SPO.L Regulatory News (SPO)

27 Sep 2005 07:03

Sportech PLC27 September 2005 Sportech PLC ("Sportech" or "the Company") Unaudited Interim Results for the six months ended 30th June 2005 Group Highlights * Turnover of £254.3m in line with last year (2004: £254.5m) with 3% revenue growth in the Betting business offset by the15% Football Pools revenue decline. * Operating profit, pre-restructuring costs, 3% lower at £9.1m (2004: £9.4m). Operating profit of £6.6m (2004: £9.1m). * Profit before tax and restructuring costs of £5.2m (2004: £6.0m). Profit before tax, £2.7m (2004: £5.7m). * Executive team significantly strengthened with appointment of Ian Penrose as Chief Executive. * Business strategy focused on two core profit generating Divisions: Betting and Football Pools. * Cost base significantly reduced across Divisions, delivering annualised employment cost savings of £2.7m. * Good progress in development and integration of Betting products: * Launch of betdirectcasino.com and betdirectpoker.com * Introduction of mobile sports book * Further strengthening of content on ITV * Littlewoodspoker.com successfully linked to first mainstream television poker programme (ITV Celebrity Poker) * Commercial negotiations with ITV are underway, aimed at improving the ITVi service and establishing a mutually beneficial financial framework. * Earnings per share of 0.34p (2004: 0.67p). Roger Withers, Acting Managing Director, said: "Sportech has undertaken a review of its business units in the first half of theyear which has resulted in a restructuring to the Group delivering significantcosts savings. Financial results have been impacted by poor sports results, as experienced bythe industry, and a higher rate of attrition in the Football Pools. The benefitof the cost savings have started to take effect and we have developed furtherour New Media betting offering. We look forward to the future with renewed optimism as we today announce theappointment of Ian Penrose as our new Chief Executive. Sportech has a strongplatform on which to build." - ends - Enquiries Sportech PLCRoger Withers, Acting Managing DirectorGary Speakman, Finance Director 0151 288 3561 Bell Pottinger Corporate & FinancialDavid Rydell / Charlotte Kirkham 020 7861 3232 The Company will hold a briefing for analysts at 9.30am today at the offices ofKirkpatrick & Lockhart Nicholson Graham, 110 Cannon Street, London, EC4N 6AR. All interested parties are duly invited. CHAIRMAN'S STATEMENT Business Update During the first six months of 2005, Sportech completed a thorough review of itsbusiness. The company is now clearly focused on its core profit generatingDivisions of Football Pools and Betting, and is well positioned to capitalise onfuture growth opportunities in the online Betting market and around theexclusive interactive deal with ITV. We are very pleased to announce the appointment of Ian Penrose. He will commencefull time duties with effect from 1 October 2005. Ian joins from Arena LeisurePlc ("Arena") where he led the company since May 2001, initially as GroupManaging Director and then as Chief Executive. Ian, a chartered accountant, hasextensive commercial experience of the leisure and media industry which will beinvaluable to Sportech as it drives its growth strategy forward. The Senior Management team has been further strengthened with the appointment ofChris Brown as New Media Gaming Director in August 2005. Chris is focused ondeveloping and integrating Sportech's Betting Division, whilst increasingcustomer activity levels across our Betting channels and continuing to reviseand improve content. Basis of Reporting These are the first financial results that the Group has published subsequent tothe adoption of International Financial Reporting Standards (IFRS). The majorimpact for the Group is that goodwill is no longer being amortised. The impactof all other IFRS adjustments is small and the adoption of IFRS has no impactupon the Groups cash flows. Details of the restatement of prior year informationwas published on the London Stock Exchange on 26th September 2005 and isavailable from the Groups website. The Football Pools Division comprises the core Littlewoods and Zetters Poolscompetitions along with "shoulder games" such as Spot the Ball and Lotto. The Betting Division comprises Telephone Betting and Interactive Betting. Thedevelopment of our ITV interactive gaming service is reported within InteractiveBetting. We remain firmly committed to offering our wide range of Bettingproducts across the direct, new media channels of internet, television, mobileand telephone. Financial Overview Revenue for the Group was broadly unchanged at £254.3m (2004: £254.5m) with 3%revenue growth in the Betting business offset by the 15% revenue decline inFootball Pools business. Profit before tax was £2.7m (2004: £5.7m) with the reduction partly due tohigher underlying interest rates, which increased the charge to £3.9m (2004:£3.4m), and a restructuring charge of £2.5m (2004: £0.3m). The £2.5mrestructuring charge in H1 2005 reflects the final cost of terminating theoutsourced call handling contract and the redundancies arising from the closureof the scratchcard business and the strategic review. Annualised employment costsavings are estimated at £2.7m. The summarised results for the Half Year were: H1 05 H1 04 % £m £m ChangeTurnover Football Pools 37.5 43.9 (15) Telephone Betting 46.3 38.6 20 Interactive Betting 170.5 172.00 (1) ------- ------- -------- Total 254.3 254.5 -PBIT Football Pools 12.6 13.2 (5) Telephone Betting (0.9) (1.3) 31 Interactive Betting (2.6) (2.5) (4) ------- ------- -------- PBIT (pre restructuring) 9.1 9.4 (3) Interest (3.9) (3.4) (15) ------- ------- -------- PBT (pre restructuring) 5.2 6.0 (13) Restructuring (2.5) (0.3) ------- ------- PBT 2.7 5.7 (53) The net cash outflow of £1.5m (2004: £0.6m outflow) reflected the impact of therestructuring payments. Net debt at the end of the period was £113.1m (2004:£114.8m) which was marginally higher than the 2004 year end position of £112.8m.Bank loans were reduced by a further £3m in the period to £109m. Football Pools Total Football Pools revenues from the Littlewoods and Zetters brands were£34.3m, 15% lower than reported last year (2004: £40.2m). Excluding overseasrevenues, where we experienced a steep decline following a re-positioning of thegame, the year on year attrition was 13.4%. Pools Direct revenues now accountfor 44% of UK revenues and in this channel, attrition was 7%. Furtherimprovements in gross margin and operating cost savings limited the impact ofthe revenue decline on profits to 6%, with profits from Football Pools totalling£12.0m (2004: £12.8m). Football Pools remains a very popular competition played by circa 700,000customers per week. We continue to seek extended distribution for the FootballPools and develop game variants which are suited to new media channels. Other games sold into the Football Pools customer base contributed revenues of£3.2m (2004: £3.7m) and profits of £0.6m (2004: £0.4m). This included operatinglosses, pre restructuring, from scratchcards of £0.1m (2004: £0.3m loss). The plan to exit the scratchcard business has now been completed and no further costs will be incurred. Total profits from Football Pools and related games pre restructuring costs were£12.6m (2004: £13.2m). Betting Total Betting revenues increased by 3% however gross win was 8% lower at £8.7m(2004: £9.5m) reflecting the impact of poor sports results. Betting Divisionlosses, pre restructuring costs, reduced by £0.3m to £3.5m, with this improvedperformance principally due to a significant reduction in the cost base for bothtelephone betting and the ITV Service. We remain on track to deliver the key developments identified at the beginningof the year. The Bet Direct offer was extended in Q2 2005 by adding brandedcasino, poker and mobile sportsbook. We have also continued to expand the sportsbetting markets offered on telephone and interactive channels. Telephone Betting We have continued to invest in improving customer service within our telephonebetting business whilst reducing operating costs. Revenues were 20% higher at£46.3m (2004: £38.6m) due to a combination of an increased number of calls (4%up) and higher average stake (18% up). The adverse sporting results impacted most significantly on telephone gross winwhich reduced to £2.8m (2004: £4.2m). Telephone margins reduced to 6% comparedto the very strong margins (11%) experienced in H1 2004. With direct costs and overheads reduced significantly, particularly callhandling, the operating loss from Telephone Betting was 31% lower than last yearat £0.9m (2004: £1.3m loss). Interactive Betting There was good growth in active customers (i.e. those placing a bet in the 6month period) with sportsbook active customers up 8% and casino/poker up 30%.Interactive gross win increased by 11% with gross win across our Casino andPoker products up 7% to £4.7m (2004: £4.4m) driven by Poker. Other interactiveproducts saw gross win increase 33% to £1.2m (2004: £0.9m). Our red button based, 24/7, content within the ITVi service has beenstrengthened further during the period, including a new Keno game and a suite offull screen games such as multi-line slots. Interactive Gaming revenues from theITVi service are building slowly with total revenues in H1 2005 of £0.6m (2004:£0.1m). The cost of delivering the gaming service with ITV reduced significantlyfollowing the planned restructuring of the development team. ITV developmentcosts were 21% lower at £2.2m (2004: £2.8m). Commercial negotiations with ITV are underway, aimed at improving theperformance of the service and establishing a mutually beneficial financialframework. The pipeline of ITVi initiatives in Q4 2005, includes interactive gaming behindCoronation Street, Emmerdale, X Factor, which commenced in late August, andfollowing the resolution of rights issues, a full betting service behindChampions League coverage. Following the first mainstream poker televisionprogramme (ITV Celebrity Poker) in July 2005, ITV will be expanding itsprogramming in this area and the next ITV Poker Show "Home Nations" is scheduledfor early 2006. We look forward to further promotion of the ITVi service by therecently established ITV Consumer Division. Current Trading & Outlook Based on the trading performance since the beginning of July, we expect thedecline in Football Pools revenue to continue at levels similar to the firsthalf. The Company also expects a return to gross win growth in the Bettingdivision but not at a level to regain the profit shortfall in the first half. As a result, the Board expects profits before tax and restructuring in H2 2005to be similar to that of the first half. A lot of work has been done in the first half and the Group is now wellpositioned to realise the potential of our product and multi channelcapabilities around internet, television, telephone and mobile. With Ian Penrose's appointment as Chief Executive, we look forward to the future withconfidence. David MathewsonChairman27 September 2005 CONSOLIDATED profit and loss accountFor the six months ended 30 June 2005 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, Notes (Unaudited) restated) restated) £m £m £mContinuing operationsRevenue 3 254.3 254.5 497.0 Cost of sales (227.5) (225.5) (439.9) --------- --------- --------- Gross profit 26.8 29.0 57.1 Distribution costs - (0.1) (0.1)Administrative expenses (20.2) (19.8) (41.5) --------- --------- ---------Operating profit beforerestructuring costs 9.1 9.4 16.7Restructuring costs 4 (2.5) (0.3) (1.2) --------- --------- --------- Operating profit 3 6.6 9.1 15.5 Interest payable and similaritems 5 (3.9) (3.4) (7.4) Interest receivable - - 0.1 --------- --------- ---------Profit before taxation 2.7 5.7 8.2 Taxation 6 (0.8) (1.7) (2.6) --------- --------- --------- Profit for the period fromcontinuing operations 1.9 4.0 5.6 --------- --------- ---------Profit for the financial period 1.9 4.0 5.6 ========= ========= ========= Profit attributable to equityshareholders 1.9 4.0 5.6 ========= ========= ========= Earnings per share 7Basic and diluted 0.34p 0.67p 0.96p ========= ========= ========= Earnings per share fromcontinuing operationsBasic and diluted 0.34p 0.67p 0.96p ========= ========= ========= CONSOLIDATED Statement of recognised income and expenseFor the six months ended 30 June 2005 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, (Unaudited) restated) restated) £m £m £m Profit for the financial period 1.9 4.0 5.6 --------- --------- ---------Total recognised income for the period 1.9 4.0 5.6 ========= ========= ========= CONSOLIDATED balance sheetAs at 30 June 2005 30 June 31 December 30 June 2004 2004 2005 (Unaudited, (Unaudited, Notes (Unaudited) restated) restated) £m £m £m ASSETSNon-current assetsGoodwill 145.2 145.2 145.2Other intangible assets 2.8 3.5 2.8Property, plant and equipment 6.8 6.9 7.5Prepayments 9.6 - 5.9Retirement benefit assets 0.2 0.2 0.2Deferred tax assets 0.5 0.6 0.3 --------- --------- --------- 165.1 156.4 161.9 --------- --------- --------- Current assets Trade and other receivables 3.8 10.8 4.4Financial assets - derivativefinancial instruments - 0.4 0.2Cash and cash equivalents 8 1.9 2.9 2.4 --------- --------- --------- 5.7 14.1 7.0 --------- --------- --------- LIABILITIESCurrent liabilities Financial liabilities-borrowings (17.4) (8.5) (11.5)Trade and other payables (18.3) (17.4) (17.4)Current tax liabilities (0.7) (1.8) (1.3) --------- --------- --------- (36.4) (27.7) (30.2) --------- --------- ---------Net current liabilities (30.7) (13.6) (23.2) --------- --------- --------- Non-current liabilitiesFinancial liabilities-borrowings (95.5) (107.2) (101.6) --------- --------- ---------NET ASSETS 38.9 35.6 37.1 ========= ========= ========= SHAREHOLDERS' EQUITY Ordinary shares 29.6 29.6 29.6Retained earnings 9.3 6.0 7.5 --------- --------- ---------TOTAL SHAREHOLDERS' FUNDS 38.9 35.6 37.1 ========= ========= ========= The interim accounts on pages 6 - 13 were approved by the board of directors on26 September and were signed on its behalf by G SpeakmanDirector CONSOLIDATED Cash flow statementFor the six months ended 30 June 2005 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, Notes (Unaudited) restated) restated) £m £m £m Cash flows from operatingactivitiesCash generated from operations 9 4.4 6.3 14.3Interest received 0.2 0.2 0.5Interest paid (3.3) (3.4) (7.3)Tax paid (1.3) (1.6) (2.7) --------- --------- ---------Net cash from operatingactivities - 1.5 4.8 --------- --------- --------- Cash flows from investingactivitiesProceeds from sale ofproperty, plant and equipment 0.3 - 0.3Purchase of intangible fixedassets - (0.3) (0.3)Purchase of property, plantand equipment (0.8) (1.0) (1.9) --------- --------- ---------Net cash used in investingactivities (0.5) (1.3) (1.9) --------- --------- --------- Cash flows from financingactivitiesNet proceeds from issue of newbank loan - 3.0 3.0Finance lease principal payments (0.1) - -Repayment of borrowings (3.0) (1.0) (1.0) --------- --------- ---------Net cash (used)/generated infinancing activities (3.1) 2.0 2.0 --------- --------- --------- Net (decrease)/increase incash and cash equivalents (3.6) 2.2 4.9 Cash and cash equivalents atstart of period 2.1 (2.8) (2.8) --------- --------- ---------Cash and cash equivalents atend of period (1.5) (0.6) 2.1 --------- --------- --------- Cash and cash equivalents consists of:Cash and cash equivalents 1.9 2.9 2.4Overdrafts (3.4) (3.5) (0.3) --------- --------- --------- (1.5) (0.6) 2.1 --------- --------- --------- Movement in Net Debt 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, Notes (Unaudited) (restated) restated) £m £m £m (Decrease)/increase in cash inperiod (3.6) 2.2 4.9Movement in charity cash 8 0.2 (0.3) (0.3) --------- --------- ---------Change in net debt resultingfrom cash flows (3.4) 1.9 4.6 Cash inflow from increase inloans - (3.0) (3.0)Cash outflow from repayment ofloans 3.0 1.0 1.0Cash outflow / (inflow) fromlease agreements 0.1 - (0.7) --------- --------- ---------(Increase)/decrease in netdebt for the period (0.3) (0.1) 1.9 At start of period (112.8) (114.7) (114.7) --------- --------- --------- At end of period (113.1) (114.8) (112.8) ========= ========= ========= Notes to the financial statementsFor the six months ended 30 June 2005 1. Accounting Policies The results for the half year ended 30 June 2005 have been prepared on the basisof the accounting policies expected to be adopted in the Group's full yearfinancial statements and which are set out in the IFRS transition documentavailable from the corporate website, www.Sportech-plc.co.uk. a) Basis of Accounting The interim financial statements have been prepared in accordance with theaccounting policies required by those International Financial AccountingStandards, incorporating International Accounting Standards (IAS's) andinterpretations (collectively IFRS) published by the International AccountingStandards Board (IASB), which are expected to be endorsed by the EU andapplicable for use in the Group's annual financial statements for the year ended31 December 2005, the Group's first annual reporting date at which it isrequired to use IAS. Comparative information for the six months ended 30 June2004 and for the year ended 31December 2004 has been restated on an IFRS basis.The endorsed IFRS that will be effective (or available for early adoption) inthe annual financial for the year ended 31 December 2005 are still subject tochange and to additional interpretations and therefore cannot be determined withcertainty. Accordingly, the accounting policies for the period will only bedetermined finally when the annual consolidated financial statements areprepared for the year ended 31 December 2005. On 26 September 2005 Sportech plc published financial information in accordancewith IFRS on the London Stock Exchange. This document included explanations ofthe impact of the transition from UK GAAP to IFRS on the financial statements ofSportech plc and contained reconciliations in respect of the restatement of the2004 interim and full year accounts from UK GAAP to IFRS of the Group's netassets at 1 January 2004, 30 June 2004 and 31 December 2004, and of the Group'snet profit or loss for the 6 months ended 30 June 2004 and year ended 31December 2004. The document is available on the Group's website. 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 8 January 2005 to 8 July2005 (2004, 26 week period). 2. Non-statutory accounts The results for the half year to 30 June 2005 and the comparative period areneither audited or reviewed by the auditors. The financial information on pages 6 to 13 does not amount to full accountswithin the meaning of the Companies Act 1985 (as amended). The comparative figures for the year ended 31 December 2004 do not constitutestatutory accounts. Apart from the changes resulting from the adoption ofInternational Financial Accounting Standards, these figures have been extractedfrom the audited accounts for that period which have been delivered to theregistrar of companies and on which the auditors issued an unqualified reportwhich did not contain a statement under either section 237 (2) or (3) of theCompanies Act 1985. 3. Segmental reporting Six months ended Football Interactive Telephone30 June 2005 pools Betting Betting Group £m £m £m £m Continuing operations Revenue 37.5 170.5 46.3 254.3 ------- ------- ------- ------- Operating profit/(loss) beforerestructuring costs 12.6 (2.6) (0.9) 9.1Restructuring (0.5) (1.2) (0.8) (2.5) ------- ------- ------- -------Operating profit/(loss) 12.1 (3.8) (1.7) 6.6 ------- ------- ------- ------- Six months ended Football Interactive Telephone30 June 2004 pools Betting Betting Group £m £m £m £m Continuing operations Revenue 43.9 172.0 38.6 254.5 ------- ------- ------- ------- Operating profit/(loss) beforerestructuring costs 13.2 (2.5) (1.3) 9.4Restructuring (0.2) (0.1) - (0.3) ------- ------- ------- -------Operating profit/(loss) 13.0 (2.6) (1.3) 9.1 ------- ------- ------- ------- Football Interactive Telephone pools Betting Betting Group £m £m £m £m Year ended31 December 2004Revenue 87.1 323.6 86.3 497.0 ------- ------- ------- ------- Operating profit/(loss) beforerestructuring costs 24.3 (4.8) (2.8) 16.7Restructuring (0.6) (0.3) (0.3) (1.2) ------- ------- ------- -------Operating profit/(loss) 23.7 (5.1) (3.1) 15.5 ------- ------- ------- ------- 4. Exceptional restructuring costs 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, (Unaudited) restated) restated) £m £m £m Football Pools 0.5 0.2 0.6Interactive betting 1.2 0.1 0.3Telephone betting 0.8 - 0.3 --------- --------- ---------Restructuring costs - operating 2.5 0.3 1.2 ========= ========= ========= Exceptional restructuring costs in the current year relate to further costs inrespect of the establishment of an in house call centre and furtherrationalisation of the interactive cost base together with associated headoffice support costs within the interactive and telephone betting segments aswell as further rationalisation of the operating cost base within the footballpools segment. Exceptional restructuring costs in the prior year relate to the establishment ofan in house call centre operation within the telephone betting segment, furtherrationalisation of the football pools operating cost base, and rationalisationof interactive development teams consequent upon the transition from developmentto trading stage 5. Interest payable and similar items 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, (Unaudited) restated) restated) £m £m £m Interest payable on bank loans andoverdrafts 3.9 3.4 7.4 ========= ========= ========= 6. Taxation note Taxation is provided on taxable profits at 30.0% being the anticipated rate oftaxation for the Group's current financial year 7. Earnings per Share The calculation of earnings per share is based on the net profit attributable toordinary shareholders of £1.9m (6 months to 30 June 2004; £4.0m: year to 31December 2004; £5.6m) divided by the weighted average number of shares in issueduring the period - 592.1m (6 months to 30 June 2004; 592.1m; year to 31December 2004; 592.1m). Basic and diluted earnings per share are identical. 8. Cash 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, Notes (Unaudited) restated) restated) £m £m £mCash balances held on behalfof registered charities (a) 1.9 2.1 2.1Cash balance constitutingcommitted security (b) - 0.8 0.3 --------- --------- --------- 1.9 2.9 2.4 ========= ========= ========= (a) Cash balances held on behalf of registered charities relate to the sale ofCharity Scratchcards in respect of charity lotteries which have not reachedtheir final sale date and for which proceeds have not been passed to thecharities concerned. (b) The cash balance constituting committed security related to deferredpayments that were required to be made under a contractual obligation of asubsidiary company. The contract was with Rehab Charity Lotteries, and relatedto the running of charity lotteries. This contract has now terminated and theassociated cash balance fully released. 9. Cash flow from operating activities Reconciliation of operating profit to net cash inflow from operating activities 6 months to Year to 31 6 months to 30 June December 30 June 2004 2004 2005 (Unaudited, (Unaudited, (Unaudited) restated) restated) £m £m £m Continuing operations Net profit 1.7 4.0 5.6Adjustments for:Taxation 0.8 1.7 2.6Depreciation 1.4 1.2 2.4Profit on disposal of property, plantand equipment (0.3) - -Interest income - - (0.1)Interest expense 3.9 3.4 7.4 Changes in working capital:(Increase) in trade and otherreceivables (3.5) (1.7) (1.2)Increase/(decrease) in trade and otherpayables 0.4 (2.3) (2.4) --------- --------- ---------Cash generated from continuingoperations 4.4 6.3 14.3 --------- --------- ---------Cash generated from operations 4.4 6.3 14.3 --------- --------- --------- This information is provided by RNS The company news service from the London Stock Exchange