Final Results

Sportech PLC 04 March 2003 Sportech PLC Preliminary Results for the year ended 31 December 2002 Sportech PLC, the UK's leading home gaming company, and owners of Littlewoods Gaming, today announced its preliminary results for the year ended 31 December 2002. Highlights • Profit before tax, amortisation of goodwill and exceptionals increased 69% to £14.0m (2001: £8.3m). • Profit before tax was £4.6m (2001: loss of £0.6m). • Turnover increased by 7% to £195.3m (2001: £183.3m). • Earnings per share, before amortisation of goodwill, increased to 2.0 pence (2001: 1.1 pence). Basic EPS was 0.5 pence (2001: loss of 0.5 pence). • Operating cashflow increased to £18.1m (2001: £15.7m). • Good progress in delivery of television gaming strategy: • In-house expertise and technical infrastructure in place. • Sky Active gaming service launched in December 2002. • First ITV programme linked games expected to launch in Summer 2003. • Further extension of product range and customer access: • Littlewoodscasino.com launched in Q3 2002. • Sainsbury's and Safeway in-store scratchcard products introduced in Q4 2002. • LittlewoodsGameOn.com soft gaming site launched in Q4 2002. Colin McGill, Managing Director, Sportech PLC said: 'We are delighted with the growth and profitability generated by our existing businesses. Our continued investment over the last year in both product and channel development now positions us to capitalise on the extensive new customer access provided through television and retail outlets. The strength and potential of our brand has been clearly demonstrated by the quality of strategic partnerships agreed in the year.' Ends Enquiries Sportech Suzanne Judge, Head of Corporate Communication 0151 288 3059 Bell Pottinger Financial Jonathon Brill / Charles Reynolds 020 7861 3232 FINANCIAL REVIEW I am pleased to report improved financial results for 2002, with the stronger profits and operating cashflow being used to drive our strategy forward and reduce our borrowings. Turnover is up 7% to £195.3m, reflecting strong growth in sports betting revenues. Operating profit, before amortisation of goodwill and exceptional costs, is 27% ahead at £22.2m. All areas of the business performed better than the equivalent period last year and the first half of this year. During the year we completed two major projects aimed at significantly improving our operating capability whilst reducing costs. Scanning technology was introduced whilst our main operating site in Liverpool was rationalised. The net cost of these initiatives was £0.6m, reflecting a non operating exceptional profit of £1.4m from a property disposal, offset by an operating exceptional charge of £2.0m relating mainly to redundancies. Profit before tax, amortisation of goodwill (£8.8m) and exceptionals (£0.6m) increased by 69% to £14.0m. Profit before tax was £4.6m compared to a loss of £0.6m in 2001. The effective rate of taxation is reduced to 13% reflecting the impact of the property disposal profit, which will not be taxable and prior year adjustments. Earnings per share before amortisation of goodwill increased to 2.0 pence (2001: 1.1 pence). Basic EPS was 0.5 pence compared to a loss of 0.5 pence last year. Net cash inflow from operating activities increased to £18.1m (2001: £15.7m) after expenditure of £3.3m relating to the execution of the television and internet gaming strategy. There was further capital investment of £1.7m relating to the television and internet strategy. Total capital expenditure during the year was £4.9m reflecting investment in the Group's building infrastructure for its football pools operation and new head office facilities, as well as substantial investment in the key television and internet strategy. Disposal of surplus property generated £2.0m and the disposal of the Pull Tab business generated £0.5m. After taking account of asset disposals, net capital investment was £2.3m. Following approval of the special resolution at the AGM, April 2002, and confirmation from the Court of Session in Scotland, the company reconstructed its capital on 23 December 2002. As a result, the company has been able to reduce the deficit on the profit and loss account by the utilisation of the £47.1m balance on the share premium account and the £0.9m balance on deferred shares. Together with the retained profit for the year, this has resulted in a balance on distributable reserves of £1.9m. Bank loans were further reduced by £14.0m during the year to £119.9m. OPERATING REVIEW Football Pools Operating profits before goodwill from the football pools increased by 10% to £25.6m, (2001: £23.2m), reflecting significant improvement in operating efficiencies, the reduction in the duty burden from April 2002 and a £0.4m contribution from Zetters since its acquisition in August 2002. We have continued to focus on our customer retention and recruitment programmes, further reducing the like for like rate of decline in turnover in the second half of the year to 14%. The acquisition of the Zetters Football Pools business for net cash of £0.7m delivered a customer base of 60,000. There has been no significant customer loss as a result of the acquisition, and the business has performed in line with expectations. We continue to identify opportunities to rationalise the operational and overhead base of the football pools whilst extending our distribution of this product via television, internet and overseas businesses. Sports Betting Littlewoods Bet Direct telephone and internet betting continued to deliver strong revenue growth, with turnover 60% higher, at £83.1m (2001:£51.8m). This growth reflected the benefits of a level playing field arising from the elimination of tax for customers in October 2001. As a result of the increased betting volumes, operating losses were halved during the year to £2.0m compared to 2001. Customer numbers increased by 20% to 272,000, with average stakes per telephone call up 23% to £36 and the average internet bet up 26% to £17. Following a strong first half, gross win margins eased back in the second half, in line with market trends, leading to a gross win margin for the full year of 10% (2001: 11%). The commencement of a three year all weather racing sponsorship programme, positioning the Littlewoods Bet Direct brand at more than one in five UK televised horse racing events, significantly raised Littlewoods Bet Direct's profile. The business continued to provide a variety of unique best and special bet offers to customers, generating continued media exposure for the brand. We are looking forward to the launch of our fixed odds service on the attheraces television channel, and expect this additional customer access to further stimulate growth and profitability. Games and Lotteries Operating profits before goodwill from Games and Lotteries increased by £0.4m to £0.9m (2001: £0.5m), mainly due to the £0.5m profit from the sale of the Pull Tabs lottery business, announced in September. 2002 was a period of significant transition for our soft gaming business as we concluded a number of major new distribution arrangements, significantly enhancing both on line and off line customer access, while withdrawing from low growth marginal businesses such as Pull Tabs lotteries. Our focus has been on interactive channels together with retail distribution. Growth of on-line games has been underpinned by the launch of LittlewoodsCasino.com, our on-line casino, which was launched in August 2002 and is already trading profitably. We are encouraged by the levels of customer interest in this product and plan to enhance the choice and quality of games available in the first half of 2003. Our plan to capture a larger share of the £500m scratchcard market* was boosted by groundbreaking retail distribution deals with both Sainsbury's and Safeway for the supply of own label scratchcards dedicated for specific charities such as Comic Relief and Great Ormond Street Hospital. Extended trials with both these supermarket groups are currently underway. Interactive Good progress has been made in the delivery of our television gaming strategy. Increased investment has enabled us to build in-house expertise and further develop our technical infrastructure. Television A close working relationship with ITV Network has been firmly established since the signing of our exclusive gaming partnership in March 2002, and we look forward to realising its significant commercial potential. The official commencement date for this relationship, which can extend for 7 years, requires a full interactive service to be available to support ITV broadcasting over a major platform, such as Sky satellite, which now has over 6.6m household subscribers. Carriage negotiations between ITV and BSkyB have now been successfully concluded, and we expect to launch our first programme linked pay to play games in summer 2003. Our technical and service capabilities have already been tested successfully by the launch of a number of games accessed from both Sky broadcast channels and Sky Active in December 2002. In addition, the ITV network provides the opportunity to promote games to both digital and analogue viewers who can then choose to play via their TV or other convenient response routes, such as telephone and internet. * source: Mintel August 2002. Internet We have continued to develop innovative and entertaining internet gaming products utilising a variety of instant win mechanics. These have included a range of ITV Pop Rivals pay to win internet games and the recently launched Formula One Fantasy league game, available at both ITV.com and our own soft gaming site, LittlewoodsGameOn.com. Outlook In terms of strategic developments, the launch of programme linked gaming on ITV will deliver our products to significant audience numbers later this year, augmenting our Sky Active and internet offerings. The profits and cashflow from our football pools business is expected to remain strong, with further growth anticipated in our sports betting and games and lotteries businesses. We will continue to seek opportunities to extend our distribution to mass markets, working with broadcasters, retailers and interactive platform providers. We look to the future with confidence. David Mathewson Chairman 3 March 2003 Sportech PLC Consolidated Profit & Loss Account For the year ended 31 December 2002 Unaudited Audited 2002 2001 Notes £m £m (restated) Group turnover 3 195.3 183.3 Cost of sales (139.4) (129.3) -------- -------- Gross profit 55.9 54.0 Net operating expenses (44.5) (45.4) Operating profit before restructuring costs and amortisation of goodwill 22.2 17.5 Exceptional - restructuring costs 4 (2.0) - Amortisation of goodwill (8.8) (8.9) Operating profit 11.4 8.6 Profit on sale of tangible fixed assets 4 1.4 - Net interest payable and similar items (8.2) (9.2) -------- -------- Profit/(loss) on ordinary activities before taxation 3 4.6 (0.6) Tax on profit/(loss) on ordinary activities 5 (1.7) (2.1) -------- -------- Retained profit/(loss) for the financial year 2.9 (2.7) ======== ======== Earnings per share 6 0.49p (0.45)p Basic ======== ======== 1.97p 1.05p Pre amortisation of goodwill ======== ======== All operations are continuing. Sportech PLC Reconciliation of movement in group shareholders' funds For the year ended 31 December 2002 Unaudited Audited 2002 2001 Notes £m £m (restated) Shareholders' funds at 1 January 2002 as previously reported 27.3 29.6 Prior period adjustment 2 1.3 1.7 -------- -------- Shareholders' funds at 1 January 2002 as restated 28.6 31.3 Profit/(loss) for the year 2.9 (2.7) -------- -------- Shareholders' funds at 31 December 2002 31.5 28.6 ======== ======== Statement of total recognised gains and losses For the year ended 31 December 2002 Unaudited Audited 2002 2001 £m £m (restated) Total recognised gains and losses relating to the year 2.9 (2.7) ======== Prior period adjustment 2 1.3 -------- Total recognised gains and losses since last annual report 4.2 ======== Sportech PLC Consolidated Balance Sheet As at 31 December 2002 Unaudited Audited 2002 2001 £m £m (restated) Fixed assets Intangible assets 155.1 161.8 Tangible assets 8.5 7.2 -------- -------- 163.6 169.0 -------- -------- Current assets Stocks 0.1 0.2 Debtors - due within one year 8.3 5.7 Debtors - due after more than one year 1.0 1.6 Cash at bank and in hand 6.0 12.9 -------- -------- 15.4 20.4 Creditors Amounts falling due within one year (43.5) (42.9) -------- -------- Net current liabilities (28.1) (22.5) -------- -------- Total assets less current liabilities 135.5 146.5 Creditors Amounts falling due after more than one year (104.0) (117.9) -------- -------- 31.5 28.6 ======== ======== Capital and reserves Called up share capital 29.6 30.5 Share premium account - 47.1 Profit & loss account 1.9 (49.0) -------- -------- Total shareholders' funds (including non-equity interests) 31.5 28.6 ======== ======== Sportech PLC Consolidated Cash Flow Statement For the year ended 31 December 2002 Unaudited Audited Notes 2002 2001 £m £m £m £m Net cash inflow from operating activities 8 18.1 15.7 Returns on investments and servicing of finance: Interest received 0.2 0.4 Interest paid (8.3) (10.2) Purchase of interest rate cap - (0.9) ------ ------ Net cash outflow from returns on investments and servicing of finance (8.1) (10.7) Taxation (2.6) (4.3) Capital expenditure and financial investment: Purchase of tangible fixed assets (4.1) (2.0) Purchase of intangible fixed assets (0.8) - Sale of tangible fixed assets 4 2.6 0.2 ------ ------ Net cash outflow from capital expenditure and financial investment (2.3) (1.8) Acquisition of business: 7 Acquisition of Zetters pools business (1.4) - Acquisition expenses (0.1) - Net cash acquired with business 0.7 - ------ ------ Net cash outflow from acquisitions and disposals (0.8) - ------ ------ Cash inflow/(outflow) before management of liquid resources and finance 4.3 (1.1) Financing: Net loans repaid (14.0) (6.0) ------ ------ Net cash outflow from financing (14.0) (6.0) ------ ------ Decrease in net cash 9 (9.7) (7.1) ====== ====== Notes to the Preliminary Statement For the year ended 31 December 2002 1. Basis of reporting a) The preliminary results have been prepared on the basis of the accounting policies set out in the group's 2001 financial statements, with the exception that FRS 19, Accounting for Deferred Tax, has been implemented as set out in note 2. The preliminary results have been drawn up for the 52 week period from 5 January 2002 to 3 January 2003 (2001, 53 week period). b) The preliminary results for the year ended 31 December 2002 are unaudited. The financial information on pages 6 to 15 does not amount to full financial statements within the meaning of Section 240 of the Companies Act 1985 (as amended). 2. Prior period adjustment The Group has adopted FRS19, Accounting for Deferred Tax, in these preliminary financial statements. Accordingly, full provision has been made for deferred tax. Corresponding figures for 2001 have been adjusted to reflect this change in accounting policy. A summary of the effect of this change is as follows: 2001 2001 2001 2002 Reported Change Restated Effect £m £m £m £m (Loss)/profit on ordinary activities before tax (0.6) - (0.6) - Taxation (1.7) (0.4) (2.1) (0.6) ------- ------- ------- ------- (Loss)/profit on ordinary activities after tax (2.3) (0.4) (2.7) (0.6) ======= ======= ======= ======= Earnings per share: (0.39p) (0.06p) (0.45p) (0.10p) Basic and diluted ======= ======= ======= ======= 1.11p (0.06p) 1.05p (0.10p) Pre-amortisation of goodwill ======= ======= ======= ======= Goodwill 162.1 (0.3) 161.8 - ======= ======= ======= ======= Deferred tax asset - 1.6 1.6 (0.6) ======= ======= ======= ======= P&L account at 1 January (48.0) 1.7 (46.3) - (Loss)/profit for the year (2.3) (0.4) (2.7) (0.6) ------- ------- ------- ------- P&L account at 31 December (50.3) 1.3 (49.0) (0.6) ======= ======= ======= ======= 3. Segmental reporting 2002 2001 £m £m (restated) Turnover Football Pools 100.8 119.0 Sports Betting 83.1 51.8 Games and Lotteries 11.4 12.5 Interactive - - ------- ------- Total Littlewoods Gaming 195.3 183.3 Technology Patents - - ------- ------- 195.3 183.3 ======= ======= Profit/(loss) before taxation Football Pools 25.6 23.2 Sports Betting (2.0) (4.0) Games and Lotteries * 0.9 0.5 Interactive (2.3) (1.6) ------- ------- 22.2 18.1 Total Littlewoods Gaming - (0.6) Technology Patents ------- ------- Operating profit before restructuring costs and amortisation of goodwill 22.2 17.5 Restructuring costs ** (2.0) - Amortisation of goodwill ** (8.8) (8.9) ------- ------- Operating profit 11.4 8.6 Profit on sale of tangible fixed assets 1.4 - Net interest payable and similar items (8.2) (9.2) ------- ------- 4.6 (0.6) ======= ======= * - included within this in 2002 is £0.5m surplus on sale of the Pull Tabs lottery business ** - principally football pools Net assets Football Pools 48.8 43.2 Sports Betting (12.0) (10.6) Games and Lotteries (2.1) (2.8) Interactive (3.2) (1.2) ------- ------- Total Littlewoods Gaming 31.5 28.6 Technology Patents - - ------- ------- 31.5 28.6 ======= ======= All turnover and profits arise in the United Kingdom. 4. Net restructuring costs 2002 2001 £m £m Restructuring costs - operating (2.0) - Profit on sale of tangible fixed assets - non-operating 1.4 - ------- ------- (0.6) - ======= ======= During the year, the Group has introduced new technology for the marking of football pools coupons. This technology is less labour and space intensive than the technology it replaced. In consequence, there was a significant reduction in staff requirements, and the restructuring costs of £2.0m comprise £1.8m of redundancy payments and £0.2m of other costs. The smaller scale of new coupon processing equipment also enabled processing to be concentrated in one of two pools processing buildings. The surplus land and building were sold for redevelopment generating proceeds of £2.0m and realising a gain on disposal of £1.4m. 5. Taxation 2002 2001 £m £m (restated) Current tax UK corporation tax @ 30% (2001, 30%) 3.2 1.7 Adjustments in respect of prior periods (2.1) - ------- ------- Total current tax 1.1 1.7 ------- ------- Deferred tax Current year 0.5 0.4 Adjustments in respect of prior periods 0.1 - ------- ------- Total deferred tax 0.6 0.4 ------- ------- 1.7 2.1 ======= ======= The tax for the period is lower (2001 : higher) than the standard rate of corporation tax in the UK (30%). The differences are explained below: 2002 2001 £m £m Profit/(loss) on ordinary activities before tax 4.6 (0.6) ===== ===== Profit/(loss) on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2001, 30%) 1.4 (0.2) Effects of: Goodwill write-off not deductible for tax purposes 2.6 2.7 Other permanent differences (0.3) 0.1 Origination and reversal of timing differences (0.5) (0.4) Adjustments to tax in respect of prior periods (2.1) - Fair value adjustments - (0.5) -------- -------- 1.1 1.7 ======== ======== 6. Earnings per Share The calculations of earnings per share are based on the following profits and numbers of shares. 2002 2001 (restated) Earnings Weighted Per share Earnings Weighted Per share average number amount average number amount of shares pence of shares pence £m '000 £m '000 Basic EPS excluding goodwill amortisation 11.7 592,074 1.97p 6.2 592,074 1.05p Effect of goodwill amortisation (8.8) 592,074 (1.48p) (8.9) 592,074 (1.50p) -------- -------- -------- -------- -------- -------- Basic EPS 2.9 592,074 0.49p (2.7) 592,074 (0.45p) ======== ======== ======== ======== ======== ======== 7. Acquisition of Zetters pools business On 29 August 2002 Sportech PLC acquired the Football Pools business of Zetters International Pools Ltd. The purchase consideration was £1.4m satisfied by cash. Goodwill arising on the acquisition of this business has been capitalised and included within intangible fixed assets and amortised over 3 years. An analysis of the acquisition is as follows: Fair value Book value adjustments Fair value £m £m £m Tangible fixed assets 0.2 - 0.2 Prepayments 0.2 - 0.2 Cash 0.7 - 0.7 --------- --------- --------- Total assets 1.1 - 1.1 --------- --------- --------- Trade creditors (0.2) - (0.2) Accruals and deferred income (0.7) - (0.7) --------- --------- --------- Total liabilities (0.9) - (0.9) --------- --------- --------- Net assets acquired 0.2 - 0.2 ========= ========= Acquisition costs (0.1) Goodwill 1.3 --------- Discharged by cash 1.4 ========= The acquired business has contributed £1.8m to turnover and £0.4m to operating profit. 8. Reconciliation of operating profit to operating cash flows 2002 2001 £m £m Operating profit 11.4 8.6 Decrease in provisions - (1.8) Depreciation on tangible fixed assets 2.4 2.2 Amortisation of goodwill 8.8 8.9 Amortisation of loan arrangement fee - 0.1 Surplus on disposal of tangible fixed assets (0.6) (0.1) Decrease in stocks 0.2 - (Increase)/decrease in trade debtors (0.3) 0.6 Decrease in other debtors 0.4 0.9 (Increase)/decrease in prepayments (2.6) 2.2 Increase in trade creditors 0.3 0.8 Decrease in other taxes (1.3) (0.3) Decrease in accruals and deferred income (0.6) (6.4) -------- -------- Net cash inflow from operating activities 18.1 15.7 ======== ======== Included within cash balances is £2.0m (2001: £nil) of cash to which the Group has restricted access. This relates to a deposit placed on the Isle of Man during 2002 in connection with the on-line casino business. This cash can only be accessed with the permission of the Isle of Man government. 9. Analysis and reconciliation of net debt At 1 At 31 January 2002 Cash flow Other movement December 2002 £m £m £m £m Cash at bank and in hand excluding charity 11.7 (7.4) - 4.3 cash balances Bank overdrafts (2.9) (2.8) - (5.7) ------- ------- ------- ------- 8.8 (10.2) - (1.4) ------- ------- ------- ------- Debt due within one year (15.9) 16.0 (16.0) (15.9) Debt due after one year (117.9) (2.0) 15.9 (104.0) ------- ------- ------- ------- (133.8) 14.0 (0.1) (119.9) ------- ------- ------- ------- (125.0) 3.8 (0.1) (121.3) ======= ======= ======= ======= 2002 2001 £m £m Decrease in cash in period (9.7) (7.1) Movement in charity cash (0.5) 0.4 -------- -------- Change in net debt resulting from cash flows (10.2) (6.7) Net cash outflow from reduction in loans 14.0 6.0 Amortisation of loan arrangement fee (0.1) (0.1) -------- -------- Movement in net debt for the period 3.7 (0.8) At 1 January 2002 (125.0) (124.2) -------- -------- At 31 December 2002 (121.3) (125.0) ======== ======== This information is provided by RNS The company news service from the London Stock Exchange

Companies

Sportech (SPO)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today