12 May 2015
AGM Trading Update
Sportech PLC ("Sportech" or "the Group")
Sportech PLC, one of the world's leading pool betting organisations, today issues the following trading update for the period from 1 January 2015 to 11 May 2015.
Overview
Sportech's strategy is to build a leading position in the rapidly developing US and global betting industry. The Group's extensive activities in international pool and tote betting services for horseracing and football provide a regulatory and legal footprint to support future growth across a wider range of gaming and entertainment opportunities, including iGaming, sports, fantasy sports, and slots.
Good progress has been made on our strategic objectives and we continue to expect trading to be in line with expectations for the full year.
Strategic Progress
We have become one of the first European gaming companies to be fully licensed in New Jersey, a gold standard for licensing globally. We have launched our iGaming activities in New Jersey in conjunction with Resorts Casino Hotel and NYX Gaming, renegotiated material improvements to an inherited onerous gaming contract in the State of Connecticut (initially concerning slots and sports betting) and have been actively involved in the debate regarding the potential for additional "satellite" casinos in Connecticut. We continue to secure new professional sports teams for our Bump 50/50 electronic in-stadia raffle business, as we diversify our gaming technology into professional sport in North America, from our extensive horseracing and greyhound racing base.
Following recent media articles, the Board confirms that it has received an approach for The Football Pools which it has rejected as it did not match our valuation of the division.
Operational Highlights
Trading in the Football Pools is in line with expectations and we continue to expect that stability in the direct channel will be achieved from 2015 and beyond. In the US, our Racing and Digital division is on track to deliver and complete the major sale of tote betting systems for horseracing in the UK to Betfred. The division has also secured important contract wins and renewals as well as experienced contract losses in the period. Trading in our Venues division in Connecticut has been impacted by the severe winter freeze affecting our site openings, race meeting cancellations (especially in New York) and by a reduction in amounts wagered across the industry as a whole. Cost actions are being taken across the Group to position the business for the future, meaning that the full year results remain in line with expectations.
Sportech Racing and Digital
Our US racing business has successfully renewed contracts with key customers including Mountaineer Gaming, Emerald Downs and Parx racing and we are progressing with several proposals to potential new customers. US thoroughbred racing industry data shows that amounts wagered in the four months to the end of April are down 3% on 2014 and we continue to focus on driving efficiencies throughout the delivery of our services.
We are on track to go-live with the supply of our core Quantum tote system to Betfred's Totepool business. Successful initial trials of the system have already taken place at certain UK race meetings, with a full roll-out to follow over the summer. We are delighted that our technology has been chosen to deliver all tote betting on horseracing in the UK and this provides a strong endorsement of the quality of our products.
Our Digital business has suffered the loss of two significant and profitable customers, including Colonial Downs in Virginia, who ceased all racing operations in April.
Sports and Interactive
Bump Worldwide, our provider of in-stadia electronic charity raffles, has continued to grow and has signed up new customers in the period, including the Montreal Canadiens and Quebec Remparts.
In April, the Racing and Digital business was awarded a Casino Service Industry Enterprise Licence by the New Jersey Division of Gaming Enforcement. This licence is regarded as one of the highest endorsements available to operators in the sector and enhances the Group's reputation in the US and worldwide.
Our joint venture with NYX, SNG Interactive, successfully launched its online gaming platform in New Jersey in April as part of its agreement with Resorts Casino Hotel. This initial market entry supports the Group's broader strategic aim to develop an online gaming business that will initially be offered to our existing racing and casino customers across the US, as regulation permits.
Sportech Venues
As mentioned above, the severe winter freeze causing race day cancellations and temporary venue closures affected our trading performance. Underlying handle is down 3%. However the adverse weather impact of race cancellations at Aquaduct in New York (a favourite betting track for our Connecticut customers) and the rebuilding of the major Jai-Alai* venues in Dania Florida, which will be closed for the whole of 2015 but re-open next year, mean overall betting volumes have declined against last year by 9%.
During the period, internet handle on MyWinners.com has grown 71% over prior year from a low base as we enter the second year of online wagering in Connecticut. We expect to continue to improve our technology and product offering during the year to support further growth in this channel.
The Kentucky Derby was run on May 2 and betting turnover across the business was slightly ahead of prior year at $4m, a record for the business, highlighting the continued attraction of the major racing events, particularly outside of the winter periods.
Against this overall revenue backdrop, we are sharply focussed on managing the controllable cost base, including staffing levels and encouraging the increased use of self-service betting terminals in venues.
Our flagship restaurant and sports bar in Bradley operated at break-even for the period, following the start-up losses experienced last year.
Football Pools
The Football Pools is performing in line with management's expectations. In the direct business channel, new subscription player recruitment is continuing with 8,400 new players to date in 2015, which is 10% higher than last year, with online acquisitions driving the growth and now making up around 60% of all new acquisitions. The online customers are acquired at a much lower cost and represent a far greater cross sell opportunity than telephone acquired customers. In line with management's plan to deliver stability in earnings, direct channel revenues are slightly ahead of prior year, with the increase in weekly revenues per customer exceeding the overall reduction in player numbers.
During the period we continued the rollout of new game content onto our footballpools.com website with the addition of a further 30 games in the period.
AGM
The 2015 Annual General Meeting will be held at the offices of Olswang LLP, 90 High Holborn, London, WC1V 6XX today at 10.00am.
*Jai-Alai is the US name for pelota, a ball game from Spain's Basque region that is used as a basis for pools gambling.
- Ends -
For further information, please contact:
Sportech PLC 020 7268 2400
Ian R Penrose, Chief Executive
Cliff Baty, Chief Financial Officer
Brunswick Group LLP 020 7404 5959
Mike Smith and Rosheeka Field
sportech@brunswickgroup.com
Investec Bank Ltd 020 7597 5970
Patrick Robb
Henry Reast
Peel Hunt LLP 020 7418 8900
Dan Webster
Richard Brown
About Sportech PLC
Sportech PLC is one of the world's leading pool betting organisations. We provide betting technology, operating systems and retail venues for betting on football (soccer), horseracing and greyhound racing. The Group operates through three divisions: Sportech Racing and Digital, Sportech Venues and The Football Pools. We focus on highly regulated markets worldwide, with our largest activities in the US, where we are licensed in over half the States and employ over 700 people. Globally we have a presence in 30 countries, employ over 1000 people and process over $13 billion in bets annually. Headquartered in London, England, the company also has operational offices in Connecticut, Atlanta, Toronto, California, New Jersey, Liverpool, Bristol, Netherlands, Germany and Ireland. For more information about Sportech PLC, please visit sportechplc.com.