SPO.L Regulatory News (SPO)

19 Sep 2006 07:01

Sportech PLC19 September 2006 Sportech PLC ("Sportech" or "the Company") Interim Results for the 26 weeks ended 7 July 2006 Highlights •Profit after tax including gains from exceptional items of £11.5m (2005: £1.9m) •Profit after tax from continuing operations increased by 25 per cent to £5m (2005: £4m) •Net debt at end June 2006 reduced by 18.4 per cent to £92.3m (June 2005: £113.1m) •Strategic review continues + •Loss making Bet Direct sold for £12.5m in cash + •Termination of ITV contract and closure of division •Business strategy refocused on core business of football-related gaming products plus bingo and online casino and poker •Littlewoods brand overhaul initiated - new brand to be launched prior to August 2007 •Earnings per share of 1.95p (2005: 0.34p); earnings per share from continuing operations 0.86p (2005: 0.68p) Ian Penrose, Chief Executive, said: "Sportech is starting a process of significant change. We have great productsand we operate in growing global markets. Our products are at the heart offootball, gaming and leisure and this is a very strong base to operate from.Having sold loss making operations we are now focused on growing our corebusinesses of football-related gaming, online bingo, poker and casino. We areaddressing all areas of our business including new product issues, technology,distribution and commercial property. "The outcome of the strategic review will not result in an instant turnaroundbut we are convinced that the efforts of your new Board will be reflected in amedium to long term strategy that creates a viable growth business deliveringenhanced returns for shareholders. The Board looks to the future withconfidence." - ends - Enquiries Sportech PLCIan Penrose, Chief Executive 0151 288 3561 Bell Pottinger Corporate & FinancialDavid Rydell / Emma Kent 020 7861 3232 Chairman's Statement Sportech is a company in transition. The new Board and management team arecommitted to creating a growth business that will deliver returns forshareholders in the medium to long term. We believe that to achieve this and torealise the potential of the business, fundamental change was required to theprevious Board's strategy. The Company faces a number of difficult challengesand radical change is not something that the Board is afraid of. The first sixmonths of the year have started well. The strategic review that commenced latelast year continues and while there is still much to do we have made progress onkey fronts. We recognised that it was imperative to eliminate loss-making activities andreduce bank debt. I am pleased to report that these key strategic objectiveswere met during the first half of 2006. The positive financial impact hasalready been registered with a 25 per cent increase in post tax profits fromcontinuing operations to £5.0 million (2005: £4.0 million) and an 18 per centreduction in debt to £92.3 million. One key finding of the strategic review is the strength of our football-gamingproducts. This is the solid foundation which has historically underpinned thefinancial performance of the group, but has in recent years received lessattention in terms of promotion and investment while the focus has centred ontrying to develop betting and interactive products and channels which provedunprofitable. We are reversing this policy. We are committed to growing ourfootball-gaming products, not least the pools business, and believe we own aunique position in a global market that can be significantly exploited for thebenefit of our shareholders. We are determined to transform the culture of Sportech from a "small companywith a big company structure" to a "big company with a small companyentrepreneurial culture". One of the key objectives set by our strategic review was to appoint a Board andmanagement team with the experience, energy and drive to change the business. Webelieve we now have that team in place following the appointment to the Board ofSteve Cunliffe as Finance Director on 3 July 2006 and the appointments to theexecutive team in early Summer of Ted Taylor to Managing Director of LittlewoodsFootball Pools and Jon Sheehy to Marketing Director. Gary Speakman resigned fromthe Board on 31 August 2006 and I would like to thank Gary for his contributionto Sportech since 2000. We believe that following the management restructuring we are now in a positionto pursue our objectives and ensure that Sportech is a company with anentrepreneurial culture. A new energy and enthusiasm to succeed is permeating the business. It remainsearly days but the bare fact that sport, leisure and gaming - our core areas ofoperation - are at the heart of British and many international cultures offersexciting opportunities in rapidly evolving sectors. The strategic review is ongoing and its findings will take time to assess andwhere necessary take effective action. We remain committed to growth and willmake the necessary changes to the Sportech business to capitalise on corestrengths. As the strategic review develops I am confident that Sportech willfind itself capitalising on the huge opportunities ahead. Piers PottingerChairman19 September 2006 Chief Executive's Review Transforming Activities, Strategy and Culture We have achieved a number of key strategic objectives during the first half of2006 and the business is seeing the benefit of these changes. We have profoundlychanged our Board and management team, creating a team with the necessaryexperience and skills set required for Sportech's future. We have terminated ourloss-making contract to provide betting services to ITV and consequently closedour interactive television operations. In June 2006 we sold our loss-makingbetting division, Bet Direct, for £12.5 million in cash. These two activitiesalone lost Sportech £8.9 million in 2005. The Board is pleased to haveeliminated these loss-making activities, to have eliminated further cashoutflows and to have achieved good value for Bet Direct. As a result, bank debthas been reduced significantly from £112 million in October 2005 to £92.3million at the period end. Debt reduction remains one of the primary objectivesof the Company. The strategy is now far more focused around football related products - notleast rejuvenating the profitable football pools business. The Board believesthis is a significant global marketplace in which Sportech has immenseopportunity. Financial Overview The profit after tax from continuing operations of £5.0 million (2005: £4.0million) together with the profit after tax from discontinued operations of £6.5million (2005: loss of £2.1 million) has resulted in an overall profit after taxfor the financial period of £11.5 million (2005: £1.9 million), an increase of£9.6 million. Net debt at the end of the period was £92.3 million (June 2005:£113.1 million), a reduction of £20.8 million, some 18.4 per cent. Operating profit from continuing operations was broadly static at £9.5 million(2005: £9.6 million). Interest payable reduced by 13 per cent to £3.4 million(2005: £3.9 million) resulting in a 7 per cent increase in profit before tax to£6.1 million (2005: £5.7 million). Tax payable has reduced to £1.1 million(2005: £1.7 million) resulting in a 25 per cent increase in after tax profitsfrom continuing operations to £5.0 million (2005: £4.0 million). The profit of £10.6 million on the successful sale of Bet Direct for £12.5million exceeded initial expectations. The associated tax charge and tradinglosses incurred prior to disposal amounting to £4.1 million reduced the profitfrom discontinued operations to £6.5 million (2005: loss of £2.1 million). Earnings per share have increased to 1.95p (2005: 0.34p). Earnings per sharefrom continuing operations have increased by 26 per cent to 0.86p (2005: 0.68p). No dividend is proposed as the Board continues to focus on investing incontinuing activities and reducing debt. Football Pools This remains the driving force of the financial performance of the group. Theongoing strategic review into our football business has highlighted many of thekey facets that need to be introduced in order to rejuvenate the business.During a period when our competitors invested heavily in product innovation,technology, marketing and distribution, Sportech chose not to make similarinvestments. This significant period of underinvestment has challenged the newBoard given the unprecedented level of sporting, media and gambling interest infootball. Our commitment is to get the product and distribution basics right and we areconfident of our ability to build an enlarged football gaming business. We havea strong commitment to new products and we will launch a number of new andrepositioned games for the football season 2007/08. Our intention is tointroduce predictor and fantasy football games, reinvigorate our core treblechance offering, relaunch Spot The Ball and introduce customer loyaltyprogrammes. Productive and cost-effective distribution is essential for consumer-drivenproducts. We believe that wider and more targeted distribution, utilising newtechnology as well as our existing collector and retail network, is essential totake the business forward and we are currently assessing how best to increaseour routes to market. We are embarking upon an overhaul of our IT infrastructure. The strategic reviewhas highlighted the fact that our IT hardware and software is out of date andinappropriate for a modern transactional business. This IT programme will bephased over the next eighteen months but we expect key customer facingactivities to be fully operational for the start of the 2007/08 football season. The decisions taken by the previous management team when planning for the 2005/06 football season set the scene for the financial results in the first half. Asa consequence profits from our Football Pools division reduced by £3.6 millionto £9.0 million (2005: £12.6 million) as the forecast continued decline incustomer numbers proved correct. Customer numbers have reduced by 8.5 per centyear on year to 546,000. We believe that the attrition can be reversed and that the business can returnto a growth mode. Encouragingly, we have reduced the rate of decline in ourcustomer numbers who play on a direct basis with us (direct mail, direct debit,postal) and as we introduce efficient database management and customerrelationship management techniques, we will be looking to stop the attrition andraise the average spend per customer. Goalrush, our new game for the World Cup, proved to be an important step in thedevelopment of our strategic plan. Whilst more than 250,000 individuals playedthe game, the website experienced operational difficulties which highlighted,and consequently accelerated, the need for an IT restructuring plan as describedabove. Encouragingly, the average spend per head online was five times greaterthan that from the traditional customer base which offers us encouragement forthe potential of our online products. The strategic review has also identified that our property overhead is excessiveand involves disparate locations. We are assessing our options as we movetowards putting all our activities under one roof thereby streamliningoperations and improving communication. Cost control remains a significant focus for the Board and we continue toactively review the cost base of our business believing that there aresignificant cost savings to be made in due course. Brand Sportech has a licence agreement until September 2010 to use the "Littlewoods"name. In the opinion of the Directors, the strength of our business is in the546,000 weekly players and the liquidity that this generates for our prizes,together with the history and tradition of the football pools business.Accordingly, as part of our strategic review, we are seeking new and improvedbranding by way of a full marketing makeover and expect that a new and enhancedbrand will be launched prior to August 2007. With a long lead time, the Boardbelieves it can use to its advantage the transfer from the Littlewoods name. Bingo We view bingo as an exciting opportunity that has the potential to perform wellalongside our core football business. The changes that we have introduced intoour football business also apply to our bingo product. Since the launch ofLittlewoodsBingo.com in February, we have changed our internal arrangements andrenegotiated our contract with St Minver, a leading supplier of gamingsolutions, to put the business on a clear strategic route forward. Together withSt Minver we have this month commenced a six month marketing and promotionscampaign to establish our position in this lucrative online market. At the endof June we had a total of 13,000 registrations, 1,200 active players and hadincurred a start-up loss of £0.1 million. Casino and Poker We have managed to reverse the decline experienced in our casino and pokerdivision. Following three successive six month periods reporting decliningprofits, we are pleased to report that we increased the profit from our casinoand poker business by 33 per cent from £0.6 million in the second half of 2005to £0.8 million in the first half of 2006. The profit for the comparable periodin 2005 was £1.1 million. We have increased our investment in marketing by £0.6million, which continues to have a positive impact on trading. The number of registered players has increased year on year by 52 per cent tomore than 96,000, whilst the number of active players has also increased by 13per cent to over 16,000. Betting We have completed the withdrawal from sportsbook betting activities followingthe sale of Bet Direct for £12.5 million and the termination of our contract toprovide exclusive betting services to ITV through the red button. Whilst we were pleased with the 35% improvement in trading through to June andadditional increases forecast for the second half year, the Board decided thatthe weekly trading loss of over £50,000, even with the incremental improvementsanticipated, was too high to tolerate as the business had failed to make aprofit in any year since its formation. Accordingly, your Board was delightedwith the sale price achieved. Summary A lot has been achieved in the last six months. But there is still much to do.Our work is underway. Some of the issues we face are deep-seated and historic.They will take time to correct and will require capital expenditure. Our aim isto complete the majority of the strategic review in 2006 and start to implementit in 2007. In this regard, it is unlikely that the company will create anyoverall improvement in financial performance in the second half of 2006 andthere remains the likelihood of short term impact for the 2006 year in full. We are starting to transform the Sportech business. The opportunities areimmense. We operate in a global growing marketplace. We have considerable expertise insome of these markets and we own brands that are ready for change andexploitation. Our technology is being modernised, our online and new mediapresence is being upgraded, new products and routes to market are being created.Distribution is a key focus of our strategic review and real opportunity lieshere. Sportech has the potential to become a significantly larger broad-basedsports, leisure and gaming business with international reach. Sportech is aCompany in real transition and we look with confidence to the future. Ian R PenroseChief Executive19 September 2006 Unaudited Interim Results for the six monthsEnded 30 June 2006 CONSOLIDATED profit and loss accountFor the twenty six weeks ended 7 July 2006 26 weeks 52 weeks 26 weeks to to 7 July 8 July 6 January Notes 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £m £m £m Continuing operations Stakes placed* 172.8 180.8 347.1 Gross win revenue 3 30.5 34.2 67.1 Cost of sales (8.8) (10.1) (19.6) ---------- --------- ---------- Gross profit 21.7 24.1 47.5 Other income - 0.4 0.4 Distribution costs - - (0.1) Administrative expenses (12.2) (14.9) (40.9) ---------------------------------------------------------------------------------- Operating profit before restructuring costs 9.5 11.3 22.2 Exceptional restructuring costs - ITV exit costs 5 - - (13.6) Exceptional restructuring costs - Other 5 - (1.7) (1.7) ---------------------------------------------------------------------------------- Operating profit 3 9.5 9.6 6.9 Interest payable and similar items 6 (3.4) (3.9) (7.5) --------- --------- -------- Profit/(loss) before taxation 6.1 5.7 (0.6) Taxation 7 (1.1) (1.7) (1.1) --------- --------- -------- Profit/(loss) for the period from continuing operations 5.0 4.0 (1.7) Discontinued operations Profit/(loss) for the period from discontinued operations 4 6.5 (2.1) (4.1) --------- ---------- --------- Profit/(loss) for the financial period attributable to equity shareholders 11.5 1.9 (5.8) ========== ========== ========= Earnings per share 8 Basic and diluted 1.95p 0.34p (0.97)p ========= ========== ========= Earnings per share from continuing 8 operations Basic and diluted 0.86p 0.68p (0.29)p ========= ========== ========= * Stakes placed does not represent a statutory number and is given forinformation purposes only. CONSOLIDATED Statement of recognised income and expenseFor the twenty six weeks ended 7 July 2006 52 weeks 26 weeks to 26 weeks to to 7 July 8 July 6 January 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £m £m £m Profit/(loss) for the financial period 11.5 1.9 (5.8) Actuarial gain on defined benefit scheme - - 0.1 --------- --------- --------- Total recognised income/(expense) for the period 11.5 1.9 (5.7) ========= ========= ========= CONSOLIDATED balance sheetAs at 7 July 2006 7 July 8 July 6 January Notes 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £m £m £m ASSETS Non-current assets Goodwill 145.2 145.2 145.2 Other intangible assets 0.1 2.8 1.0 Property, plant and equipment 3.8 6.8 4.8 Prepayments - 9.6 - Retirement benefit assets 0.3 0.2 0.3 Deferred tax assets 1.3 0.5 1.3 ---------- --------- -------- 150.7 165.1 152.6 ---------- --------- -------- Current assets Trade and other receivables 2.2 3.8 2.9 Cash and cash equivalents 9 2.4 1.9 1.6 ---------- --------- -------- 4.6 5.7 4.5 ---------- --------- -------- LIABILITIES Current liabilities Financial liabilities- borrowings (15.0) (17.6) (22.8) Trade and other payables (15.2) (18.1) (17.3) Current tax liabilities (3.8) (0.7) - ---------- --------- -------- (34.0) (36.4) (40.1 ) ---------- --------- -------- Net current liabilities (29.4) (30.7) (35.6) ---------- --------- -------- Non-current liabilities Financial liabilities- borrowings (78.1) (95.5) (85.3) Deferred tax liabilities (0.3) - (0.3) ---------- --------- -------- (78.4) (95.5) (85.6) ---------- --------- -------- NET ASSETS 42.9 38.9 31.4 ========== ========= ======== SHAREHOLDERS' EQUITY Ordinary shares 29.6 29.6 29.6 Other reserves 0.2 0.1 0.2 Retained earnings 13.1 9.2 1.6 ---------- --------- -------- TOTAL SHAREHOLDERS' EQUITY 42.9 38.9 31.4 ========== ========= ======== The interim accounts on pages 4 to 11 were approved by the Board of Directors on18 September and were signed on its behalf by Ian Penrose Steve CunliffeChief Executive Finance Director CONSOLIDATED Cash flow statementFor the twenty six weeks ended 7 July 2006 52 weeks 26 weeks to 26 weeks to to 7 July 8 July 6 January Notes 2006 2005 2006 (Unaudited) (Unaudited)) (Audited) £m £m £m Cash flows from operating activities Cash generated from operations 10 7.1 4.4 14.9 Interest received - 0.2 0.2 Interest paid (2.3) (3.3) (7.5) Tax received/(paid) 0.4 (1.3) (1.9) -------- --------- -------- Net cash from operating activities 5.2 - 5.7 -------- --------- -------- Cash flows from investing activities Net proceeds from sale of Bet Direct 4 10.8 - - Proceeds from sale of property, plant and equipment - 0.3 0.4 Purchase of intangible fixed assets - - (0.7) Purchase of property, plant and equipment (0.2) (0.8) (1.1) -------- -------- ------- Net cash generated by/(used in) investing activities 10.6 (0.5) (1.4) -------- -------- ------- Cash flows from financing activities Finance lease principal payments (0.5) (0.1) (0.3) Repayment of borrowings (10.0) (3.0) (9.0) -------- -------- ------- Net cash used in financing activities (10.5) (3.1) (9.3) -------- -------- ------- Net increase/(decrease) in cash and cash equivalents 5.3 (3.6) (5.0) Cash and cash equivalents at start of period (2.9) 2.1 2.1 -------- -------- ------- Cash and cash equivalents at end of period 2.4 (1.5) (2.9) -------- -------- ------- Cash and cash equivalents consists of: Cash and cash equivalents 2.4 1.9 1.6 Overdrafts - (3.4) (4.5) -------- -------- ------- 2.4 (1.5) (2.9) -------- -------- ------- Reconciliation of Net Debt Increase/(decrease) in cash in period 5.3 (3.6) (5.0) Movement in charity cash 9 - 0.2 0.5 -------- -------- ------- Change in net debt resulting from cash flows 5.3 (3.4) (4.5) Cash outflow from repayment of loans 10.0 3.0 9.0 Cash outflow from repayment of finance lease agreements 0.5 0.1 0.3 Other non-cash changes - - (0.1) -------- -------- ------- Decrease /(increase) in net debt for the period 15.8 (0.3) 4.7 At start of period (108.1) (112.8) (112.8) -------- -------- ------- At end of period (92.3) (113.1) (108.1) ======== ======== ======= Notes to the financial statementsFor the twenty six weeks ended 7 July 2006 1. Accounting Policies The results for the 26 weeks ended 7 July 2006 have been prepared on the basisof the accounting policies set out in the report and accounts for the 52 weeksending 6 January 2006. a) Basis of Accounting The preparation of financial statements in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amount of assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during the reportingperiod. Although these estimates are based on management's best knowledge of theamount, event or actions, actual results may ultimately differ from thoseestimates. b) Basis of Consolidation The consolidated financial statements include the accounts of the Company andits subsidiaries drawn up for the 26 week period from 7 January 2006 to 7 July2006 (2005: 26 week period). 2. Non-statutory accounts The results for the 26 weeks to 7 July 2006 are neither audited nor reviewed bythe auditors. The financial information on pages 4 to 11 does not amount to full accountswithin the meaning of the Companies Act 1985 (as amended). The comparative figures for the 52 weeks ended 6 January 2006 do not constitutestatutory accounts. With the exception of the re-analysis of continuing anddiscontinued operations, these figures have been extracted from the auditedaccounts for that period which have been delivered to the registrar of companiesand on which the auditors issued an unqualified report which did not contain astatement under either section 237 (2) or (3) of the Companies Act 1985. Notes to the financial statementsFor the twenty six weeks ended 7 July 2006 3. Segmental reporting 26 weeks ended Football Interactive Telephone 7 July 2006 pools Betting Betting Group £m £m £m £m Continuing operations Revenue 25.4 5.1 - 30.5 --------------------------------------------------------------------------------------- Segment result before restructuring costs 9.0 0.5 - 9.5 --------------------------------------------------------------------------------------- Operating profit/(loss) from continuing operations 9.0 0.5 - 9.5 --------------------------------------------------------------------------------------- Discontinued operations Revenue - 1.4 2.6 4.0 --------------------------------------------------------------------------------------- Segment result before restructuring costs - (0.4) (0.9) (1.3) --------------------------------------------------------------------------------------- Operating (loss) from discontinued operations - (0.4) (0.9) (1.3) --------------------------------------------------------------------------------------- 26 weeks ended Football Interactive Telephone 8 July 2005 pools Betting Betting Group £m £m £m £m Continuing operations Revenue 29.6 4.6 - 34.2 --------------------------------------------------------------------------------------- Segment result before restructuring costs 12.6 (1.3) - 11.3 Exceptional restructuring costs - Other (0.5) (1.2) - (1.7) --------------------------------------------------------------------------------------- Operating profit/(loss) 12.1 (2.5) - 9.6 --------------------------------------------------------------------------------------- Discontinued operations Revenue - 1.1 2.6 3.7 --------------------------------------------------------------------------------------- Segment result before restructuring costs - (1.3) (0.9) (2.2) Exceptional restructuring costs - - (0.8) (0.8) --------------------------------------------------------------------------------------- Operating (loss) from discontinued operations - (1.3) (1.7) (3.0) --------------------------------------------------------------------------------------- 52 weeks ended Football Interactive Telephone 6 January 2006 pools Betting Betting Group £m £m £m £m Continuing operations Revenue 57.4 9.7 - 67.1 --------------------------------------------------------------------------------------- Segment result before restructuring costs 24.4 (2.2) - 22.2 Exceptional restructuring costs - ITV exit costs - (13.6) - (13.6) Exceptional restructuring costs - Other (0.5) (1.2) - (1.7) --------------------------------------------------------------------------------------- Operating profit/(loss) 23.9 (17.0) - 6.9 --------------------------------------------------------------------------------------- Discontinued operations Revenue - 2.6 5.5 8.1 --------------------------------------------------------------------------------------- Segment result before restructuring costs - (2.7) (2.3) (5.0) Exceptional restructuring costs - - (0.8) (0.8) --------------------------------------------------------------------------------------- Operating(loss) from discontinued operations - (2.7) (3.1) (5.8) --------------------------------------------------------------------------------------- Notes to the financial statementsFor the twenty six weeks ended 7 July 2006 4. Discontinued Activities 52 weeks 26 weeks to 26 weeks to to 7 July 8 July 6 January 2006 2005 2006 (Unaudited) (Unaudited)) (Audited) £m £m £m Trading losses (1.3) (3.0) (5.8) Tax on trading losses 0.4 0.9 1.7 Profit on disposal of Bet Direct 10.6 - - Tax on profit on disposal of Bet Direct (3.2) - - ----------- ---------- --------- Profit/(loss) for the period from discontinued operations 6.5 (2.1) (4.1) =========== ========== ========= On 7 June 2006 the Group disposed of its Bet Direct branded sports bettingbusiness to 32Red plc for £12.5m. A summary of the net assets disposed, and ofthe profit and net cash generated is; 26 weeks to 7 July 2006 (Unaudited) £m Tangible assets 0.7 Intangible assets 0.6 Current assets 0.5 Current liabilities (1.6) ----------- Net assets disposed of 0.2 Disposal costs 1.7 Net gain on disposal 10.6 ----------- Sale proceeds 12.5 Less customer cash deposits transferred to 32Red (1.5) ----------- Net cash inflow on sale 11.0 =========== Reconciliation to net cash in cash flow statement; Sale proceeds 12.5 Disposal costs (1.7) ----------- Net cash inflow on sale of Bet Direct per cash flow statement 10.8 =========== 5. Exceptional restructuring costs 52 weeks 26 weeks to 26 weeks to to 7 July 8 July 6 January 2006 2005 2006 (Unaudited) (Unaudited) (Audited) £m £m £m Continuing Exceptional restructuring costs - ITV exit costs - - 13.6 Exceptional restructuring costs - Other - Football Pools - 0.5 0.5 Exceptional restructuring costs - Other - Interactive Betting - 1.2 1.2 ---------- ---------- --------- - 1.7 15.3 Discontinued Exceptional restructuring costs - Other - Telephone Betting - 0.8 0.8 ---------- ---------- --------- Exceptional restructuring costs - 2.5 16.1 ========== ========== ========= The contract with ITV was terminated in the prior year on 3 January 2006. Theexit costs comprised the write off of advance payments made since the inceptionof the contract with ITV that were to have been recovered against futurecommissions earned by ITV over the life of the contract. These payments were notrecoverable in the event of a termination. Notes to the financial statementsFor the twenty six weeks ended 7 July 2006 5. Exceptional restructuring costs (continued) Other exceptional restructuring costs in the prior year relate to costs inrespect of the establishment of an in house call centre and rationalisation ofthe interactive cost base together with associated head office support costswithin the Interactive and Telephone Betting segments as well as furtherrationalisation of the operating cost base within the Football Pools segment. 6. Interest payable and similar items 52 weeks 26 weeks to 26 weeks to to 7 July 8 July 6 January 2006 2005 2006 (Unaudited) (Unaudited)) (Audited) £m £m £m Interest payable on bank loans and overdrafts 3.4 3.9 7.5 ---------- ---------- --------- Interest receivable - 0.2 0.2 (Loss) on fair value adjustments to financial instruments - (0.2) (0.2) ----------- ---------- --------- Interest receivable - - - ----------- ---------- --------- Net interest payable and similar items 3.4 3.9 7.5 =========== ========== ========= 7. Taxation note Taxation is provided on taxable profits at 17.5% being the anticipated rate oftaxation for the Group's current financial year 8. Earnings per Share The calculation of earnings per share is based on the net profit attributable toordinary shareholders of £11.5m (26 weeks to 8 July 2005; £1.9m: 52 weeks to 6January 2006; £(5.8m) divided by the weighted average number of shares in issueduring the period - 592.1m (26 weeks to 8 July 2005; 592.1m; 52 weeks to 6January 2006; 592.1m). There is no difference between basic and diluted earningsper share. The calculation of continuing earnings per share is based on the net profitattributable to ordinary shareholders of £5.0m (26 weeks to 8 July 2005; £4.0m:52 weeks to 6 January 2006; £(1.7m) divided by the weighted average number ofshares in issue during the period - 592.1m (26 weeks to 8 July 2005; 592.1m; 52weeks to 6 January 2006; 592.1m). There is no difference between basic anddiluted earnings per share. 9. Cash 7 July 8 July 6 January 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £m £m £m Cash balances held on behalf of registered charities 1.6 1.9 1.6 Other cash balances 0.8 - - ---------- --------- -------- 2.4 1.9 1.6 ========== ========= ======== Cash balances held on behalf of registered charities relate to the sale ofCharity lottery products in respect of charity lotteries that have not reachedtheir final sale date and for which proceeds have not been passed to thecharities concerned. Notes to the financial statementsFor the twenty six weeks ended 7 July 2006 10. Cash flow from operating activities Reconciliation of operating profit to net cash inflow from operating activities 52 weeks 26 weeks to 26 weeks to to 7 July 8 July 6 January 2006 2005 2006 (Unaudited) (Unaudited)) (Audited) £m £m £m Continuing operations Net profit/(loss) 5.0 4.0 (1.7) Adjustments for: Taxation 1.1 1.7 1.1 Depreciation 0.6 0.8 2.0 Impairment of property plant and equipment - - 1.6 Profit on disposal of property, plant and equipment - (0.4) (0.4) Amortisation of intangibles 0.1 0.1 0.6 Impairment of intangibles - - 1.0 Interest expense 3.4 3.9 7.5 Other non-cash changes - - 0.2 Changes in working capital: (Increase)/decrease in prepayments - (3.7) 5.9 (Increase)/decrease in trade and other receivables (0.3) 0.6 1.7 (Decrease)/increase in trade and other payables (0.9) 0.7 (0.4) ---------- -------- --------- Cash generated from continuing operations 9.0 7.7 19.1 ---------- -------- --------- Discontinued operations Net profit/(loss) 6.5 (2.1) (4.1) Adjustments for: Taxation 2.8 (0.9) (1.7) Depreciation - 0.1 0.2 Profit on disposal of Bet Direct (10.6) - - Amortisation of intangibles 0.1 0.4 0.8 Changes in working capital: Decrease/(increase) in trade and other receivables - (0.5) 0.3 (Decrease)/increase in trade and other payables (0.7) (0.3) 0.3 ---------- --------- --------- Cash utilised by discontinued operations (1.9) (3.3) (4.2) ---------- --------- --------- Cash generated from operations 7.1 4.4 14.9 ---------- --------- --------- This information is provided by RNS The company news service from the London Stock Exchange