Member Info for JohnLewis79

Heavily trailed to be poor, ebita to fall to £55m from £86m with CEO Richard Glyn's job on the line.The digital switch to Playtech being the problem child. Ladbrokes late to the party giving William Hill more than a head start owing to issues with a previous supplier 'Microgaming'.At one time Sportech was in competition with the big two (Bet 365) and has since very wisely distanced itself from the cut throat UK gaming scene.So in so far as Ladbrokes results are of interest to Sportech (sentiment and current state of the gaming market) shareholders can rest easy that there will be minimum effect however bad the interims are.

Half year results were announced on Thursday 22nd last year so approx 3+ wks away.The sp fell 3p on the figs to 86p on light volume of 117k closing on the wk at 85p weekly vol rose to 810k.Comment on the interims?......only the Daily Telegraph bothered . For the rest of the year the stock drifted sideways and down from results announcement to 81p ish tho up 16% on year.

Ok, so you have done your valuation for the pools business.Here are mine. My future estimates are based solely on past average performance. The averaging smooths out the ebb and flows of the economy hence I have put a higher multiple of earnings on Spo as their track record is so consistent.Thus I reckon 16× earnings × £21.4m gives us a Mrk Cap of £342.4m or 168pps some 86% north of where we are currently

Of course all figs below relate to the pools only you decide what value you would put on a business that provided that consistency over that period.Investors like nothing better than predictability of earnings, ask Warren Buffett.

Profit margins are perhaps the most important aspect of a business, the ability to turn sales into profits at a reasonable rate of return and they vary hugely from buis to buis (Supermarkets at less than 3%) )software cos much higher (with added risk).Sportech shareholders should be aware of what a stunning business the pools is and is often overlooked in the general hubbub of annual announcements. I have gone back to 2000 (16wks) and calculated the gross operating profits/margins right up to 2013.They show returns of between 19% and 41% over the period.! From 2000 Sportech has earned £285.2m gross averaging out at £21.4m.The % return averages out... wait for it 34.3%! What consistency considering how the economy has been over that period.Boy wouldnt you like to own a business with those figures.

It's very useful to know the payback term on any share you hold, it also leads to finding undervalued shares (along with other methods) but with payback you get 2 for the price of 1.So you need to know how long it takes to return your cash. Take Sportech (keeping nos simple)we'll assume sp at 100p and earnings of 10p generates 10% annual return for a pe of 10.In other words you would have to pay 100p to claim 10p of Spo earnings.You have to decide if that is a fair price? to help you decide you need to estimate Spo growth rate (check past figs).If Spo growth was flat to zero it would take 10 years to generate 100p of earnings far too lon g for most investors. So we'll assume earnings grow at 15%(not unreasonable)and a pe of 15 I'll do the math payback would be 7-8yrs much better.So the rate of payback is dependent on 2 factors the pe/earnings yield. the quicker the payback the more upside potential.A stock with a quicker payback is superior to one with 10+years payback.Finally if Spo can grow its earnings at 30% and a pe of 20 in 7 years you'd get your cash back and would be considered undervalued relative to its growth rate. Of course over time a stocks payback shifts according to market forces but always look for quick payback stocks (7yrs or better) than long paybacks (10+yrs)

Figs to look for 2013 h/yr (£11.8m) ebita netted down to (£4.2m) profit after tax before exceptionals. These figs were down on 2012 profit after tax (£5.4m) O Outside of unknowns I'd expect 2014 interims to be up.

As sdog says cash flow is what he's mainly interested in.Im sure Spo investors are well up on cash flows and the importance to a cos well being, in a nutshell its a measurement of a co health it's ability to pay creditors and employees on time.The amount of cash generated will help to increase sales, reduce costs, overheads and provide confidence in the co in case they need to raise finance and above all service the co debts. Figs to look for 2013 h/yr £0.4m well down on 2012 (£5.8m) so not a lot to beat.

Not that this has any real reevance in 2014 but I thought interesting nonetheless. Back in 2000 staff numbers were 646 and total wages were £5.4m averaging out at £8000.Now 14 years later staff nos are 795 (+23%) and wages £33m .Considering how much the co has expanded in the intervening years this is prob very reasonable so sdog your right on the admin costs though these will surely reduce as the internet/online operations take hold (EBet etc...) Figs to look for at interim stage 2012 .Operating profit £5.4m netted out at £2.1m for the period .

I thought I'd check back a few years to see if there was a trend re % net profit and admin % expenses.My alarm at 35% (still think its too high) but as you will see a huge improvement on previous years so I guess I'm out of touch on that score but there should be able to reduce these expenses via the Internet/mobile applications reducing head count particularly the pools.Anyways 2012 (1.3% net admin 35%) 2011 (4.4% net admin 33%) 2010 (7.3% net admin 60%) 2009 (net loss admin 95% huge jump in exceptionals/redundancies/impairments etc) 2008 (7.1% net admin 55%) 2007 (13.5% net admin 41%).lm sure these admin figs alarmed me at the time but I must have had other things on my mind.As regards under reporting good news id say the opposite the co has always been bullish without ever really delivering.They are however now positioned for possibly explosive growth and I have no doubt that in 5 years time they will be the preeminent leisure/gaming co in the US.Interims last year showed net profit of 3.6%

Thought this might be of interest to Spo holders who may not these figs to hand so nav as below. 2000----------5p 2001----------4.6p 2002----------5.3p 2003----------5.2p 2004----------4.7p 2005----------5.3p 2006----------7.7p 2007----------85.9p (1/10) cons 2008----------96.6p 2009----------84.9p 2010----------75.6p (stock issue) 2011----------79.0p 2012----------68.0p (stock issue) 2013----------70.0p (stock issue) So the nav has appreciated from £29m to last years £140m over the period.Thank you and goodnight.

Sdog your too kind so pos my last thoughts on Spo (for a bit) whats surprising is how hard you have to sweat the business to get a decent return.When you consider Spos terrific margins the pools (41%) ventures (14%) racing (21%) the group overall (24%) in the leisure/gaming bus these are nos to die for!.Yet from group revs the net profit drops to an alarming 3%!.Okay a serious chunk of this is admin (wages) at 35%! (far too high) and dep+amortiz+ exceptionals (£17m) or 15%.These 2 items account for 51% of t/o!.Sdog you may agree but with Spos margins a 3% return is just not good enough . I've always said boost the top line look after the middle bits and the bottom line will take care of itself.Of course a Vat win will wipe out the debt and the whole picture will change. Up coming interims August(late) may show some improvement over last year.

Just a quick update ive had a few further thoughts.On the audited figs the pools contribute 68% of co profits so with the current mrk cap around £184m id expect the pools division to be worth a minimum of £135m or 8× earnings. This of course takes no account of future prospects and 10+times earnings might be more realistic?.Of course this will never happen but you never know, would the board turn down £200m only 11×earnings?.

Spo have not yet won their appeal.HMRC have settled prior to the decision to save accrual interest while awaiting judgement and poss appeals.As to the second part re "compounding" no idea but id be very surprised if Sportechs lawyers didnt have all bases covered . The decision is due anytime soon.

No quibbles with your comprehensive analysis of Spo current status though I urge shareholders to lobby the co regarding compound interest(in the event of a successful outcome) as per the recent Littlewoods case.Just as an aside I know that selling the pools business (Shock Horror!!!) Is an anathema to the co and pretty much a non starter but as a stand alone its a very tasty morsel. Consider 2013 rev /ebita were (£41m/£17m) gross 41%!.how bad is that? Of course we know the decline in pools players has been horrific over the years down from over 1m weekly back in 2000 to current 360k a week but fair play too the management the profit decline has been far less.What would the pools business fetch if sold off?....10x earnings? possibly more but I doubt the board would consider the proposition considering the co was founded on the pools business.

Hmmmm..... £9m+over 10yrs? Id guess poss spin-offs, add-on may prove more lucrative over the period.Half year results due late Aug where 2013 revenues at half year were below 2012 (£57.7m) and ebita was £1.3m lower. So not much to beat but dont expect fireworks my guess they will be flat.Of course by then we may have had a positive outcome to the vat appeal enabling the co to clear debts and look for acquisitions (no more joint enterprises please!) All in all I guess im never sure whether im madly bullish or bearish on the stock they have disappointed me more often than not over the years despite the cos big ambitions. It really is time they started to ramp up the bottom line!.

OH HOW LUCKY WERE SPORTECH TO LOSE THE AUCTION FOR THE TOTE! God almighty fancy having to run 5/6/7/hundred shops or more jeez what a nightmare that idiot who runs betfred exhorting punters about his latest push trouble is no one's listening cos the shops are empty!.I was in my local betfred scratching my arse from 10ish to 11ish and I could have been in the local 7th day adventist chapel chatting about the Sandown form with a couple of believers.They dont know it but that was a truly miraculous escape for Sportech.

Do you ever get the feeling they dont want you in the shops? assuming you can find one open on time (im talking south london) with their invariably balshie staff who dont know the diff between a patent and a union Jack are you welcome? You bet your not take your yankee bet elsewhere we want mug punters on the machines so we can sit behind the jump playing games on.our mobiles."Yea man you want?" well yes I have a tricast up on thw dogs doubling with a forecast on the 2.30 at Sandown.Mobile fixed to ear "no man cant'fin bet man".No worries ill fly to Vietnam they'll.pay me out".God give me strength trust me any one who goes into a betting shop needs their heads examined when your mobile gives you instant info on most sports and makes the bet and payment so user friendly.If betting shops are still on the high street in 10 years time it will be the idiot machines keeping the doors open with legislation and punter awareness this is a doomsday scenario long term.

If you read the excellent post by jumpedship you will gather that there'many a slip between cup and lip . With the decision imminent and many an uncertainty on the horizon (tho most will see this as HMRC's last throw of the dice) and about bloody time shareholders may well be looking forward to a special dividend payout.I think that would be a bad move.I very much doubt that Spo holders look for a yield on their stock no.. the monies should be used for a) elimination of debt and interest payments. b) future expansion of the co. As an aside we have been talking of simple interest when legitimately Spo should be considering compound interest over the period which would double the payout! Shareholders should be pressing management on this!

Your right bjamieson the usa is where Spo see the companies future what with the horrible decline in the pools players (on a downward path since the ghastly lottery) they have had to rethink entirely tje co future.While the pools still provide ebita of £17m annually and this money/cash flow will be used for future developments across the pond. My main concern is that most of the expansion is coming from joint deals often a recipe for friction and management inertia.Maybe this is the only way into the US market? Its a minefield of regs/licenses and other hurdles.No doubt the acquisition of Scientific Games was and will be seen as a game changer for the co.Sportech tho tiny in comparison to the big US players are so far ahead in US footprint to the likes of WHill/Ladbrokes as to be positively embarassing!.I am in no doubt that 5 years down the line Sportech will be the preeminent betting/leisure co in America.