Q3 Trading and Strategic Review Update

RNS Number : 5919V

Sportech PLC

06 November 2017

 

For immediate release

6 November 2017

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

This announcement contains inside information

Sportech PLC

("Sportech" or the "Group" or "Company")

Q3 Trading Update

 Update on Strategic Review and Formal Sale Process

Sportech is pleased to announce a trading update for the three-month period from 1 July 2017 to 30 September 2017 along with an update on progress of the Company's Strategic Review and Formal Sale Process. 

 Q3 2017 TRADING UPDATE

Revenues

The Group is pleased to report that:

·      Q3 Revenue increased by 7.6% to £18.3m (Q3 2016: £17.0m)

·      Year to date revenue increased by 5.8% to £54.7m (YTD 2016:  £51.7m)

·      Bump 50:50, the sports raffle product, increased revenues by 41.5% in Q3, vs Q3 2016, following further signings

·      Other Racing and Digital revenues increased by 8.1% during the quarter vs Q3 2016

·      The addition of the new Stamford sports bar and restaurant doubled the Venues' food and beverage revenues to £1.2m in Q3 over the same quarter last year   

·      Q3 Venues total revenue increased by 6.0% during the quarter vs Q3 2016

Racing and Digital

The Racing and Digital business is capturing higher margin revenues from its strong position as global leader in its field, by providing expanding co-mingling opportunities to its global client network, and through its Bump 50:50 sports raffle.

The business continues to focus on expanding successful Bump 50:50 partnerships with more US and Canadian professional sports stadia distribution relationships and is progressing with new initiatives to optimise its technology offerings.

The business has demonstrated strong B2B service revenue growth through the year to date. However, as highlighted in August, certain pari-mutuel technology and hardware sales anticipated during the year may be delayed to 2018.  The 2017 hurricane season had a devastating effect on some clients' operations in Puerto Rico. The Group is pursuing a business interruption insurance claim to cover losses above contractual excess.

Venues

The Group is pleased that the investment into the business and its pivotal position in the gaming market in Connecticut has seen revenues increase by 6% in the quarter over last year, and by 9.3% in the year to date. Following the opening of the flagship venue in Stamford in June 2017, the Group's food and beverage revenues have grown strongly. Furthermore, the online division also continues to grow strongly, offsetting the impacts of the delayed opening in Stamford and the postponement of Jai Alai in August and September 2017.

Runnerz, the business in The Netherlands, continues to deliver growth via its online and venues model and is well positioned after securing its exclusive licence earlier this year.

Financial position

The Group's interim results, released on 24 August 2017 showed that the Group had current assets, less current and longer-term liabilities, of £62.6m with no debt. Since that time, the Group has disposed of its shares in NYX Gaming Group realising a further £2.3m of cash as against a carrying value of £1.3m. Cash (net of customer liabilities) as at 31 October 2017 was £68m.

Distribution to shareholders

As previously announced, the Group intends to make a further, and significant, distribution to shareholders this year. The precise timing of this distribution is conditional on the approval of the reduction of the Company's share capital by the Scottish Court.  The reduction of the Company's share capital will create a capital reserve of up to £55.6m which would be the maximum available for potential shareholder distribution. 

The Company has made important progress and is expects the Court's decision in the near future. We will update shareholders further at that time and, if approved, detail the quantum and structure of shareholder returns whilst ensuring the Company has sufficient capital to meet continued business operations.

Outlook

Richard McGuire, Non-Executive Chairman of Sportech, said: "The Group has continued to trade well in the first few weeks of the current quarter and the outcome for the full year remains in line with Board expectations. During the coming weeks, we expect to provide a further update on the proposed distribution to shareholders and, at the appropriate time, provide further comments relating to the ongoing Formal Sale Process. Our financial position remains robust, and will benefit further from annualised cost savings of at least £2 million."

UPDATE ON STRATEGIC REVIEW

The Board has set up an internal task force to consider all options available to strengthen the Group, assess numerous innovative opportunities for further growth, and ultimately deliver a Group that is capable of delivering sustainable returns or a significant capital return to shareholders.

Formal Sale Process

Following preliminary approaches to acquire the Company, Sportech initiated a Formal Sale Process on 19 October 2017, although naturally there can be no certainty that an offer will be made.

The Company has engaged with interested parties, has executed several non-disclosure agreements and will be providing selected parties with access to due diligence information and management in the coming weeks. This initial round of discussions is expected to conclude by the end of this year, with a timetable for seeking offers by the end of January 2018.  The Board will update shareholders further at the appropriate time. 

Parties with an interest in making a proposal should contact Canaccord Genuity through the contact details set out at the end of this announcement.

Effective cost management

As announced on 18 September 2017, Mickey Kalifa, CFO, left the business on 31 October 2017 and Ian Penrose, CEO, will be leaving the business on 31 December 2017. The Board has identified annualised cost savings, including the compensation of executive directors, totalling not less than £2 million per annum. The Board does not currently intend to replace these individuals and, as such, views these as ongoing reductions to the costs of the Group.

Management

Richard McGuire will assume the role of Executive Chairman, effective 4 December 2017.  Following the announcement of 18 September 2017, Ian Penrose has continued to manage the Group as CEO and supported an effective professional transition of duties. This will continue through to the end of the year.

Board

The Company intends to appoint an additional independent non-executive director as the current independent Board members have become more involved in executive matters in addition to managing the formal sales process. The Board continues with its commitment to review and assess all opportunities to deliver tangible shareholder returns. 

- Ends -

Contacts:

Sportech PLC	Tel: [phone]
Richard McGuire, Non-Executive Chairman Richard Cooper, Non-Executive Director
Canaccord Genuity Limited (Financial adviser to Sportech)
Chris Robinson	Tel: [phone]
Miles Cox
Mike Kogan	Tel: [phone]
Peel Hunt LLP	Tel: [phone]
(Corporate broker to Sportech) Dan Webster George Sellar
Buchanan	Tel: [phone]
(Financial PR adviser to Sportech) Henry Harrison-Topham Mark Court Jamie Hooper	[e-mail]

Notes to Editors:

About Sportech

Sportech PLC, listed on the London Stock Exchange, provides and operates technology solutions for some of the world's best-known gaming companies, sports teams, horse and greyhound racetracks, as well as owning and operating its own gaming venues in Connecticut, USA and the Netherlands under exclusive licences.

The Group is a leading player in the global pari-mutuel betting technology sector focusing on highly regulated markets worldwide. It has more than 27,000 betting terminals deployed to over 400 clients across 37 countries including those in the USA, where it operates under 35 licenses across 37 States and processes approximately US$11.6 billion of bets annually. It has invested over US$60 million in developing its technology services to clients and the successful expansion of its leading US gaming Venues in the last five years, resulting in its proprietary Quantum™ product being the most widely deployed pari-mutuel betting system globally.

Inside information and responsibility

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement this inside information is now considered to be in the public domain.  The person responsible for this announcement on behalf of Sportech is Richard McGuire, Chairman of the Board of Directors of Sportech.

Publication on website

A copy of this announcement is also available on the Company's website at www.sportechplc.com.

No profit forecasts, quantified financial benefit statements or estimates

No statement in this announcement is intended as a profit forecast or profit estimate for any period.

 

END

 

 

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