Interim results for the 6 months ended 30 June 12

RNS Number : 6052K

Sportech PLC

23 August 2012

 



Sportech PLC ("Sportech" or "the Group")

Interim results for the six months ended 30 June 2012

Sportech, one of the world's leading operators and suppliers of pools and tote betting services, is pleased to announce its interim results for the six months ended 30 June 2012.

Financial highlights

·      Revenue increased to £57.7m (2011: £57.4m)

·      EBITDA* increased to £12.6m (2011: £12.4m)

·      Adjusted profit before tax** of £7.4m (2011: £7.4m)

·      Profit before tax of £3.2m (2011: £3.7m), lower due to higher exceptional costs

·      Adjusted earnings per share up to 2.7p (2011: 2.6p)

·      Earnings per share of 1.1p (2011: 1.2p)

·      Strong operating cash flows reduced net bank debt by 10% to £53.4m (31 December 2011: £59.2m)

·      New £75.0m revolving bank credit facility signed in July 2012

Strategic and operational highlights

·      Football Pools: broadening distribution and modernisation continues:

o  Increase in weekly spend per customer within direct channel equivalent to 15% year-on-year

o  Distribution agreement signed with France-Pari

o  Continued efficiency benefits

·      Sportech Racing: making further good progress in the USA:

o  Key tote contracts with California Racing and TVG extended until 2015

o  Good momentum in the Off-Track Betting (betting shop) estate and in telephone betting

o  Seven racing customers now live for online horseracing tote

·      e-Gaming: beginning to grow after transitionary period:

o  All products, other than bingo, now launched on Playtech platform

o  Single branding of Vernons across all e-Gaming sites completed

o  Mobile casino to be launched before the end of 2012

*    EBITDA is stated before exceptional costs and share option expense.

**   Adjusted profit figures are stated before amortisation of acquired intangibles, exceptional costs, share of loss after tax of joint venture and other finance charges.

Ian Penrose, Chief Executive of Sportech PLC, said:

"The Group has increased EBITDA, generated strong cash flows and reduced its net bank debt by 10% during the first six months of the financial year.

Following a period of integration and operational improvements, we are pleased to have secured larger and improved banking arrangements that will facilitate business development and growth initiatives in the near future.

Management has invested a significant amount of time in our acquired North American gaming business. As a result, more than 30% of our profits now come from our North American business, and with the emerging regulatory environment and our unique strategic positioning we expect the region to become an increasingly important area for Sportech.

Despite the challenging global economic conditions, trading remains in line with management expectations for the full year and we look forward to the future with confidence."

For further information, please contact:

Ian Penrose, Chief Executive

Steve Cunliffe, Finance Director

Sportech PLC                                                           Tel: [phone]

David Rydell/Emma Kent/Rosanne Perry

Pelham Bell Pottinger                                              Tel: [phone]

Forward-looking statements

Certain statements in this Interim Report are forward-looking. Although the Group believes that the expectations reflected in this forward-looking statement are reasonable, it can give no assurance that these expectations will prove to be correct. As these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

Sportech PLC ("Sportech" or "the Group")

Interim results for the six months ended 30 June 2012

Overview

Sportech is one of the world's leading operators and suppliers of pools and tote betting services, occupying a unique position in the highly regulated and emerging gaming markets worldwide. The interim results for the six months ended 30 June 2012 reflect the continued progress made by the Group.

The financial performance, with an increase in EBITDA to £12.6m and a further 10% reduction in net bank debt to £53.4m, reflects these improvements and focused investments. We expect that the second half of the financial year will see Sportech continue to build upon these firm foundations.

Following a period of integration and operational improvements, we are pleased to have secured larger and improved banking arrangements that will facilitate business development and growth initiatives in the near future.

Financial performance

Overall, Group revenue increased to £57.7m (2011: £57.4m), Group EBITDA increased to £12.6m (2011: £12.4m) and adjusted profit before tax was held at £7.4m (2011: £7.4m). The Group reported a profit before tax of £3.2m (2011: £3.7m) and profit after tax amounting to £2.1m (2011: £2.3m). Basic earnings per share amounted to 1.1p (2011: 1.2p). Adjusted earnings per share amounted to 2.7p (2011: 2.6p).

Analysis of Group revenue and EBITDA performance by business segment is shown in the table below:

£m	Revenue		EBITDA
	2012	2011	2012	2011
Football Pools	21.7	23.7	8.7	8.7
Sportech Racing	33.6	32.1	5.0	4.8
e-Gaming	2.6	2.0	0.7	0.9
Inter-segment elimination	(0.2)	(0.4)	-	(0.1)
Corporate costs	-	-	(1.8)	(1.9)
Total Group	57.7	57.4	12.6	12.4

Football Pools

We continue to develop our Football Pools business, increasing customer spend per head whilst exercising strong cost control. Revenue for the period amounted to £21.7m (2011: £23.7m), generating £8.7m of EBITDA, the same as that generated in the prior year.

As previously highlighted, the strategy has been to increase spend per head from our large core customer base, rather than target expensive low margin recruitment, and so we are pleased to report that there has been a 15% increase in spend per head within our core direct channel year-on-year. We also continue to increase the percentage of customers using automated payment methods, such as direct debit and recurring card transactions. This has improved customer retention rates to 57% at 30 June 2012 (31 December 2011: 52%). As at 30 June 2012, at the seasonally low point in the football calendar, we had a total of 394,000 Football Pools customers.

We continue to strengthen our international distribution network and we are pleased to announce a distribution agreement with France-Pari, one of the oldest betting operators licensed in France, introducing a number of Sportech's online Football Pools products to French players before the end of the financial year.

We are committed to the ongoing development of our products and customer experience and we are currently in discussions with a third party to bring to market a new and exciting complementary pools offering. We expect to make an announcement on this shortly.

Our continued investment inmodernisingthe Football Pools has led to further cost reductions in the period and our focus on driving efficiencies through our operational activities continues.

Sportech Racing

Our acquisition of Sportech Racing in October 2010 firmly established the Group in the North American gaming marketplace. Following the emerging regulatory change, it is expected by many to become the world's largest gaming market. Sportech Racing has over 700 employees, offices and operation centres in Connecticut, Atlanta, New Jersey and California, 15 betting and entertainment venues, a telephone betting business and racing customers across the world, and processes $13.0 billion of bets annually, representing approximately 50% of all horseracing bets in North America.

In order to position the business for growth and take advantage of opportunities that will become available following regulatory change, the management of Sportech Racing has been realigned and focused accordingly.

After a number of years of declining handle and profitability, it is pleasing that EBITDA has increased to £5.0m (2011: £4.8m) for the half year. This can be analysed further as follows:

£m	2012 H1		2011 H1
	Revenue	EBITDA	Revenue	EBITDA
Tote services and equipment	16.1	2.6	14.4	2.4
Venue management	17.5	2.6	17.7	2.5
Central costs	-	(0.2)	-	(0.1)
Sportech Racing	33.6	5.0	32.1	4.8

Tote services and equipment

We have continued to make good progress in our Sportech Racing Tote business. Following on from 2011 when we successfully renewed or extended 16 contracts with racetracks, we have made further progress with the renewal of an additional eight contracts. Importantly our contracts to provide tote services to all of the State of California (excluding CalExpo) and to TVG/Betfair have been extended until 2015.

In the first half we also opened another wagering facility in a sports bar in Santa Clarita, California, under our licence to install 45 such operations. This licensing process to open new facilities is lengthy and it is an important part of Sportech's strategy to increase the roll out of such facilities in 2013 and beyond.

Work continues to improve our core tote technology offering and also to significantly enhance our interactive products. In the period, we have launched mobile betting within the boundaries of a racetrack and continued to develop our new online offering, which is expected in Spring 2013. As a consequence of these current and past investments, we have recently managed to secure an increase in certain aspects of our pricing.

Following the creation of our Interactive Products and Services division last year to focus on the regulated online horseracing market, we have continued to make progress and momentum is building. As mentioned previously, we are developing the new online offering for our racetrack partners, in addition to the Connecticut marketplace when legislation permits, and have established a full turnkey technology, marketing and customer service business plan. Our contract to provide such services to the only racetrack in Puerto Rico went live earlier this year and we have recently secured a contract to provide interactive services to Pocono Downs, part of the Mohegan Sun Group. We are actively pursuing new customers in this important growth market.

Our Tote services division also sells tote systems, terminals and associated software services to customers across the world. During the first half of 2012, we completed the sale of a full tote system to our customer in Chile, together with terminal and software sales to existing customers. In addition, we successfully completed the sale (over 80% occurred in 2011) and installation of over 1,240 terminals to Tabcorp in Australia.

We continue to work on creating a pipeline of interactive sales, with some markets more difficult than others at present due to the global economic climate.

Sportech Venues

In Connecticut, USA, Sportech Venues operates all betting on horseracing under an exclusive and in perpetuity licence.

Performance in Connecticut has been encouraging, driven by the continued investment in facilities, customers and employees that we started in 2011. Betting volumes generated from our OTB estate (betting shops) of 15 venues and telephone betting amount to $98m, up 2% from last year on a like-for-like basis. In the first six months of the year, we refurbished and expanded the call centre for our telephone betting business and secured an important legislative change to the Simulcast Bill to facilitate the provision of pictures of racing to be installed in future OTB sites.

We continue to review the opportunities for other areas of expanded gaming in Connecticut, including actively seeking new sites for opening a further three OTBs under our existing state licence.

In the Netherlands, we operate a number of OTBs, point of sale terminals and online betting on horseracing, all on an exclusive basis under a licence from the Ministry of Justice. We continue to closely monitor regulatory change for gambling in the country, as we anticipate that we are well positioned from both an online and offline perspective to operate a thriving, gaming business in what we expect to be a highly regulated market.

e-Gaming

After a period of transition, the first half of 2012 has seen our e-Gaming business launch in earnest on the Playtech platform following the successful conclusion of a number of complex software migrations. All sites have on launch been rebranded using the Vernons name following the cessation of our rights to use the Littlewoods name on 30 June 2012.

Other than bingo, which migrates at the end of the year, we now offer an integrated platform with customers able to play casino, poker and games from a single wallet. Later this year, we will be launching a mobile offering to complement the online play.

As a consequence of these improvements, we have been able to increase our marketing expenditure in the first half to drive the recruitment of new customers.

First-time depositors have increased on our casino and poker products by 300% to 6,000 during the first half of the year. This has led to gross win revenues increasing by 30% to £2.6m (2011: £2.0m), despite the overall reduction in active players to 16,600 (2011: 19,200), reflecting the improved mix of players following the marketing, rebranding and migration over the last few months.

As a result of the increase in marketing expenditure during the first half of the year, EBITDA has fallen slightly to £0.7m (2011: £0.9m). We expect good growth in our e-Gaming division in the second half of 2012 and beyond.

Corporate costs

Corporate costs of £1.8m (2011: £1.9m) have been tightly controlled. In addition, we also have a non-cash share option expense under IFRS 2 of £0.7m (2011: £0.5m).

Depreciation and amortisation

The Group's normal depreciation and amortisation charge increased in the period to £2.5m (2011: £2.1m) principally due to the capital expenditure program undertaken to improve our venues business in North America. In addition, the Group incurred a non-cash amortisation charge of £3.0m (2011: £3.0m) on the intangible assets acquired with Vernons in 2007. This charge continues at an annualised £6.0m until June 2014.

Exceptional costs

The Group has incurred exceptional costs of £1.0m (2011: £0.3m) in the six-month period. These costs include restructuring and other costs of £0.7m (2011: £0.3m) and compensation for loss of office of £0.3m (2011: £nil).

Net finance costs

The Group has incurred net interest payments of £2.0m, £0.4m lower than last year, principally due to the reduction in debt.

The Group has also incurred other finance charges of £0.1m (2011: £0.2m) primarily being the non- cash interest costs associated with the $10.0m deferred consideration payable (plus interest at the rate of 1% above the average Bank of England base rate) to Scientific Games Corporation in September 2013 in respect of the acquisition of Sportech Racing.

Net bank debt

The strengthening of the balance sheet has been one of the key objectives for the Board. We are therefore pleased to report a further reduction in net debt of £5.8m (10%) in the six-month period to £53.4m (31 December 2011: £59.2m) continuing the progress made in previous years, with bank debt now being at less than half the level at the commencement of the turnaround strategy. The Group has reduced its bank leverage ratio (net bank debt/EBITDA) to 2.03 times as at 30June 2012 (30 June 2011: 2.85 times).

Total shareholders' equity and the Group's net assets have increased to £133.9m (30 June 2011: £127.8m).

Banking facilities

On 18 July 2012, the Group entered into a new £75.0 million, multi-currency revolving credit facility, to include up to £5.0m of ancillary working capital facilities across its key trading jurisdictions, provided by Bank of Scotland Plc, Barclays Bank Plc and The Royal Bank of Scotland Plc.

The facility has an initial debt maturity date of 31 August 2015, which can be extended at the Group's request, with the agreement of the lenders, for a further twelve-month period.

The facility replaces the Group's previous amortising loan facilities provided solely by the Bank of Scotland Plc, which were due to expire in July 2013 and consisted at the time of refinancing of a £55.5m term loan and a £3.0m UK working capital facility.

Within the terms of the facility, the Group believes it has operational flexibility to implement its medium term investment plans. Financial covenants provide increased flexibility with consolidated total net borrowings to adjusted EBITDA ("leverage") required to be no higher than 2.75x for testing periods through to March 2014, reducing to 2.50x through to March 2015 and thereafter 2.25x. The Group's borrowing costs will be dependent on the ongoing level of leverage with a debt margin payable of between 250 and 375 basis points per annum. Commitment fees will also apply at normal commercial rates. An arrangement fee of 1.75% was paid in July, which will be expensed during the second half of 2012 along with associated refinancing, legal, and debt advisory fees.

  
Of particular note, the Group has secured agreement with the lenders that the facility will remain in place in its entirety should the Group be ultimately successful in its ongoing Spot the Ball VAT claim against HM Revenue & Customs.

As a related point to the refinancing, the Group's existing interest rate swaps will no longer remain eligible for hedge accounting under International Financial Reporting Standards following the refinancing.  Accordingly, in the second half of the Company's financial year ending 31 December 2012, the existing mark-to-market exposures of the interest rate swaps will be required to be applied to the income statement. At the date of the facility signing, the mark-to-market exposures under the interest rate swaps, which are entirely of a non-cash nature, were approximately £3.3m.

Dividend

Continuing the policy of recent years, no dividend is proposed, as the Board believes that the Group's significant cash generation should currently be used to position the business for growth, in addition to reducing debt.

Taxation

A tax charge for the period of £1.1m (2011: £1.4m) has been provided at the expected average annual current tax rate for the Group of 26.5% (2011: 29.7%) excluding the impact of share option charges and joint venture losses. The Group has a net deferred tax asset of £2.0m (31 December 2011: £3.0m) representing primarily tax losses to be utilised against future profits, deferred tax provided on interest rate swap liabilities and tax allowances for tangible assets in excess of accounting charges incurred. Tax payments of £0.9m were made during the period (2011: £0.3m) principally representing final payments on account for the 2011 tax liability and overseas tax deducted at source.

VAT claim

The Board has previously announced that the Group had submitted a claim for in excess of £40.0m to HMRC for the repayment of VAT overpaid in respect of the "Spot the Ball" game from 1979 to 1996. Interest may also be added to the principal sum claimed, which, if successful, given the timeframe of the claim, could more than double the sum claimed. The claim has not been recognised in the Group's financial statements.

The date of the Tribunal has been set for the week commencing 8 October 2012.  

India

Sportech considers that the market for legal gaming in India has great potential, particularly given the tens of billions of pounds that are thought to be bet through grey markets in India each year. As a consequence, and in view of required regulatory change, the Group has adopted a long term approach to this market. Our existing joint venture with India's leading lottery business, Playwin will, amongst other things, provide technology capable of being used by Playwin's parent company, The Essel Group, to offer sports pools, initially focusing on cricket. The Essel Group secured a provisional gaming licence in Sikkim in 2011, which is expected to become a full gaming licence in due course.

Board and employees

The development of Sportech into an international business has placed significant demands upon executives and employees. The Board would like to thank them for their continued dedication and commitment to the business.

Principal risks and uncertainties for the remainder of the year

The principal risks and uncertainties for the Group are outlined below and remain the same as those detailed on pages 18 and 19 of the 2011 Sportech PLC Annual Report and Accounts, where descriptions of mitigating activities carried out by the Group are also outlined. 

Regulatory - licences

The Group operates under a number of licences across worldwide jurisdictions, including the UK and USA. The loss or inadvertent breach of any such licence could have a significant impact on the Group's ability to continue to trade within that and other jurisdictions and therefore on the Group's trading and results. In addition, such loss or inadvertent breach would potentially lead to the imposition of fines on the Group and could lead to substantial legal costs.

Regulatory - Bribery Act

Sportech operates in a number of jurisdictions around the world. The Bribery Act 2010 became effective during 2011.

Operational - technology

A significant proportion of the Group's annual income is dependent on technology-led products.

Operational - economy

A significant proportion of the Group's annual income is derived from consumer-facing activities and is thus subject to the impact of economic downturns. Any significant downturn in the economy could lead to a negative impact on the results of the Group and its cash flows.

Financial

The Group has historically been relatively highly leveraged and is dependent on the provision of debt financing to enable it to continue its operations. This risk has been mitigated significantly during the period by the refinance of the Group's debt as noted earlier.

Health and safety

The Group runs a number of venues offering pari-mutuel wagering, principally in the state of Connecticut, USA and the Netherlands. These operations involve the handling of significant sums of cash. In addition, the venues are used by a high number of customers on a daily basis. The Group therefore has a health and safety risk in respect of both its employees and its customers.

Related party transactions

Related party transactions are detailed in note 15 of this interim management report.

Outlook

Sportech is established as one of the world's leading pools and tote betting groups in the regulated and emerging gaming markets globally and is well positioned to capitalise on the growth opportunities in these markets. The Group has made good operational and financial progress in the first half of 2012 and has laid further foundations for growth across our divisions. Despite the challenging global economic conditions, trading remains in line with management expectations for the full year and the Board looks forward to the future with confidence.

Ian Penrose

Chief Executive

23 August 2012

Interim consolidated income statement

For the six months ended 30 June 2012

		Six months	Six months	Year
		ended	ended	ended
		30 June	30 June	31 December
		2012	2011	2011
		(Unaudited)	(Unaudited)	(Audited)
	Note	£m	£m	£m
Revenue	4	57.7	57.4	118.2
Cost of sales		(32.3)	(30.9)	(64.7)
Gross profit		25.4	26.5	53.5
Distribution costs		(0.4)	(0.4)	(1.1)
Administrative expenses		(19.6)	(19.6)	(38.7)
EBITDA before exceptional costs and share option expense		12.6	12.4	26.1
Share option expense		(0.7)	(0.5)	(1.1)
Depreciation and amortisation (excluding amortisation of acquired intangibles)		(2.5)	(2.1)	(4.5)
Amortisation of acquired intangibles		(3.0)	(3.0)	(5.9)
Exceptional costs	5	(1.0)	(0.3)	(0.9)
Operating profit	4	5.4	6.5	13.7
Finance costs	6	(2.0)	(2.5)	(4.8)
Finance income	6	-	0.1	0.1
Other finance charges	6	(0.1)	(0.2)	(0.4)
Net finance costs	6	(2.1)	(2.6)	(5.1)
Share of loss after tax of joint venture	10	(0.1)	(0.2)	(0.6)
Profit before taxation		3.2	3.7	8.0
Adjusted profit before taxation*		7.4	7.4	15.8
Taxation	7	(1.1)	(1.4)	(2.8)
Profit for the period		2.1	2.3	5.2
Earnings per share attributable to equity holders of the parent during the period
Basic	8	1.1p	1.2p	2.6p
Diluted	8	1.0p	1.1p	2.5p
Adjusted earnings per share attributable to equity holders of the parent during the period
Basic	8	2.7p	2.6p	5.7p
Diluted	8	2.6p	2.5p	5.4p

* Adjusted profit before taxation is profit before taxation, amortisation of acquired intangibles, exceptional costs, share of loss after tax of joint venture and other finance charges.

Interim consolidated statement of comprehensive income

For the six months ended 30 June 2012

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2012	2011	2011
	(Unaudited)	(Unaudited)	(Audited)
	£m	£m	£m
Profit for the period	2.1	2.3	5.2
Other comprehensive income:
Actuarial loss on retirement benefit obligations	-	-	(0.7)
Deferred tax on movement on actuarial loss on retirement benefit obligations	-	-	0.3
Movement on derivative financial instruments	0.4	0.7	0.8
Deferred tax on movement on derivative financial instruments	(0.1)	(0.2)	(0.3)
Currency translation differences	(0.4)	(0.2)	0.1
Other comprehensive (expense)/income for the period net of tax	(0.1)	0.3	0.2
Total comprehensive income for the period	2.0	2.6	5.4

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

Interim consolidated statement of changes in equity

For the six months ended 30 June 2012

					Other reserves
					Share				Currency		Financial
			Ordinary		option		Pension		translation		instrument		Retained
			shares		reserve		reserve		reserve		reserve		earnings		Total
			£m		£m		£m		£m		£m		£m		£m
At 1 January 2012 (audited)			99.4		2.4		(0.3)		0.3		(2.8)		32.2		131.2
Comprehensive income
Profit for the period			-		-		-		-		-		2.1		2.1
Other comprehensive income
Financial instrument reserve movement*			-		-		-		-		0.3		-		0.3
Currency translation differences			-		-		-		(0.4)		-		-		(0.4)
Total other comprehensive (expense)/income			-		-		-		(0.4)		0.3		-		(0.1)
Total comprehensive (expense)/income			-		-		-		(0.4)		0.3		2.1		2.0
Transactions with owners
Share option credit			-		0.7		-		-		-		-		0.7
At 30 June 2012 (unaudited)			99.4		3.1		(0.3)		(0.1)		(2.5)		34.3		133.9
				Other reserves
				Share				Currency		Financial
	Ordinary	Share		option		Pension		translation		instrument		Retained
	shares	premium		reserve		reserve		reserve		reserve		earnings		Total
	£m	£m		£m		£m		£m		£m		£m		£m
At 1 January 2011 (audited)	99.4	20.7		1.3		0.1		0.2		(3.3)		6.3		124.7
Comprehensive income
Profit for the period	-	-		-		-		-		-		2.3		2.3
Other comprehensive income
Financial instrument reserve movement*	-	-		-		-		-		0.5		-		0.5
Currency translation differences	-	-		-		-		(0.2)		-		-		(0.2)
Total other comprehensive (expense)/income	-	-		-		-		(0.2)		0.5		-		0.3
Total comprehensive (expense)/income	-	-		-		-		(0.2)		0.5		2.3		2.6
Transactions with owners
Share option credit	-	-		0.5		-		-		-		-		0.5
At 30 June 2011 (unaudited)	99.4	20.7		1.8		0.1		-		(2.8)		8.6		127.8
					Other reserves
					Share				Currency		Financial
	Ordinary		Share		option		Pension		translation		instrument		Retained
	shares		premium		reserve		reserve		reserve		reserve		earnings		Total
	£m		£m		£m		£m		£m		£m		£m		£m
At 1 January 2011 (audited)	99.4		20.7		1.3		0.1		0.2		(3.3)		6.3		124.7
Comprehensive income
Profit for the year	-		-		-		-		-		-		5.2		5.2
Other comprehensive income
Financial instrument reserve movement*	-		-		-		-		-		0.5		-		0.5
Actuarial loss on retirement benefit obligations*	-		-		-		(0.4)		-		-		-		(0.4)
Currency translation differences	-		-		-		-		0.1		-		-		0.1
Total other comprehensive (expense)/income	-		-		-		(0.4)		0.1		0.5		-		0.2
Total comprehensive (expense)/income	-		-		-		(0.4)		0.1		0.5		5.2		5.4
Transactions with owners
Share option credit	-		-		1.1		-		-		-		-		1.1
Cancellation of share premium account	-		(20.7)		-		-		-		-		20.7		-
At 31 December 2011 (audited)	99.4		-		2.4		(0.3)		0.3		(2.8)		32.2		131.2

* Net of deferred tax.

Interim consolidated balance sheet

As at 30 June 2012

		As at	As at	As at
		30 June	30 June	31 December
		2012	2011	2011
		(Unaudited)	(Unaudited)	(Audited)
	Note	£m	£m	£m
ASSETS
Non-current assets
Goodwill		147.6	147.6	147.6
Intangible fixed assets	9	48.1	54.5	50.4
Property, plant and equipment	9	14.5	11.9	14.3
Trade and other receivables		0.1	-	0.1
Net investment in joint venture	10	0.5	0.4	0.3
Retirement benefit assets		-	0.1	-
Deferred tax assets		2.4	2.9	3.0
		213.2	217.4	215.7
Current assets
Trade and other receivables		8.2	10.1	8.6
Inventories		2.3	1.5	2.6
Cash and cash equivalents	11	2.1	3.6	3.3
		12.6	15.2	14.5
TOTAL ASSETS		225.8	232.6	230.2
LIABILITIES
Current liabilities
Overdraft	11	-	(0.3)	-
Derivative financial instruments		(3.3)	(3.9)	(3.7)
Financial liabilities	13	(10.0)	(13.0)	(14.0)
Trade and other payables		(23.4)	(23.6)	(22.9)
Provisions	12	(0.2)	(0.6)	(0.3)
Current tax liabilities		(0.8)	(0.3)	(1.5)
		(37.7)	(41.7)	(42.4)
Net current liabilities		(25.1)	(26.5)	(27.9)
Non-current liabilities
Financial liabilities	13	(51.9)	(61.1)	(54.6)
Retirement benefit liability		(1.2)	(0.8)	(1.3)
Provisions	12	(0.7)	(0.6)	(0.7)
Deferred tax liabilities		(0.4)	(0.6)	-
		(54.2)	(63.1)	(56.6)
TOTAL LIABILITIES		(91.9)	(104.8)	(99.0)
NET ASSETS		133.9	127.8	131.2
EQUITY
Ordinary shares		99.4	99.4	99.4
Share premium		-	20.7	-
Other reserves		2.7	1.9	2.4
Financial instrument reserve		(2.5)	(2.8)	(2.8)
Retained earnings		34.3	8.6	32.2
TOTAL EQUITY		133.9	127.8	131.2

Interim consolidated statement of cash flows

For the six months ended 30 June 2012

		Six months	Six months	Year
		ended	ended	ended
		30 June	30 June	31 December
		2012	2011	2011
		(Unaudited)	(Unaudited)	(Audited)
	Note	£m	£m	£m
Cash flows from operating activities
Cash generated from operations	14	13.8	13.1	25.7
Interest received		-	0.1	0.1
Interest paid		(2.4)	(2.5)	(4.8)
Profit on foreign exchange contracts		-	0.1	-
Tax paid		(0.9)	(0.3)	(1.0)
Net cash generated from operating activities before cash exceptional costs		10.5	10.5	20.0
Cash exceptional costs		(1.0)	(0.3)	(0.9)
Net cash generated from operating activities		9.5	10.2	19.1
Cash flows from investing activities
Investment in joint venture	10	(0.2)	(0.7)	(0.8)
Purchase of intangible fixed assets	9	(1.8)	(0.7)	(1.4)
Purchase of property, plant and equipment	9	(1.6)	(1.8)	(3.9)
Net cash used in investing activities		(3.6)	(3.2)	(6.1)
Cash flows from financing activities
Proceeds from borrowings	13	-	1.5	1.5
Repayment of borrowings	13	(7.0)	(6.0)	(12.0)
Net cash used in financing activities		(7.0)	(4.5)	(10.5)
Net (decrease)/increase in cash and cash equivalents		(1.1)	2.5	2.5
Cash and cash equivalents at the beginning of the period		3.3	0.8	0.8
Exchange loss on cash and cash equivalents		(0.1)	-	-
Cash and cash equivalents at the end of the period	11	2.1	3.3	3.3
Reconciliation of net bank debt
(Decrease)/increase in cash in the period		(1.2)	2.5	2.5
Cash outflow from repayment of loans	13	7.0	6.0	12.0
Cash inflow from loans taken	13	-	(1.5)	(1.5)
Movement in net bank debt for the period		5.8	7.0	13.0
At the beginning of the period		(59.2)	(72.2)	(72.2)
At the end of the period		(53.4)	(65.2)	(59.2)
Net bank debt comprises:
Cash and cash equivalents	11	2.1	3.3	3.3
Loans repayable within one year	13	(10.0)	(13.0)	(14.0)
Loans repayable after one year	13	(45.5)	(55.5)	(48.5)
At the end of the period		(53.4)	(65.2)	(59.2)

Notes to the consolidated interim financial statements

For the six months ended 30 June 2012

1. General information

Sportech PLC (the 'Company'), its subsidiaries and joint venture (together the 'Group') operate football pools and associated games, a portfolio of online casino, poker, bingo and fixed-odds games businesses, provides pari-mutuel wagering services and systems and operates off-track betting venues.

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled within the UK. The address of the registered office is 249 West George Street, Glasgow G2 4RB.

The condensed consolidated interim financial statements were approved for issue on 23 August 2012.

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 2011 which have been prepared in accordance with IFRSs as adopted by the European Union.

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 2011 were approved by the Board of Directors on 7 March 2012 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.

(b) The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements. In assessing the going concern basis, the Directors considered the Group's business activities, the financial position of the Group, its banking facilities and its future planned activities.

(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, the significant judgements made by management were the same as those that applied to the consolidated financial statements for the year ended 31 December 2011.

3. Accounting policies

The accounting policies applied in these condensed consolidated interim financial statements are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those annual financial statements.

The following new standards and amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2012 and have been adopted by the Group. None of these standards and interpretations has had any material effect on the Group's results or net assets.

Standard or interpretation	Content	Applicable for financial years beginning on or after
Amendment to IFRS 7*	Financial Instruments: Disclosures	1 July 2011
Amendment: IAS 12*	Income Taxes	1 January 2012

The following standards, amendments and interpretations are not yet effective and have not been adopted early by the Group.

Standard or interpretation	Content	Applicable for financial years beginning on or after
Amendment to IAS 1*	Presentation of financial statements Instruments on OCI	1 July 2012
Amendment to IFRS 7*	Financial Instruments: asset and liability offsetting	1 January 2013
IFRS 10	Consolidated financial statements	1 January 2013
IFRS 11*	Joint arrangements	1 January 2013
IFRS 12*	Disclosures of Interests in Other Entities	1 January 2013
IFRS 13*	Fair Value Measurement	1 January 2013
IAS 19R (revised 2011)	Employee benefits	1 January 2013
IAS 27 (revised 2011)*	Separate financial statements	1 January 2013
IAS 28 (revised 2011)*	Associates and joint ventures	1 January 2013
Annual improvements to IFRSs 2011	Various	1 January 2013
IFRIC 20*	Stripping costs in the production phase of a surface mine	1 January 2013
IFRS 9*	Financial instruments: Classification and measurement	1 January 2015
*These standards and amendments to standards are not expected to be relevant to the Group

IAS 19R - Employee benefits - is likely to have an impact on future financial statements when it is adopted. Under IAS 19R the interest cost on the defined benefit obligation, and the expected rate of return on plan assets, will be replaced with a net interest charge that is calculated by applying the discount rate to the net defined benefit liability.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total earnings for the year taking into consideration the likely taxable position of one-off items such as costs associated with acquisitions.

4. 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 Executive Committee, which makes strategic and operational decisions.

The Group has identified its business segments as outlined below:

·      Football Pools - football pools and associated games through traditional channels such as mail, telephone, agent-based collection, retail outlets and third-party licensed betting offices, and through online and digital channels;

·      Sportech Racing - provision of pari-mutuel wagering services and systems worldwide and off-track betting venue management;

·      e-Gaming - a portfolio of online casino, poker, bingo and fixed-odds games operated through a variety of third parties; and

·      corporate costs - central costs relating to the Company in its capacity as the PLC holding company of the Group.

The Executive Committee assesses the performance of the operating segments based on a measure of adjusted EBITDA which excludes the effects of non-recurring expenditure such as restructuring costs and impairments of assets.  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 2012 (Unaudited)
	Football	Sportech		Inter- segment	Corporate
	Pools	Racing	e-Gaming	elimination	costs	Group
	£m	£m	£m	£m	£m	£m
Revenue from sale of goods	21.7	2.7	2.6	(0.1)	-	26.9
Revenue from rendering of services	-	30.9	-	(0.1)	-	30.8
Total revenue	21.7	33.6	2.6	(0.2)	-	57.7
EBITDA before exceptional costs and share option expense	8.7	5.0	0.7	-	(1.8)	12.6
Share option expense	-	-	-	-	(0.7)	(0.7)
Depreciation and amortisation (excluding amortisation of acquired intangibles)	(0.6)	(1.8)	(0.1)	-	-	(2.5)
Segment result before amortisation of acquired intangibles and exceptional costs	8.1	3.2	0.6	-	(2.5)	9.4
Amortisation of acquired intangibles	(3.0)	-	-	-	-	(3.0)
Exceptional costs	(0.4)	(0.5)	-	-	(0.1)	(1.0)
Operating profit/(loss)	4.7	2.7	0.6	-	(2.6)	5.4
Net finance costs						(2.1)
Share of loss after tax of joint venture						(0.1)
Profit before taxation						3.2
Taxation						(1.1)
Profit for the period						2.1

	Six months ended 30 June 2011  (Unaudited)
	Football			Sportech		Inter- segment	Corporate
	Pools			Racing	e-Gaming	elimination	costs	Group
	£m			£m	£m	£m	£m	£m
Revenue from sale of goods	23.7			1.1	2.0	(0.1)	-	26.7
Revenue from rendering of services	-			31.0	-	(0.3)	-	30.7
Total revenue	23.7			32.1	2.0	(0.4)	-	57.4
EBITDA before exceptional costs and share option expense	8.7			4.8	0.9	(0.1)	(1.9)	12.4
Share option expense	-			-	-	-	(0.5)	(0.5)
Depreciation and amortisation (excluding amortisation of acquired intangibles)	(0.5)			(1.5)	(0.1)	-	-	(2.1)
Segment result before amortisation of acquired intangibles and exceptional costs	8.2			3.3	0.8	(0.1)	(2.4)	9.8
Amortisation of acquired intangibles	(3.0)			-	-	-	-	(3.0)
Exceptional costs	(0.2)			(0.1)	-	-	-	(0.3)
Operating profit/(loss)	5.0			3.2	0.8	(0.1)	(2.4)	6.5
Net finance costs								(2.6)
Share of loss after tax of joint venture								(0.2)
Profit before taxation								3.7
Taxation								(1.4)
Profit for the period								2.3
	Year ended 31 December 2011  (Audited)
	Football		Sportech			Inter- segment	Corporate
	Pools		Racing		e-Gaming	elimination	costs	Group
	£m		£m		£m	£m	£m	£m
Revenue from sale of goods	47.7		6.3		4.1	(0.4)	-	57.7
Revenue from rendering of services	-		61.0		-	(0.5)	-	60.5
Total revenue	47.7		67.3		4.1	(0.9)	-	118.2
EBITDA before exceptional costs and share option expense	18.5		10.0		1.6	(0.2)	(3.8)	26.1
Share option expense	-		-		-	-	(1.1)	(1.1)
Depreciation and amortisation (excluding amortisation of acquired intangibles)	(1.2)		(3.1)		(0.2)	-	-	(4.5)
Segment result before amortisation of acquired intangibles and exceptional costs	17.3		6.9		1.4	(0.2)	(4.9)	20.5
Amortisation of acquired intangibles	(5.9)		-		-	-	-	(5.9)
Exceptional costs	(0.3)		(0.3)		-	-	(0.3)	(0.9)
Operating profit/(loss)	11.1		6.6		1.4	(0.2)	(5.2)	13.7
Net finance costs								(5.1)
Share of loss after tax of joint venture								(0.6)
Profit before taxation								8.0
Taxation								(2.8)
Profit for the year								5.2

5. Exceptional costs

Exceptional costs by type are as follows:

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2012	2011	2011
	(Unaudited)	(Unaudited)	(Audited)
	£m	£m	£m
Included in administrative expenses:
Redundancy costs in respect of the rationalisation and modernisation of the business	0.5	0.1	0.5
Compensation for loss of office	0.3	-	-
Other exceptional costs	0.2	0.2	0.4
Total exceptional costs	1.0	0.3	0.9

6. Net finance costs

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2012	2011	2011
	(Unaudited)	(Unaudited)	(Audited)
	£m	£m	£m
Interest payable on bank loans, derivative financial instruments and overdrafts	2.0	2.5	4.8
Interest receivable on cash balances	-	(0.1)	(0.1)
Non-cash finance charges*	0.2	0.2	0.5
Foreign exchange (gain)/loss on cash balances and financial liabilities	(0.1)	0.1	-
Gain on foreign exchange contracts	-	(0.1)	(0.1)
Net finance costs	2.1	2.6	5.1

*Non-cash finance charges are in respect of the deferred consideration payable on the acquisition of Sportech Racing.

Non-cash finance charges, foreign exchange (gain)/loss on cash balances and financial liabilities and gain on foreign exchange contracts are together shown as other finance charges in the income statement.

7. Taxation

Taxation is provided based on management's best estimate of the weighted average annual taxation rate for the full year. The estimated weighted average annual tax rate for the year ending 31 December 2012 is 26.5% (2011: 29.7%).

8. Earnings per share

The calculation of earnings per share ("EPS") is based on the profit attributable to ordinary shareholders of £2.1m (six months ended 30 June 2011: £2.3m; year ended 31 December 2011: £5.2m) divided by the weighted average number of shares in issue during the period of 198.8m (six months ended 30 June 2011: 198.8m; year ended 31 December 2011: 198.8m).

The calculation of adjusted EPS is based on the adjusted profit after taxation attributable to ordinary shareholders of £5.4m (six months ended 30 June 2011: £5.2m; year ended 31 December 2011: £11.3m) divided by the weighted average number of shares in issue during the period of 198.8m (six months ended 30 June 2011: 198.8m; year ended 31 December 2011: 198.8m). Adjusted profit after taxation is defined as profit before taxation, amortisation of acquired intangibles, exceptional costs, share of loss after tax of joint venture and other finance charges, less taxation based on management's best estimate of the underlying taxation rate for the year of 26.5% (2011: 29.7%).

The number of shares that have a dilutive effect on basic and adjusted EPS is 14.1m (30 June 2011: 9.0m, 31 December 2011: 9.3m).

9. Capital expenditure

		Property, plant and equipment
		and intangible fixed assets
	Six months		Six months	Year
	ended		ended	ended
	30 June		30 June	31 December
	2012		2011	2011
	(Unaudited)		(Unaudited)	(Audited)
	£m		£m	£m
Opening net book amount at the beginning of the period	64.7		69.5	69.5
Additions	3.4		2.5	5.3
Depreciation and amortisation	(5.5)		(5.1)	(10.4)
Exchange differences	-		(0.5)	0.3
Closing net book amount at the end of the period	62.6		66.4	64.7

10. Net investment in joint venture

			Six months	Six months	Year
			ended	ended	ended
			30 June	30 June	31 December
			2012	2011	2011
			(Unaudited)	(Unaudited)	(Audited)
			£m	£m	£m
Opening net investment			0.3	(0.1)	(0.1)
Additions			0.2	0.7	0.8
Direct investment in joint venture			0.1	-	0.2
Share of loss after tax			(0.1)	(0.2)	(0.6)
Closing net investment			0.5	0.4	0.3

The Group's share of the results in its joint venture, which is unlisted, and its aggregated assets and liabilities are as follows:

			Six months	Six months	Year
			ended	ended	ended
			30 June	30 June	31 December
			2012	2011	2011
			(Unaudited) £m	(Unaudited) £m	(Audited) £m
Non-current assets			0.1	0.1	0.1
Current assets			0.1	0.5	0.1
Total assets			0.2	0.6	0.2
Current liabilities			(0.1)	(0.2)	(0.2)
Net assets			0.1	0.4	-
Total revenue			-	-	-
Loss for the period after tax			0.1	0.2	0.6
Percentage held			50%	50%	50%

11. Cash and cash equivalents

	As at	As at	As at
	30 June	30 June	31 December
	2012	2011	2011
	(Unaudited)	(Unaudited)	(Audited)
	£m	£m	£m
Cash balances	2.1	3.6	3.3
Overdrafts	-	(0.3)	-
	2.1	3.3	3.3

12. Provisions

		Onerous	Other
		contracts	provisions	Total
	£m		£m	£m
At 1 January 2012 (audited)	0.6		0.4	1.0
Utilised during the period	(0.1)		-	(0.1)
At 30 June 2012 (unaudited)	0.5		0.4	0.9

		Onerous	Onerous	Other
		contracts	leases	provisions	Total
	£m		£m	£m	£m
At 1 January 2011 (audited)	0.8		0.1	0.4	1.3
Utilised during the period	(0.1)		-	-	(0.1)
At 30 June 2011 (unaudited)	0.7		0.1	0.4	1.2

		Onerous	Onerous	Other
		contracts	leases	provisions	Total
	£m		£m	£m	£m
At 1 January 2011 (audited)	0.8		0.1	0.4	1.3
Utilised during the period	(0.2)		(0.1)	-	(0.3)
At 31 December 2011 (audited)	0.6		-	0.4	1.0

Provisions have been recognised where the Group has contractual obligations to provide services where the estimated unavoidable costs to carry out the obligation exceed the expected future economic benefits to be received. Provisions against the future rental costs of operating sites which are loss making have been recognised within onerous leases. Other provisions include obligations to reinstate property to its original condition at the start of the lease term.

Of the provisions included in the above tables, £0.2m are expected to be utilised within twelve months (30 June 2011: £0.6m; 31 December 2011: £0.3m) and £0.7m (30 June 2011: £0.6m; 31 December 2011: £0.7m) are expected to be utilised after twelve months.

13. Financial liabilities

	As at	As at	As at
	30 June	30 June	31 December
	2012	2011	2011
	(Unaudited)	(Unaudited)	(Audited)
	£m	£m	£m
Current
Bank loans due within one year	10.0	13.0	14.0
Non-current
Bank loans due after one year	45.5	55.5	48.5
Deferred consideration due after one year	6.4	5.6	6.1
	51.9	61.1	54.6

At the balance sheet date and during the period under review, bank loans bore interest based on LIBOR plus a bank margin of 3%. Bank borrowings were secured by a composite debenture incorporating fixed and floating charges over all assets and undertakings of Sportech PLC, all trading UK companies and Racing Technology Ireland Limited but excluding monies standing to the credit of trust accounts and over the shares in Sportech Holdco 2 Limited, Sportech Venues Inc., Sportech Racing Inc. and Trackplay LLC.

On 18 July 2012, the Group entered a new senior facility agreement which made available a multi-currency, revolving credit facility of £75.0m including up to £5.0m of ancillary facilities bearing interest based on LIBOR plus a bank margin dependent on leverage levels, initially 3.5%. The Group drew down £58.0m of loans on 19 July 2012 which was used to prepay the original term loans and pay refinancing related fees. The borrowings are secured by composite debentures incorporating fixed and floating charges over all assets (excluding monies standing to the credit of trust accounts) and undertakings of Sportech PLC, all UK trading companies, UK holding companies of overseas entities, Sportech Mauritius Limited and Racing Technology Ireland Limited. In addition, share charges have been entered into in respect of shares in Racing Technology Ireland Limited, Sportech Racing B.V. (a Netherlands company), Sportech Inc., Sportech Venues Inc., Sportech Racing LLC, Trackplay LLC (all four are USA companies) and Sportech Mauritius Limited. Furthermore, a Guernsey law security interest agreement has been entered into by Sportech Alderney Limited.

The carrying amounts of borrowings are not materially different from their fair values as market rates of interest are charged.

Deferred consideration due after one year is in relation to the acquisition of Sportech Racing and is payable on 30 September 2013.

14. Cash flow from operating activities

Reconciliation of profit after taxation to cash flows from operating activities

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2012	2011	2011
	(Unaudited)	(Unaudited)	(Audited)
	£m	£m	£m
Profit after taxation	2.1	2.3	5.2
Adjustments for:
Taxation	1.1	1.4	2.8
Cash exceptional costs	1.0	0.3	0.9
Share of loss after tax of joint venture	0.1	0.2	0.6
Depreciation	1.2	1.0	2.1
Amortisation of intangibles acquired with Vernons	3.0	3.0	5.9
Amortisation of other intangibles	1.3	1.1	2.4
Net finance costs	2.0	2.4	4.7
Other finance charges	0.1	0.2	0.4
Share option expense	0.7	0.5	1.1
Movement in retirement benefit obligation	(0.1)	-	(0.1)
Movement in provisions	(0.1)	-	(0.3)
Changes in working capital:
Decrease in trade and other receivables	0.4	2.1	3.6
Decrease/(increase) in inventories	0.3	(0.5)	(1.6)
Increase/(decrease) in trade and other payables	0.7	(0.9)	(2.0)
Cash flows from operating activities	13.8	13.1	25.7

15. 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 months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2012	2011	2011
	(Unaudited)	(Unaudited)*	(Audited)*
	£m	£m	£m
Salaries and other short term employee benefits	0.8	0.8	1.6
Defined contribution scheme payments	-	-	0.1
Compensation for loss of office	0.3	-	-
Share-based payments	0.4	0.4	0.7
	1.5	1.2	2.4

*Prior period disclosures have been amended to reflect the key management as at 30 June 2012 to enable comparability.

b.             The Group invested £0.2m (six months ended 30 June 2011: £0.7m; year ended 31 December 2011: £0.8m) cash into its joint venture SportsHub Private Limited and contributed £0.1m (six months ended 30 June 2011: £nil; year ended 31 December 2011: £0.2m) to capital expenditure.

c.             Scientific Games Corporation Inc. ("SGC") is a 19.99% shareholder in Sportech PLC.  SGC is therefore considered to be a related party.  Lorne Weil, Non-executive Director of, and shareholder in Sportech PLC, is Chairman and Chief Executive Officer of SGC.

During the period there have been a number of transactions and at the period end there remain outstanding balances between the Group and SGC as detailed below:

·      deferred consideration of $10.0m (£6.4m discounted) is due to SGC, payable in September 2013 (2011: $10.0m (£5.4m discounted); year ended 31 December 2011: $10.0m (£6.2m discounted));

·      £0.4m (2011: £0.5m; year ended 31 December 2011: £0.4m) is due to the Group from SGC for the settlement of an under-funded pension liability as at 5 October 2010, payable in five equal annual instalments which commenced September 2011; and

·      the Group is required to pay further consideration for the acquisition of Sportech Racing in 2013 if certain performance targets are reached by the acquired business as follows:

There is the potential for contingent consideration of up to $8.0m to be payable if, during the three-year period commencing at the date of the end of the first quarter after completion (the "Contingent Consideration Period"), certain EBITDA targets are met, as follows:

(i)            in the event that no relevant US business acquisition is consummated during the Contingent Consideration Period, $5.0m shall be payable if the average annual EBITDA of the Sportech Racing business equals or exceeds $20.0m but is less than $21.0m; or

(ii)           in the event that no relevant US business acquisition is consummated during the Contingent Consideration Period, $8.0m shall be payable if the average annual EBITDA of the Sportech Racing business equals or exceeds $21.0m; or

(iii)          in the event that any relevant US business acquisition is consummated during the Contingent Consideration Period, $8.0m shall be payable if the annual EBITDA of the enlarged Sportech Racing business, less 15% of the purchase price paid for the relevant US business acquisition, equals or exceeds $25.0m.

·      Sportech Racing LLC has ongoing service agreements with a subsidiary of SGC, Global Draw, to provide Global Draw with employees to operate and supervise gaming systems in Puerto Rico. During the period £0.2m was charged to SGC for these services (six months ended 30 June 2011: £0.2m; year ended 31 December 2011: £0.3m).

·      Sportech Racing LLC purchases ticket paper from SGC under the terms of the supply agreement entered into upon acquisition of Sportech Racing LLC by Sportech PLC from SGC.  Total purchases of ticket paper during the period ended 30 June 2012 amounted to £0.6m (six months ended 30 June 2011: £0.7m; year ended 31 December 2011: £1.2m). Sportech Racing LLC also purchased spare parts for terminals from SGC amounting to £nil during the period ended 30 June 2012 (six months ended 30 June 2011: £0.1m; year ended 31 December 2011: £0.1m).

·      Racing Technology Ireland Limited ("RTI") purchased spare parts from SGC amounting to £0.1m (six months ended 30 June 2011: £nil; year ended 31 December 2011: £0.1m) and paid SGC sales commission in relation to the sale of Wave terminals amounting to £0.1m in the period ended 30 June 2012 (six months ended 30 June 2011: £nil; year ended 31 December 2011: £0.4m).

At the period end the following amounts were due to/from SGC by Sportech PLC Group companies:

	30 June 2012		30 June 2011		31 December 2011
Sportech Group company	Due to SGC £m	Due from SGC £m	Due to SGC £m	Due from SGC £m	Due to SGC £m	Due from SGC £m
Sportech PLC	6.4	0.4	5.6	0.5	6.2	0.4
Sportech Racing LLC	0.3	-	0.2	-	0.2	0.1
Racing Technology Ireland Limited	-	-	-	-	0.1	-
	6.7	0.4	5.8	0.5	6.5	0.5

The amount owed by Sportech PLC being deferred consideration and the amount owed from SGC to Sportech PLC being for deferred pension settlement, both as referred to above.

d.             Playtech Limited is a 10% shareholder in Sportech PLC. Roger Withers, Chairman, is also Chairman of Playtech Limited and Mor Weizer, Non-executive Director, is Chief Executive of Playtech Limited, Playtech Limited is therefore considered to be a related party. 

Playtech Limited provides e-Gaming services to Group Companies. These services include the provision of gaming software for casino, poker, bingo and side game offerings. These services commenced in early August 2011 when Playtech replaced the Group's previous principal e-Gaming provider.

·      During the period the Group deposited £nil as a security deposit with Playtech Limited (six months ended 30 June 2011: £nil; year ended 31 December 2011: £0.1m), which is required by Playtech licensees for participation in the Poker network, £0.1m remained due to the Group at 30 June 2012, which was deposited in the prior year (2011: £nil; year end 31 December 2011: £0.1m), and is repayable on exit of the Poker network.   

·      The Group paid Playtech Limited £nil (six months ended 30 June 2011: £nil; year ended 31 December 2011: £0.1m) for hardware during the period which has been capitalised on the Group's balance sheet.

·      Operating expenses for customer relationship management services and royalties paid to Playtech Limited during the period amounted to £0.6m (six months ended 30 June 2011: £nil; year ended 31 December 2011: £0.1m).

·      At 30 June 2012, the Group owed Playtech Limited £0.1m (2011: £nil; year ended 31 December 2011: £0.1m) in relation to services rendered and royalties due.

16. Post balance sheet events

On 18 July 2012, the Group entered into a new £75.0m, multi-currency revolving credit facility, to include up to £5.0m of ancillary working capital facilities across key trading jurisdictions, provided by Bank of Scotland Plc, Barclays Bank Plc and The Royal Bank of Scotland Plc. The facility has an initial debt maturity date of 31 August 2015, which is able to be extended at the Group's request, with the agreement of the lenders, for a further twelve month period. The facility replaces the Group's previous amortising loan facilities provided solely by the Bank of Scotland Plc, which were due to expire in July 2013 and consisted at the time of refinancing of a £55.5m term loan and a £3.0m UK working capital facility.

The Group's borrowing costs will be dependent on the ongoing level of leverage with a debt margin payable of between 250 and 375 basis points per annum. Commitment fees will also apply at normal commercial rates. An arrangement fee of 1.75% is payable at the outset of the facility which will be expensed in July 2012 along with associated refinancing, legal and debt advisory fees.

The Group's existing interest rate swaps will no longer remain eligible for hedge accounting under International Financial Reporting Standards following the refinancing. Accordingly, in the second half of the Group's financial year ending 31 December 2012, the existing mark-to-market exposures of the interest rate swaps will be required to be applied to the income statement. At the date of refinancing, the mark-to-market exposures under the interest rate swaps was £3.3m.

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.

The Directors of Sportech PLC are listed in the Sportech PLC Annual Report and Accounts for the year ended 31 December 2011. There have been no changes in the period other than the resignation of Brooks Pierce on 11 May 2012. A list of current Directors is maintained on the Sportech PLC website: www.sportechplc.com.

By order of the Board

Ian Penrose                                                 Steve Cunliffe

Chief Executive                                            Finance Director

23 August 2012                                           23 August 2012

 

END

 

 

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