Interim Results
Sportech PLC
19 September 2006
Sportech PLC ('Sportech' or 'the Company')
Interim Results for the 26 weeks ended 7 July 2006
Highlights
•Profit after tax including gains from exceptional items of £11.5m (2005:
£1.9m)
•Profit after tax from continuing operations increased by 25 per cent to
£5m (2005: £4m)
•Net debt at end June 2006 reduced by 18.4 per cent to £92.3m (June 2005:
£113.1m)
•Strategic review continues
+ •Loss making Bet Direct sold for £12.5m in cash
+ •Termination of ITV contract and closure of division
•Business strategy refocused on core business of football-related gaming
products plus bingo and online casino and poker
•Littlewoods brand overhaul initiated - new brand to be launched prior to
August 2007
•Earnings per share of 1.95p (2005: 0.34p); earnings per share from
continuing operations 0.86p (2005: 0.68p)
Ian Penrose, Chief Executive, said:
'Sportech is starting a process of significant change. We have great products
and we operate in growing global markets. Our products are at the heart of
football, gaming and leisure and this is a very strong base to operate from.
Having sold loss making operations we are now focused on growing our core
businesses of football-related gaming, online bingo, poker and casino. We are
addressing all areas of our business including new product issues, technology,
distribution and commercial property.
'The outcome of the strategic review will not result in an instant turnaround
but we are convinced that the efforts of your new Board will be reflected in a
medium to long term strategy that creates a viable growth business delivering
enhanced returns for shareholders. The Board looks to the future with
confidence.'
- ends -
Enquiries
Sportech PLC
Ian Penrose, Chief Executive 0151 288 3561
Bell Pottinger Corporate & Financial
David Rydell / Emma Kent 020 7861 3232
Chairman's Statement
Sportech is a company in transition. The new Board and management team are
committed to creating a growth business that will deliver returns for
shareholders in the medium to long term. We believe that to achieve this and to
realise the potential of the business, fundamental change was required to the
previous Board's strategy. The Company faces a number of difficult challenges
and radical change is not something that the Board is afraid of. The first six
months of the year have started well. The strategic review that commenced late
last year continues and while there is still much to do we have made progress on
key fronts.
We recognised that it was imperative to eliminate loss-making activities and
reduce bank debt. I am pleased to report that these key strategic objectives
were met during the first half of 2006. The positive financial impact has
already been registered with a 25 per cent increase in post tax profits from
continuing operations to £5.0 million (2005: £4.0 million) and an 18 per cent
reduction in debt to £92.3 million.
One key finding of the strategic review is the strength of our football-gaming
products. This is the solid foundation which has historically underpinned the
financial performance of the group, but has in recent years received less
attention in terms of promotion and investment while the focus has centred on
trying to develop betting and interactive products and channels which proved
unprofitable. We are reversing this policy. We are committed to growing our
football-gaming products, not least the pools business, and believe we own a
unique position in a global market that can be significantly exploited for the
benefit of our shareholders.
We are determined to transform the culture of Sportech from a 'small company
with a big company structure' to a 'big company with a small company
entrepreneurial culture'.
One of the key objectives set by our strategic review was to appoint a Board and
management team with the experience, energy and drive to change the business. We
believe we now have that team in place following the appointment to the Board of
Steve Cunliffe as Finance Director on 3 July 2006 and the appointments to the
executive team in early Summer of Ted Taylor to Managing Director of Littlewoods
Football Pools and Jon Sheehy to Marketing Director. Gary Speakman resigned from
the Board on 31 August 2006 and I would like to thank Gary for his contribution
to Sportech since 2000.
We believe that following the management restructuring we are now in a position
to pursue our objectives and ensure that Sportech is a company with an
entrepreneurial culture.
A new energy and enthusiasm to succeed is permeating the business. It remains
early days but the bare fact that sport, leisure and gaming - our core areas of
operation - are at the heart of British and many international cultures offers
exciting opportunities in rapidly evolving sectors.
The strategic review is ongoing and its findings will take time to assess and
where necessary take effective action. We remain committed to growth and will
make the necessary changes to the Sportech business to capitalise on core
strengths. As the strategic review develops I am confident that Sportech will
find itself capitalising on the huge opportunities ahead.
Piers Pottinger
Chairman
19 September 2006
Chief Executive's Review
Transforming Activities, Strategy and Culture
We have achieved a number of key strategic objectives during the first half of
2006 and the business is seeing the benefit of these changes. We have profoundly
changed our Board and management team, creating a team with the necessary
experience and skills set required for Sportech's future. We have terminated our
loss-making contract to provide betting services to ITV and consequently closed
our interactive television operations. In June 2006 we sold our loss-making
betting division, Bet Direct, for £12.5 million in cash. These two activities
alone lost Sportech £8.9 million in 2005. The Board is pleased to have
eliminated these loss-making activities, to have eliminated further cash
outflows and to have achieved good value for Bet Direct. As a result, bank debt
has been reduced significantly from £112 million in October 2005 to £92.3
million at the period end. Debt reduction remains one of the primary objectives
of the Company.
The strategy is now far more focused around football related products - not
least rejuvenating the profitable football pools business. The Board believes
this is a significant global marketplace in which Sportech has immense
opportunity.
Financial Overview
The profit after tax from continuing operations of £5.0 million (2005: £4.0
million) together with the profit after tax from discontinued operations of £6.5
million (2005: loss of £2.1 million) has resulted in an overall profit after tax
for the financial period of £11.5 million (2005: £1.9 million), an increase of
£9.6 million. Net debt at the end of the period was £92.3 million (June 2005:
£113.1 million), a reduction of £20.8 million, some 18.4 per cent.
Operating profit from continuing operations was broadly static at £9.5 million
(2005: £9.6 million). Interest payable reduced by 13 per cent to £3.4 million
(2005: £3.9 million) resulting in a 7 per cent increase in profit before tax to
£6.1 million (2005: £5.7 million). Tax payable has reduced to £1.1 million
(2005: £1.7 million) resulting in a 25 per cent increase in after tax profits
from continuing operations to £5.0 million (2005: £4.0 million).
The profit of £10.6 million on the successful sale of Bet Direct for £12.5
million exceeded initial expectations. The associated tax charge and trading
losses incurred prior to disposal amounting to £4.1 million reduced the profit
from discontinued operations to £6.5 million (2005: loss of £2.1 million).
Earnings per share have increased to 1.95p (2005: 0.34p). Earnings per share
from continuing operations have increased by 26 per cent to 0.86p (2005: 0.68p).
No dividend is proposed as the Board continues to focus on investing in
continuing activities and reducing debt.
Football Pools
This remains the driving force of the financial performance of the group. The
ongoing strategic review into our football business has highlighted many of the
key facets that need to be introduced in order to rejuvenate the business.
During a period when our competitors invested heavily in product innovation,
technology, marketing and distribution, Sportech chose not to make similar
investments. This significant period of underinvestment has challenged the new
Board given the unprecedented level of sporting, media and gambling interest in
football.
Our commitment is to get the product and distribution basics right and we are
confident of our ability to build an enlarged football gaming business. We have
a strong commitment to new products and we will launch a number of new and
repositioned games for the football season 2007/08. Our intention is to
introduce predictor and fantasy football games, reinvigorate our core treble
chance offering, relaunch Spot The Ball and introduce customer loyalty
programmes.
Productive and cost-effective distribution is essential for consumer-driven
products. We believe that wider and more targeted distribution, utilising new
technology as well as our existing collector and retail network, is essential to
take the business forward and we are currently assessing how best to increase
our routes to market.
We are embarking upon an overhaul of our IT infrastructure. The strategic review
has highlighted the fact that our IT hardware and software is out of date and
inappropriate for a modern transactional business. This IT programme will be
phased over the next eighteen months but we expect key customer facing
activities to be fully operational for the start of the 2007/08 football season.
The decisions taken by the previous management team when planning for the 2005/
06 football season set the scene for the financial results in the first half. As
a consequence profits from our Football Pools division reduced by £3.6 million
to £9.0 million (2005: £12.6 million) as the forecast continued decline in
customer numbers proved correct. Customer numbers have reduced by 8.5 per cent
year on year to 546,000.
We believe that the attrition can be reversed and that the business can return
to a growth mode. Encouragingly, we have reduced the rate of decline in our
customer numbers who play on a direct basis with us (direct mail, direct debit,
postal) and as we introduce efficient database management and customer
relationship management techniques, we will be looking to stop the attrition and
raise the average spend per customer.
Goalrush, our new game for the World Cup, proved to be an important step in the
development of our strategic plan. Whilst more than 250,000 individuals played
the game, the website experienced operational difficulties which highlighted,
and consequently accelerated, the need for an IT restructuring plan as described
above. Encouragingly, the average spend per head online was five times greater
than that from the traditional customer base which offers us encouragement for
the potential of our online products.
The strategic review has also identified that our property overhead is excessive
and involves disparate locations. We are assessing our options as we move
towards putting all our activities under one roof thereby streamlining
operations and improving communication.
Cost control remains a significant focus for the Board and we continue to
actively review the cost base of our business believing that there are
significant cost savings to be made in due course.
Brand
Sportech has a licence agreement until September 2010 to use the 'Littlewoods'
name. In the opinion of the Directors, the strength of our business is in the
546,000 weekly players and the liquidity that this generates for our prizes,
together with the history and tradition of the football pools business.
Accordingly, as part of our strategic review, we are seeking new and improved
branding by way of a full marketing makeover and expect that a new and enhanced
brand will be launched prior to August 2007. With a long lead time, the Board
believes it can use to its advantage the transfer from the Littlewoods name.
Bingo
We view bingo as an exciting opportunity that has the potential to perform well
alongside our core football business. The changes that we have introduced into
our football business also apply to our bingo product. Since the launch of
LittlewoodsBingo.com in February, we have changed our internal arrangements and
renegotiated our contract with St Minver, a leading supplier of gaming
solutions, to put the business on a clear strategic route forward. Together with
St Minver we have this month commenced a six month marketing and promotions
campaign to establish our position in this lucrative online market. At the end
of June we had a total of 13,000 registrations, 1,200 active players and had
incurred a start-up loss of £0.1 million.
Casino and Poker
We have managed to reverse the decline experienced in our casino and poker
division. Following three successive six month periods reporting declining
profits, we are pleased to report that we increased the profit from our casino
and poker business by 33 per cent from £0.6 million in the second half of 2005
to £0.8 million in the first half of 2006. The profit for the comparable period
in 2005 was £1.1 million. We have increased our investment in marketing by £0.6
million, which continues to have a positive impact on trading.
The number of registered players has increased year on year by 52 per cent to
more than 96,000, whilst the number of active players has also increased by 13
per cent to over 16,000.
Betting
We have completed the withdrawal from sportsbook betting activities following
the sale of Bet Direct for £12.5 million and the termination of our contract to
provide exclusive betting services to ITV through the red button.
Whilst we were pleased with the 35% improvement in trading through to June and
additional increases forecast for the second half year, the Board decided that
the weekly trading loss of over £50,000, even with the incremental improvements
anticipated, was too high to tolerate as the business had failed to make a
profit in any year since its formation. Accordingly, your Board was delighted
with the sale price achieved.
Summary
A lot has been achieved in the last six months. But there is still much to do.
Our work is underway. Some of the issues we face are deep-seated and historic.
They will take time to correct and will require capital expenditure. Our aim is
to complete the majority of the strategic review in 2006 and start to implement
it in 2007. In this regard, it is unlikely that the company will create any
overall improvement in financial performance in the second half of 2006 and
there remains the likelihood of short term impact for the 2006 year in full.
We are starting to transform the Sportech business. The opportunities are
immense.
We operate in a global growing marketplace. We have considerable expertise in
some of these markets and we own brands that are ready for change and
exploitation. Our technology is being modernised, our online and new media
presence is being upgraded, new products and routes to market are being created.
Distribution is a key focus of our strategic review and real opportunity lies
here. Sportech has the potential to become a significantly larger broad-based
sports, leisure and gaming business with international reach. Sportech is a
Company in real transition and we look with confidence to the future.
Ian R Penrose
Chief Executive
19 September 2006
Unaudited Interim Results for the six months
Ended 30 June 2006
CONSOLIDATED profit and loss account
For the twenty six weeks ended 7 July 2006
26 weeks 52 weeks
26 weeks to to
7 July 8 July 6 January
Notes 2006 2005 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
Continuing operations
Stakes placed* 172.8 180.8 347.1
Gross win revenue 3 30.5 34.2 67.1
Cost of sales (8.8) (10.1) (19.6)
---------- --------- ----------
Gross profit 21.7 24.1 47.5
Other income - 0.4 0.4
Distribution costs - - (0.1)
Administrative expenses (12.2) (14.9) (40.9)
----------------------------------------------------------------------------------
Operating profit before
restructuring costs 9.5 11.3 22.2
Exceptional restructuring costs -
ITV exit costs 5 - - (13.6)
Exceptional restructuring costs -
Other 5 - (1.7) (1.7)
----------------------------------------------------------------------------------
Operating profit 3 9.5 9.6 6.9
Interest payable and similar items 6 (3.4) (3.9) (7.5)
--------- --------- --------
Profit/(loss) before taxation 6.1 5.7 (0.6)
Taxation 7 (1.1) (1.7) (1.1)
--------- --------- --------
Profit/(loss) for the period from
continuing operations 5.0 4.0 (1.7)
Discontinued operations
Profit/(loss) for the period from
discontinued operations 4 6.5 (2.1) (4.1)
--------- ---------- ---------
Profit/(loss) for the financial
period attributable to equity
shareholders 11.5 1.9 (5.8)
========== ========== =========
Earnings per share 8
Basic and diluted 1.95p 0.34p (0.97)p
========= ========== =========
Earnings per share from continuing 8
operations
Basic and diluted 0.86p 0.68p (0.29)p
========= ========== =========
* Stakes placed does not represent a statutory number and is given for
information purposes only.
CONSOLIDATED Statement of recognised income and expense
For the twenty six weeks ended 7 July 2006
52 weeks
26 weeks to 26 weeks to to
7 July 8 July 6 January
2006 2005 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
Profit/(loss) for the financial period 11.5 1.9 (5.8)
Actuarial gain on defined benefit scheme - - 0.1
--------- --------- ---------
Total recognised income/(expense)
for the period 11.5 1.9 (5.7)
========= ========= =========
CONSOLIDATED balance sheet
As at 7 July 2006
7 July 8 July 6 January
Notes 2006 2005 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
ASSETS
Non-current assets
Goodwill 145.2 145.2 145.2
Other intangible assets 0.1 2.8 1.0
Property, plant and equipment 3.8 6.8 4.8
Prepayments - 9.6 -
Retirement benefit assets 0.3 0.2 0.3
Deferred tax assets 1.3 0.5 1.3
---------- --------- --------
150.7 165.1 152.6
---------- --------- --------
Current assets
Trade and other receivables 2.2 3.8 2.9
Cash and cash equivalents 9 2.4 1.9 1.6
---------- --------- --------
4.6 5.7 4.5
---------- --------- --------
LIABILITIES
Current liabilities
Financial liabilities- borrowings (15.0) (17.6) (22.8)
Trade and other payables (15.2) (18.1) (17.3)
Current tax liabilities (3.8) (0.7) -
---------- --------- --------
(34.0) (36.4) (40.1 )
---------- --------- --------
Net current liabilities (29.4) (30.7) (35.6)
---------- --------- --------
Non-current liabilities
Financial liabilities- borrowings (78.1) (95.5) (85.3)
Deferred tax liabilities (0.3) - (0.3)
---------- --------- --------
(78.4) (95.5) (85.6)
---------- --------- --------
NET ASSETS 42.9 38.9 31.4
========== ========= ========
SHAREHOLDERS' EQUITY
Ordinary shares 29.6 29.6 29.6
Other reserves 0.2 0.1 0.2
Retained earnings 13.1 9.2 1.6
---------- --------- --------
TOTAL SHAREHOLDERS' EQUITY 42.9 38.9 31.4
========== ========= ========
The interim accounts on pages 4 to 11 were approved by the Board of Directors on
18 September and were signed on its behalf by
Ian Penrose Steve Cunliffe
Chief Executive Finance Director
CONSOLIDATED Cash flow statement
For the twenty six weeks ended 7 July 2006
52 weeks
26 weeks to 26 weeks to to
7 July 8 July 6 January
Notes 2006 2005 2006
(Unaudited) (Unaudited)) (Audited)
£m £m £m
Cash flows from operating activities
Cash generated from operations 10 7.1 4.4 14.9
Interest received - 0.2 0.2
Interest paid (2.3) (3.3) (7.5)
Tax received/(paid) 0.4 (1.3) (1.9)
-------- --------- --------
Net cash from operating activities 5.2 - 5.7
-------- --------- --------
Cash flows from investing activities
Net proceeds from sale of Bet Direct 4 10.8 - -
Proceeds from sale of property,
plant and equipment - 0.3 0.4
Purchase of intangible fixed assets - - (0.7)
Purchase of property, plant and
equipment (0.2) (0.8) (1.1)
-------- -------- -------
Net cash generated by/(used in)
investing activities 10.6 (0.5) (1.4)
-------- -------- -------
Cash flows from financing activities
Finance lease principal payments (0.5) (0.1) (0.3)
Repayment of borrowings (10.0) (3.0) (9.0)
-------- -------- -------
Net cash used in financing activities (10.5) (3.1) (9.3)
-------- -------- -------
Net increase/(decrease) in cash
and cash equivalents 5.3 (3.6) (5.0)
Cash and cash equivalents at start
of period (2.9) 2.1 2.1
-------- -------- -------
Cash and cash equivalents at end
of period 2.4 (1.5) (2.9)
-------- -------- -------
Cash and cash equivalents consists of:
Cash and cash equivalents 2.4 1.9 1.6
Overdrafts - (3.4) (4.5)
-------- -------- -------
2.4 (1.5) (2.9)
-------- -------- -------
Reconciliation of Net Debt
Increase/(decrease) in cash in period 5.3 (3.6) (5.0)
Movement in charity cash 9 - 0.2 0.5
-------- -------- -------
Change in net debt resulting from cash flows 5.3 (3.4) (4.5)
Cash outflow from repayment of loans 10.0 3.0 9.0
Cash outflow from repayment of
finance lease agreements 0.5 0.1 0.3
Other non-cash changes - - (0.1)
-------- -------- -------
Decrease /(increase) in net debt
for the period 15.8 (0.3) 4.7
At start of period (108.1) (112.8) (112.8)
-------- -------- -------
At end of period (92.3) (113.1) (108.1)
======== ======== =======
Notes to the financial statements
For the twenty six weeks ended 7 July 2006
1. Accounting Policies
The results for the 26 weeks ended 7 July 2006 have been prepared on the basis
of the accounting policies set out in the report and accounts for the 52 weeks
ending 6 January 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 26 week period from 7 January 2006 to 7 July
2006 (2005: 26 week period).
2. Non-statutory accounts
The results for the 26 weeks to 7 July 2006 are neither audited nor reviewed by
the auditors.
The financial information on pages 4 to 11 does not amount to full accounts
within the meaning of the Companies Act 1985 (as amended).
The comparative figures for the 52 weeks ended 6 January 2006 do not constitute
statutory accounts. With the exception of the re-analysis of continuing and
discontinued operations, 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.
Notes to the financial statements
For the twenty six weeks ended 7 July 2006
3. Segmental reporting
26 weeks ended Football Interactive Telephone
7 July 2006 pools Betting Betting Group
£m £m £m £m
Continuing operations
Revenue 25.4 5.1 - 30.5
---------------------------------------------------------------------------------------
Segment result before
restructuring costs 9.0 0.5 - 9.5
---------------------------------------------------------------------------------------
Operating profit/(loss) 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)
---------------------------------------------------------------------------------------
26 weeks ended Football Interactive Telephone
8 July 2005 pools Betting Betting Group
£m £m £m £m
Continuing operations
Revenue 29.6 4.6 - 34.2
---------------------------------------------------------------------------------------
Segment result before
restructuring costs 12.6 (1.3) - 11.3
Exceptional restructuring costs -
Other (0.5) (1.2) - (1.7)
---------------------------------------------------------------------------------------
Operating profit/(loss) 12.1 (2.5) - 9.6
---------------------------------------------------------------------------------------
Discontinued operations
Revenue - 1.1 2.6 3.7
---------------------------------------------------------------------------------------
Segment result before
restructuring costs - (1.3) (0.9) (2.2)
Exceptional restructuring costs - - (0.8) (0.8)
---------------------------------------------------------------------------------------
Operating (loss) from discontinued
operations - (1.3) (1.7) (3.0)
---------------------------------------------------------------------------------------
52 weeks ended Football Interactive Telephone
6 January 2006 pools Betting Betting Group
£m £m £m £m
Continuing operations
Revenue 57.4 9.7 - 67.1
---------------------------------------------------------------------------------------
Segment result before
restructuring costs 24.4 (2.2) - 22.2
Exceptional restructuring costs -
ITV exit costs - (13.6) - (13.6)
Exceptional restructuring costs -
Other (0.5) (1.2) - (1.7)
---------------------------------------------------------------------------------------
Operating profit/(loss) 23.9 (17.0) - 6.9
---------------------------------------------------------------------------------------
Discontinued operations
Revenue - 2.6 5.5 8.1
---------------------------------------------------------------------------------------
Segment result before
restructuring costs - (2.7) (2.3) (5.0)
Exceptional restructuring costs - - (0.8) (0.8)
---------------------------------------------------------------------------------------
Operating(loss) from discontinued
operations - (2.7) (3.1) (5.8)
---------------------------------------------------------------------------------------
Notes to the financial statements
For the twenty six weeks ended 7 July 2006
4. Discontinued Activities
52 weeks
26 weeks to 26 weeks to to
7 July 8 July 6 January
2006 2005 2006
(Unaudited) (Unaudited)) (Audited)
£m £m £m
Trading losses (1.3) (3.0) (5.8)
Tax on trading losses 0.4 0.9 1.7
Profit on disposal of Bet Direct 10.6 - -
Tax on profit on disposal of
Bet Direct (3.2) - -
----------- ---------- ---------
Profit/(loss) for the period
from discontinued operations 6.5 (2.1) (4.1)
=========== ========== =========
On 7 June 2006 the Group disposed of its Bet Direct branded sports betting
business to 32Red plc for £12.5m. A summary of the net assets disposed, and of
the profit and net cash generated is;
26 weeks to
7 July
2006
(Unaudited)
£m
Tangible assets 0.7
Intangible assets 0.6
Current assets 0.5
Current liabilities (1.6)
-----------
Net assets disposed of 0.2
Disposal costs 1.7
Net gain on disposal 10.6
-----------
Sale proceeds 12.5
Less customer cash deposits
transferred to 32Red (1.5)
-----------
Net cash inflow on sale 11.0
===========
Reconciliation to net cash in
cash flow statement;
Sale proceeds 12.5
Disposal costs (1.7)
-----------
Net cash inflow on sale of Bet
Direct per cash flow statement 10.8
===========
5. Exceptional restructuring costs
52 weeks
26 weeks to 26 weeks to to
7 July 8 July 6 January
2006 2005 2006
(Unaudited) (Unaudited) (Audited)
£m £m £m
Continuing
Exceptional restructuring costs -
ITV exit costs - - 13.6
Exceptional restructuring costs -
Other - Football Pools - 0.5 0.5
Exceptional restructuring costs -
Other - Interactive Betting - 1.2 1.2
---------- ---------- ---------
- 1.7 15.3
Discontinued
Exceptional restructuring costs -
Other - Telephone Betting - 0.8 0.8
---------- ---------- ---------
Exceptional restructuring costs - 2.5 16.1
========== ========== =========
The contract with ITV was terminated in the prior year on 3 January 2006. The
exit costs comprised the write off of advance payments made since the inception
of the contract with ITV that were to have been recovered against future
commissions earned by ITV over the life of the contract. These payments were not
recoverable in the event of a termination.
Notes to the financial statements
For the twenty six weeks ended 7 July 2006
5. Exceptional restructuring costs (continued)
Other exceptional restructuring costs in the prior year relate to costs in
respect of the establishment of an in house call centre and rationalisation of
the interactive cost base together with associated head office support costs
within the Interactive and Telephone Betting segments as well as further
rationalisation of the operating cost base within the Football Pools segment.
6. Interest payable and similar items
52 weeks
26 weeks to 26 weeks to to
7 July 8 July 6 January
2006 2005 2006
(Unaudited) (Unaudited)) (Audited)
£m £m £m
Interest payable on bank loans
and overdrafts 3.4 3.9 7.5
---------- ---------- ---------
Interest receivable - 0.2 0.2
(Loss) on fair value
adjustments to financial
instruments - (0.2) (0.2)
----------- ---------- ---------
Interest receivable - - -
----------- ---------- ---------
Net interest payable and
similar items 3.4 3.9 7.5
=========== ========== =========
7. Taxation note
Taxation is provided on taxable profits at 17.5% 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 £11.5m (26 weeks to 8 July 2005; £1.9m: 52 weeks to 6
January 2006; £(5.8m) divided by the weighted average number of shares in issue
during the period - 592.1m (26 weeks to 8 July 2005; 592.1m; 52 weeks to 6
January 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 £5.0m (26 weeks to 8 July 2005; £4.0m:
52 weeks to 6 January 2006; £(1.7m) divided by the weighted average number of
shares in issue during the period - 592.1m (26 weeks to 8 July 2005; 592.1m; 52
weeks to 6 January 2006; 592.1m). There is no difference between basic and
diluted earnings per share.
9. Cash
7 July 8 July 6 January
2006 2005 2005
(Unaudited) (Unaudited) (Audited)
£m £m £m
Cash balances held on behalf of
registered charities 1.6 1.9 1.6
Other cash balances 0.8 - -
---------- --------- --------
2.4 1.9 1.6
========== ========= ========
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.
Notes to the financial statements
For the twenty six weeks ended 7 July 2006
10. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from operating activities
52 weeks
26 weeks to 26 weeks to to
7 July 8 July 6 January
2006 2005 2006
(Unaudited) (Unaudited)) (Audited)
£m £m £m
Continuing operations
Net profit/(loss) 5.0 4.0 (1.7)
Adjustments for:
Taxation 1.1 1.7 1.1
Depreciation 0.6 0.8 2.0
Impairment of property plant and
equipment - - 1.6
Profit on disposal of property,
plant and equipment - (0.4) (0.4)
Amortisation of intangibles 0.1 0.1 0.6
Impairment of intangibles - - 1.0
Interest expense 3.4 3.9 7.5
Other non-cash changes - - 0.2
Changes in working capital:
(Increase)/decrease in prepayments - (3.7) 5.9
(Increase)/decrease in trade and
other receivables (0.3) 0.6 1.7
(Decrease)/increase in trade and
other payables (0.9) 0.7 (0.4)
---------- -------- ---------
Cash generated from continuing operations 9.0 7.7 19.1
---------- -------- ---------
Discontinued operations
Net profit/(loss) 6.5 (2.1) (4.1)
Adjustments for:
Taxation 2.8 (0.9) (1.7)
Depreciation - 0.1 0.2
Profit on disposal of Bet Direct (10.6) - -
Amortisation of intangibles 0.1 0.4 0.8
Changes in working capital:
Decrease/(increase) in trade and
other receivables - (0.5) 0.3
(Decrease)/increase in trade and
other payables (0.7) (0.3) 0.3
---------- --------- ---------
Cash utilised by discontinued
operations (1.9) (3.3) (4.2)
---------- --------- ---------
Cash generated from operations 7.1 4.4 14.9
---------- --------- ---------
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