40 85
Other finance (costs)/income:
Foreign exchange (loss)/gain on financial assets and
liabilities denominated in foreign currency (139) (25) 363
Unwinding of interest on discounted non-current balances (12) 38 92
----------------------------------------------------------- -------------- -------------- --------------
Total other financial (costs)/income (151) 13 455
----------------------------------------------------------- -------------- -------------- --------------
Net finance (costs)/income (364) 53 473
----------------------------------------------------------- -------------- -------------- --------------
9. Taxation
Taxation is provided based on management's best estimate of the expected weighted average annual taxation rate for the full year. The estimated weighted average annual tax rate for the year ended 31 December 2019 is 19.7% (2018: 1.2%). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates.
The Group continues to hold a tax provision of GBP4,600k for tax potentially due on the 2016 Spot the Ball refund. Further provisions are held totaling GBP2,005k for other uncertain tax positions.
10. Acquisition of Lot.to Systems Limited
On 1 February 2019, the Group acquired 100% of the issued share capital of Lot.to Systems Limited ("Lot.to") a UK-based digital gaming technology business. The acquisition provides Sportech with a leading digital gaming platform, iLottery and a specialist team focused on innovative digital gaming technologies. It also helps solidify the Group's global gaming capabilities and services position. Importantly, the acquisition also provides Sportech with growth opportunities through broadening the suite of gaming services offered by the Group.
UK-regulated Lot.to is recognised as a digital specialist in the lottery sector which has developed turn-key solutions. Whilst its proprietary 'Rapid Lotto' and lotto betting verticals online have been its core consumer products, Lot.to's iLottery platform has the capability to operate in any gambling vertical including self-service POS terminals plus online and mobile interfaces.
Goodwill arising on the acquisition amounted to GBPnil.
The following table summarises the fair value of consideration paid for Lot.to and the amounts of the assets acquired and liabilities assumed recognised at acquisition date.
Unaudited
Fair value of consideration at 1 February 2019 Note GBP000
--------------------------------------------------- ------ ----------
Ordinary shares in Sportech PLC (2,000,000 shares
at 35.7p*) 714
Repayment of shareholder loan 1,300
------------------------------------------------------------ ----------
Total fair value of consideration transferred 2,014
------------------------------------------------------------ ----------
Recognised provisional fair value of identifiable
assets acquired and liabilities assumed
--------------------------------------------------- ------ ----------
Intangible fixed assets - software 2,112
Intangible fixed assets - licences 150
Tangible fixed assets - fixtures and fittings 1
Cash at bank and in hand 71
Trade and other receivables 99
Trade and other payables (14)
Corporation tax liability (3)
Deferred tax on acquired intangibles (402)
------------------------------------------------------------ ----------
Total identifiable net assets 2,014
------------------------------------------------------------ ----------
Total fair value of consideration transferred 2,014
------------------------------------------------------------ ----------
*share price of the Company on 1 February 2019.
There was no contingent consideration payable. The shareholder loan was agreed to be repaid in three installments of GBP300,000 on completion date, GBP500,000 by 31 March 2019 and GBP500,000 by 31 December 2019.
Acquisition costs amounted to GBP52,000 and have been recognised as an expense in the consolidated income statement as an exceptional item (see note 7).
The fair values of identifiable assets acquired and liabilities assumed are considered provisional in nature due to the business combination occurring just five months prior to the period end. Management will continue to monitor the provisional values during the year ended 31 December 2019 to ensure any fair values amendments are identified as a hindsight adjustment.
No contingent liabilities have been recognised as at the acquisition date.
Lot.to has contributed revenues of GBP170,000 and a loss of GBP121,000 to the Group results from the acquisition date to 30 June 2019. Had the acquisition occurred on 1 January 2019, the Group's revenue for the period ended 30 June 2019 would have been GBP32,642,000 and the Group's loss for the period would have been GBP1,989,000. These amounts have been determined by applying the Group's accounting policies and adjusting the results of Lot.to to reflect additional amortisation that would have been charged, assuming the fair value adjustments to intangible assets had been applied from 1 January 2019.
The premium on the shares issued in Sportech PLC of GBP314k is recorded as a merger reserve in retained earnings.
11. Net (loss)/profit from discontinued operations
Results from discontinued operations includes the Football Pools division, disposed of in June 2018, and also the Venues business in The Netherlands, Sportech Racing BV and its subsidiaries ("Sportech Holland"). Sportech Holland was disposed of in full on 26 July 2018 and was considered to be a held for sale asset as at 30 June 2018. The sale of this business to RBP Luxembourg SA was structured as a locked box, with an effective date of 1 January 2018. The risks and benefits of its cash generation were therefore transferred to the purchaser from that date. Control of the entity did not however transfer until completion of the deal on 26 July 2018 and accordingly its results were included in the six months ended 30 June 2018 as those of a discontinued operation.
Six months ended June Year ended 31 December
2018 (Unaudited) 2018
(Audited)
--------------------------- ---------------------------
FP* Holland Total FP* Holland Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- -------- -------- --- ------- -------- --------
Revenue - 2,631 2,631 - 3,065 3,065
Cost of sales, marketing
and distribution and adjusted
operating expenses 46 (2,562) (2,516) 78 (2,968) (2,890)
-------------------------------- ------- -------- -------- ------- -------- --------
Adjusted EBITDA 46 69 115 78 97 175
Depreciation and amortisation - (82) (82) - (93) (93)
Exceptional items - (461) (461) - (461) (461)
Finance costs - - - - (18) (18)
--------------------------------
Profit/(loss) before tax 46 (474) (428) 78 (475) (397)
Tax, excluding tax arising
on disposal - - - (169) - (169)
-------------------------------- ------- -------- -------- ------- -------- --------
Profit/(loss) after tax 46 (474) (428) (91) (475) (566)
Net gain on disposal (note
11a) 73 - 73 59 2,329 2,388
-------------------------------- ------- -------- -------- ------- -------- --------
Net result from discontinued
operations 119 (474) (355) (32) 1,854 1,822
-------------------------------- ------- -------- -------- ------- -------- --------
* Holland results for 2018 are to the date of disposal of 26 July 2018.
11a) Net gain on disposal
Six months ended June
2018
FP
(Unaudited)
GBP000
--------------------------------------------------- ------------- ----------- ---------------
Consideration, net of working capital adjustments 73
Gain on disposal 73
Year ended 31 December 2018
FP Holland Total
(Audited) (Audited) (Audited)
GBP000 GBP000 GBP000
--------------------------------------------------- ------------- ----------- ------------------
Consideration, net of working capital adjustments 73 3,007 3,080
Net assets disposed of - (318) (318)
Transaction costs incurred in the year - (360) (360)
--------------------------------------------------- ------------- ----------- ------------------
Pre-tax gain on disposal 73 2,329 2,402
Tax arising on disposal (14) - (14) --------------------------------------------------- ------------- ----------- ------------------ Gain on disposal 59 2,329 2,388 --------------------------------------------------- ------------- ----------- ------------------
Of the consideration receivable for Sportech Racing BV, GBP2,692k was received in cash during 2018 and GBP314k was recorded as contingent consideration receivable and was received in January 2019. Transaction costs of GBP79k were also paid in January 2019, the rest having been settled in cash in 2018. No tax is payable on the disposal of Sportech Racing BV as Substantial Shareholder Relief is being applied.
12. Earnings per share
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
(Unaudited) (Unaudited) (Audited)
----------
Basic EPS Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
(Loss)/profit
for the
period
(GBP000) (1,959) - (1,959) (574) (355) (929) (4,458) 1,822 (2,636)
Weighted
average no
of shares
('000) 188,331 188,331 188,331 186,029 186,029 186,029 186,393 186,393 186,393
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Basic EPS (1.0)p - (1.0)p (0.3)p (0.2)p (0.5)p (2.4)p 1.0p (1.4)p
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December 2018
(Unaudited) (Unaudited) (Audited)
----------
Diluted EPS Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
(Loss)/profit
for the
period
(GBP000) (1,959) - (1,959) (574) (355) (929) (4,458) 1,822 (2,636)
Weighted
average no
of shares
('000) 188,331 188,331 188,331 186,029 186,029 186,029 186,393 186,393 186,393
Dilutive N/A - N/A
potential N/A N/A N/A N/A - N/A
ordinary
shares ('000)
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Total
potential
ordinary
shares ('000) 188,331 188,331 188,331 186,029 186,029 186,029 186,393 186,393 186,393
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Diluted EPS (1.0)p - (1.0)p (0.3)p (0.2)p (0.5)p (2.4)p 1.0p (1.4)p
--------------- ----------- ------------- -------- ----------- ------------- ---------- ----------- ------------- ----------
Adjusted EPS
Adjusted EPS is calculated by dividing the adjusted profit after tax attributable to owners of the Company, as defined in note 4, by the weighted average number of ordinary shares in issue during the year.
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2019 2018 2018
Note (Unaudited) (Unaudited) (Audited)
---------------------------------- ------ -------------- --------------- ---------------
Adjusted (loss)/profit after tax
(GBP000) 4 (376) (124) 484
Basic Adjusted EPS (pence) (0.2)p (0.1)p 0.3p
Diluted Adjusted EPS (pence) (0.2)p (0.1)p 0.3p
---------------------------------- ------ -------------- --------------- ---------------
13. Intangible fixed assets
Six Six Year
months months
ended ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
Note GBP000 GBP000 GBP000
-------------------------------------------------------- ----- -------------- -------------- --------------
At 1 January 13,551 11,629 11,629
Additions - continuing operations 1,401 1,569 3,106
Additions - business combination 10 2,262 - -
Amortisation charge for period - continuing operations (1,379) (953) (1,917)
Movement as a result of foreign exchange 11 305 733
-------------- -------------- --------------
Net book amount at end of period 15,846 12,550 13,551
-------------------------------------------------------- ----- -------------- -------------- --------------
14. Property, plant and equipment
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
------------------------------------------ -------------- -------------- --------------
At 1 January 26,337 25,705 25,705
Additions 963 920 1,927
Additions - business combination 1 - -
Depreciation charge for period (1,613) (1,388) (2,860)
Movement as a result of foreign exchange (155) 529 1,565
-------------- -------------- --------------
Net book amount at end of period 25,533 25,766 26,337
------------------------------------------ -------------- -------------- --------------
15. Right-of-use assets
Six
months
ended
30 June
2019
(Unaudited)
GBP000
------------------------------------------ --------------
At 1 January - on transition to IFRS 16 7,918
Depreciation charge for period (731)
Movement as a result of foreign exchange (25)
--------------
Net book amount at end of period 7,162
------------------------------------------ --------------
16. Trade and other receivables
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
----------------------------------------------------- -------------- -------------- --------------
Non-current
Trade and other receivables 601 660 667
Contingent consideration receivable from disposal - 1,629 -
of Sportech-NYX Gaming, LLC
----------------------------------------------------- -------------- -------------- --------------
Total non-current trade and other receivables 601 2,289 667
----------------------------------------------------- -------------- -------------- --------------
Current
Trade and other receivables 10,637 11,479 8,169
Total trade and other receivables 11,238 13,768 8,836
----------------------------------------------------- -------------- -------------- --------------
17. Cash and cash equivalents
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
Note GBP000 GBP000 GBP000
--------------------------------- ----- -------------- -------------- --------------
Cash and short-term deposits 11,795 12,477 14,728
Customer funds 18 3,093 3,960 3,187
Total cash and cash equivalents 14,888 16,437 17,915
--------------------------------- ----- -------------- -------------- --------------
Customer funds are matched by liabilities of an equal value within trade and other payables (see note 18).
Included within cash and short-term deposits as at 30 June 2019 are amounts held in tills and vaults and other estimated amounts required by the Group to fund day to day working capital commitments totalling approximately GBP2.5m.
18. Trade and other payables
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
Note GBP000 GBP000 GBP000
--------------------------------------- ----- -------------- -------------- --------------
Trade payables 6,115 6,014 4,018
Other taxes and social security costs 331 157 113
Accruals 4,884 5,825 5,382
Deferred income 224 208 246
Player liability 17 3,093 3,960 3,187
Total trade and other payables 14,647 16,164 12,946
--------------------------------------- ----- -------------- -------------- --------------
19. Provisions
Six months Six Year
ended months
ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
------------------------------------------------------ ---- -------------- -------------- --------------
At beginning of period 2,411 2,626 2,626
Utilised during the period - (186) (96)
Release of discount interest to the income statement 12 7 22
Credit to income statement - share of loss of
JV (179) - (291)
Currency movements (12) 55 150
------------------------------------------------------------ -------------- -------------- --------------
Total provisions 2,232 2,502 2,411
------------------------------------------------------------ -------------- -------------- --------------
Provisions are in relation to:
Current provisions
Onerous contracts 737 1,050 977
Total current provisions 737 1,050 977
------------------------------------------------------------ -------------- -------------- --------------
Non-current provisions
Onerous contracts 1,377 1,338 1,315
Other 118 114 119
Total non-current provisions 1,495 1,452 1,434
------------------------------------------------------------ -------------- -------------- --------------
20. Cash flow from operating activities
Reconciliation of loss before taxation to cash flows from operating activities for continuing operations
Six months Six months Year
ended ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
--------------------------------------------------- -------------- --------------- --------------
Loss before taxation - continuing operations (2,441) (602) (2,439)
Adjustments for:
Net exceptional items 682 451 3,453
Depreciation and amortisation 3,723 2,341 4,777
Net finance charges/(income) 364 (53) (473)
Share option expense 1,073 660 1,222
Employers' taxes paid on options vested - (67) (67)
Changes in working capital:
(Increase)/decrease in trade and other receivables (2,240) (1,556) 1,831
(Increase)/decrease in inventories (306) 122 76
Increase/(decrease) in trade and other payables,
excluding player liabilities 2,058 176 (2,805)
(Decrease)/increase in customer funds (94) 1,088 315
Cash generated from operating activities, before
exceptional items 2,819 2,560 5,890
21. Lease liabilities
As at
30 June
2019
(Unaudited)
Maturity analysis - contractual undiscounted cashflows GBP000
---- --------------
Less than one year 1,697
Between 2 and 5 years 4,071
More than 5 years 5,984
Total 11,752
--------------
The weighted average incremental borrowing rate applied to
the lease liabilities was 5.75%.
As at
30 June
2019
(Unaudited)
Lease liabilities included in the balance sheet GBP000
---- --------------
Current 1,234
Non-current 7,297
Total 8,531
--------------
As at
30 June
2019
(Unaudited)
GBP000
---- --------------
At 1 January 2019 9,196
Interest charged to the income statements 247
Lease rentals paid (889)
Movement as a result of foreign exchange (23)
Total 8,531
--------------
22. Financial liabilities
Six Six months Year
months ended
ended
30 June 30 June ended
31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
Amounts payable to former shareholder of Lot.to Systems
Limited 500 - -
The final instalment of the original GBP1,300k shareholder loan to Lot.to Systems Limited which was assumed by Sportech PLC on the acquisition of the whole of the share capital of Lot.to Systems Limited is repayable on or before 31 December 2019.
23. Related party transactions
The extent of transactions with related parties of the Group and the nature of the relationship with them are summarised below.
a. Key management compensation is disclosed below:
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
---- -------------- -------------- --------------
Short-term employee benefits 623 511 752
Consultancy fees - 174 76
Share-based payments 49 164 388
Accelerated IFRS 2 charge for departing management 755 - -
Pay in lieu of notice 300 - -
Post-employment benefits 2 5 5
Total 1,729 854 1,221
-------------- --------------
b. The Group invested the following amounts of cash into each of its joint ventures and associates during the period:
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
GBP000 GBP000 GBP000
---- -------------- -------------- --------------
S&S Venues California, LLC 230 187 291
-------------- --------------
Six Six Year
months months
ended ended
30 June 30 ended
June 31 December
2018
2019 2018 (Audited)
(Unaudited) (Unaudited)
S&S Venues California, LLC GBP000 GBP000 GBP000
---- -------------- -------------- --------------
At 1 January - - -
Additions 230 187 291
Income statement items:
Impairment (121) (71) (44)
Share of loss after tax (109) (116) (247)
-------------- --------------
Net income statement expense (230) (187) (291)
Total - - -
-------------- --------------
The net income statement expense has been charged to exceptional costs (see note 7), given the provision for onerous contracts in relation to this joint venture, has been released to exceptional costs, having been recorded through exceptional costs in 2017. In 2019 the losses exceed the amounts provided which were the lease rentals only.
24. Contingencies
Contingent items
Tax
The Group's activities in recent periods have resulted in material tax liabilities crystallising. The ultimate tax liability due, in all instances, is subject to a degree of management judgement. The judgements which are made are done so in good faith, with the aim of always paying the correct amount of tax at the appropriate time. Management work diligently with the Group's external financial advisors in quantifying the anticipated accurate and fair tax liability which arises from material one-off events such as the Spot the Ball legal case and the disposal of the Football Pools. Management have an open, transparent and constructive relationship with tax regulators and engage positively when discussing any difference in legal interpretation between that of the Group and the regulators.
Certain contingent items exist at the reporting date with respect to tax liabilities as outlined below.
Corporation tax
Judgement has been applied by management as to the corporation tax which arises on the sale of the Football Pools in June 2017. Exposure to further liabilities as a result of differences to management judgement exists and a possible further tax liability could arise.
VAT
As disclosed in the 2015 interim financial statements, HMRC have previously challenged the recovery of VAT by Sportech PLC as an active holding company providing wholly economic activities. This challenge was aligned to European Case Law which ultimately ruled in the taxpayer's favour.
HMRC adjusted their challenge to Sportech in 2017 to instead focus on the value of the economic activities that Sportech PLC provides to its trading subsidiaries, the majority of which are based overseas. Assessments have been raised totaling GBP3.3m for the period to 30 June 2017, citing an under-valuation of the Group's management supplies which is made primarily to its exempt UK Football Pools business. The Group has continued to engage its external advisors on this issue and has entered into a formal appeals process and further dialogue with HMRC.
To continue with the appeal, and in accordance with due process, GBP1.3m was paid to HMRC in 2018 (HMRC agreed to defer payment of the remaining amount). A provision of GBP1.7m has been made in the Group accounts and Management consider that the likelihood of any further material outflow, over this amount, being made to HMRC to settle this issue is remote.
Irish subsistence claims
The Irish Revenue have assessed the Group for EUR106k for income tax allegedly underpaid in relation to subsistence claims of Irish field crew. Management believe that this assessment is incorrect and that all subsistence claims paid were made without tax deduction in accordance with relevant regulations. An appeal is being pursued and no provision has been recorded in these financial statements.
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 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.
Legal
The Group is engaged in certain disputes in the ordinary course of business which could potentially lead to outflows greater than those provided for on the balance sheet. The maximum possible exposure considered to exist, in view of advice received from the Group's professional advisors, is up to GBP0.6m. Management are of the view that the risk of those outflows arising is not probable and accordingly they are considered contingent items.
Statement of Directors' responsibilities
The Directors confirm that these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the Interim Management Report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related party transactions in the first six months and any material changes in the related party transactions described in the last Annual Report and Accounts.
A list of current Directors of Sportech PLC is maintained on the Sportech PLC website: www.sportechplc.com.
On behalf of the Board
Richard McGuire Tom Hearne Chief Executive Officer Chief Financial Officer 21 August 2019 21 August 2019
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR EAEPFAANNEAF
(END) Dow Jones Newswires
August 22, 2019 02:01 ET (06:01 GMT)
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