1 September 2022

Sportech PLC

("Sportech" or the "Group" or the "Company")

Interim Results

Sportech (AIM:SPO), an international betting technology business, is pleased to announce its interim results for the six months ended 30 June 2022 ("H1 2022" or the "period").

Summary

The Group stabilised revenue, improved EBITDA and returned £7 million to shareholders during the period as a result of online retail marketing projects, lower costs, the development of sports betting initiatives in Connecticut and the proceeds from an asset sale announced on 4 January 2022.

Group Adjusted EBITDA improved markedly during the period to £0.3 million (H1 2021: loss of £0.9 million). The commencement of Sports Betting in Connecticut in late 2021, where the Group has a commercial retail sports betting arrangement with the State via the Connecticut Lottery Corporation; stronger food and beverage revenues, digital business growth and lower corporate costs supported the improvement.

Following a return to pre-COVID revenues, a significant part of the former Sportech Lotteries division was sold to Inspired Entertainment Inc, as announced on 4 January 2022 (LEIDSA disposal). This enabled the Group to return a further £7 million to shareholders by means of a 7p per share dividend, announced on 27 April 2022, taking shareholder repayments to £42.5 million during the last 12 months and £117.5 million since 2017. Comparatives for H1 2021 have been restated to classify LEIDSA operating results to discontinued operations.

1.        Contribution is defined as gross profit, less marketing and distribution costs.

2.        Adjusted EBITDA is earnings from continuing operations before interest, taxation, depreciation and amortisation, share option charges, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.

3.        Adjusted loss is the aggregate of Adjusted EBITDA, share option charges, depreciation, amortisation (excluding amortisation of acquired intangibles) and certain finance charges.

4.        Prior year comparatives have been adjusted for discontinued operations (LEIDSA contract).

As the Group moves through the rest of the financial year, the corporate focus remains on delivering positive shareholder returns, operationally executing the delivery of sports betting across key locations and escalating the Group's digital wagering opportunities. The Board remain positive in the quality of the Group's innovative products, management strategy and continuing commercial relationships and are confident of achieving full year 2022 forecasts. There remains deferred contingent consideration potentially due to the Group in Q1 2023 of c£1.1 million (CAD$2 million) in connection with the Bump disposal, however this has not been recognised on the Group's balance sheet as a receivable due to the uncertainty over the revenue hurdle being achieved.

The business transformation continues with the following objectives:

•      Secure position within Connecticut expanded gaming.

•      Deliver a less capital-intensive business and significantly reduce the future corporate cost base.

•      Execute further licensing opportunities within digital lottery.

•      Evaluate and execute material corporate opportunities, delivering tangible investor returns.

Richard McGuire, Executive Chairman of Sportech, said: "The first half of 2022 recorded the successful execution of Group strategic objectives. Online revenue growth; non-core asset disposals; further shareholder capital returns and a US team focused on developing sports betting initiatives, all positive hallmarks of 2021, continued during the period. As previously announced, Nicola Rowlands, our outgoing CFO, will be leaving at the end of September, we wish her continued success. We also welcome Paul Humphreys to the Board as of today, as an Independent Non-executive Director. Paul's appointment further strengthens the Board, and he brings with him significant experience that is highly relevant to the strategy of the Group. Paul will chair the Group's Audit Committee.

The Group has a clear vision, a strong Board, a variety of attractive operating assets, no debt, and cash to meet strategic objectives in the second half of 2022 and beyond."

For further information, please contact:

Sportech PLC                                                                                        enquiries@sportechplc.com

Richard McGuire, Executive Chairman

Nicola Rowlands, Chief Financial Officer

Peel Hunt                                                                                              Tel: +44 (0) 20 7418 8900

(NOMAD and Corporate Broker to Sportech)

George Sellar / Andrew Clark / Lalit Bose

Group Overview

The Group underwent significant restructuring during 2021, completing the sale of various operational divisions, returning significant capital to investors and retaining sufficient net cash for a potential combination of growth investment and future investor returns. That momentum continued in H1 2022, following the sale of Sportech Lotteries LLC on 31 December 2021 and the payment of a 7p dividend per share. Positive marketing initiatives, lower costs and sports betting resulted in positive EBITDA despite a modest reduction in gross revenues, on a constant currency basis.

1.        2021 numbers are at constant currency.

Sportech Digital

The acquisition of the technology platforms and talent of Lot.to Systems and the integration of these assets into Sportech's organisation completed in early 2019, resulting in further expansion of the Group's B2B lottery capabilities with a key mobile component and robust administrative, CRM and marketing tools. The team advanced digital lottery capabilities facilitating the sale of Sportech Lotteries LLC and the agreement to provide a digital lottery platform to Inspired Entertainment Inc.

The continuing digital business revenues increased versus H1 2021, and expenses were reduced resulting in an improved EBITDA for the period. The core focus for the Digital team, based in Chester, UK, remains pursuing licensing opportunities drawing on the Sportech brand, legacy, and digital expertise to deliver an enhanced consumer experience.

1.               Adjusted operating expenses exclude depreciation and amortisation, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.

2.               Prior year comparatives have been adjusted for discontinued operations (LEIDSA contract).

Sportech Venues

Sportech Venues operates ten gaming venues, providing betting on horse racing, greyhound racing and jai alai in the State of Connecticut under an exclusive and in-perpetuity licence for retail, online, and telephone betting. In 2021, an agreement was concluded whereby Sportech can offer betting on all other sports across a number of Venue locations under licence of the Connecticut Lottery Corporation, (CLC). Management have worked tirelessly with the CLC to introduce retail sports betting across the State since Q4 2021 and have comprehensive marketing plans in place ahead of the 2022/23 American football season, commencing September 2022.

COVID related travel and hospitality restrictions within retail outlets eased during the period resulting in an 80.6% increase in food and beverage ("F&B") revenue. However, the H1 F&B revenue of £1.6 million remains below the £2.5 million H1 2018 high, indicating upward potential when office workers return to 'normal occupancy'.

Sportech was delighted to announce in August 2021 a commercial arrangement with the Connecticut Lottery Corporation ("CLC") which, subject to required regulatory consents, provided Sportech Venues Inc., in conjunction with CLC's sports book provider Rush Street Interactive Inc. ("RSI"), an ability to deliver sports betting across certain locations and promote CLC's online and mobile channels.

Contribution margin of 50.7% (H1 2021: 49.7%) was marginally better despite the costs of introducing sports betting capabilities during the period. At the end of the period, the division operated nine leasehold premises and one freehold premise in Connecticut, USA.

1.        Adjusted operating expenses exclude depreciation and amortisation and separately disclosed items as reported in note 1 of the Interim Financial Statements.

Corporate Costs

Corporate costs reduced by £0.4 million to £1.1 million due to staff costs savings, having restructured in H2 2021, as well as a general drive to reduce costs of the PLC. Costs are expected to continue to be reduced though H2 2022 as we aim to align the costs as close as possible to the reduced size of the Group.

Depreciation and Amortisation

Capital expenditure and depreciation/amortisation is much reduced in the continuing group from that of the Group prior to the 2021 disposals. Depreciation and amortisation in the period reduced from £0.8 million to £0.7 million. This is despite 2022 depreciation increasing following the change in assumption on the lease term of the Stamford venue as at 31 December 2021 and the upward revaluation of certain assets at the same venue.

Separately Disclosed Items

The Group incurred administration costs in continuing operations during the period of £0.6 million (H1 2021: £0.5 million) which are shown as separately disclosed items. H1 2022 items include pay in lieu of notice payments to former Directors and settlement of contract liabilities. The Company does not expect further costs in H2 2022 as the business has mostly completed restructuring.

Net Finance Income

The Group has no debt. The Group had a net finance income in continuing operations of £0.1 million (H1 2021: £0.1 million), including £nil (H1 2021: £0.1 million) interest accrued on potential tax liabilities payable, £0.1 million (H1 2021: £0.1 million) interest payable on lease liabilities and £0.2 million (H1 2021: £0.2 million) foreign exchange gain on financial assets and liabilities denominated in foreign currency.

Taxation

Taxation is provided based on management's best estimate of the expected weighted average annual taxation rate for the full year. The estimated weighted average annual tax rate for the year ended 31 December 2022 is (3.7)% (2021: 49%). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates, the non-recognition of deferred tax on losses in the UK due to uncertainty of non-recovery as well as the utilization of previously unprovided tax assets in the US.

The Group paid tax on account during the period of £4.6 million to HMRC for tax potentially due on the 2016 Spot the Ball VAT refund (excluding interest). The payment was in line with the tax provision held on the balance sheet of £4.6 million at both 30 June 2021 and 31 December 2021. The current tax asset on the balance sheet as at 30 June 2022 is an estimated overpayment of preliminary taxes in the US on profits generated in the six months to 30 June 2022.

Net Cash

The Group held cash balances of £8.1 million, excluding customer balances (31 December 2021: £21.9 million). The reduction is due to the payment of a £7.0 million dividend, settling lease and other legacy liabilities as well as paying tax on account of £4.6 million relating to the Spot the Ball tax dispute with HMRC. Legacy liabilities are now substantially settled.

Capital Expenditure

Capital expenditure was controlled again in the period and amounted to £0.1 million (H1 2021: £1.1 million). £1.0 million in the prior year related to the discontinued operations and was mainly staff costs capitalised or expenditure agreed to be reimbursed by the buyer of the operation. Capital expenditure will increase into H2 2022 and 2023 as venues are improved to support continued sports betting growth and with the move of Sports Haven to a new building.

Shareholders' Funds

Shareholders' funds decreased by £6.8 million from 31 December 2021 to £13.0 million (31 December 2021: £19.8 million) following the dividend paid in the period. The loss made in the period of £0.8 million is offset in reserves by a foreign exchange gain on translation of net assets denominated in US dollar of £1.0 million, given the weakening of Sterling over the period.

Going Concern

After making reasonable enquiries and forecasting the Group's cash flows with reasonable downside assumptions applied, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements. The Directors have not included in the downside model any assumption of a further local or more widespread "lockdown" as a result of COVID-19 cases or a new pandemic arising. Under this scenario the Directors will take all actions necessary (as evidenced in 2020 and 2021) and make use of all government support available to ensure the Company and the Group continues in operational existence.

Outlook

Enhancing Group value remains the Board's key focus and the Group strategy is structured accordingly with regard to this central measure.

Interim consolidated income statement
For the six months ended 30 June 2022

See note 4 for a reconciliation of the above interim consolidated income statement to the adjusted performance measures used by the Board of Directors to assess divisional performance.

Prior half year comparatives have been restated to exclude the results of the LEIDSA contract which have been included with the results of the Global Tote and Bump 50:50 within profit after taxation from discontinued operations.