SPO.L Regulatory News (SPO)

11 Sep 2007 07:01

Sportech PLC11 September 2007 Sportech PLC Interim 2007 Sportech PLC ("Sportech"or "the Company")Unaudited interim results for the six months ended 30 June 2007 Highlights Profit before tax for the six months ended 30 June 2007 of £5.2m (2006: £6.1m) is in line with the Board's expectations and reflects the implementation of the Company's turnaround strategy Net debt at end June reduced to £87m (December 2006: £89.9m): the second half will be impacted by recent rises in interest rate costs Significant progress made on the three major foundations for recovery: products,technology and distribution Enhanced and new products launched - Premier 10, Fantasy Football, predictor games and fixed odds games. Relaunch of Spot the Ball on target for 2008 Significant progress made upgrading back-end technology systems following technology and distribution partnership with Scientific Games and E-gaming technology supply partnership with Orbis Earnings per share from continuing operations of 0.61p (2006: 0.86p) Appointment of Jon Holmes as non executive director; strengthened management team with appointment of Christian Heap, Head of International Development Preliminary clearance received from the Competition Commission for the acquisition of Vernons Ian Penrose, Chief Executive of Sportech, said today: "We are transforming Sportech and making good progress implementing the changes necessary to realise the Company's potential to become a significantly larger broad-based sports, leisure and gaming business with international reach." "Our technology partnerships with Scientific Games and Orbis have given us the head start we needed to modernise our technology infrastructure, and to upgrade our online and new media presence. We have initiated the introduction of new and enhanced products as well as making significant progress with opportunities to distribute our products into overseas markets. We look forward to the secondhalf with confidence." - ends - Enquiries: Sportech PLCIan Penrose, Chief Executive 0151 288 3561 Bell Pottinger Corporate & FinancialDavid Rydell/Emma Kent/Rosanne Perry 020 7861 3232 Chairman's Statement The Board completed its strategic review of the Company earlier this year and the process of implementing the changes required to deliver a growth-oriented business is now well underway. Importantly, during the period the Company was presented with an exciting opportunity to acquire the Vernons Football Pools business and entered into heads of terms with the vendor Ladbrokes plc. The acquisition raised certain competition issues and the matter was referred to both the Office of Fair Trading and the Competition Commission. As a result, a considerable amount of management time and effort has been spent cooperating with both bodies and it is against this backdrop that the Company has delivered good financial results and operational progress. The Board is very pleased that the Competition Commission gave provisional clearance for this acquisition on 31August 2007 and we look forward to a final decision being announced later this year. The management team is committed to implementing the Board's new strategic direction for the Company. Our goal is to create a market leading sports, leisure and gaming business with international reach and growth potential. We operate in a global and growing marketplace. Football, and particularly Britishfootball, continues to benefit from an unprecedented global boom, whilst pool (pari-mutuel) gaming and games of skill continue to enjoy popularity around the world. We have a market leading position in pool betting on British football and are therefore ideally placed to build upon our strengths and the qualities of our heritage to further establish Sportech's position in this global market. Financial Performance The Company is pleased to announce a profit before tax of £5.2m for the six months to 30 June 2007 (2006: £6.1m) which was in line with the Board's expectations. Net debt at the end of the period was £87.0m (Dec 2006: £89.9m), a reduction of £2.9 million. Earnings per share from continuing operations were 0.61p (2006: 0.86p). The Board now expects to see the initiatives introduced to improve the core football gaming business start to flow through into the financial performance in the second half of 2007 and beyond. However, the results for the second halfwill be impacted by recent rises in interest rate costs. Board and Employees We were delighted to welcome Jon Holmes onto the Board in July. Jon brings a wealth of experience of the sports business, in particular the football industry, and his knowledge and understanding of sports marketing and branding will be invaluable. In line with the growing opportunities overseas, we have strengthened the executive team by appointing Christian Heap as Head of International Development, who will join us at the end of the month. A combination of the rapid changes to the business that are being introduced, and the enormous challenge that the Competition Commission process places on time and resources, has put many pressures on the Board and employees. I shouldlike to express my thanks to those whose contribution during this challenging period Acquisition of Vernons On 7 March 2007 the Company was pleased to announce that it had entered into exclusive negotiations with Ladbrokes Plc regarding the potential acquisition of the Vernons Pools business. Following a referral by the Office of Fair Trading on 3 May, the Competition Commission, on 31 August 2007, issued its preliminary ruling that this transaction could proceed and that there would not be a significant lessening of competition as a result. We will continue to work closely with and offer our full support to the Competition Commission during the period until its final report is issued on or before 17 October 2007. In the event that the transaction runs smoothly we would expect to update shareholders regarding the potential acquisition of Vernons before the end of 2007. Outlook The business of Sportech is being transformed. A lot has been achieved, but there remains much to do. We are changing many aspects of the business, some ofwhich are deep-seated and historic. The Board is committed to delivering shareholder value and we look to the future with confidence. Piers PottingerChairman11 September 2007 Chief Executive's Review Investing in Products, Technology and Distribution The strategic review highlighted that there had been a significant under investment over many years in the three key operational areas of products, technology and distribution. Your Board is addressing these three areas as the key foundations for the turnaround strategy. Products The Company's aim is to achieve growth by giving customers new and improved products. We are enhancing and refining existing products, to make them more engaging and accessible. Alongside these existing products we are creating new games that will be attractive to a wider audience. The delivery of this enhanced suite of products has already begun with the recently launched Premier 10, Fantasy Football, several football predictor games and a portfolio of fixed odds games. By early 2008 we will launch additional predictor games and a remodelled Spot The Ball. To augment our football prediction games, we are building a content-rich websiteaimed directly at the football fan. In addition to the current streaming of breaking football headlines, we will introduce a community focused fans' forum, quizzes, bespoke player league tables and other football related content. We will continue to generate our own unique content, having launched the Football Fever report in January of this year which examined each of the 92 football clubs and identified by ranking the most stressful to support. This award-winning report (National CIPR Excellence Award) was followed up a fortnight ago by the launch of Football Fever 2, looking at which clubs have themost and least optimistic supporters and can be viewed at www.footballpools.com. Technology Making our games easy to access and play is fundamental to restoring growth to the business. Investing in new technology is a vital step in order to achieve this, enabling new distribution channels to be opened up and delivering many operational benefits. We were delighted to sign a strategic technology and distribution partnership with Scientific Games, the New York based operator of pari-mutuel (pool) systems lotteries and betting terminals, earlier this year. At the same time, we also signed a contract with a second technology partner, Orbis, a leading provider of interactive betting and gaming solutions. These two partnerships will enable the Company to overhaul completely its technology backbone at a cost of £3.5m, thereby delivering significant customer benefits, distribution enhancements and operational synergies. We are pleased that the first phase of the technology roll out plan was delivered last month for the start of the 2007/08 football season and we have a series of upgrades and launches scheduled throughout the next eight months as we transform our technical capabilities. Distribution We are currently modernising our distribution channels to enable the Company to offer its new and existing products in an easy-to-play format for the mass football market. The investment in technology will help facilitate this expansion of the distribution network and augment the historic methods of distribution of primarily door to door collectors and direct mail. As stated previously, we have extended the distribution of our products online, with the first phase launch of the website in August. This will be subject to a number of major enhancements over the next few months. The strategic technology and distribution partnership signed earlier this year with Scientific Games will offer the Company the potential to develop enhanced distribution of its games to customers within Scientific Games' global customer network, once the new technology is fully implemented and operational. This initiative offers significant potential for the second half of 2008 and beyond. Extending our reach into retail venues remains a key strategic goal for the business. We expect to announce details of significant progress in this area in the next few months. We consider that the international marketplace offers great potential for our pari-mutuel games of skill, and we have held discussions with a number of partners for distribution into a selection of overseas territories. Whilst the introduction of a strong technological backbone is paramount for international development, we have made significant progress in our plans for expanding our reach into Asia.. Financial Results Profit before tax for the six months to 30 June 2006 of £5.2m (2006: £6.1m) was is line with the Board's expectations and reflects the implementation of the turnaround strategy. The Board is also committed to reducing its debt levels and net debt at the end of the period was £87.0m, a £2.9m reduction in the six months. Earnings per share from continuing operations were 0.61p (2006: 0.86p). Operating profit from continuing operations amounted to £8.4m (2006: £9.5m). Interest payable was reduced to £3.2m (2006: £3.4m) and following a full tax charge of 30% (2006: 18%), profit after tax from continuing operations amounted to £3.7m (2006: £5.0m). The first half of 2006 saw the disposal of Bet Direct, which generated a profit on disposal after deducting losses from trading and taxof £6.5m, taking the overall profit for the period to June 2006 to £11.5m. Football Gaming Certain of the initiatives introduced have successfully reduced the rate of decline of the operating profit in the football gaming business. As a consequence, operating profit amounted to £7.3m (2006: £9.0m), a reduction of £1.7m being less than half the reduction experienced in the corresponding period. We have embarked upon a series of initiatives to improve our communications withour customers and sales networks as we continue to change the shape of our business. We are aiming to put the customer back at the heart of our business as we become customer and market driven rather than process driven. We have merged our two operational bases into one deriving operational, financial and communications benefits. Following on from the improvements made last year we have steadied the reductionin customer numbers over the six month period at 55,000 (2006: 57,000), to 492,000 active weekly customers at the period end. E-gaming Our e-gaming division has successfully built upon the improvements made last year by more than doubling its operating profit to £1.1m (2006: £0.5m). Gross win increased by 29% (£1.5m) to £6.6m (2006: £5.1m), with the total number of active customers increasing by 5,000 (26%) to 23,000 (2006: 18,000). The total number of registered customers increased by 44,000 (45%) to 142,000. Following the changes introduced by the Gambling Act 2005, we are in the processof relocating our casino and poker businesses to Malta from Curacao in the Dutch Antilles. This will provide the two operations (littlewoodscasino.com andlittlewoodspoker.com) with a more stable framework in which to operate, including the ability to continue to advertise in the UK. Brand The "Littlewoods" name is used under a licence agreement which expires in September 2010. We are creating a new brand for the business, however the launch, originally planned for August 2007, was deferred pending the outcome of the decision by the Competition Commission regarding the acquisition of Vernons.We now anticipate launching the new brand early in 2008. Summary During the period we have continued to make good progress implementing changes that our strategic review highlighted as necessary. The management team is committed to these changes and we are already enjoying operational and communication benefits, having consolidated operations into one building and realising cost savings as a result, and seeing continued progress in debt reduction. Although there is still change to be delivered we look forward to continuing the transition of the Company into a growth orientated sports, leisure and gaming business with international reach. Ian PenroseChief Executive11 September 2007 Six months to Six months to Year to 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited)Continuing operations Note £m £m £mStakes placed* 179.4 172.8 352.7Gross win revenue 3 28.5 30.5 60.8Cost of sales (8.0) (8.8) (17.1)Gross profit 20.5 21.7 43.7Distribution costs (0.4) (0.4) (0.8)Administrative expenses (11.7) (11.8) (27.4)Operating profit before restructuring costs 8.4 9.5 18.4Exceptional restructuring costs - other 5 - - (2.9)Operating profit 3 8.4 9.5 15.5Interest payable and similar items 6 (3.2) (3.4) (6.4)Profit before taxation 5.2 6.1 9.1Taxation 7 (1.5) (1.1) (1.5)Profit for the period from continuing operations 3.7 5.0 7.6Discontinued operationsProfit for the period from discontinued operations 4 - 6.5 6.5 Profit for the financial period attributable to equity shareholders 3.7 11.5 14.1Earnings per shareBasic and diluted 8 0.61p 1.95p 2.38pEarnings per share from continuingoperationsBasic and diluted 8 0.61p 0.86p 1.28p * Stakes placed does not represent a statutory number and is given for information purposes only. Six months to Six months to Year to 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £m £m £mProfit for the financial period 3.7 11.5 14.1Total recognised income for the period 3.7 11.5 14.1 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) Notes £m £m £mASSETSNon-current assetsGoodwill 145.2 145.2 145.2Other intangible assets 0.9 0.1 0.2Property, plant and equipment 2.0 3.8 2.1Retirement benefit assets 0.3 0.3 0.3Deferred tax assets 1.0 1.3 1.0 149.4 150.7 148.8Current assetsTrade and other receivables 2.2 2.2 2.2Cash and cash equivalents 9 1.6 2.4 0.4 3.8 4.6 2.6LIABILITIESCurrent liabilitiesFinancial liabilities - borrowings (22.0) (15.0) (21.8)Trade and other payables (13.6) (15.2) (14.0)Current tax liabilities (1.7) (3.8) (1.5) (37.3) (34.0) (37.3)Net current liabilities (33.5) (29.4) (34.7) Non-current liabilitiesFinancial liabilities - borrowings (66.1) (78.1) (68.1)Deferred tax liabilities (0.3) (0.3) (0.3) (66.4) (78.4) (68.4)NET ASSETS 49.5 42.9 45.7 SHAREHOLDERS' EQUITYOrdinary shares 29.6 29.6 29.6Other reserves 0.3 0.2 0.2Retained earnings 19.6 13.1 15.9TOTAL SHAREHOLDERS' EQUITY 49.5 42.9 45.7 The interim accounts on pages 5 to 12 were approved by the Board of Directors on10 September 2007 and were signed on its behalf by Ian Penrose Steve CunliffeDirector Director Six months Six months to to Year to 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) Notes £m £m £mCash flows from operating activitiesCash generated from operations 10 8.5 7.1 15.0Interest paid (3.2) (2.3) (6.4)Tax (paid)/received (1.3) 0.4 (2.0)Net cash from operating activities 4.0 5.2 6.6Net cash from operating activitiesbefore charity cash movement 3.9 5.2 7.8Charity cash movement 0.1 - (1.2)Net cash from operating activities 4.0 5.2 6.6Cash flows from investing activitiesNet proceeds from sale of Bet Direct 4 - 10.8 10.8Purchase of intangible fixed assets (0.8) - (0.1)Purchase of property, plant and equipment (0.2) (0.2) (0.3)Net cash (used in)/generated by investing activities (1.0) 10.6 10.4Cash flows from financing activitiesFinance lease principal payments - (0.5) (0.5)Repayment of borrowings - (10.0) (15.0)Net cash used in financing activities - (10.5) (15.5)Net increase in cash and cash equivalents 3.0 5.3 1.5Cash and cash equivalents at start of period (1.4) (2.9) (2.9)Cash and cash equivalents at end of period 1.6 2.4 (1.4) Cash and cash equivalents consists of:Cash and cash equivalents 1.6 2.4 0.4Overdrafts - - (1.8) 1.6 2.4 (1.4)Reconciliation of net debtIncrease in cash in period 3.0 5.3 1.5Movement in charity cash 9 (0.1) - 1.2Change in net debt resulting from cash flows 2.9 5.3 2.7Cash outflow from repayment of loans - 10.0 15.0Cash outflow from repayment of finance lease agreements - 0.5 0.5Decrease in net debt for the period 2.9 15.8 18.2At start of period (89.9) (108.1) (108.1)At end of period (87.0) (92.3) (89.9) 1. Accounting policies The results for the six months ended 30 June 2007 have been prepared on thebasis of the accounting policies set out in the report and accounts for the yearto 31 December 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 six month period to 30 June 2007 (2006: sixmonth period). The Company has not early adopted IAS34 'Interim FinancialReporting'. 2. Non-statutory accounts The results for the half year to 30 June 2007 are neither audited nor reviewedby the auditors. The financial information on pages 5 to 12 does not amount to full accountswithin the meaning of the Companies Act 1985 (as amended). The comparative figures for the year ended 31 December 2006 do not constitutestatutory accounts. These figures have been extracted from the audited accountsfor that period which have been delivered to the registrar of companies and onwhich the auditors issued an unqualified report which did not contain astatement under either Section 237 (2) or (3) of the Companies Act 1985. 3. Segmental reporting Football Gaming e-Gaming GroupContinuing operations £m £m £mGross win revenue 21.9 6.6 28.5Segment result before restructuring costs 7.3 1.1 8.4Operating profit from continuing operations 7.3 1.1 8.4 3. Segmental reporting (continued) Six months to 30 June 2006 Football Telephone Gaming e-Gaming Betting GroupContinuing operations £m £m £m £mGross win revenue 25.4 5.1 - 30.5Segment result before restructuring costs 9.0 0.5 - 9.5Operating profit from continuing operations 9.0 0.5 - 9.5Discontinued operationsRevenue - 1.4 2.6 4.0Segment result before restructuring costs - (0.4) (0.9) (1.3) Operating loss from discontinued operations - (0.4) (0.9) (1.3) Year to 31 December 2006 Football Telephone Gaming e-Gaming Betting GroupContinuing operations £m £m £m £mGross win revenue 49.6 11.2 - 60.8Segment result before restructuring costs 17.4 1.0 - 18.4Exceptional restructuring costs - other (2.9) - - (2.9)Operating profit 14.5 1.0 - 15.5Discontinued operationsRevenue - 1.4 2.6 4.0Segment result before restructuring costs - (0.4) (0.9) (1.3)Profit on disposal of operation - - - 10.6Taxation - - - (2.8)Profit for the period from discontinued operations - - - 6.5 4. Discontinued activities Six months to Six months to Year to 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £m £m £mTrading losses - (1.3) (1.3)Tax on trading losses - 0.4 0.4Profit on disposal of Bet Direct - 10.6 10.6Tax on profit on disposal of Bet Direct - (3.2) (3.2)Profit for the period from discontinued operations - 6.5 6.5 On 7 June 2006 the Group disposed of its Bet Direct branded sports bettingbusiness to 32Red plc for £12.5m, generating a pre-tax profit on disposal of£10.6m. 5. Exceptional restructuring costs Six months Six months to Year to to 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited)Continuing £m £m £mExceptional restructuring costs - other - Football Gaming - - 2.9 Other exceptional restructuring costs in the prior year relate to assetimpairments and accrued building lease payments resulting from the strategicreview of the business and relate to the rationalisation of buildinginfrastructure and asset impairment charges, together with associated staffredundancy costs. 6. Interest payable and similar items Six months Six months to Year to to 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £m £m £mInterest payable on bank loans and overdrafts 3.2 3.4 6.4Net interest payable and similar items 3.2 3.4 6.4 7. Taxation note Taxation is provided on taxable profits at 30.0% 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 £3.7m (six months to 30 June 2006: £11.5m; year to 31December 2006: £14.1m) divided by the weighted average number of shares in issueduring the period of 592.1m (6 months to 30 June 2006: 592.1m; year to 31December 2006: 592.1m). There is no difference between basic and dilutedearnings per share. The calculation of continuing earnings per share is based on the net profitattributable to ordinary shareholders of £3.7m (6 months to 30 June 2006: £5.0m;year to 31 December 2006: £7.6m) divided by the weighted average number ofshares in issue during the period of 592.1m (6 months to 30 June 2006: 592.1m;year to 31 December 2006 592.1m.) There is no difference between basic anddiluted earnings per share. 9. Cash 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £m £m £mCash balances held on behalf of registered charities 0.5 1.6 0.4Other cash balances 1.1 0.8 - 1.6 2.4 0.4 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. These cash balances are excluded when calculating the netdebt of the Group. 10. Cash flow from operating activities Reconciliation of operating profit to net cash inflow from operating activities Six months to Six months to Year to 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited)Continuing operations £m £m £mNet profit 3.7 5.0 7.6Adjustments for:Taxation 1.5 1.1 1.5Depreciation 0.3 0.6 0.8Impairment of property, plant and equipment - - 1.2Amortisation of intangibles 0.1 0.1 0.3Impairment of intangibles - - 0.1Interest expense 3.2 3.4 6.4Other non-cash changes 0.1 - 0.2Changes in working capital:Increase in trade and other receivables - (0.3) (0.2)Decrease in trade and other payables (0.4) (0.9) (1.0)Cash generated from continuing operations 8.5 9.0 16.9Discontinued operationsNet profit - 6.5 6.5Adjustments for:Taxation - 2.8 2.8Depreciation - - -Profit on disposal of Bet Direct - (10.6) (10.6)Amortisation of intangibles - 0.1 0.1Changes in working capital:Decrease in trade and other payables - (0.7) (0.7)Cash used in discontinued operations - (1.9) (1.9)Cash generated from operations 8.5 7.1 15.0 This information is provided by RNS The company news service from the London Stock Exchange