Interim Results
Sportech PLC
11 September 2007
Sportech PLC
Interim 2007
Sportech PLC ('Sportech'or 'the Company')
Unaudited interim results for the six months ended 30 June 2007
Highlights
Profit before tax for the six months ended 30 June 2007 of £5.2m (2006: £6.1m)
is in line with the Board's expectations and reflects the implementation of the
Company's turnaround strategy
Net debt at end June reduced to £87m (December 2006: £89.9m): the second half
will be impacted by recent rises in interest rate costs
Significant progress made on the three major foundations for recovery: products,
technology and distribution
Enhanced and new products launched - Premier 10, Fantasy Football, predictor
games and fixed odds games. Relaunch of Spot the Ball on target for 2008
Significant progress made upgrading back-end technology systems following
technology and distribution partnership with Scientific Games and E-gaming
technology supply partnership with Orbis
Earnings per share from continuing operations of 0.61p (2006: 0.86p)
Appointment of Jon Holmes as non executive director; strengthened management
team with appointment of Christian Heap, Head of International Development
Preliminary clearance received from the Competition Commission for the
acquisition of Vernons
Ian Penrose, Chief Executive of Sportech, said today:
'We are transforming Sportech and making good progress implementing the changes
necessary to realise the Company's potential to become a significantly larger
broad-based sports, leisure and gaming business with international reach.'
'Our technology partnerships with Scientific Games and Orbis have given us the
head start we needed to modernise our technology infrastructure, and to upgrade
our online and new media presence. We have initiated the introduction of new
and enhanced products as well as making significant progress with opportunities
to distribute our products into overseas markets. We look forward to the second
half with confidence.'
- ends -
Enquiries:
Sportech PLC
Ian Penrose, Chief Executive 0151 288 3561
Bell Pottinger Corporate & Financial
David Rydell/Emma Kent/Rosanne Perry 020 7861 3232
Chairman's Statement
The Board completed its strategic review of the Company earlier this year and
the process of implementing the changes required to deliver a growth-oriented
business is now well underway. Importantly, during the period the Company was
presented with an exciting opportunity to acquire the Vernons Football Pools
business and entered into heads of terms with the vendor Ladbrokes plc. The
acquisition raised certain competition issues and the matter was referred to
both the Office of Fair Trading and the Competition Commission. As a result,
a considerable amount of management time and effort has been spent cooperating
with both bodies and it is against this backdrop that the Company has delivered
good financial results and operational progress. The Board is very pleased that
the Competition Commission gave provisional clearance for this acquisition on 31
August 2007 and we look forward to a final decision being announced later this
year.
The management team is committed to implementing the Board's new strategic
direction for the Company. Our goal is to create a market leading sports,
leisure and gaming business with international reach and growth potential. We
operate in a global and growing marketplace. Football, and particularly British
football, continues to benefit from an unprecedented global boom, whilst pool
(pari-mutuel) gaming and games of skill continue to enjoy popularity around the
world. We have a market leading position in pool betting on British football
and are therefore ideally placed to build upon our strengths and the qualities
of our heritage to further establish Sportech's position in this global market.
Financial Performance
The Company is pleased to announce a profit before tax of £5.2m for the six
months to 30 June 2007 (2006: £6.1m) which was in line with the Board's
expectations. Net debt at the end of the period was £87.0m (Dec 2006: £89.9m),
a reduction of £2.9 million. Earnings per share from continuing operations were
0.61p (2006: 0.86p).
The Board now expects to see the initiatives introduced to improve the core
football gaming business start to flow through into the financial performance
in the second half of 2007 and beyond. However, the results for the second half
will be impacted by recent rises in interest rate costs.
Board and Employees
We were delighted to welcome Jon Holmes onto the Board in July. Jon brings a
wealth of experience of the sports business, in particular the football
industry, and his knowledge and understanding of sports marketing and branding
will be invaluable.
In line with the growing opportunities overseas, we have strengthened the
executive team by appointing Christian Heap as Head of International
Development, who will join us at the end of the month.
A combination of the rapid changes to the business that are being introduced,
and the enormous challenge that the Competition Commission process places on
time and resources, has put many pressures on the Board and employees. I should
like to express my thanks to those whose contribution during this challenging
period
Acquisition of Vernons
On 7 March 2007 the Company was pleased to announce that it had entered into
exclusive negotiations with Ladbrokes Plc regarding the potential acquisition
of the Vernons Pools business. Following a referral by the Office of Fair
Trading on 3 May, the Competition Commission, on 31 August 2007, issued its
preliminary ruling that this transaction could proceed and that there would not
be a significant lessening of competition as a result.
We will continue to work closely with and offer our full support to the
Competition Commission during the period until its final report is issued on or
before 17 October 2007. In the event that the transaction runs smoothly we
would expect to update shareholders regarding the potential acquisition of
Vernons before the end of 2007.
Outlook
The business of Sportech is being transformed. A lot has been achieved, but
there remains much to do. We are changing many aspects of the business, some of
which are deep-seated and historic. The Board is committed to delivering
shareholder value and we look to the future with confidence.
Piers Pottinger
Chairman
11 September 2007
Chief Executive's Review
Investing in Products, Technology and Distribution
The strategic review highlighted that there had been a significant under
investment over many years in the three key operational areas of products,
technology and distribution. Your Board is addressing these three areas as the
key foundations for the turnaround strategy.
Products
The Company's aim is to achieve growth by giving customers new and improved
products. We are enhancing and refining existing products, to make them more
engaging and accessible. Alongside these existing products we are creating new
games that will be attractive to a wider audience. The delivery of this
enhanced suite of products has already begun with the recently launched Premier
10, Fantasy Football, several football predictor games and a portfolio of fixed
odds games. By early 2008 we will launch additional predictor games and a
remodelled Spot The Ball.
To augment our football prediction games, we are building a content-rich website
aimed directly at the football fan. In addition to the current streaming of
breaking football headlines, we will introduce a community focused fans' forum,
quizzes, bespoke player league tables and other football related content. We
will continue to generate our own unique content, having launched the Football
Fever report in January of this year which examined each of the 92 football
clubs and identified by ranking the most stressful to support. This
award-winning report (National CIPR Excellence Award) was followed up a
fortnight ago by the launch of Football Fever 2, looking at which clubs have the
most and least optimistic supporters and can be viewed at www.footballpools.com.
Technology
Making our games easy to access and play is fundamental to restoring growth to
the business. Investing in new technology is a vital step in order to achieve
this, enabling new distribution channels to be opened up and delivering many
operational benefits. We were delighted to sign a strategic technology and
distribution partnership with Scientific Games, the New York based operator of
pari-mutuel (pool) systems lotteries and betting terminals, earlier this year.
At the same time, we also signed a contract with a second technology partner,
Orbis, a leading provider of interactive betting and gaming solutions.
These two partnerships will enable the Company to overhaul completely its
technology backbone at a cost of £3.5m, thereby delivering significant customer
benefits, distribution enhancements and operational synergies. We are pleased
that the first phase of the technology roll out plan was delivered last month
for the start of the 2007/08 football season and we have a series of upgrades
and launches scheduled throughout the next eight months as we transform our
technical capabilities.
Distribution
We are currently modernising our distribution channels to enable the Company to
offer its new and existing products in an easy-to-play format for the mass
football market. The investment in technology will help facilitate this
expansion of the distribution network and augment the historic methods of
distribution of primarily door to door collectors and direct mail.
As stated previously, we have extended the distribution of our products online,
with the first phase launch of the website in August. This will be subject to a
number of major enhancements over the next few months.
The strategic technology and distribution partnership signed earlier this year
with Scientific Games will offer the Company the potential to develop enhanced
distribution of its games to customers within Scientific Games' global customer
network, once the new technology is fully implemented and operational. This
initiative offers significant potential for the second half of 2008 and beyond.
Extending our reach into retail venues remains a key strategic goal for the
business. We expect to announce details of significant progress in this area
in the next few months.
We consider that the international marketplace offers great potential for our
pari-mutuel games of skill, and we have held discussions with a number of
partners for distribution into a selection of overseas territories. Whilst the
introduction of a strong technological backbone is paramount for international
development, we have made significant progress in our plans for expanding our
reach into Asia..
Financial Results
Profit before tax for the six months to 30 June 2006 of £5.2m (2006: £6.1m) was
is line with the Board's expectations and reflects the implementation of the
turnaround strategy. The Board is also committed to reducing its debt levels
and net debt at the end of the period was £87.0m, a £2.9m reduction in the six
months. Earnings per share from continuing operations were 0.61p (2006: 0.86p).
Operating profit from continuing operations amounted to £8.4m (2006: £9.5m).
Interest payable was reduced to £3.2m (2006: £3.4m) and following a full tax
charge of 30% (2006: 18%), profit after tax from continuing operations amounted
to £3.7m (2006: £5.0m). The first half of 2006 saw the disposal of Bet Direct,
which generated a profit on disposal after deducting losses from trading and tax
of £6.5m, taking the overall profit for the period to June 2006 to £11.5m.
Football Gaming
Certain of the initiatives introduced have successfully reduced the rate of
decline of the operating profit in the football gaming business. As a
consequence, operating profit amounted to £7.3m (2006: £9.0m), a reduction of
£1.7m being less than half the reduction experienced in the corresponding
period.
We have embarked upon a series of initiatives to improve our communications with
our customers and sales networks as we continue to change the shape of our
business. We are aiming to put the customer back at the heart of our business
as we become customer and market driven rather than process driven. We have
merged our two operational bases into one deriving operational, financial and
communications benefits.
Following on from the improvements made last year we have steadied the reduction
in customer numbers over the six month period at 55,000 (2006: 57,000), to
492,000 active weekly customers at the period end.
E-gaming
Our e-gaming division has successfully built upon the improvements made last
year by more than doubling its operating profit to £1.1m (2006: £0.5m). Gross
win increased by 29% (£1.5m) to £6.6m (2006: £5.1m), with the total number of
active customers increasing by 5,000 (26%) to 23,000 (2006: 18,000). The total
number of registered customers increased by 44,000 (45%) to 142,000.
Following the changes introduced by the Gambling Act 2005, we are in the process
of relocating our casino and poker businesses to Malta from Curacao in the
Dutch Antilles. This will provide the two operations (littlewoodscasino.com and
littlewoodspoker.com) with a more stable framework in which to operate,
including the ability to continue to advertise in the UK.
Brand
The 'Littlewoods' name is used under a licence agreement which expires in
September 2010. We are creating a new brand for the business, however the
launch, originally planned for August 2007, was deferred pending the outcome of
the decision by the Competition Commission regarding the acquisition of Vernons.
We now anticipate launching the new brand early in 2008.
Summary
During the period we have continued to make good progress implementing changes
that our strategic review highlighted as necessary. The management team is
committed to these changes and we are already enjoying operational and
communication benefits, having consolidated operations into one building and
realising cost savings as a result, and seeing continued progress in debt
reduction. Although there is still change to be delivered we look forward to
continuing the transition of the Company into a growth orientated sports,
leisure and gaming business with international reach.
Ian Penrose
Chief Executive
11 September 2007
Six months
to Six months to Year to
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Continuing operations Note £m £m £m
Stakes placed* 179.4 172.8 352.7
Gross win revenue 3 28.5 30.5 60.8
Cost of sales (8.0) (8.8) (17.1)
Gross profit 20.5 21.7 43.7
Distribution costs (0.4) (0.4) (0.8)
Administrative expenses (11.7) (11.8) (27.4)
Operating profit before restructuring costs 8.4 9.5 18.4
Exceptional restructuring costs - other 5 - - (2.9)
Operating profit 3 8.4 9.5 15.5
Interest payable and similar items 6 (3.2) (3.4) (6.4)
Profit before taxation 5.2 6.1 9.1
Taxation 7 (1.5) (1.1) (1.5)
Profit for the period from continuing
operations 3.7 5.0 7.6
Discontinued operations
Profit for the period from discontinued
operations 4 - 6.5 6.5
Profit for the financial period
attributable to equity shareholders 3.7 11.5 14.1
Earnings per share
Basic and diluted 8 0.61p 1.95p 2.38p
Earnings per share from continuing
operations
Basic and diluted 8 0.61p 0.86p 1.28p
* Stakes placed does not represent a statutory number and is given for information purposes only.
Six months to Six months to Year to
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
Profit for the financial period 3.7 11.5 14.1
Total recognised income for the period 3.7 11.5 14.1
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Notes £m £m £m
ASSETS
Non-current assets
Goodwill 145.2 145.2 145.2
Other intangible assets 0.9 0.1 0.2
Property, plant and equipment 2.0 3.8 2.1
Retirement benefit assets 0.3 0.3 0.3
Deferred tax assets 1.0 1.3 1.0
149.4 150.7 148.8
Current assets
Trade and other receivables 2.2 2.2 2.2
Cash and cash equivalents 9 1.6 2.4 0.4
3.8 4.6 2.6
LIABILITIES
Current liabilities
Financial liabilities - borrowings (22.0) (15.0) (21.8)
Trade and other payables (13.6) (15.2) (14.0)
Current tax liabilities (1.7) (3.8) (1.5)
(37.3) (34.0) (37.3)
Net current liabilities (33.5) (29.4) (34.7)
Non-current liabilities
Financial liabilities - borrowings (66.1) (78.1) (68.1)
Deferred tax liabilities (0.3) (0.3) (0.3)
(66.4) (78.4) (68.4)
NET ASSETS 49.5 42.9 45.7
SHAREHOLDERS' EQUITY
Ordinary shares 29.6 29.6 29.6
Other reserves 0.3 0.2 0.2
Retained earnings 19.6 13.1 15.9
TOTAL SHAREHOLDERS' EQUITY 49.5 42.9 45.7
The interim accounts on pages 5 to 12 were approved by the Board of Directors on
10 September 2007 and were signed on its behalf by
Ian Penrose Steve Cunliffe
Director Director
Six months Six months
to to Year to
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Notes £m £m £m
Cash flows from operating activities
Cash generated from operations 10 8.5 7.1 15.0
Interest paid (3.2) (2.3) (6.4)
Tax (paid)/received (1.3) 0.4 (2.0)
Net cash from operating activities 4.0 5.2 6.6
Net cash from operating activities
before charity cash movement 3.9 5.2 7.8
Charity cash movement 0.1 - (1.2)
Net cash from operating activities 4.0 5.2 6.6
Cash flows from investing activities
Net proceeds from sale of Bet Direct 4 - 10.8 10.8
Purchase of intangible fixed assets (0.8) - (0.1)
Purchase of property, plant and
equipment (0.2) (0.2) (0.3)
Net cash (used in)/generated by
investing activities (1.0) 10.6 10.4
Cash flows from financing activities
Finance lease principal payments - (0.5) (0.5)
Repayment of borrowings - (10.0) (15.0)
Net cash used in financing activities - (10.5) (15.5)
Net increase in cash and cash
equivalents 3.0 5.3 1.5
Cash and cash equivalents at start of period (1.4) (2.9) (2.9)
Cash and cash equivalents at end of period 1.6 2.4 (1.4)
Cash and cash equivalents consists of:
Cash and cash equivalents 1.6 2.4 0.4
Overdrafts - - (1.8)
1.6 2.4 (1.4)
Reconciliation of net debt
Increase in cash in period 3.0 5.3 1.5
Movement in charity cash 9 (0.1) - 1.2
Change in net debt resulting from cash
flows 2.9 5.3 2.7
Cash outflow from repayment of loans - 10.0 15.0
Cash outflow from repayment of finance
lease agreements - 0.5 0.5
Decrease in net debt for the period 2.9 15.8 18.2
At start of period (89.9) (108.1) (108.1)
At end of period (87.0) (92.3) (89.9)
1. Accounting policies
The results for the six months ended 30 June 2007 have been prepared on the
basis of the accounting policies set out in the report and accounts for the year
to 31 December 2006.
(a) Basis of accounting
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amount of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Although these estimates are based on management's best knowledge of the
amount, event or actions, actual results may ultimately differ from those
estimates.
(b) Basis of consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries drawn up for the six month period to 30 June 2007 (2006: six
month period). The Company has not early adopted IAS34 'Interim Financial
Reporting'.
2. Non-statutory accounts
The results for the half year to 30 June 2007 are neither audited nor reviewed
by the auditors.
The financial information on pages 5 to 12 does not amount to full accounts
within the meaning of the Companies Act 1985 (as amended).
The comparative figures for the year ended 31 December 2006 do not constitute
statutory accounts. These figures have been extracted from the audited accounts
for that period which have been delivered to the registrar of companies and on
which the auditors issued an unqualified report which did not contain a
statement under either Section 237 (2) or (3) of the Companies Act 1985.
3. Segmental reporting
Football
Gaming e-Gaming Group
Continuing operations £m £m £m
Gross win revenue 21.9 6.6 28.5
Segment result before restructuring costs 7.3 1.1 8.4
Operating profit from continuing operations 7.3 1.1 8.4
3. Segmental reporting (continued)
Six months to 30 June 2006
Football Telephone
Gaming e-Gaming Betting Group
Continuing operations £m £m £m £m
Gross win revenue 25.4 5.1 - 30.5
Segment result before restructuring
costs 9.0 0.5 - 9.5
Operating profit from continuing
operations 9.0 0.5 - 9.5
Discontinued operations
Revenue - 1.4 2.6 4.0
Segment result before restructuring costs - (0.4) (0.9) (1.3)
Operating loss from discontinued operations - (0.4) (0.9) (1.3)
Year to 31 December 2006
Football Telephone
Gaming e-Gaming Betting Group
Continuing operations £m £m £m £m
Gross win revenue 49.6 11.2 - 60.8
Segment result before restructuring
costs 17.4 1.0 - 18.4
Exceptional restructuring costs -
other (2.9) - - (2.9)
Operating profit 14.5 1.0 - 15.5
Discontinued operations
Revenue - 1.4 2.6 4.0
Segment result before restructuring costs - (0.4) (0.9) (1.3)
Profit on disposal of operation - - - 10.6
Taxation - - - (2.8)
Profit for the period from
discontinued operations - - - 6.5
4. Discontinued activities
Six months to Six months to Year to
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
Trading losses - (1.3) (1.3)
Tax on trading losses - 0.4 0.4
Profit on disposal of Bet Direct - 10.6 10.6
Tax on profit on disposal of Bet Direct - (3.2) (3.2)
Profit for the period from discontinued operations - 6.5 6.5
On 7 June 2006 the Group disposed of its Bet Direct branded sports betting
business to 32Red plc for £12.5m, generating a pre-tax profit on disposal of
£10.6m.
5. Exceptional restructuring costs
Six months Six months to Year to
to
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Continuing £m £m £m
Exceptional restructuring costs - other -
Football Gaming - - 2.9
Other exceptional restructuring costs in the prior year relate to asset
impairments and accrued building lease payments resulting from the strategic
review of the business and relate to the rationalisation of building
infrastructure and asset impairment charges, together with associated staff
redundancy costs.
6. Interest payable and similar items
Six months Six months to Year to
to
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
Interest payable on bank loans and overdrafts 3.2 3.4 6.4
Net interest payable and similar items 3.2 3.4 6.4
7. Taxation note
Taxation is provided on taxable profits at 30.0% being the anticipated rate of
taxation for the Group's current financial year.
8. Earnings per share
The calculation of earnings per share is based on the net profit attributable to
ordinary shareholders of £3.7m (six months to 30 June 2006: £11.5m; year to 31
December 2006: £14.1m) divided by the weighted average number of shares in issue
during the period of 592.1m (6 months to 30 June 2006: 592.1m; year to 31
December 2006: 592.1m). There is no difference between basic and diluted
earnings per share.
The calculation of continuing earnings per share is based on the net profit
attributable to ordinary shareholders of £3.7m (6 months to 30 June 2006: £5.0m;
year to 31 December 2006: £7.6m) divided by the weighted average number of
shares in issue during the period of 592.1m (6 months to 30 June 2006: 592.1m;
year to 31 December 2006 592.1m.) There is no difference between basic and
diluted earnings per share.
9. Cash
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
Cash balances held on behalf of
registered charities 0.5 1.6 0.4
Other cash balances 1.1 0.8 -
1.6 2.4 0.4
Cash balances held on behalf of registered charities relate to the sale of
charity lottery products in respect of charity lotteries that have not reached
their final sale date and for which proceeds have not been passed to the
charities concerned. These cash balances are excluded when calculating the net
debt of the Group.
10. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from operating activities
Six months
to Six months to Year to
30 June 30 June 31 December
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Continuing operations £m £m £m
Net profit 3.7 5.0 7.6
Adjustments for:
Taxation 1.5 1.1 1.5
Depreciation 0.3 0.6 0.8
Impairment of property, plant and equipment - - 1.2
Amortisation of intangibles 0.1 0.1 0.3
Impairment of intangibles - - 0.1
Interest expense 3.2 3.4 6.4
Other non-cash changes 0.1 - 0.2
Changes in working capital:
Increase in trade and other receivables - (0.3) (0.2)
Decrease in trade and other payables (0.4) (0.9) (1.0)
Cash generated from continuing operations 8.5 9.0 16.9
Discontinued operations
Net profit - 6.5 6.5
Adjustments for:
Taxation - 2.8 2.8
Depreciation - - -
Profit on disposal of Bet Direct - (10.6) (10.6)
Amortisation of intangibles - 0.1 0.1
Changes in working capital:
Decrease in trade and other payables - (0.7) (0.7)
Cash used in discontinued operations - (1.9) (1.9)
Cash generated from operations 8.5 7.1 15.0
This information is provided by RNS
The company news service from the London Stock Exchange
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