5 March 2014
Sportech PLC ("Sportech" or "the Group")
Preliminary results for the twelve months ended 31 December 2013
Progress against strategic objectives with good US momentum
Sportech, one of the world's leading pool betting organisations, focused on highly regulated markets worldwide, is pleased to announce its preliminary results for the twelve months ended 31 December 2013.
Financial highlights
· Revenue grew to £110.3m (2012: £107.7m3)
· EBITDA1 increased to £26.0m (2012: £25.2m3)
o Sportech Racing and Digital up 40%
o Sportech Venues up 2%
o Football Pools down 7%
· Adjusted2 profit before tax of £14.5m (2012: £14.9m3)
· Statutory profit before tax of £5.2m (2012: £1.3m)
· Earnings per share from continuing operations of 1.7p (2012: 0.3p)
· Net bank debt of £63.4m (2012: £57.1m)
· Capital investment and acquisition spend of £22.0m in the year
· First-tier Tribunal found in favour of Sportech in respect of £95m VAT claim in March 2013. HMRC appeal to Upper Tribunal to be heard on 29 and 30 April 2014
Strategic and operational highlights
Following the disposal of the loss-making UK e-Gaming business we have refocused management and finalised our new divisional structure.
· Sportech Racing and Digital - major contracts secured and digital products successfully brought to market
o New contracts signed with major gaming businesses in the US, Denmark and UK
o Launched innovative mobile and online products
o Strengthened European operations through the acquisition of Data Tote
o Integration of eBet complete with synergies realised
o Formed joint ventures with NYX and Picklive to supply online gaming and fantasy sports games
· Sportech Venues - multi-platform operator well positioned for future growth
o Opened flagship sports bar, restaurant and betting venue in Bradley, Connecticut
o Launched exclusive online horserace betting platform for Connecticut customers
o Signed development agreement to roll-out an estate of branded sports bars and betting venues in California
· Football Pools - continued progress in migration to new platform
o Increase in spend per head has partially offset forecast player number decline
o Successful new player recruitment through direct marketing offset by overall player decline
Ian Penrose, Chief Executive of Sportech PLC, said:
"The Group has delivered a good set of results in a transformational year. We have strengthened the management team and Board, invested cash of £22m in the Group and completed a number of corporate transactions to increase our focus and operational capabilities.
Our US-based businesses now account for 60% of Group revenues, and we are particularly pleased with their strong profit growth, driven primarily by the technological investment in our core Racing and Digital business. Since the turn of the year, we have launched Connecticut's only legal website for betting on horseracing and augmented our retail estate by opening a 10,000 sq ft innovative sports bar and betting venue in Connecticut. The first in a chain of similar venues is to be opened in California later this year.
We remain well positioned for future growth in the US market and, with the strong cash flows from our Football Pools business, we have entered 2014 with confidence."
(1) EBITDA is from continuing operations and is stated before exceptional costs and share option expense.
(2) Adjusted profit figures are from continuing operations and are stated before amortisation of acquired intangibles, exceptional costs, share of loss after tax of joint ventures and other finance income/(charges.)
(3) Restated to reflect disposal of e-Gaming business during the year.
Forward-looking statements
Certain statements in this Preliminary Statement 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")
Preliminary results for the twelve months ended 31 December 2013
Overview
Sportech is one of the world's leading operators and suppliers of pools betting services, occupying a unique position in the highly regulated and emerging gaming markets worldwide.
In 2010, Sportech established itself as one of the largest European based gaming businesses with significant operations in the United States. Since that time, the Group has continued to invest in its businesses, such that over 60% of Group revenues are now generated from our US-based operations, where we are licensed by gaming regulators in 24 states, employing 700 people across field operations and four corporate offices.
The Group's focus continues to be to build a multi-platform (retail, telephone and online) dynamic gaming business in the US. Initially focusing on the legal and highly regulated gaming operations of horseracing and greyhounds, we will seek to take advantage of organic business development opportunities. Subsequently we plan to use this strong and expanding platform to position the Group for broader-based gaming opportunities as regulation evolves over the coming years.
During 2013, the Group made good progress in line with its strategy. We continued to invest in our operations, to leverage our unique exclusive licensing position in Connecticut, US, and last month launched both the only legal website in Connecticut for betting on horseracing, and opened a flagship sports bar, restaurant and betting facility in Bradley. The investment is aimed at increasing the distribution of racing, and widening the exposure and thrill of betting on horseracing to a sport-based audience. In another major step forward, we were able to develop our extensive operations in California (where we process all betting on horseracing, around $1.8bn per annum) by obtaining a licence to develop a chain of branded betting venues, restaurants and sports bars. The first venue will open in Norco, near Los Angeles, in the summer of 2014. Furthermore, we have invested in our core tote betting technology, and in December launched a suite of market-leading online and mobile betting products for our customers.
Corporately, and in line with our strategy of enhancing our product range in the US, we established joint ventures with NYX Gaming and Picklive US to focus on the emerging iGaming and significant fantasy sports markets. Furthermore, we acquired Data Tote for an initial consideration of £3.1m in order to strengthen our European tote betting operations, whilst our loss-making UK-focused e-Gaming business was sold towards the end of the year for £3.0m. These strategic transactions leave the Group increasingly focused on the attractive opportunities in our key growth markets.
The Group has also made a number of organisational changes, establishing three key divisions. We have created Sportech Racing and Digital, which combined the former Sportech Racing, Sportech Interactive Products and Services and also eBet, in order to create one cohesive, larger division to provide all terrestrial, online and mobile betting technology products to our customers. This division is managed by Andrew Gaughan. Our Sportech Venues business, operating Connecticut's exclusive betting operations in retail venues, on the telephone and now online at MyWinners.com, is led by Ted Taylor, and our UK Football Pools business is led by Conleth Byrne. As a consequence of the increase in the Group's activities overseas and the reduction of activity in the UK following the sale of the loss-making e-Gaming activity, Ian Hogg has decided to leave the Group at, or before, the end of the year for personal reasons as he does not wish to increase his duties overseas.
The Group is pleased to have increased its EBITDA from continuing operations in 2013 by £0.8m to £26.0m with EBITDA from US-based activities increasing by over 20%. The Football Pools business delivered a strong performance with EBITDA of £17.4m, representing 58% of Group EBITDA before central costs. The Football Pools division is making good progress towards stabilisation of its direct revenues and generates strong cash flows.
Outlook
We have launched a number of growth initiatives in February this year, notably the exclusive online betting website and the innovative sports bar, restaurant and betting facility, both in Connecticut. We continue to make progress in California, and our new technology developments are being well received by customers. However, the severe snow storms and extreme cold weather across the east coast of the US have resulted in the closure of our retail venues on several days this year, and there have been 170 race cancellations to date in 2014 compared to 54 in 2013. Whilst this has impacted on the performance of our US operations, the Board remains confident in the Group's prospects for the full year ahead.
Financial performance
Group revenue from continuing operations was slightly ahead of prior year at £110.3m (2012: £107.7m). EBITDA from continuing operations increased by 3% to £26.0m (2012: £25.2m) driven by growth in Sportech Racing and Digital which offset the decline in Football Pools. Adjusted profit before tax was £14.5m (2012: £14.9m) impacted by an increased depreciation charge following capital investment. Profit after tax was £3.4m (2012: £1.3m) with basic earnings per share from continuing operations of 1.7p (2012: 0.3p) and adjusted earnings per share of 5.3p (2012: 5.4p). Net debt at 31 December 2013 was £63.4m (2012: £57.1m).
An analysis of Group revenue and EBITDA performance from continuing operations by business segment is shown in the table below:
|
|
Revenue |
EBITDA |
||
|
£m |
FY 2013 |
FY 2012 |
FY 2013 |
FY 2012 |
|
Sportech Racing and Digital |
35.9 |
31.7 |
7.7 |
5.5 |
|
Sportech Venues |
34.1 |
33.7 |
4.8 |
4.7 |
|
Football Pools |
41.3 |
42.9 |
17.4 |
18.8 |
|
Trading divisions |
111.3 |
108.3 |
29.9 |
29.0 |
|
Inter-segment elimination and corporate costs |
(1.0) |
(0.6) |
(3.9) |
(3.8) |
|
Total Group |
110.3 |
107.7 |
26.0 |
25.2 |
Sportech Racing and Digital
Sportech Racing and Digital has a leading position worldwide in the provision of Tote software both through land based terminals and online solutions including mobile and tablet devices. The business processes $13bn of bets annually and is licensed in 24 states in the US with offices and operational centres in Atlanta, New Jersey, Ireland, Germany and the UK.
The business has invested heavily in technology including its suite of mobile applications (known as Digital Link) which delivers an array of wagering and account management services through the racing consumer's own smart phone in conjunction with the on-track wagering devices. In addition, the division has developed a new online betting platform, G4, to improve consumers' online betting experience. These investments will support the business's future success, ensuring its competitiveness and generating opportunities for increased efficiency through technological developments.
During the year the business secured several major new contracts including a six year agreement with Penn National Gaming ("PNG"), a five year agreement with Danske Spil, the state-owned Danish gaming operator and terminal sales to the UK Tote.
In September, the business purchased Data Tote, a leading provider of on-track and online greyhound and horserace betting services in Europe. This acquisition further strengthens our European operations through an increased customer base and complementary product suite.
The results can be analysed as follows:
|
|
Revenue |
EBITDA |
||
|
£m |
2013 FY |
2012 FY |
2013 FY |
2012 FY |
|
|
|
|
|
|
|
Tote services and equipment sales |
32.0 |
30.1 |
7.0 |
5.7 |
|
Digital |
3.9 |
1.6 |
0.7 |
(0.2) |
|
Total |
35.9 |
31.7 |
7.7 |
5.5 |
Within Tote services, we have seen continued strong operational performance from our customer within the Dominican Republic following the investment made in new terminals last year.
During H2 2013, we wound down our US west coast data centre and transferred our operations to a single site in New Jersey. This will deliver improved customer service and cost efficiencies in 2014 and beyond. Revenues of £32.0m (2012: £30.1m) included equipment sales of £4.1m (2012: £4.3m), and EBITDA of £7.0m (2012: £5.7m) was generated.
Within Digital, the integration of the eBet business acquired in December 2012 has been successfully achieved and expected synergies of £0.2m were delivered in 2013 following call-centre rationalisation and transfer of bet processing to our own Tote system. Revenues for 2013 were £3.9m (2012: £1.6m) with EBITDA of £0.7m (2012: loss of £0.2m), in line with management expectations.
The Digital business has entered into a joint venture with NYX Gaming Group, an award-winning supplier of online gaming platforms and content, to provide online gaming products. In addition the business has entered into a separate joint venture with Picklive Limited to develop new fantasy sports games targeting the rapidly growing US market. Both these initiatives, together with the technological investments in the G4 online betting platform and Digital Link mobile applications, will help drive future performance.
Sportech Venues
|
|
Revenue |
EBITDA |
||
|
£m |
2013 FY |
2012 FY |
2013 FY |
2012 FY |
|
|
|
|
|
|
|
Venues - Connecticut |
28.2 |
27.7 |
4.4 |
4.4 |
|
Venues - Other |
5.9 |
6.0 |
0.4 |
0.3 |
|
Total |
34.1 |
33.7 |
4.8 |
4.7 |
In the state of Connecticut, Sportech Venues operates all betting on horseracing under an exclusive and in perpetuity licence for retail, telephone and internet.
During the year we have invested in our venues and online opportunities to support future growth. February 2014 saw the official opening of the "Bobby V's" sports bar in Bradley, a partnership with baseball legend and experienced restaurateur Bobby Valentine. This new $4m facility allows customers to bet on horse and greyhound racing while enjoying the amenities of a high-end sports bar and restaurant. Also during the year we have upgraded the facilities at Sports Haven, our 50,000 sq ft venue, to create sports and games zones together with a redesigned bar area. We are also progressing the development of a potential new site in Stamford, a city close to the New York state border with a population of 125,000 which currently has no gambling venue.
February 2014 also saw the full launch of Connecticut's only legal online horserace betting platform, MyWinners.com. This launch will be supported by marketing campaigns and the issuance of formal cease and desist letters by the Connecticut authorities.
2013 operating performance saw overall revenues £0.5m ahead of prior year with EBITDA at £4.4m (2012: £4.4m), with increased content costs being offset by other overhead reductions.
Other Venues
Revenue for Other Venues was £5.9m (2012: £6.0m) with EBITDA of £0.4m (2012: £0.3m).
During 2013, the Group provided betting technology and services to customers of five third-party venues in southern and central California. A further two outlets have opened in early 2014. These outlets are performing well with a strong return on invested capital; however, overall returns are restricted due to the limited number of potential venues and the relative Sportech share of the venues' profits.
In December we signed an agreement with Southern California Off Track Wagering, Inc. ("SCOTWinc") for a licence to allow Sportech to operate up to ten innovative retail venues offering customers the ability to bet on horseracing in a high-end sports bar and restaurant facility. The Group will open the first venue, a 10,000 sq ft purpose-built facility in the city of Norco, in the summer of 2014. This location is a joint venture between Sportech and the Silky Sullivan Group LLC, a food and beverage operator based in southern California. This agreement will allow the business to benefit from an enhanced share of horserace wagering margin together with the food and beverage profits from the restaurant facility.
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. This licence has been extended until December 2014 when the government's new laws regarding gambling are due to come into effect. We continue to communicate closely with the government regarding these plans.
Football Pools
The strategy of the Pools business is to stabilise then grow revenues through improved customer retention, increase spend per head from core customers and recruitment of new players to direct debit and online channels. Modernisation of the business continues with investment in technology driving efficiencies including consolidation of customers into a single database, enabling greater cross-sell opportunities and a lower and more agile operating cost base.
Revenues for the period were £41.3m (2012: £42.9m), the reduction driven primarily by a £1.6m decrease in the collector and overseas channels. EBITDA fell by £1.4m to £17.4m (2012: £18.8m) with cost efficiencies offset by increased marketing spend to drive recruitment that will add value into 2014 and beyond. Classic Pools average weekly customer spend has increased to £2.67 (2012: £2.58) driven by an increase in games to two games per week, every week. As at December 2013, total customer numbers were 360,000 compared to 397,000 in prior year. In the direct channel, customer numbers fell by 6% to 248,000. Importantly, we also recruited 15,000 new customers to this channel through our telemarketing investment and will increase this activity, together with online marketing, to drive new player acquisition throughout 2014.
We continue to broaden our product offering outside our core Classic Pools product and in November, our Jackpot 12 pool grew to greater than £600,000 with one customer winning £440,000.
To progress our digital offering, we have entered into an agreement with NYX to develop a new footballpools.com site with greater content, flexibility and functionality. The full site is planned to launch in mid 2014 with mobile and tablet applications of Classic Pools, Premier 10, Jackpot 12 and Lucky Clover being launched during the first half of 2014.
Corporate costs
Corporate costs of £3.9m (2012: £3.8m) have been managed carefully and remain in line with the prior year. In addition, we also have a non-cash share option expense under IFRS 2 of £1.5m (2012: £1.4m).
Depreciation and amortisation
The Group's normal depreciation and amortisation charge increased in the period to £5.7m (2012: £4.8m), principally due to the ongoing capital expenditure in our businesses in North America. In addition, the Group incurred a non-cash amortisation charge of £7.2m (2012: £5.9m) on the intangible assets acquired with Vernons in 2007, eBet in 2012 and Data Tote in 2013. The Vernons charge continues at an annualised £5.9m until June 2014.
Exceptional costs
The Group has incurred exceptional costs of £2.7m (2012: £2.8m) in the twelve month period. These costs include restructuring and other costs of £1.3m (2012: £1.3m), compensation for loss of office of £0.3m (2012: £0.3m), costs in relation to the New Jersey licence of £0.3m (2012: £0.4m), transaction costs in relation to acquisitions of £0.3m (2012: £0.6m) and legal costs of £0.5m in connection with the "Spot the Ball" VAT claim (2012: £0.2m).
Net finance costs
The Group has incurred net interest costs in the period of £4.3m (2012: £4.1m). In addition, other finance income amounted to £0.8m (2012: charges of £4.7m), primarily being the fair value movement on interest rate swaps.
Net bank debt
The Group has a £75m revolving credit facility until August 2015, which is enabling the Board to invest in strategic opportunities, particularly in the USA. Net bank debt has increased by £6.3m in the twelve month period to £63.4m (31 December 2012: £57.1m), reflecting capital spend of £12.6m, as well as £9.4m investment in acquisitions. The Group's bank leverage ratio for covenant testing purposes (net bank debt/adjusted EBITDA) was 2.41x as at 31 December 2013 (31 December 2012: 2.12x). At 31 December 2013, this leverage covenant was 3.0x (net bank debt/adjusted EBITDA).
Total shareholders' equity and the Group's net assets have increased to £139.7m (31 December 2012: £135.4m).
Acquisitions and disposals
During the year the Group acquired Data Tote for £3.1m in cash consideration with a potential further deferred consideration payment of £1.0m in the event that the business meets certain growth performance targets for the period to 30 June 2016. Of this deferred consideration, £0.1m was accrued at the acquisition date with £0.9m accrued over the performance period subject to ongoing assessment of expectations. Cash on balance sheet at the acquisition date was £0.7m.
Total fair value of assets recognised was £3.2m with resultant goodwill of £nil. Acquisition costs totalled £0.2m.
On 30 September 2013, £6.5m was paid to Scientific Games Corporation Inc., representing deferred consideration in relation to the 2010 acquisition of Sportech Racing. Performance targets for the contingent element of consideration were not met by 31 December 2013 and no further payments under the acquisition agreement are due.
In addition £0.3m was paid in December 2013 in deferred consideration for the 2012 acquisition of eBet Online Inc. A further £0.7m is due to be paid in December 2014 with additional maximum potential consideration due of £0.9m based on future performance.
The Group disposed of its e-Gaming business to NetPlay TV Group Limited on 31 October 2013 for total cash consideration of £3.0m. This generated a net profit after tax from discontinued operations of £0.1m including trading losses and costs of disposal. This disposal followed a strategic review that concluded the business was not of sufficient scale ahead of the implementation of UK point of consumption tax, which would impact the business significantly.
VAT claim
The VAT repayment claim, in respect of the "Spot the Ball" game, was successfully determined in the Group's favour by the First-tier Tax Tribunal ("FTT") in March 2013. HMRC has been given leave to appeal this decision to the Upper Tribunal and the appeal hearing will be held on 29 and 30 April 2014. The claim is for approximately £95m including simple interest.
We are pleased with our success to date and remain confident in our arguments and a successful outcome of the appeal.
The claim has not been recognised in the Group's financial statements.
Dividend
No dividend is proposed. The Board will continue to assess when to commence the payment of a maiden dividend in consideration of the Group's financial position, business performance and future growth opportunities.
Taxation
A tax charge for the period of £1.9m (2012: £0.8m) has been provided at the weighted average applicable tax rate for the Group of 26.8% (2012: 36.5%). The Group has a net deferred tax asset of £0.7m (31 December 2012: £1.3m), representing primarily foreign taxes withheld which can be utilised against future profits and deferred tax provided on unvested share options and on interest rate swap liabilities. Tax payments of £1.7m were made during the period (2012: £2.0m), principally representing final payments for prior year tax liabilities and overseas tax deducted at source.
Board and employees
Cliff Baty joined the Board on 14 May 2013 as Chief Financial Officer, bringing relevant industry and financial experience from his roles at Ladbrokes Plc and Hilton Group Plc.
In December, Rich Roberts was appointed as a Non-executive Director. Rich, a US resident, brings many years' experience within the multi-platform entertainment industries, developing businesses in the internet portal, digital distribution, mobile and iGaming markets.
Mor Weizer left the Board on 20 June 2013 following Playtech Limited's sale of its 10% holding in Sportech PLC.
In December, John Barnes decided to retire following eight years as a Board member during which he made an invaluable contribution to the Group's development.
Sportech is a growing international business and places significant demands upon executives and employees. The Board would like to thank them for their continued dedication and commitment to the business.
Ian Penrose
Chief Executive
5 March 2014
Consolidated Income Statement
For the year ended 31 December 2013
|
|
|
|
Restated |
|
|
Note |
£m |
£m |
|
Continuing operations |
|
|
|
|
Revenue |
|
110.3 |
107.7 |
|
Cost of sales |
|
(61.2) |
(60.0) |
|
Gross profit |
|
49.1 |
47.7 |
|
Distribution costs |
|
(1.1) |
(1.1) |
|
Administrative expenses |
|
(39.1) |
(36.3) |
|
EBITDA before exceptional costs and share option expense |
|
26.0 |
25.2 |
|
Share option expense |
|
(1.5) |
(1.4) |
|
Depreciation and amortisation (excluding amortisation of acquired intangibles) |
|
(5.7) |
(4.8) |
|
Amortisation of acquired intangibles |
|
(7.2) |
(5.9) |
|
Exceptional costs |
5 |
(2.7) |
(2.8) |
|
Operating profit |
|
8.9 |
10.3 |
|
Finance costs |
6 |
(4.3) |
(4.1) |
|
Other finance income/(charges) |
6 |
0.8 |
(4.7) |
|
Net finance costs |
6 |
(3.5) |
(8.8) |
|
Share of loss after tax of joint venture |
|
(0.2) |
(0.2) |
|
Profit before taxation |
|
5.2 |
1.3 |
|
Adjusted profit before taxation * |
|
14.5 |
14.9 |
|
Taxation |
7 |
(1.9) |
(0.8) |
|
Profit for the year from continuing operations |
|
3.3 |
0.5 |
|
Profit for the year from discontinued operations |
|
0.1 |
0.8 |
|
Profit for the year |
|
3.4 |
1.3 |
|
|
|
|
|
|
Earnings per share attributable to owners of the parent during the year |
|
|
|
|
Basic earnings per share: |
|
|
|
|
From continuing operations |
8 |
1.7p |
0.3p |
|
From discontinued operations |
8 |
- |
0.4p |
|
From profit for the year |
8 |
1.7p |
0.7p |
|
Diluted earnings per share: |
|
|
|
|
From continuing operations |
8 |
1.6p |
0.2p |
|
From discontinued operations |
8 |
- |
0.4p |
|
From profit for the year |
8 |
1.6p |
0.6p |
|
Adjusted earnings from continuing operations per share attributable to owners of the parent during the year |
|
|
|
|
Basic |
8 |
5.3p |
5.4p |
|
Diluted |
8 |
4.9p |
5.0p |
* Adjusted profit before taxation is profit from continuing operations before taxation, amortisation of acquired intangibles, exceptional costs, share of loss after tax of joint ventures and other finance income/(charges).
Comparatives have been restated to exclude the results of discontinued operations.
Consolidated statement of comprehensive income
For the year ended 31 December 2013
|
|
|
|
|
|
£m |
£m |
|
Profit for the year |
3.4 |
1.3 |
|
Other comprehensive income: |
|
|
|
Items that will not be reclassified to profit and loss |
|
|
|
Actuarial gain/(loss) on retirement benefit obligations |
0.3 |
(0.3) |
|
Deferred tax on movement on retirement benefit obligations |
(0.1) |
0.1 |
|
Movement on derivative financial instruments |
- |
0.4 |
|
Deferred tax on movement on derivative financial instruments |
- |
(0.1) |
|
Cumulative movement on derivative financial instruments - reclassification |
|
|
|
adjustment to the income statement |
- |
3.3 |
|
Deferred tax on cumulative movement on derivative financial instruments |
|
|
|
- reclassification adjustment to the income statement |
- |
(0.8) |
|
|
0.2 |
2.6 |
|
Items that may be subsequently reclassified to profit and loss |
|
|
|
Currency translation differences |
(0.7) |
(1.1) |
|
Other comprehensive (expense)/income for the year, net of tax |
(0.5) |
1.5 |
|
Total comprehensive income for the year |
2.9 |
2.8 |
|
Attributable to the owners of the parent arises from: |
|
|
|
- Continuing operations |
2.8 |
2.0 |
|
- Discontinued operations |
0.1 |
0.8 |
|
|
2.9 |
2.8 |
Consolidated statement of changes in equity
For the year ended 31 December 2013
|
|
|
Other reserves |
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Share option reserve |
|
Currency translation reserve |
Financial instrument reserve |
|
|
|
||||||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
||||||
|
At 1 January 2012 |
99.4 |
2.4 |
(0.3) |
0.3 |
(2.8) |
32.2 |
131.2 |
|
||||||
|
Comprehensive income |
|
|
|
|
|
|
|
|
||||||
|
Profit for the year |
- |
- |
- |
- |
- |
1.3 |
1.3 |
|
||||||
|
Other comprehensive income |
|
|
|
|
|
|
|
|
||||||
|
Financial instrument reserve movement * |
- |
- |
- |
- |
2.8 |
- |
2.8 |
|
||||||
|
Actuarial loss on retirement benefit |
|
|
|
|
|
|
|
|
||||||
|
obligations * |
- |
- |
(0.2) |
- |
- |
- |
(0.2) |
|
||||||
|
Currency translation differences |
- |
- |
- |
(1.1) |
- |
- |
(1.1) |
|
||||||
|
Total other comprehensive |
|
|
|
|
|
|
|
|
||||||
|
(expense)/income |
- |
- |
(0.2) |
(1.1) |
2.8 |
- |
1.5 |
|
||||||
|
Total comprehensive (expense)/income |
- |
- |
(0.2) |
(1.1) |
2.8 |
1.3 |
2.8 |
|
||||||
|
Transactions with owners |
|
|
|
|
|
|
|
|
||||||
|
Share option credit |
- |
1.4 |
- |
- |
- |
- |
1.4 |
|
||||||
|
At 31 December 2012 |
99.4 |
3.8 |
(0.5) |
(0.8) |
- |
33.5 |
135.4 |
|
||||||
|
Comprehensive income |
|
|
|
|
|
|
|
|
||||||
|
Profit for the year |
- |
- |
- |
- |
- |
3.4 |
3.4 |
|
||||||
|
Other comprehensive income |
|
|
|
|
|
|
|
|
||||||
|
Actuarial gain on retirement benefit |
|
|
|
|
|
|
|
|
||||||
|
obligations * |
- |
- |
0.2 |
- |
- |
- |
0.2 |
|
||||||
|
Currency translation differences |
- |
- |
- |
(0.7) |
- |
- |
(0.7) |
|
||||||
|
Total other comprehensive |
|
|
|
|
|
|
|
|
||||||
|
income/(expense) |
- |
- |
0.2 |
(0.7) |
- |
- |
(0.5) |
|
||||||
|
Total comprehensive income/(expense) |
- |
- |
0.2 |
(0.7) |
- |
3.4 |
2.9 |
|
||||||
|
Transactions with owners |
|
|
|
|
|
|
|
|
||||||
|
Share option credit |
- |
1.5 |
- |
- |
- |
- |
1.5 |
|
||||||
|
Employment taxes paid on vestings in the year |
- |
(0.1) |
- |
- |
- |
- |
(0.1) |
|
||||||
|
Shares issued in relation to PSP |
3.0 |
(3.0) |
- |
- |
- |
- |
- |
|
||||||
|
At 31 December 2013 |
102.4 |
2.2 |
(0.3) |
(1.5) |
- |
36.9 |
139.7 |
|
||||||
* Net of deferred tax.
Consolidated balance sheet
As at 31 December 2013
|
|
|
|
Restated |
|
|
Note |
£m |
£m |
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
|
153.1 |
153.1 |
|
Intangible fixed assets |
|
42.7 |
47.4 |
|
Property, plant and equipment |
|
21.6 |
16.1 |
|
Net investment in joint venture |
|
0.5 |
0.5 |
|
Trade and other receivables |
|
0.3 |
- |
|
Deferred tax assets |
|
1.8 |
1.3 |
|
|
|
220.0 |
218.4 |
|
Current assets |
|
|
|
|
Trade and other receivables |
|
9.0 |
8.0 |
|
Inventories |
|
1.5 |
1.6 |
|
Cash and cash equivalents |
|
2.6 |
2.9 |
|
|
|
13.1 |
12.5 |
|
TOTAL ASSETS |
|
233.1 |
230.9 |
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Derivative financial instruments |
|
(1.3) |
(2.7) |
|
Financial liabilities |
10 |
(0.7) |
(6.3) |
|
Trade and other payables |
|
(21.1) |
(22.3) |
|
Provisions |
|
(0.2) |
(0.3) |
|
Current tax liabilities |
|
(0.7) |
(0.6) |
|
|
|
(24.0) |
(32.2) |
|
Net current liabilities |
|
(10.9) |
(19.7) |
|
Non-current liabilities |
|
|
|
|
Financial liabilities |
10 |
(66.6) |
(61.2) |
|
Retirement benefit liability |
|
(1.3) |
(1.6) |
|
Provisions |
|
(0.4) |
(0.5) |
|
Deferred tax liabilities |
|
(1.1) |
- |
|
|
|
(69.4) |
(63.3) |
|
TOTAL LIABILITIES |
|
(93.4) |
(95.5) |
|
NET ASSETS |
|
139.7 |
135.4 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
Ordinary shares |
|
102.4 |
99.4 |
|
Other reserves |
|
0.4 |
2.5 |
|
Retained earnings |
|
36.9 |
33.5 |
|
TOTAL EQUITY |
|
139.7 |
135.4 |
Comparatives have been restated for the revision of the estimated contingent consideration payable of eBet Online Inc.
Consolidated statement of cash flows
For the year ended 31 December 2013
|
|
|
|
|
|
|
Note |
£m |
£m |
|
Cash flows from operating activities |
|
|
|
|
Cash generated from operations |
9 |
24.4 |
26.6 |
|
Interest paid |
|
(4.3) |
(4.1) |
|
Tax paid |
|
(1.7) |
(2.0) |
|
Net cash generated from operating activities before cash exceptional costs |
|
18.4 |
20.5 |
|
Cash exceptional costs |
|
(2.7) |
(2.0) |
|
Net cash generated from operating activities |
|
15.7 |
18.5 |
|
Cash flows from investing activities |
|
|
|
|
Investment in joint venture |
|
(0.2) |
(0.3) |
|
Acquisition of eBet Online Inc. net of cash acquired |
|
- |
(5.7) |
|
Acquisition of Datatote (England) Limited net of cash acquired |
|
(2.4) |
- |
|
Payment of deferred consideration for Sportech Racing |
|
(6.5) |
- |
|
Payment of deferred consideration for eBet Online Inc. |
|
(0.3) |
- |
|
Purchase of intangible fixed assets |
|
(3.8) |
(3.2) |
|
Purchase of property, plant and equipment |
|
(8.8) |
(5.1) |
|
Net cash used in investing activities |
|
(22.0) |
(14.3) |
|
Cash flows from financing activities |
|
|
|
|
Refinancing fee paid - exceptional cost |
|
- |
(2.1) |
|
Net cash inflow/(outflow) from drawdown/(repayment) of borrowings |
|
6.0 |
(2.5) |
|
Net cash from/(used in) financing activities |
|
6.0 |
(4.6) |
|
Net decrease in cash and cash equivalents |
|
(0.3) |
(0.4) |
|
Cash and cash equivalents at the beginning of the year |
|
2.9 |
3.3 |
|
Cash and cash equivalents at the end of the year |
|
2.6 |
2.9 |
|
|
|
|
|
|
Reconciliation of net bank debt |
|
|
|
|
Decrease in cash in the year |
|
(0.3) |
(0.4) |
|
Net cash (inflow)/outflow from (drawdown)/repayment of borrowings |
|
(6.0) |
2.5 |
|
Movement in net bank debt for the year |
|
(6.3) |
2.1 |
|
At 1 January |
|
(57.1) |
(59.2) |
|
At 31 December |
|
(63.4) |
(57.1) |
|
|
|
|
|
|
Net bank debt comprises: |
|
|
|
|
Cash and cash equivalents |
|
2.6 |
2.9 |
|
Loans repayable after one year |
10 |
(66.0) |
(60.0) |
|
At 31 December |
|
(63.4) |
(57.1) |
|
|
|
|
|
Notes to the preliminary statement
For the year ended 31 December 2013
1. Reporting entity
Sportech PLC (the "Company") is a company domiciled in the UK and listed on the London Stock Exchange. The Company's registered office is Collins House, Rutland Square, Edinburgh, Midlothian, Scotland EH1 2AA. The consolidated financial statements of the Company as at and for the year ended 31 December 2013 comprise the Company, its subsidiaries and joint ventures (together referred to as the "Group"). The principal activities of the Group are sports betting, entertainment and wagering technology solutions.
2. Basis of reporting
a. The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the Group's 2012 financial statements except for the adoption of IAS 19R "Employee Benefits" and various other minor changes to IFRSs, none of which have had a material effect on the Group's income or financial position. They are also consistent with those in the full financial statements which have yet to be published. The preliminary results for the year ended 31 December 2013 were approved by the Board of Directors on 5 March 2014.
b. The financial information set out in this announcement does not constitute statutory financial statements for the years ended 31 December 2013 and 2012 within the meaning of Section 435 of the Companies Act 2006, but is extracted from those financial statements. The auditors have reported on those financial statements and have given an unqualified report which does not contain a statement under Section 498 of the Companies Act 2006.
c. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretation Committee ("IFRIC") as adopted by the European Union ("IFRSs as adopted by the EU") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative instruments) at fair valuethrough profit or loss.
d. The Group has committed revolving credit banking facilities totalling £75m in place with Bank of Scotland plc, Barclays Bank PLC and Royal Bank of Scotland plc until August 2015. The Group's forecasts and projections, which have been prepared for the period to 30 June 2015 and taking into account reasonably possible changes in performance, show that the Group will be able to operate within the level of its current facilities and comply with its banking covenants.
e. After making reasonable enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
3. Estimates
The preparation of consolidated 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.
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, third-party licensed betting offices, and through online and digital channels;
- Sportech Racing and Digital - provision of pari-mutuel wagering services and systems worldwide principally to the horseracing industry;
- Sportech Venues - off-track betting venue management; and
- corporate costs - central costs relating to the Company in its capacity as the PLC holding company of the Group.
|
|
2013 |
|||||
|
|
|
|
|
|
|
|
|
|
Football Pools |
Sportech Racing and Digital |
Sportech Venues |
Corporate costs |
Inter-segment elimination |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Revenue from sale of goods |
41.3 |
4.1 |
- |
- |
(0.1) |
45.3 |
|
Revenue from rendering of services |
- |
31.8 |
34.1 |
- |
(0.9) |
65.0 |
|
Total revenue |
41.3 |
35.9 |
34.1 |
- |
(1.0) |
110.3 |
|
EBITDA before exceptional costs and share |
|
|
|
|
|
|
|
option expense |
17.4 |
7.7 |
4.8 |
(3.8) |
(0.1) |
26.0 |
|
Share option expense |
- |
- |
- |
(1.5) |
- |
(1.5) |
|
Depreciation and amortisation (excluding |
|
|
|
|
|
|
|
amortisation of acquired intangibles) |
(1.4) |
(2.9) |
(1.4) |
- |
- |
(5.7) |
|
Segment result before amortisation of acquired |
|
|
|
|
|
|
|
intangibles and exceptional costs |
16.0 |
4.8 |
3.4 |
(5.3) |
(0.1) |
18.8 |
|
Amortisation of acquired intangibles |
(5.9) |
(1.3) |
- |
- |
- |
(7.2) |
|
Exceptional costs |
(0.4) |
(0.6) |
(0.3) |
(1.4) |
- |
(2.7) |
|
Operating profit/(loss) |
9.7 |
2.9 |
3.1 |
(6.7) |
(0.1) |
8.9 |
|
Net finance costs |
|
|
|
|
|
(3.5) |
|
Share of loss after tax of joint ventures |
|
|
|
|
|
(0.2) |
|
Profit before taxation |
|
|
|
|
|
5.2 |
|
Taxation |
|
|
|
|
|
(1.9) |
|
Profit for the year from continuing operations |
|
|
|
|
|
3.3 |
|
Profit for the year from discontinued operations |
|
|
|
|
|
0.1 |
|
Profit for the year |
|
|
|
|
|
3.4 |
|
|
2012 (Restated) |
|||||
|
|
|
|
|
|
|
|
|
|
Football Pools |
Sportech Racing and Digital |
Sportech Venues |
Corporate costs |
Inter-segment elimination |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Revenue from sale of goods |
42.9 |
4.3 |
- |
- |
(0.2) |
47.0 |
|
Revenue from rendering of services |
- |
27.4 |
33.7 |
- |
(0.4) |
60.7 |
|
Total revenue |
42.9 |
31.7 |
33.7 |
- |
(0.6) |
107.7 |
|
EBITDA before exceptional costs and share |
|
|
|
|
|
|
|
option expense |
18.8 |
5.5 |
4.7 |
(3.7) |
(0.1) |
25.2 |
|
Share option expense |
- |
- |
- |
(1.4) |
- |
(1.4) |
|
Depreciation and amortisation (excluding |
|
|
|
|
|
|
|
amortisation of acquired intangibles) |
(1.3) |
(2.2) |
(1.4) |
- |
0.1 |
(4.8) |
|
Segment result before amortisation of acquired |
|
|
|
|
|
|
|
intangibles and exceptional costs |
17.5 |
3.3 |
3.3 |
(5.1) |
- |
19.0 |
|
Amortisation of acquired intangibles |
(5.9) |
- |
- |
- |
- |
(5.9) |
|
Exceptional costs |
(0.7) |
(1.3) |
(0.1) |
(0.7) |
- |
(2.8) |
|
Operating profit/(loss) |
10.9 |
2.0 |
3.2 |
(5.8) |
- |
10.3 |
|
Net finance costs |
|
|
|
|
|
(8.8) |
|
Share of loss after tax of joint venture |
|
|
|
|
|
(0.2) |
|
Profit before taxation |
|
|
|
|
|
1.3 |
|
Taxation |
|
|
|
|
|
(0.8) |
|
Profit for the year from continuing operations |
|
|
|
|
|
0.5 |
|
Profit for the year from discontinued operations |
|
|
|
|
|
0.8 |
|
Profit for the year |
|
|
|
|
|
1.3 |
5. Exceptional costs
Exceptional costs by type are as follows:
|
|
|
|
|
|
|
|
£m |
£m |
|
Included in administrative expenses: |
|
|
|
|
Redundancy and restructuring costs in respect of the rationalisation and |
|
|
|
|
modernisation of the business |
|
1.0 |
0.9 |
|
Compensation for loss of office |
|
0.3 |
0.3 |
|
Costs and fees in relation to Spot the Ball VAT claim |
|
0.5 |
0.2 |
|
Transaction costs in respect of the acquisition of subsidiaries |
|
0.2 |
0.6 |
|
Licensing costs in New Jersey in respect of the acquisition of Sportech Racing |
|
0.3 |
0.4 |
|
IFRS 3 employment costs in relation to eBet Online Inc. and Datatote (England) Limited |
|
0.1 |
- |
|
Other exceptional costs |
|
0.3 |
0.4 |
|
|
|
2.7 |
2.8 |
|
Included in net finance costs: |
|
|
|
|
Refinancing fee |
|
- |
2.1 |
|
Fair value of derivative financial instruments reclassified to the income statement |
|
- |
3.3 |
|
Movement on derivative financial instruments post designation as ineffective |
|
(1.4) |
(0.5) |
|
|
|
(1.4) |
4.9 |
|
Total exceptional costs |
|
1.3 |
7.7 |
6. Net finance costs
|
|
|
|
|
|
£m |
£m |
|
Interest payable on bank loans, derivative financial instruments and overdrafts |
4.3 |
4.1 |
|
Refinancing fee |
- |
2.1 |
|
Fair value of derivative financial instruments reclassified to the income statement |
- |
3.3 |
|
Movement on derivative financial instruments post designation as ineffective |
(1.4) |
(0.5) |
|
Non-cash finance charges/(income) * |
0.4 |
(0.1) |
|
Foreign exchange loss/(gain) on financial assets and liabilities denominated in foreign |
|
|
|
currency |
0.2 |
(0.1) |
|
Net finance costs |
3.5 |
8.8 |
* Non-cash finance charges/(income) are in respect of the deferred consideration payable on the acquisition of Sportech Racing in October 2010.
The refinancing fee, the fair value movements on derivative financial instruments, the foreign exchange loss/(gain) on financial assets and liabilities denominated in foreign currency and the non-cash finance charges/(income) are all together shown as other finance income/(charges) in the income statement. Included in the above table is exceptional income of £1.4m (2012: costs of £4.9m).
7. Taxation
|
|
|
|
|
|
£m |
£m |
|
Current tax: |
|
|
|
Current tax on profit for the year |
1.8 |
1.1 |
|
Adjustments in respect of prior years |
- |
(0.1) |
|
Total current tax |
1.8 |
1.0 |
|
Deferred tax: |
|
|
|
Origination and reversal of temporary differences |
(0.1) |
(0.4) |
|
Effect of changes in tax rates |
0.2 |
0.2 |
|
Total deferred tax |
0.1 |
(0.2) |
|
Total taxation charge |
1.9 |
0.8 |
The taxation on the Group's profit before taxation differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits and losses of the consolidated entities as follows:
|
|
|
|
|
|
£m |
£m |
|
Profit before taxation |
5.2 |
1.3 |
|
Add share of loss after tax of joint ventures |
0.2 |
0.2 |
|
Profit before taxation and share of loss after tax of joint ventures |
5.4 |
1.5 |
|
Tax calculated at domestic tax rates applicable to profits/(losses) in the respective countries |
1.5 |
0.8 |
|
Tax effects of: |
|
|
|
- permanent differences |
0.3 |
(0.1) |
|
- deferred tax not previously provided |
(0.1) |
- |
|
- effect of changes in tax rates |
0.2 |
0.2 |
|
- adjustments in respect of prior years |
- |
(0.1) |
|
Total taxation charge |
1.9 |
0.8 |
The weighted average applicable tax rate was 26.8% (2012: 36.5%). The decrease is as a result of a change in mix of profits in jurisdictions with varying tax rates.
8. Earnings per share
The calculations of earnings per share ("EPS") are based on the following profits attributable to ordinary shareholders and the weighted average number of shares in issue:
|
|
|
|
|
|
£m |
£m |
|
Profit from continuing operations attributable to the owners of the parent |
3.3 |
0.5 |
|
Profit from discontinued operations attributable to the owners of the parent |
0.1 |
0.8 |
|
Total |
3.4 |
1.3 |
|
Weighted average number of ordinary shares in issue ('000) |
200,227 |
198,810 |
The calculations of adjusted EPS are based on the following profits attributable to ordinary shareholders, the weighted average number of shares and an estimated adjusted tax charge of 27.7% (2012: 28.2%):
|
|
|
|
Restated |
||||
|
|
|
|
|
|
|
|
|
|
Operating profit before amortisation of |
|
|
|
|
|
|
|
|
acquired intangibles and exceptional costs |
18.8 |
200,227 |
9.4 |
|
19.0 |
198,810 |
9.6 |
|
Net finance costs (excluding other finance |
|
|
|
|
|
|
|
|
income/(charges)) |
(4.3) |
200,227 |
(2.1) |
|
(4.1) |
198,810 |
(2.1) |
|
Adjusted profit before taxation |
14.5 |
200,227 |
7.3 |
|
14.9 |
198,810 |
7.5 |
|
Tax at 27.7% (2012: 28.2%) |
(4.0) |
200,227 |
(2.0) |
|
(4.2) |
198,810 |
(2.1) |
|
Adjusted basic EPS |
10.5 |
200,227 |
5.3 |
|
10.7 |
198,810 |
5.4 |
Certain employee options (707,070 in number; 2012: 707,070) have been excluded from the calculated diluted EPS as their exercise price is greater than the weighted average share price during the year and therefore would not be dilutive. The weighted average number of shares that have a dilutive effect on adjusted EPS is 13,161,000 (2012: 13,742,000). Diluted basic EPS is 1.6p (2012: 0.6p) and diluted adjusted EPS is 4.9p (2012: 5.0p).
9. Cash flow from operating activities
Reconciliation of profit before taxation to cash flows from operating activities
|
|
|
|
|
|
£m |
£m |
|
Profit before taxation including profit from discontinued operations |
5.3 |
2.1 |
|
Adjustments for: |
|
|
|
Exceptional costs |
2.7 |
2.8 |
|
Share of loss after tax of joint ventures |
0.2 |
0.2 |
|
Depreciation |
3.2 |
2.6 |
|
Amortisation of acquired intangibles |
7.2 |
5.9 |
|
Amortisation of other intangibles |
2.5 |
2.6 |
|
Net finance costs |
4.3 |
4.1 |
|
Other finance (income)/charges |
(0.8) |
4.7 |
|
Share option expense |
1.5 |
1.4 |
|
Movement in retirement benefit obligation |
0.2 |
- |
|
Movement in provisions |
(0.2) |
(0.2) |
|
Loss on disposal of property, plant and equipment |
0.1 |
- |
|
Loss on disposal of intangible assets |
0.3 |
- |
|
Changes in working capital: |
|
|
|
(Increase)/decrease in trade and other receivables |
(0.4) |
1.0 |
|
Decrease in inventories |
0.2 |
1.0 |
|
Decrease in trade and other payables |
(1.9) |
(1.6) |
|
Cash flows from operating activities |
24.4 |
26.6 |
|
|
|
|
10. Maturity of financial liabilities
|
|
|
|
|
|
£m |
£m |
|
Current |
|
|
|
Deferred consideration due within one year |
0.7 |
6.3 |
|
Total current financial liabilities |
0.7 |
6.3 |
|
|
|
Restated |
|
|
£m |
£m |
|
Non-current |
|
|
|
Drawn revolving credit facility due after one year |
66.0 |
60.0 |
|
Deferred consideration due after one year |
0.6 |
1.2 |
|
Total non-current financial liabilities |
66.6 |
61.2 |
11. Discontinued activities and disposal
On 31 October 2013, the Group disposed of the trade and assets of its UK-facing e-Gaming division to NetPlay TV Group Limited for total cash consideration of £3.0m.
|
|
|
|
|
|
£m |
£m |
|
Revenue |
3.9 |
4.3 |
|
Expenses |
(5.3) |
(3.5) |
|
(Loss)/profit after tax of discontinued operations |
(1.4) |
0.8 |
|
|
|
|
|
|
|
£m |
|
Proceeds from sale |
|
3.0 |
|
Impairment of assets |
|
(0.4) |
|
Redundancy and other closure costs |
|
(0.3) |
|
Other costs of disposal |
|
(0.8) |
|
Loss after tax for the year from discontinued activities |
|
(1.4) |
|
Net profit after tax on disposal |
|
0.1 |
12. Business combinations
a) Datatote (England) Limited
On 27 September 2013, the Group acquired 100% of the issued share capital of Datatote (England) Limited ("Data Tote"), a leading UK betting operator and technology and services provider focused on the European greyhound and horseracing betting market.
The acquisition of Data Tote further reinforces Sportech's position as one of the largest operators and providers of betting technologies and services in the world. Data Tote brings an incremental customer base with strong year-on-year revenue growth that will broaden Sportech's share of the European betting market.
Goodwill arising on the acquisition amounted to £nil.
The following table summarises the fair value of consideration paid for Data Tote and the amounts of the assets acquired and liabilities assumed recognised at acquisition date.
|
Provisional fair value of consideration at 27 September 2013 |
£m |
|
Cash |
3.1 |
|
Deferred contingent consideration |
0.1 |
|
Total fair value of consideration transferred |
3.2 |
|
Recognised provisional fair value amounts of identifiable assets acquired and liabilities assumed |
£m |
|
Cash |
0.7 |
|
Intangible assets - customer contracts and relationships |
1.9 |
|
Property, plant and equipment |
0.4 |
|
Trade and other receivables |
0.6 |
|
Inventories |
0.1 |
|
Trade and other payables |
(0.1) |
|
Deferred tax liability |
(0.4) |
|
Total identifiable net assets |
3.2 |
|
Goodwill |
- |
|
Total fair value of consideration transferred |
3.2 |
Deferred contingent consideration
There is potential for contingent consideration of up to £1.0m to be payable if the Data Tote business' EBITDA for the period from 1 July 2013 to 30 June 2016 reaches the following:
• less than £2.0m - the contingent consideration payable will equal £nil; and
• equal or greater than £2.0m - the contingent consideration payable will equal £0.5m plus £1.00 for every £1.00 that the Data Tote business exceeds £2.0m by, up to a maximum amount payable of £1.0m.
The amount payable is due five business days after the date on which the calculation of the earn out EBITDA becomes final and binding.
The Directors have reviewed the potential consideration payable based on the above performance requirements and accordingly recognised a fair value of £0.1m, representing the present value of the Group's estimate of the probability weighted cash outflow (discounted at 8.3%). An additional £0.9m of potential consideration payable has been treated as employment costs under IFRS 3 'Business Combinations' (revised) and will accordingly be accrued on a time appointed basis to 30 June 2016. This expectation will be reviewed annually in accordance with IFRS 3 'Business Combinations' (revised).
Acquisition costs
Acquisition related costs amounting to £0.2m have been recognised as an expense in the consolidated income statement as an exceptional item.
Provisional fair value amounts of identifiable assets acquired and liabilities assumed
The fair values of the identifiable assets acquired and liabilities assumed are considered provisional in nature due to the business combination occurring close to the year end. Management will continue to monitor the provisional values during the year ended 31 December 2014 to ensure any fair value amendments are identified as a hindsight adjustment.
The fair value of trade and other receivables is £0.6m. The gross contractual amount for trade receivables due is £0.6m, of which £nil is expected to be uncollectable.
No contingent liabilities have been recognised as at the acquisition date.
Data Tote contribution to the Group results
Data Tote has contributed £0.3m and £nil to the Group's revenues and profit, respectively, from the acquisition date to 31 December 2013. Had the acquisition occurred on 1 January 2013, the Group's revenue for the period ended 31 December 2013 would have been £112.5m and the Group's profit for the year would have been £3.7m. These amounts have been determined by applying the Group's accounting policies and adjusting the results of Data Tote to reflect additional depreciation and amortisation that would have been charged, assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied from 1 January 2013, together with their consequential tax effects.
b) eBet Online Inc.
On 19 December 2012, the Group acquired 100% of the issued share capital of eBet Online Inc. There were no changes to the fair value assumptions applied by management at acquisition during the hindsight period in relation to net assets acquired and consideration paid other than in relation to the contingent deferred consideration expected to be paid in early 2016. EBITDA estimates for the combined Interactive Products and Services business have been revised down and as a result the estimate of deferred consideration expected to be paid have been revised down from £0.8m ($1.3m) to £0.5m ($0.9m). Given the reassessment was within the hindsight period, the prior year accounting for the acquisition has been restated.
c) Sportech Racing
On 5 October 2010, the Group acquired 100% of the issued share capital of the racing businesses and venues management business of Scientific Games Corporation Inc.
The performance period for the contingent consideration targets ended on 31 December 2013 and it has been confirmed that no contingent consideration is payable due to failure to meet minimum EBITDA targets. No liability was recognised in the consolidated financial statements in relation to this potential liability and as a result there has been no effect on the 2013 income statement.
13. AGM
The Annual General Meeting will be held at 10.00 a.m. on 13 May 2014 at the offices of Olswang LLP, 90 High Holburn, London WC1V 6XX.
-Ends-