10 November 2015
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 21 August to 9 November 2015.
Sportech's strategy is to build a leading position in the 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 platform to support future growth across a wider range of gaming and entertainment opportunities.
Strategic Update
On Friday 6 November we announced that, discussions with Contagious Gaming Inc. regarding a potential offer for Sportech have been terminated.
In addition, the Board confirmed it has recently received more than one preliminary proposal in respect of The Football Pools and will be reviewing the terms of these proposals in due course. We remain focused on developing the growth opportunities for each of the Group's divisions and on maximising value for shareholders.
Outlook
The Group continues to make good progress and trading remains in line with management expectations.
Sportech Racing and Digital
Revenues across our Racing and Digital business are slightly above prior year for the period up to 9 November 2015.
In the period, we have continued to win new long-term contracts, providing strong evidence of our business credentials and quality of technology which is expected to benefit future sales. Importantly we have agreed a major contract with Penn National Gaming, the largest owner and operator of racetrack and associated betting facilities in the United States, to provide our G4 website technology and the Digital Link mobile app, along with a package of associated services, commencing January 2016.
We have continued with the ongoing implementation of our Quantum Tote, with supporting software and hardware to Betfred, following its successful initial launch at Royal Ascot in June. The Group now has an encouraging pipeline of potential sales. However, the delivery of a sale of hardware to a major international customer may now be recognised in the first quarter of 2016, rather than the final quarter of 2015. We continue to look for good returns from all new contracts, and accordingly we were unable to continue our loss making contract with the German Tote, which terminates at the end of December. This will lead to further efficiencies by facilitating the closure of our German based European Operations centre and integrating remaining activities into our New Jersey data and operations centre.
As previously advised, our contract to operate betting for the California racing industry ended last month and restructuring actions have been taken to help offset this loss of revenues.
In the Sports and Interactive part of the division, Bump Worldwide, our provider of 50:50 sports raffles, has continued to make further progress, by signing up teams associated with Kroenke Sports Enterprises teams including the Colorado Avalanche (NHL), Denver Nuggets (NBA), Colorado Mammoth (Lacrosse) and Colorado Rapids (MLS).
In June, we sold our recently established online gaming JV to NYX for nearly four times our original investment in three months of operations, generating a profit of over £8m.
As part of our strategy to grow new forms of gaming revenue, the Group acquired 35% of Draft Day Gaming Group in September. This acquisition was for zero consideration, in return for providing executive management and a highly regulated potential customer network. Draft Day is the third largest operator in the rapidly growing daily fantasy sports industry and is well positioned to become an important player offering a B2B alternative for the regulated gaming industry in what is currently a B2C driven market undergoing regulatory scrutiny.
Sportech Venues
Our Venues business has seen betting volumes in line with expectations, after the reported difficulties in the first few months of the year, caused by the severe winter weather in the US and the full year closure for redevelopment of the Dania Jai Alai stadium, a key venue for one of our important betting products. Overall handle is, as expected, down 6% against prior year to date, in line with trends highlighted in the interim announcement. We look forward to the Dania stadium reopening early in 2016.
Internet revenues are up 53% on last year. We continue to face competition from larger unlicensed internet operators who accept bets in Connecticut which impacts revenues both offline and online and take tax and jobs from the State of Connecticut.
"Striders", our first branded sports bar, restaurant and betting venue in downtown San Diego, California opened on 31 October for the Breeders Cup. This site is the only wagering venue in the city and has been developed as a joint venture with local operators, Silky Sullivan Group.
Football Pools
The Football Pools continues to trade in line with management expectations. In the subscription channel, and importantly in our drive for stability this year and then growth in the business, revenues remain broadly in line with prior year, driven by an increase in spend per head, together with improved retention in core player numbers, following the successful roll out of an improved CRM programme.
New player acquisition was slightly down year on year, 16,000 to date (2014: 20,000) with 9,000 digital (2014: 7,000), due to extensive trials of new digital acquisition channels and a planned reduction in telemarketing activity. However, following these trials, the business remains confident it will continue to improve acquisition from current levels, driving stability in the core pools player base.
The collector channel has performed in line with management expectations and continues to add positive contribution to the overall business in the short-term.
Non-subscription digital performance is beginning to deliver positive incremental gross margin as a result of the continued investment in our mobile-first website and the on-going addition of new and engaging content. Our focus continues to be growing the subscription base via digital acquisition.
VAT Claim
The Group was advised that the hearing of its appeal to the Court of Appeal, in relation to the £97m VAT repayment claim on the "Spot the Ball" game, due to be heard on 3 and 4 November, has been delayed due to a lack of judicial availability.
The Court of Appeal will now schedule a new hearing date and the Group will provide shareholders with an update accordingly.
Net Debt
The Group's net debt at 31 October 2015 was £60.0m reduced from £63.3m at 30 June 2015.
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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
Stuart Donnelly
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 operators and suppliers of pools betting services, occupying a unique position in the highly regulated and emerging gaming markets worldwide. We focus on highly regulated markets worldwide, with our largest activities in the US. Globally we process over $13 billion in bets annually, with a presence in 30 countries, including customers in most US states that permit such betting. The Group operates through 3 divisions: Sportech Racing and Digital, Sportech Venues, and The Football Pools, providing betting technology and operating systems and retail venues for betting on football (soccer), horseracing and greyhound racing. 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 www.sportechplc.com.