4 March 2015
Sportech PLC ("Sportech" or the "Group")
Preliminary results for the twelve months ended 31 December 2014
Sportech, one of the world's leading pool betting operators and technology suppliers, focused on highly regulated markets worldwide, is pleased to announce its preliminary results for the twelve months ended 31 December 2014.
Continued strategic progress
· Sportech Racing and Digital - improved profitability on the back of contract wins and renewals
· Football Pools - making progress with record number of new customer subscriptions in Classic Pools
· Sportech Venues - operating in challenging environment; however, confidence in long-term prospects
· Adjusted profit before tax up 2.8% to £14.4m (2013: £14.0m, constant currency)
Financial highlights
|
|
Reported 2014 FY £m |
Constant currency3 2013 FY £m |
Constant currency change % |
Reported 2013 FY £m |
|
Revenue |
104.1 |
106.2 |
-2.0% |
110.3 |
|
EBITDA1 |
24.0 |
25.3 |
-5.1% |
26.0 |
|
Adjusted profit before tax |
14.4 |
14.0 |
+2.8% |
14.5 |
|
Statutory (loss)/profit before tax |
(21.3) |
4.8 |
-543.7% |
5.3 |
|
Adjusted2 earnings per share (basic) |
5.5p |
5.1p |
+7.8% |
5.3p |
|
Net debt |
63.8 |
63.3 |
+0.8% |
63.4 |
Statutory loss before tax is after a £28.1m non-cash impairment of the Football Pools goodwill to a carrying value of £119.5m following a revision of the underlying assumptions to reflect a stable earnings profile.
Operational highlights
· Sportech Racing and Digital
o Sportech Racing and Digital delivered an EBITDA of £8.1m (2013: £7.3m, constant currency) - driven by improved margins
o Agreement with BetFred to provide new systems and digital technology to Totepool (UK Tote)
o Launched US online gaming services in February 2015 to iconic Atlantic City-based Resorts Casino Hotel through SNG, our joint venture with NYX Gaming Group
· Sportech Venues
o Sportech Venues delivered an EBITDA of £3.2m (2013: £4.5m, constant currency) - due to previously highlighted weather and market changes
o Opened 10,000 sq ft sports bar and restaurant at our existing betting venue in Bradley, Connecticut and launched Connecticut's only legal online betting site, MyWinners.com
o Received regulatory approval to open a pipeline of three new sports bar, restaurant and betting venues in Stamford, Connecticut and in San Diego and Norco in California
· Football Pools
o Football Pools delivered an EBITDA of £16.6m (2013: £17.4m) - moving toward revenue and EBITDA stability
o Acquired record number of new customers to the Classic Pools subscription business
Ian Penrose, Chief Executive of Sportech PLC, said:
"We are pleased that we finished the year ahead of our internal expectations. Investment in our core technology and people has delivered a strong performance in our US-based betting technology business and The Football Pools has had a good year. Our Venues division had a challenging year, but continues to lay foundations for long term growth. Regulatory approvals for new venues and the launch of Connecticut's only legal betting website followed positive reaction to the opening of our flagship facility in Bradley.
Importantly, the Group has also entered the iGaming and sports markets in the US, by launching iGaming operations for Resorts Casino Hotel in New Jersey last week, and by entering the in-stadia sports raffle market for professional sports teams in the NFL, NHL, NBA and MLB by acquiring Bump.
These are exciting times for the global gaming industry. Regulatory and tax changes are presenting opportunities for those focused on highly regulated markets. Sportech continues to make progress in line with our strategy of developing a leading international position, with a particular focus on the US."
(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 and impairment of goodwill, exceptional costs, share of loss after tax of joint ventures and other finance income.
(3) 2013 reported results are restated using 2014 exchange rates.
For further information, please contact:
Sportech PLC Tel: +44 (0)20 7268 2400
Ian Penrose, Chief Executive
Cliff Baty, Chief Financial Officer
Brunswick Group LLP Tel: +44 (0)20 7404 5959
Mike Smith, Rosheeka Field
Investec Bank PLC Tel: +44 (0)20 7597 5970
Patrick Robb, Henry Reast
Peel Hunt LLP Tel: +44 (0)20 7418 8900
Dan Webster, Richard Brown
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 2014
Overview
Sportech is one of the world's leading operators and suppliers of pool betting services, operating in highly regulated markets worldwide.
The Group's strategy is to build a multi-platform gaming business in the US using the legal regulated horseracing and greyhound operations as a base to position the Group for broader-based gaming opportunities as regulation develops.
The Group comprises three divisions: Racing and Digital, Venues and Football Pools, all of which focus on horseracing and football markets. The Racing and Digital and Venues divisions are based in the United States, where we are licensed by gaming regulators in 28 states, employing 700 people across field operations and four corporate offices. The Football Pools is the oldest football gaming business in the world and, through its Classic Pools product, together with a range of pools and casino games, it generates strong cash flows.
During 2014, the Group has made further progress in delivering its strategy. This includes entry into the New Jersey online gaming market through SNG Interactive, our joint venture with NYX. This is an important first step for the business in the largest US state to have legalised online gaming to date, and provides a platform for future growth as online regulation develops across the US. In our Venues business, we opened a 10,000 sq ft sports bar and restaurant in our Bradley venue which is attracting a younger, more diverse customer base. In Connecticut, we also launched the State's only legal online betting site, MyWinners.com. The Group obtained key regulatory approvals for new sports bar, restaurant and betting venues in Stamford, Connecticut and San Diego and Norco in California. Refinement of Venues expansion plans is ongoing and development is subject to the Group's available capital resources. The Racing and Digital business has secured a number of new contracts in the year, including the supply of a new tote system and digital technology to Totepool in the UK. However, we have been informed that our contract with the Californian racing authorities to process bets across the State will not be renewed at the end of October 2015. The Group is confident that it will be able to substantially mitigate the impact of this contract loss through cost saving and revenue generating actions.
During the year the Group strengthened its capability in online technology with the appointment of Rich Roberts to head its Digital operations in the US, including SNG Interactive and MyWinners.com. Rich has recruited an experienced team to drive progress in this important growth area.
Turning to the performance of our three divisions, our Racing and Digital business has shown EBITDA growth following the investments made in technology and products over recent years. The Football Pools has made further progress in modernisation of its systems and development of its customer offering, and is moving towards stabilisation of direct channel revenues.
However, Venues profits fell in 2014 due to reduced wagering revenues combined with increased content costs and start-up losses at Bradley. Whilst disappointing, the fall in Connecticut revenues has been in line with US industry-wide wagering handle and our venues have performed better than similar facilities in the North East of America. This difficult trading environment is expected to continue in 2015, but we remain confident in the long-term value within the Venues business.
In September, the Upper Tribunal ruled in favour of Her Majesty's Revenue & Customs ("HMRC") in HMRC's appeal case relating to a VAT repayment claim on the "Spot the Ball" game. This followed the initial ruling last year of the First-tier Tax Tribunal in Sportech's favour. The Group has been granted permission to appeal to the Court of Appeal, and the hearing will be held in the week commencing 2 November 2015.
Outlook
Racing and Digital and Football Pools are trading in line with expectations. Trading in our Venues business remains challenging, with amounts wagered below prior year levels, as a result of a lack of racing due to the cold weather in North East USA. The Group launched operations in its online gaming joint venture in February. The Board remains confident in the Group's prospects for the full year ahead.
Financial performance
Group revenue from continuing operations was £6.2m lower than the prior year at £104.1m (2013: £110.3m). EBITDA from continuing operations fell by 8% to £24.0m (2013: £26.0m). Growth in Sportech Racing and Digital, despite adverse foreign exchange ("FX") impacts, was offset by declines in Football Pools and Sportech Venues, the latter also impacted by FX. Adjusted profit before tax was £14.4m (2013: £14.5m), the EBITDA shortfall and increased depreciation charge being offset by a lower share option expense and interest savings, having held £93m of Spot the Ball VAT repayment monies for five months. An impairment of £28.1m has been recorded which reduces the carrying value of the Football Pools goodwill to £119.5m. Loss after tax as a result was £21.3m (2013: profit, £3.4m) with basic loss per share of 10.4p (2013: earnings, 1.7p) and adjusted earnings per share of 5.5p (2013: 5.3p). Net debt at 31 December 2014 was £63.8m (2013: £63.4m).
An analysis of Group revenue and EBITDA performance by business segment is shown in the table below:
|
|
Revenue |
EBITDA |
||
|
£m |
2014 FY |
2013 FY |
2014 FY |
2013 FY |
|
Sportech Racing and Digital |
34.5 |
33.7 |
8.1 |
7.3 |
|
Sportech Venues |
32.5 |
32.2 |
3.2 |
4.5 |
|
Football Pools |
38.0 |
41.3 |
16.6 |
17.4 |
|
FX effect |
- |
4.1 |
- |
0.7 |
|
Trading divisions |
105.0 |
111.3 |
27.9 |
29.9 |
|
Inter-segment elimination and corporate costs |
(0.9) |
(1.0) |
(3.9) |
(3.9) |
|
Total Group |
104.1 |
110.3 |
24.0 |
26.0 |
Sportech Racing and Digital
Sportech Racing and Digital is the largest international provider of pool betting systems and services for a global customer base of licensed racing and betting operators, both on and off-track. The division's proprietary betting hardware and software product offerings range from agent-operated to self-service, and include apps that allow players to use their own smart phones or tablets to place bets (known as Digital LinkTM). Racing and Digital also provide customised websites and telephone betting systems, as well as the services that help customers manage these digital channels.
During the year, the division agreed a ten-year contract to supply Betfred's Totepool business with a comprehensive suite of its betting technology products, including its mobile and online betting platform, as well as the core Quantum tote system. This system will go-live in 1H 2015. The agreement with Betfred further highlights the quality of our offer, following the 2013 sales to Danske Spil, the State-owned Danish gaming operator, and Penn National, the largest owner and operator of racetracks and betting facilities in the United States. Both these prior year sales have been successfully implemented during 2014.
The division also agreed with Hawthorne Race Course in Illinois to supply its full suite of digital and land-based betting technologies, including the Digital LinkTM mobile product, together with its next generation self-service wagering terminal. We were also pleased to have renewed our contract to operate Nassau OTB network following a tender process. However, we were disappointed to receive notice that we were not successful in renewing our contract to process all bets across the State of California. Our existing agreement in California will come to an end in October 2015 resulting in the loss of a significant number of Sportech staff, together with the withdrawal of approximately 3,500 betting terminals from the State. Plans to mitigate the ongoing impact of this loss from October 2015 are in progress.
The results can be analysed as follows:
|
|
Revenue |
EBITDA |
||
|
£m |
2014 FY |
2013 FY |
2014 FY |
2013 FY |
|
|
|
|
|
|
|
Tote services and equipment sales |
30.8 |
30.0 |
6.9 |
6.7 |
|
Digital |
3.7 |
3.7 |
1.2 |
0.6 |
|
FX effect |
- |
2.2 |
- |
0.4 |
|
Total |
34.5 |
35.9 |
8.1 |
7.7 |
For the Racing and Digital division, overall revenues have declined to £34.5m (2013: £35.9m) due primarily to foreign exchange. Within Tote Services and equipment sales, on a constant currency basis, revenues are £0.8m ahead of prior year. There was a slight decline in US domestic revenues due to poor weather and a weak third quarter (US industry data shows that thoroughbred wagering handle declined 2.8% in 2014 versus 2013). Offsetting this is another solid performance from our Dominican Republic customer, as well as the full year of revenues from the Data Tote acquisition completed in September last year. Total equipment sales revenues in the period were £4.2m (2013: £3.9m, constant currency basis) including £1.7m in relation to the Betfred system sale.
EBITDA for the division has increased by £0.4m to £8.1m (2013: £7.7m). On a constant currency basis, EBITDA in Tote Services and equipment sales has increased by £0.2m, driven by cost reductions in the US domestic business together with a full year contribution from Data Tote, offset by reductions in Puerto Rico and Germany.
Within Digital, at constant currency, revenues are in line with prior year. EBITDA is ahead of prior year at £1.2m (2013: £0.6m) due to the recovery of a previously written-off bad debt, together with specific cost actions including the closure of the San Diego office.
In February 2015, our joint venture with NYX Gaming Group, SNG Interactive, launched its online gaming platform in the New Jersey market as a supplier to the Atlantic City-based Resorts Casino Hotel. The Group has invested £0.9m to date in the set-up and operation of the joint venture.
During the year the division acquired BUMP Worldwide Inc. ("Bump") for £0.1m on completion, and a contingent earn-out payment based upon 2016 operating performance. Bump is a provider of electronic charitable raffles conducted in-stadia during professional sporting events, known as "50:50 raffles", and its customers are the charitable foundations of US professional sports teams across the NHL, NBA, NFL, MLS and NASCAR. The business has significant growth potential and has recently announced new supply agreements with the Montreal Canadians (NHL) and Cleveland Browns (NFL).
Sportech Venues
|
|
Revenue |
EBITDA |
||
|
£m |
2014 FY |
2013 FY |
2014 FY |
2013 FY |
|
|
|
|
|
|
|
Venues - Connecticut |
27.0 |
26.6 |
3.0 |
4.1 |
|
Venues - Other |
5.5 |
5.6 |
0.2 |
0.4 |
|
FX effect |
- |
1.9 |
- |
0.3 |
|
Total |
32.5 |
34.1 |
3.2 |
4.8 |
Overall revenues have decreased to £32.5m (2013: £34.1m), due to foreign exchange.
Connecticut
In the State of Connecticut, Sportech Venues operates all betting on horseracing under an exclusive and in perpetuity licence for retail, telephone and internet.
Overall revenues have increased by £0.4m compared to prior year at constant currency, driven by food and beverage sales. Betting revenues have declined 3.0% impacted by some severe weather at the start of 2014, which caused a significant number of race cancellations together with a reduction in amounts wagered by certain VIP customers. Internet revenues were £1.0m (2013: £0.4m) following the launch of the MyWinners.com website in the year. This site is the only legal betting website in Connecticut, although it currently faces considerable competition from other online operators who pay no state taxes. The Connecticut authorities have issued formal cease and desist letters to these operators.
During 2014, food and beverage revenues increased by £1.3m due to the opening of Bobby V's sports bar and restaurant in Bradley, in February 2014. This facility has received positive customer feedback and is growing its local reputation as the best local destination to watch big sporting events. Start-up losses of £0.3m were incurred in the year.
EBITDA at constant currency has declined by £1.1m, with £0.5m due to the reduced wagering, £0.3m due to increase in content costs following an increase in rates charged by suppliers, together with the £0.3m of start-up losses at Bobby V's.
We have received regulatory approval to build and open a flagship sports bar, restaurant and betting venue in downtown Stamford. Stamford has no existing betting venue and has a population of more than 120,000, including a thriving financial district. Detailed construction plans are being prepared with build-out to commence subject to the Group's available capital resources. The Group remains committed to development of this exciting new location.
Other Venues
Revenue for Other Venues was £5.5m (2013: £5.6m,) with EBITDA of £0.2m (2013: £0.4m), comparatives at constant currency.
The Group has an agreement to develop up to ten new sports bar, restaurant and betting venues across Southern California under the brand name "Striders". Local approvals have been received at two locations; in the town of Norco and in the heart of downtown San Diego, with both being developed in partnership with local partner, the Silky Sullivan Group. Preliminary work at the Norco site has been undertaken with full construction work at both developments planned to commence subject to the availability of finance.
The Group currently supplies betting services to eight locations in Southern California. Amounts wagered at these locations grew 58% following the opening of three additional facilities in the year, generating total revenues of £0.4m (2013: £0.3m).
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 2016 and we continue to work closely with the Government, the regulator and the horseracing industry regarding the future regulatory plans. Netherlands revenues were £5.1m (2013: £5.3m) with EBITDA of £0.3m (2013: £0.2m), comparatives at constant currency.
Football Pools
The strategy of The Football Pools business is to stabilise then grow revenues through improved customer retention, increased spend per head from core customers, and recruitment of new players to direct debit and online channels. As part of our ongoing modernisation project we have consolidated over 100,000 customers onto our proprietary "Turnstile" platform. In October, we integrated the NYX gaming platform into this platform and re-launched footballpools.com. This new site enables new customers and our direct channel customers to manage their accounts online, facilitating cross-sell opportunities to a wide range of pools and casino games.
Revenues for the period were £38.0m (2013: £43.1m), the reduction driven primarily by a £2.1m decrease in the collector and overseas channels following the closure of a number of collector regions in the year, together with forecast decline. Direct revenues showed continued resilience in the year at £27.0m (2013: £27.5m), and are expected to stabilise in the coming year. Classic Pools average weekly customer spend has increased to £2.81 (2013: £2.67) driven by additional games added in 2013, together with a reduction in discounted entries following the migration to the new Turnstile platform. EBITDA fell by £0.8m to £16.6m (2013: £17.4m) with cost efficiencies offset by increased marketing spend to drive player recruitment. Over 23,000 new customers were recruited, compared to 15,000 in 2013, through a combination of online and telemarketing leading to a reduction in the rate of decline of overall players. In December 2014, Classic Pools had 240,000 direct customers compared to 248,000 customers in the prior year, a net reduction of 8,000 players, which compares to a net reduction of 17,000 players in 2013, with approximately half playing via direct debit.
Our new footballpools.com website offers a wide range of innovative content, including Premier 10, Jackpot 12 pools games, together with MatchXtra, which offers fixed-odds style betting opportunities on Premier League and televised football matches. This is complemented by a wide variety of slots including branded titles such as Judge Dredd, together with fixed odds games such as Lucky Clover.
Corporate costs
Corporate costs of £3.9m (2013: £3.9m) have been managed carefully and again remain in line with the prior year. In addition, we also have a non-cash share option expense under IFRS 2 of £0.6m (2013: £1.5m), reduced as a result of employees leaving the Group and a revision of expected likely vesting.
Depreciation, amortisation and impairment of goodwill
The Group's normal depreciation and amortisation charge increased in the period to £6.2m (2013: £5.7m), principally due to the ongoing capital expenditure in our businesses in North America. In addition, the Group incurred a non-cash amortisation charge of £4.1m (2013: £7.2m) on the intangible assets acquired with Vernons in 2007, eBet in 2012 and Data Tote in 2013. The Vernons assets became fully amortised in June 2014, which resulted in the reduced charge in 2014 compared to 2013. An impairment of £28.1m was recorded to reduce the carrying value of The Football Pools goodwill to £119.5m. This is as a result of revisions to the underlying cash flow assumptions to reflect the division achieving ongoing earnings stability.
Exceptional costs
The Group has incurred exceptional administration costs of £2.3m (2013: £2.7m) in the twelve month period. These costs include restructuring and other costs of £1.4m (2013: £1.3m), costs in relation to the set-up of our joint venture companies of £0.6m (2013: £nil), compensation for loss of office of £nil (2013: £0.3m), costs in relation to the New Jersey licence of £0.1m (2013: £0.3m), transaction costs in relation to acquisitions of £0.1m (2013: £0.2m) and legal costs of £0.2m in connection with the "Spot the Ball" VAT claim (2013: £0.5m). A refinancing fee of £1.4m and fair value movement on ineffective interest rate hedges of £0.8m are classified as exceptional and are disclosed in net finance costs.
Net finance costs
The Group has incurred net interest costs in the period of £2.8m (2013: £4.3m), with the reduction being primarily due to the savings made from holding £93m in cash in relation to the VAT repayment claim from the end of June to November 2014. In addition, other finance income amounted to £0.3m (2013: £0.8m), reflecting a refinancing fee of £1.4m, offsetting the credit of fair value movement on interest rate swaps of £0.8m and foreign exchange gains on intercompany loans of £0.9m.
Net bank debt
In May 2014, the Group refinanced its banking facilities, increasing the facility to £80m and extending the term to August 2018, whilst obtaining increased flexibility and improved covenant terms. Net bank debt has increased marginally in the year to £63.8m (2013: £63.4m), following investment in capital expenditure and joint ventures of £11.9m. The Group's bank leverage ratio for covenant testing purposes (net bank debt/adjusted EBITDA) was 2.66x as at 31 December 2014 (31 December 2013: 2.41x). At 31 December 2014, the leverage covenant was 3.00x (net bank debt/adjusted EBITDA).
Total shareholders' equity and the Group's net assets have reduced by £19.9m to £119.8m (2013: £139.7m), profit before the impairment of £6.8m being offset by the £28.1m impairment charge.
Capital expenditure
Capital expenditure was £2.6m lower than the prior year at £10.0m (2013: £12.6m). Expenditure included continuing modernisation of Football Pools technology, the customer database and online platform, contract renewals in Sportech Racing and Digital and completion of the Bradley sports bar in Sportech Venues.
Acquisitions and investment in joint ventures
During the year the Group acquired Bump 50:50 Inc. for £0.1m in cash consideration with a potential further contingent consideration of up to £5.5m in the event that the business meets challenging growth performance targets in the year ended 31 December 2016. Dan Tanenbaum, the 100% owner and Chief Executive of Bump has remained in employment with the Group and as such the expected contingent consideration payable is being accrued over the performance period in exceptional costs. £0.1m has been accrued as at 31 December 2014. Cash on balance sheet at the acquisition date was an overdraft of £0.1m.
In December 2014, £0.7m was paid in deferred consideration for the 2012 acquisition of eBet Online Inc. Additional maximum potential consideration is due of £0.9m, based on EBITDA performance in the year ended 31 December 2015.
The Group has invested £0.6m into its Californian joint venture to commence the preliminary construction phase at the Norco venue, and has invested £0.2m in Picklive USA and £0.9m in Sportech NYX Gaming (both joint venture companies). In addition, the Group continues to support the running costs of its Indian joint venture at £0.2m per annum.
VAT claim
In September 2014, HMRC were successful in their appeal to the Upper Tribunal ("UT") in respect of the "Spot the Ball" game VAT repayment claim. This followed the decision in the Group's favour by the First-tier Tax Tribunal ("FTT") in March 2013. The claim is for approximately £96m including simple interest, and the Group has been granted permission to appeal to the Court of Appeal. The appeal will be heard in the week commencing 2 November 2015.
The Group received £93m from HMRC in June 2014 in relation to this claim. Following the reversal of the FTT decision by the UT, these funds were repaid to HMRC in November 2014.
Dividend
No dividend is proposed. The Board will continue to assess when to commence the payment of dividends.
Taxation
A tax charge for the period of £1.3m (2013: £1.9m) has been provided at the weighted average applicable tax rate for the Group of 23.0% (2013: 26.8%). The Group has a net deferred tax asset of £0.8m (2013: £0.7m), 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 £1.3m were made during the period (2013: £1.7m), principally representing final payments for prior year tax liabilities and overseas tax deducted at source.
Board and employees
Subsequent to his appointment to the Board as a Non-executive Director in December 2013, Rich Roberts was appointed as an Executive Director in July 2014. 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.
In July, Ian Hogg decided to resign after four years as a Board member, during which he made an invaluable contribution to the Group.
Sportech is a geographically diverse business which 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
4 March 2015
Consolidated income statement
For the year ended 31 December 2014
|
|
|
|
|
|
|
Note |
£m |
£m |
|
Revenue |
|
104.1 |
110.3 |
|
Cost of sales |
|
(58.1) |
(61.2) |
|
Gross profit |
|
46.0 |
49.1 |
|
Distribution costs |
|
(0.9) |
(1.1) |
|
Administrative expenses |
|
(62.4) |
(39.1) |
|
EBITDA before exceptional costs and share option expense |
|
24.0 |
26.0 |
|
Share option expense |
|
(0.6) |
(1.5) |
|
Depreciation and amortisation (excluding amortisation of acquired intangibles) |
|
(6.2) |
(5.7) |
|
Amortisation of acquired intangibles and impairment of goodwill |
|
(32.2) |
(7.2) |
|
Exceptional costs |
5 |
(2.3) |
(2.7) |
|
Operating (loss)/profit |
|
(17.3) |
8.9 |
|
Finance costs |
6 |
(2.8) |
(4.3) |
|
Other finance income |
6 |
0.3 |
0.8 |
|
Net finance costs |
6 |
(2.5) |
(3.5) |
|
Share of loss after tax of joint ventures |
|
(0.2) |
(0.2) |
|
(Loss)/profit before taxation |
|
(20.0) |
5.2 |
|
Adjusted profit before taxation * |
|
14.4 |
14.5 |
|
Taxation |
7 |
(1.3) |
(1.9) |
|
(Loss)/profit for the year from continuing operations |
|
(21.3) |
3.3 |
|
Profit for the year from discontinued operations ** |
|
- |
0.1 |
|
(Loss)/profit for the year |
|
(21.3) |
3.4 |
|
|
|
|
|
|
(Loss)/earnings per share attributable to owners of the parent during the year |
|
|
|
|
Basic |
8 |
(10.4)p |
1.7p |
|
Diluted |
8 |
(9.9)p |
1.6p |
|
Adjusted earnings per share attributable to owners of the parent during the year |
|
|
|
|
Basic |
8 |
5.5p |
5.3p |
|
Diluted |
8 |
5.2p |
4.9p |
* Adjusted profit before taxation is profit from continuing operations before taxation, amortisation of acquired intangibles and impairment of goodwill, exceptional costs, share of loss after tax of joint ventures and other finance income.
** Discontinued operations reported in 2013 relate to the e-Gaming division which was disposed of in October 2013. There were no discontinued operations in 2014.
Consolidated statement of comprehensive (expense)/income
For the year ended 31 December 2014
|
|
|
|
|
|
£m |
£m |
|
(Loss)/profit for the year |
(21.3) |
3.4 |
|
Other comprehensive (expense)/income: |
|
|
|
Items that will not be reclassified to profit and loss |
|
|
|
Actuarial (loss)/gain on retirement benefit liability |
(0.4) |
0.3 |
|
Deferred tax on movement on retirement benefit liability |
0.1 |
(0.1) |
|
|
(0.3) |
0.2 |
|
Items that may be subsequently reclassified to profit and loss |
|
|
|
Currency translation differences |
1.4 |
(0.7) |
|
Other comprehensive income/(expense) for the year, net of tax |
1.1 |
(0.5) |
|
Total comprehensive (expense)/income for the year |
(20.2) |
2.9 |
|
Attributable to the owners of the parent arises from: |
|
|
|
- Continuing operations |
(20.2) |
2.8 |
|
- Discontinued operations |
- |
0.1 |
|
|
(20.2) |
2.9 |
Consolidated statement of changes in equity
For the year ended 31 December 2014
|
|
|
Other reserves |
|
|
|
||||||
|
|
|
|
|
|
|
|
|||||
|
|
|
Share option reserve |
|
Currency translation reserve |
Retained earnings |
|
|||||
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|||||
|
At 1 January 2013 |
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/(expense) |
|
|
|
|
|
|
|||||
|
Actuarial gain on retirement benefit |
|
|
|
|
|
|
|||||
|
liability * |
- |
- |
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 |
|||||
|
Comprehensive (expense)/income |
|
|
|
|
|
|
|||||
|
(Loss)/profit for the year |
- |
- |
- |
- |
(21.3) |
(21.3) |
|||||
|
Other comprehensive (expense)/income |
|
|
|
|
|
|
|||||
|
Actuarial loss on retirement benefit |
|
|
|
|
|
|
|||||
|
liability * |
- |
- |
(0.3) |
- |
- |
(0.3) |
|||||
|
Currency translation differences |
- |
- |
- |
1.4 |
- |
1.4 |
|||||
|
Total other comprehensive |
|
|
|
|
|
|
|||||
|
(expense)/income |
- |
- |
(0.3) |
1.4 |
- |
1.1 |
|||||
|
Total comprehensive (expense)/income |
- |
- |
(0.3) |
1.4 |
(21.3) |
(20.2) |
|||||
|
Transactions with owners |
|
|
|
|
|
|
|||||
|
Share option credit |
- |
0.6 |
- |
- |
- |
0.6 |
|||||
|
Employment taxes paid on vestings in the year |
- |
(0.3) |
- |
- |
- |
(0.3) |
|||||
|
Shares issued in relation to PSP |
0.2 |
(0.2) |
- |
- |
- |
- |
|||||
|
At 31 December 2014 |
102.6 |
2.3 |
(0.6) |
(0.1) |
15.6 |
119.8 |
|||||
* Net of deferred tax.
Consolidated balance sheet
As at 31 December 2014
|
|
|
|
|
|
|
Note |
£m |
£m |
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
9 |
125.0 |
153.1 |
|
Intangible fixed assets |
|
42.1 |
42.7 |
|
Property, plant and equipment |
|
24.9 |
21.6 |
|
Net investment in joint ventures |
|
2.2 |
0.5 |
|
Trade and other receivables |
|
1.2 |
0.3 |
|
Deferred tax assets |
|
1.4 |
1.8 |
|
|
|
196.8 |
220.0 |
|
Current assets |
|
|
|
|
Trade and other receivables |
|
10.4 |
9.0 |
|
Inventories |
|
1.5 |
1.5 |
|
Cash and cash equivalents |
|
6.3 |
2.6 |
|
|
|
18.2 |
13.1 |
|
TOTAL ASSETS |
|
215.0 |
233.1 |
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Derivative financial instruments |
|
(0.5) |
(1.3) |
|
Financial liabilities |
11 |
- |
(0.7) |
|
Trade and other payables |
|
(20.5) |
(21.1) |
|
Provisions |
|
(0.2) |
(0.2) |
|
Current tax liabilities |
|
(0.8) |
(0.7) |
|
|
|
(22.0) |
(24.0) |
|
Net current liabilities |
|
(3.8) |
(10.9) |
|
Non-current liabilities |
|
|
|
|
Financial liabilities |
11 |
(70.6) |
(66.6) |
|
Retirement benefit liability |
|
(1.6) |
(1.3) |
|
Provisions |
|
(0.4) |
(0.4) |
|
Deferred tax liabilities |
|
(0.6) |
(1.1) |
|
|
|
(73.2) |
(69.4) |
|
TOTAL LIABILITIES |
|
(95.2) |
(93.4) |
|
NET ASSETS |
|
119.8 |
139.7 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
Ordinary shares |
|
102.6 |
102.4 |
|
Other reserves |
|
1.6 |
0.4 |
|
Retained earnings |
|
15.6 |
36.9 |
|
TOTAL EQUITY |
|
119.8 |
139.7 |
Consolidated statement of cash flows
For the year ended 31 December 2014
|
|
|
|
|
|
|
Note |
£m |
£m |
|
Cash flows from operating activities |
|
|
|
|
Cash flows from operations, before exceptional items |
10 |
20.4 |
24.4 |
|
Interest paid |
|
(3.0) |
(4.3) |
|
Tax paid |
|
(1.3) |
(1.7) |
|
Net cash generated from operating activities before cash exceptional costs |
|
16.1 |
18.4 |
|
Cash exceptional costs |
|
(2.3) |
(2.7) |
|
Net cash generated from operating activities |
|
13.8 |
15.7 |
|
Cash flows from investing activities |
|
|
|
|
Investment in joint ventures |
|
(1.9) |
(0.2) |
|
Acquisition of Bump Worldwide Inc. net of overdraft assumed |
|
(0.2) |
- |
|
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. |
|
(0.7) |
(0.3) |
|
Purchase of intangible fixed assets |
|
(5.1) |
(3.8) |
|
Purchase of property, plant and equipment |
|
(4.9) |
(8.8) |
|
Net cash used in investing activities |
|
(12.8) |
(22.0) |
|
Cash flows from financing activities |
|
|
|
|
Refinancing fee paid - exceptional cost |
|
(1.4) |
- |
|
Net cash inflow from drawdown of borrowings |
|
4.1 |
6.0 |
|
Net cash from financing activities |
|
2.7 |
6.0 |
|
Net increase/(decrease) in cash and cash equivalents |
|
3.7 |
(0.3) |
|
Cash and cash equivalents at the beginning of the year |
|
2.6 |
2.9 |
|
Cash and cash equivalents at the end of the year |
|
6.3 |
2.6 |
|
|
|
|
|
|
Reconciliation of net bank debt |
|
|
|
|
Increase/(decrease) in cash in the year |
|
3.7 |
(0.3) |
|
Net cash inflow from drawdown of borrowings |
|
(4.1) |
(6.0) |
|
Movement in net bank debt for the year |
|
(0.4) |
(6.3) |
|
At 1 January |
|
(63.4) |
(57.1) |
|
At 31 December |
|
(63.8) |
(63.4) |
|
|
|
|
|
|
Net bank debt comprises: |
|
|
|
|
Cash and cash equivalents |
|
6.3 |
2.6 |
|
Loans repayable after one year |
11 |
(70.1) |
(66.0) |
|
At 31 December |
|
(63.8) |
(63.4) |
Notes to the preliminary statement
For the year ended 31 December 2014
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 2014 comprise the Company, its subsidiaries and joint ventures (together referred to as the "Group"). The principal activities of the Group are pools betting, both B2B and B2C, and supply of 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 2013 financial statements. 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 2014 were approved by the Board of Directors on 4 March 2015.
b. The Company's accounting reference date is 31 December. Consistent with the normal monthly reporting process, the actual date to which the balance sheet has been drawn up is 4 January 2015 (2013: 5 January 2014). For ease of reference in this preliminary announcement, all references to the results for the year are for the year ended 31 December 2014 (2013: 31 December 2013) and the financial position at 31 December 2014 (2013: 31 December 2013).
c. The financial information set out in this announcement does not constitute statutory financial statements for the years ended 31 December 2014 and 2013 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.
d. 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.
e. The Group has committed revolving credit banking facilities totalling £80m in place with Bank of Scotland plc, Barclays Bank PLC and Royal Bank of Scotland plc until August 2018. The Group's forecasts and projections, which have been prepared for the period to 30 June 2016, 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.
f. 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.
|
|
2014 |
|||||
|
|
|
|
|
|
|
|
|
|
Football Pools |
Sportech Racing and Digital |
Sportech Venues |
Corporate costs |
Inter-segment elimination |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Revenue from sale of goods |
38.0 |
4.2 |
- |
- |
- |
42.2 |
|
Revenue from rendering of services |
- |
30.3 |
32.5 |
- |
(0.9) |
61.9 |
|
Total revenue |
38.0 |
34.5 |
32.5 |
- |
(0.9) |
104.1 |
|
EBITDA before exceptional costs and share |
|
|
|
|
|
|
|
option expense |
16.6 |
8.1 |
3.2 |
(3.9) |
- |
24.0 |
|
Share option expense |
- |
- |
- |
(0.6) |
- |
(0.6) |
|
Depreciation and amortisation (excluding |
|
|
|
|
|
|
|
amortisation of acquired intangibles) |
(1.5) |
(3.5) |
(1.2) |
- |
- |
(6.2) |
|
Segment result before amortisation of acquired |
|
|
|
|
|
|
|
Intangibles, impairment of goodwill and exceptional costs |
15.1 |
4.6 |
2.0 |
(4.5) |
- |
17.2 |
|
Amortisation of acquired intangibles and impairment of goodwill |
(30.7) |
(1.5) |
- |
- |
- |
(32.2) |
|
Exceptional costs |
(1.4) |
- |
(0.1) |
(0.8) |
- |
(2.3) |
|
Operating (loss)/profit |
(17.0) |
3.1 |
1.9 |
(5.3) |
- |
(17.3) |
|
Net finance costs |
|
|
|
|
|
(2.5) |
|
Share of loss after tax of joint ventures |
|
|
|
|
|
(0.2) |
|
Loss before taxation |
|
|
|
|
|
(20.0) |
|
Taxation |
|
|
|
|
|
(1.3) |
|
Loss for the year |
|
|
|
|
|
(21.3) |
|
|
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 |
- |
|
|
|
|
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 venture |
|
|
|
|
|
(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 |
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 |
|
1.1 |
1.0 |
|
Compensation for loss of office |
|
- |
0.3 |
|
Costs and fees in relation to Spot the Ball VAT claim |
|
0.2 |
0.5 |
|
Transaction costs in respect of the acquisition of subsidiaries |
|
0.1 |
0.2 |
|
Licensing costs in New Jersey in respect of the acquisition of Sportech Racing |
|
0.1 |
0.3 |
|
Costs in relation to the set-up of US joint ventures |
|
0.6 |
- |
|
IFRS 3 employment costs in relation to Datatote (England) Limited and Bump Worldwide Inc. |
|
0.4 |
0.1 |
|
Release of deferred consideration accrued for eBet Online Inc. |
|
(0.5) |
- |
|
Other exceptional costs |
|
0.3 |
0.3 |
|
|
|
2.3 |
2.7 |
|
Included in net finance costs: |
|
|
|
|
Refinancing fee |
|
1.4 |
- |
|
Movement on derivative financial instruments post designation as ineffective |
|
(0.8) |
(1.4) |
|
|
|
0.6 |
(1.4) |
|
Total exceptional costs |
|
2.9 |
1.3 |
6. Net finance costs
|
|
|
|
|
|
£m |
£m |
|
Interest payable on bank loans, derivative financial instruments and overdrafts |
2.8 |
4.3 |
|
Refinancing fee |
1.4 |
- |
|
Movement on derivative financial instruments post designation as ineffective |
(0.8) |
(1.4) |
|
Non-cash finance charges * |
- |
0.4 |
|
Foreign exchange (gain)/loss on financial assets and liabilities denominated in |
|
|
|
foreign currency |
(0.9) |
0.2 |
|
Net finance costs |
2.5 |
3.5 |
* Non-cash finance charges 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 non-cash finance charges and the foreign exchange (gain)/loss on financial assets and liabilities denominated in foreign currency are all together shown as other finance income in the income statement. Included in the above table are exceptional costs of £0.6m (2013: income of £1.4m).
7. Taxation
|
|
|
|
|
|
£m |
£m |
|
Current tax: |
|
|
|
Current tax on profit for the year |
1.5 |
1.8 |
|
Adjustments in respect of prior years |
(0.2) |
- |
|
Total current tax |
1.3 |
1.8 |
|
Deferred tax: |
|
|
|
Origination and reversal of temporary differences |
0.1 |
(0.1) |
|
Effect of changes in tax rates |
(0.1) |
0.2 |
|
Total deferred tax |
- |
0.1 |
|
Total taxation charge |
1.3 |
1.9 |
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 |
|
(Loss)/profit before taxation |
(20.0) |
5.2 |
|
Add share of loss after tax of joint ventures |
0.2 |
0.2 |
|
(Loss)/profit before taxation and share of loss after tax of joint ventures |
(19.8) |
5.4 |
|
Tax calculated at domestic tax rates applicable to profits/(losses) in the respective countries |
(4.6) |
1.5 |
|
Tax effects of: |
|
|
|
- permanent differences |
6.2 |
0.3 |
|
- deferred tax not previously provided |
- |
(0.1) |
|
- effect of changes in tax rates |
(0.1) |
0.2 |
|
- adjustments in respect of prior years |
(0.2) |
- |
|
Total taxation charge |
1.3 |
1.9 |
The weighted average applicable tax rate was 23.0% (2013: 26.8%). The decrease is as a result of a change in mix of profits in jurisdictions with varying tax rates.
Included within permanent differences is the tax effect at 21.5% of the £28.1m impairment of goodwill in The Football Pools segment for which no tax relief is received.
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 |
|
(Loss)/profit from continuing operations attributable to the owners of the parent |
(21.3) |
3.3 |
|
Profit from discontinued operations attributable to the owners of the parent |
- |
0.1 |
|
Total |
(21.3) |
3.4 |
|
Weighted average number of ordinary shares in issue ('000) |
204,986 |
200,227 |
|
Basic (loss)/earnings per share |
(10.4)p |
1.7p |
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 22.3% (2013: 27.7%). The adjusted tax charge is based on adjusted profits in the jurisdictions in which the Group generates profits/(loss).
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
Operating profit before amortisation of |
|
|
|
|
|
|
|
|
acquired intangibles and exceptional costs |
17.2 |
204,986 |
8.4 |
|
18.8 |
200,227 |
9.4 |
|
Net finance costs (excluding other finance |
|
|
|
|
|
|
|
|
income) |
(2.8) |
204,986 |
(1.4) |
|
(4.3) |
200,227 |
(2.1) |
|
Adjusted profit before taxation |
14.4 |
204,986 |
7.0 |
|
14.5 |
200,227 |
7.3 |
|
Tax at 22.3% (2013: 27.7%) |
(3.2) |
204,986 |
(1.5) |
|
(4.0) |
200,227 |
(2.0) |
|
Adjusted basic EPS |
11.2 |
204,986 |
5.5 |
|
10.5 |
200,227 |
5.3 |
Certain employee options (707,070 in number; 2013: 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 9,005,000 (2013: 13,161,000). Diluted basic loss per share is 9.9p (2013: earnings per share, 1.6p) and diluted adjusted EPS is 5.2p (2013: 4.9p).
9. Goodwill
|
|
|
|
|
|
£m |
£m |
|
Cost |
|
|
|
At 1 January |
171.0 |
165.5 |
|
Business combination |
- |
5.5 |
|
At 31 December |
171.0 |
171.0 |
|
Accumulated impairment charges |
|
|
|
At 1 January |
(17.9) |
(17.9) |
|
Impairment charged to income in the year |
(28.1) |
- |
|
At 31 December |
(46.0) |
(17.9) |
|
Opening net book value |
153.1 |
147.6 |
|
Closing net book value |
125.0 |
153.1 |
Goodwill relates to the acquisitions of Littlewoods Leisure, including the Littlewoods Football Pools business, in September 2000 amounting to £145.2m, the goodwill arising on the acquisition of Vernons Football Pools in December 2007 amounting to £20.3m, and the goodwill arising on the acquisition of eBet Online Inc. in December 2012 of £5.5m. The accumulated impairment charges brought forward relate to the goodwill in the Football Pools segment.
During the year the Group carried out its annual impairment review of the carrying value of its goodwill. It was concluded that the goodwill related to the Football Pools segment was impaired given its value-in-use was estimated to be £119.5m and its carrying value was £147.6m. As a result an impairment charge of £28.1m has been expensed to the income statement in administration expenses.
10. Cash flow from operating activities
Reconciliation of profit before taxation to cash flows from operating activities
|
|
|
|
|
|
£m |
£m |
|
(Loss)/profit before taxation including profit from discontinued operations |
(20.0) |
5.3 |
|
Adjustments for: |
|
|
|
Exceptional costs |
2.3 |
2.7 |
|
Share of loss after tax of joint ventures |
0.2 |
0.2 |
|
Depreciation |
3.0 |
3.2 |
|
Amortisation of acquired intangibles and impairment of goodwill |
32.2 |
7.2 |
|
Amortisation of other intangibles |
3.2 |
2.5 |
|
Net finance costs |
2.8 |
4.3 |
|
Other finance income |
(0.3) |
(0.8) |
|
Share option expense |
0.6 |
1.5 |
|
Movement in retirement benefit liability |
(0.2) |
0.2 |
|
Movement in provisions |
- |
(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 in trade and other receivables |
(2.3) |
(0.4) |
|
Decrease in inventories |
- |
0.2 |
|
Decrease in trade and other payables |
(1.1) |
(1.9) |
|
Cash flows from operating activities before exceptional costs |
20.4 |
24.4 |
|
|
|
|
11. Maturity of financial liabilities
|
|
|
|
|
|
£m |
£m |
|
Current |
|
|
|
Deferred consideration due within one year |
- |
0.7 |
|
|
|
|
|
|
£m |
£m |
|
Non-current |
|
|
|
Drawn revolving credit facility due after one year |
70.1 |
66.0 |
|
Deferred consideration due after one year |
0.5 |
0.6 |
|
Total non-current financial liabilities |
70.6 |
66.6 |
12. Business combinations
a) Bump Worldwide Inc.
On 12 June 2014, the Group acquired 100% of the issued share capital of Bump Worldwide Inc. ("Bump"), a provider of electronic charitable raffles conducted during professional sporting events, known as "50:50 raffles".
The customers of Bump are the charitable foundations of US professional sports teams across the NHL, NBA, NFL, MLS and NASCAR. It is a growing business that will benefit from the greater sales and technology resources available following its acquisition by Sportech.
Goodwill arising on the acquisition amounted to £nil.
The following table summarises the fair value of consideration paid for Bump and the amounts of the assets acquired and liabilities assumed, recognised at acquisition date.
|
Provisional fair value of consideration at 12 June 2014 |
£m |
|
Cash |
0.1 |
|
Total fair value of consideration transferred |
0.1 |
|
Recognised provisional fair value amounts of identifiable assets acquired and liabilities assumed |
£m |
|
Intangible assets - software |
0.2 |
|
Intangible assets - customer contracts and relationships |
0.1 |
|
Bank overdraft |
(0.1) |
|
Trade and other payables |
(0.1) |
|
Total identifiable net assets |
0.1 |
|
Goodwill |
- |
|
Total fair value of consideration transferred |
0.1 |
Deferred contingent consideration
There is potential for contingent consideration of up to £5.5m to be payable dependent on the Bump business' EBITDA for the period 1 January 2016 to 31 December 2016. This is split between the following two elements:
· an amount equivalent to the 2016 EBITDA earned by Bump, up to a maximum consideration payable of £4.7m; and
· if 2016 EBITDA earned by Bump exceeds £0.8m, an additional contingent consideration will be payable equivalent to that excess, up to a maximum of £0.8m.
The amount payable is due subsequent to the finalisation of the 2016 financial statements.
The Directors have reviewed the potential consideration payable on the above performance requirements. The expectation is that a sum of £0.3m will be payable in respect of these performance targets. This is treated as employment costs under IFRS 3 'Business Combinations' (revised) and will accordingly be accrued on a time apportioned basis to 31 December 2016. This expectation will be reviewed annually in accordance with IFRS 3 'Business Combinations' (revised).
Acquisition costs
Acquisition-related costs amounting to £0.1m 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 just six months prior to the year end. Management will continue to monitor the provisional values during the year ended 31 December 2015 to ensure any fair value amendments are identified as a hindsight adjustment.
No contingent liabilities have been recognised as at the acquisition date.
Bump contribution to the Group results
Bump has contributed £0.2m to the Group's revenues and a loss of £0.2m to profit from the acquisition date to 31 December 2014. Had the acquisition occurred on 1 January 2014, the Group's revenue for the period ended 31 December 2014 would have been £104.3m and the Group's loss for the year would have been £21.5m. These amounts have been determined by applying the Group's accounting policies and adjusting the results of Bump 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 2014.
b) Datatote (England) Limited
On 27 September 2013, the Group acquired 100% of the issued share capital of Datatote (England) Limited. 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.
c) eBet Online Inc.
Management estimates that the achievement of the EBITDA targets required for any contingent consideration to be paid on the acquisition of eBet Online Inc. is unlikely. As such, the accrual recognised in the balance sheet at 31 December 2013 has been released in full.
13. AGM
The Annual General Meeting will be held at 10.00 a.m. on 12 May 2015 at the offices of Olswang LLP, 90 High Holburn, London WC1V 6XX.
-Ends-