SPO.L Regulatory News (SPO)

24 August 2017

Sportech PLC ("Sportech" or the "Group")

Interim results for the six months ended 30 June 2017

Sportech, one of the world's leading regulated gaming technology suppliers and operators, is pleased to announce its interim results for the six months ended 30 June 2017.

Group Highlights

· Technology investment delivering global expansion in:

o Asia (Hong Kong)

o Europe (Denmark and Netherlands)

o US (additional Connecticut licensing)

· Group has cash of £76.2m at 30 June 2017, and no bank debt following the cancellation of the bank facility, which totalled £75m at 30 June 2016

· Successful VAT claim - final receipt of outstanding cash in March 2017 taking refund to £97m

· Returned £21m to shareholders through Tender Offer in March 2017

· Following shareholder approval, Court process commenced to create approximately £55m of reserves to enable a substantial return to shareholders

· Completion of £83m sale of The Football Pools announced on 26 June 2017

· Total Group EBITDA of £3.9m from continuing operations (2016: £4.1m)

Financial Highlights

· Revenue up by 5% but reducing on a constant currency basis by 7%, primarily due to timing delays in the completion of one-off system sales, with a corresponding impact on EBITDA

· Adjusted profit before tax improved by £1.5m to £1.1m

· Statutory loss before tax improved by £0.7m

· Sportech Racing and Digital - EBITDA of £3.9m, down £0.9m on a constant currency basis, due to timing delays in system sales, offsetting the improvement in quality of earnings with growth in recurring revenues

· Sportech Venues - EBITDA of £1.7m, on a constant currency, in line with last year

· The Group generated approximately £6m of cash from the Football Pools during the period prior to disposal for a further £83m

Ian Penrose, Chief Executive of Sportech PLC, said:

"2017 has seen the transformation of the Group continue.

We were successful with the £97m VAT legal case in the Supreme Court, we modernised and sold the Football Pools for £83m, repaid over £60m in debt and returned £21m to shareholders with further substantial shareholder returns still to come from the £76m cash balance.

Following significant investment into our technology and licensing, Sportech has now established a strategic base to grow our business globally through our unique regulated gaming business based in North America together with our expanding presence in Asia. We have transitioned our business away from the UK market which is encountering regulatory headwinds, and await with interest the Supreme Court's decision in the US on the future of sports betting.

With our strong balance sheet and cash balances, we have the resources to fund attractive growth opportunities, meet ongoing commitments and deliver substantial returns to shareholders."

(1) 2016 revenue and EBITDA are those at reported currency excluding the results of the Football Pools segment.

(2) EBITDA is stated before amortisation of acquired intangibles, impairment of assets, exceptional items and share option expense.

(3) Adjusted profit figures are stated before amortisation of acquired intangibles, impairment of assets, exceptional items, share of loss after tax and impairment of joint ventures and associates, and other finance income.

(4) Adjusted net cash/(debt) represents cash balances net of overdrafts and customer funds. The Spot the Ball VAT repayment was also excluded prior to the Supreme Court ruling, in the Group's favour, in December 2016.

For further information, please contact:

Sportech PLC Tel: +44 (0)20 7268 2400

Ian Penrose, Chief Executive

Mickey Kalifa, Chief Financial Officer

Brunswick Group LLP Tel: +44 (0)20 7404 5959

Jonathan Glass, Stuart Donnelly

Investec Bank PLC Tel: +44 (0)20 7597 4000

Patrick Robb, Henry Reast

Forward-looking statements

Certain statements in this Interims Statement are forward-looking. Although the Group believes that the expectations reflected in this forward-looking statement are reasonable, it can give no assurance that these expectations will prove to be correct. As these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

Sportech PLC ("Sportech" or the "Group")

Preliminary results for the six months ended 30 June 2017

Group Overview

The Group is a highly-focused gaming technology and betting organisation with its primary business operations based in North America, with growing activities across Europe and Asia.

We provide gaming technology solutions (in our Racing and Digital division) for customers in horseracing and lotteries and to professional sports teams (NFL, NBA, NHL and MLB) and other gaming operators. Sportech's core technology system (QuantumTM) is the most widely deployed tote based betting software in the world, currently powering 99 customers worldwide and facilitating commingling between 244 betting organisations, in 37 countries and 38 US states, processing an estimated $11.6 billion in annual betting turnover.

Our Venues division comprises our betting activities in the state of Connecticut and in the Netherlands. In Connecticut, we operate under an exclusive and in perpetuity licence for all legal betting currently permitted by the State. This is carried out in 16 venues and across digital platforms. In the Netherlands, our betting activities currently centre around 12 betting shops, a number of point of sale positions and the digital platform, all under an exclusive licence.

Globally we employ over 800 people.

Group Financial Overview

* 2016 divisional results are at "constant currency", retranslated using 2017 exchange rates.

Sportech Racing and Digital

(i) Sportech Racing and Digital: Business Review

Since we acquired the division in 2010, we have transformed our gaming technology business from a North American horseracing centric business, to owning industry leading gaming technology for use across a host of sporting and gaming institutions. Customers include the Dallas Cowboys, Miami Dolphins, Atlanta Braves, Chicago Bulls, Penn National Gaming (the leading North American casino and racecourse group), Betfred's UK Tote, the Macau Jockey Club, and LEIDSA, (the leading lottery in the Dominican Republic).

In order to expand our market leading position in North America and Europe and to broaden our global profile, we have established a sales office in Singapore from which to expand into the already sizeable and rapidly growing Asian horseracing betting market. The advancement and flexibility of our new technology has brought about significant new revenue streams, including enabling customers in Europe, Asia and the Americas to bet into each other's markets, most notably allowing betting into the world's premier race market, the Hong Kong Jockey Club, by our customers in the UK, Macau, Canada and the Americas. We expect further such international/cross-border betting contracts to be signed in due course.

We have renewed and extended eight existing customer contracts in our core North American base, including Hawthorne Race Course and Mohegan Sun at Pocono Downs. We are also pleased to report that we have not experienced any lost contracts in the period and remain confident of securing and delivering important contracts in Asia in the second half of the year.

The Bump 50:50 business continues to make good progress. Bump, which supplies in-stadia electronic lotteries to professional sports teams, is growing rapidly from a customer base of seven in June 2014 to 48 professional sports teams within three years. Revenues have grown at 55% CAGR since acquisition. Newly secured and renewed customers, obtained or renewed, in the first half of the year include the Atlanta Braves, the Detroit Lions, Jacksonville Jaguars and three Raceways featuring NASCAR events, and since the half year, we have secured the Columbus Blue Jackets (NHL).

Bump has also secured approval for online and mobile sales in the province of Manitoba (Canada), expected to commence in the autumn. Using our technology, this will be the first time a team can sell its lottery outside of the stadium addressing a significantly larger customer base. We expect an increase in sales following this development and anticipate this to be the first of many teams to move online as other states and provinces enact similar regulation.

In February 2017, the Group's Indian joint venture partner, Playwin, India's largest lottery provider, commenced its betting operations in the State of Sikkim. We are watching developments in the market with great interest.

(ii) Sportech Racing and Digital: Financial Review

* 2016 channel results are at "constant currency", retranslated using 2017 exchange rates.

Total revenue is broadly in line with last year at £17.6m (2016: £17.8m) and EBITDA for the division was reduced for the first six months, at £3.9m (2016: £4.3m). Variances to prior year include foreign exchange benefits in revenue and EBITDA of £2.2m and £0.5m respectively.

Revenue from tote services and maintenance contracts has increased from £12.4m to £13.0m and EBITDA has increased 100% to £2.0m as a result of the commencement of our contract to enable commingling into horseracing pools in Hong Kong, through our customer, Betfred.

Digital services including sports and other lotteries has performed in line with prior year and is positioned well for growth as we continue to drive our Bump business forward.

Revenue from system software and equipment sales has decreased by £3.3m (87%). 2016 sales were generated in Asia as a result of our increased activities. We expect sales in H2 to be secured and delivered in this region, demonstrating the benefit of our expanded international focus in recent years.

Sportech Venues

(i) Sportech Venues: Business Review

Sportech Venues operates all betting on horseracing, greyhound racing and jai alai in the state of Connecticut under an exclusive and in perpetuity licence for retail, telephone and online. The business, which is operated with close consultation and oversight from the State, is the only legally permitted betting operator in Connecticut outside of the tribal casinos. We continue to develop our retail estate as we endeavour to broaden our revenue streams, increase the product offering and create a modern environment to eat, drink and place bets.

We have now completed the construction of our flagship sports bar, restaurant and betting venue in downtown Stamford, which opened in June 2017. This venue, in common with our venue in Bradley, has been developed in partnership with Bobby Valentine, who relocated his existing Stamford sports bar and restaurant into the new facility. We have received positive customer feedback and early trading has been encouraging.

The business currently offers wagering on horseracing, greyhounds and jai alai. In due course, dependent on there being changes in the regulatory environment, we intend to develop these operations into a wider portfolio of sports and gaming products. With this in mind, and following several years of positioning and lobbying by the Group, we were delighted when the Governor of the state of Connecticut signed into law a new Bill which authorised the extension of our licence from 18 to 24 venues. Equally, the Bill has also required regulators to consider the future for sports betting in Connecticut, should it be permitted federally. Developments advanced on the future of sports betting in the United States when the Supreme Court on 27 June 2017, agreed that it would consider whether the existing ban on betting on sports imposed by PASPA is legal. Oral arguments are scheduled for the autumn/winter and a decision expected by June 2018.

We are progressing with unlocking value through the sale (and leaseback) of the nine-acre Sports Haven site in New Haven, Connecticut.

In the Netherlands, we were successful in June 2017, following an open tender process in obtaining a new five-year licence for the exclusive right to carry out tote betting on horseracing. This is operated in nine betting shops, 38 other outlets with point-of-sale terminals and online through our site www.runnerz.nl. Having operated in the past under a few short-term temporary licences, we are now able to plan and operate for the medium term.

(ii) Sportech Venues: Financial Review

* 2016 channel results are at "constant currency", retranslated using 2017 exchange rates.

Revenues and EBITDA for the division are ahead of prior year at £19.3m and £1.7m respectively. On a constant currency basis, revenue and EBITDA are broadly in line with last year.

Although handle was down by 2% in the first half compared to prior year, this is a marked improvement from the reduction seen in H1 2016 (down 5% vs H1 2015). The opening of Stamford should see a growth in handle, together with further growth in food and beverage revenues in the second half of 2017. The online betting platform ("ADW") continues to grow having seen a further 8% increase in handle, and now represents 10% of overall betting turnover. This growth is despite the continued presence of illegal online operators in the State. The business remains focused on its cost base.

In the Netherlands and California, the combined revenues and EBITDA were marginally up on prior year.

The Football Pools - discontinued operations

We completed the sale of The Football Pools for £83m in cash, which was paid on 26 June 2017. In addition to the proceeds from the sale, The Football Pools generated approximately £6m of cash for the Group in the first half of the year.

The Football Pools has been classified as a discontinued operation, against which a loss of £3.1m has been reported. This comprises a first half year post-tax trading profit of £3.8m, offset by a loss on disposal of £6.9m, comprising a gain on disposal of assets of £1.6m, taxes arising on the disposal of £6.4m (payable by the end of 2017) and £2.1m of disposal costs.

Corporate costs

Following the sale of The Football Pools, the Group has commenced a programme of reducing central costs. The benefits of these actions which will be seen in the second half of 2017 and the full year of 2018. Costs have remained static in H1 2017 at £1.7m (2016: £1.7m). In addition, we also have a non-cash share option expense under IFRS 2 of £0.5m (2016: £0.1m).

Depreciation and amortisation

The Group's normal depreciation and amortisation charge decreased in the period to £2.1m (2016: £3.0m). In addition, the Group incurred a non-cash amortisation charge of £0.1m (2016: £0.3m) on the intangible assets acquired with Datatote in 2013.

Exceptional costs

The Group has exceptional administration costs of £0.3m, significantly reduced from prior year (2016: £2.0m). The costs in 2017 comprise further licensing costs in relation to New Jersey (£0.1m), accrued contingent consideration costs for Bump (£0.1m) and pre-construction costs for new venue builds (£0.1m).

Net finance costs

The significant reduction in Group net interest costs in the period to £0.2m (2016: £1.4m) arises from substantially lower average net debt levels this year. In addition, other finance charges amounted to £0.6m (2016: income of £2.3m) representing foreign exchange losses arising from the retranslation of foreign currency denominated inter-company loans and cash balances held within the Group.

Taxation

A tax charge for the period of £nil (2016: £0.2m) has been provided at the weighted average applicable tax rate for the Group of (3.68)% (2016: 23.3%) together with the tax effects of permanent differences and other adjustments. The underlying effective tax rate of 6.61% (2016: 8.29%) is similar to prior year.

The Group has a net deferred tax asset of £3.4m (2016: £0.9m), representing primarily foreign taxes withheld which can be utilised against future profits. Tax payments of £12.1m were made during the period (2016: £1.1m), principally representing final payments for prior-year tax liabilities including tax payable on the Spot the Ball receipt of £13.8m (less adjustments for overestimated UK tax payments in 2016 following the impairments made to assets in the final quarter) and overseas tax deducted at source in the US.

VAT claim

The Group received the outstanding payment of £3.1m from HMRC in March 2017 taking the total VAT repayment claim on the "Spot the Ball" game to £97m.

Net cash/net current assets

The Group held cash balances of £76.2m at 30 June 2017. As a result, the Group's remaining bank facility of £50.0m was cancelled. Net current assets amounted to £64.4m (December 2016: £8.2m).

Foreign exchange

Following the sale of The Football Pools, the Group generates approximately 78% of revenues in USD and 18% of revenues in Euros, with the balance being generated in Sterling and Canadian Dollars. Movements in overseas currency rates are closely monitored by management and action taken to minimise cash flow risk arising from this. The Group has benefited in its reported results from the weakening of GBP from H1 2016, with an EBITDA benefit versus prior year of £0.7m. We have entered into hedging instruments to protect a portion of the Group EBITDA denominated in USD, at £1 : $1.29 to year end.

Capital expenditure

Capital expenditure in the period was £8.6m (2016: £3.7m), of which £5.2m related to the newly opened 20,000 sq ft Stamford venue.

Dividend and capital distribution

Sportech returned £21m (representing approximately 10% of the share capital of the Company at that time) to shareholders in March 2017, by way of a tender offer. Following the completion of the Court process to create £55m of distributable reserves, the Board will announce its intention regarding a further significant return to shareholders.

Shareholders' funds

Total equity and the Group's net assets at 30 June 2017 have reduced to £122.2m (31 December 2016: £148.8m), principally as a result of the return to shareholders.

Board and employees

The Group announced on 27 January 2017 that Andrew Gaughan was appointed to the Board as an Executive Director.

On 24 May 2017 Roger Withers retired as Chairman and Richard McGuire was appointed to the role. In addition, Richard Cooper was appointed to the Board as Independent Non-executive Director and Chairman of the Audit Committee.

Sportech is a global business which places significant demands upon executives and employees. The Board would like to thank them for their dedication and commitment to the Group.

Outlook

Following significant investment into our technology and licensing, Sportech has now established a strategic base to grow our business globally through our unique regulated gaming business based in North America together with our expanding presence in Asia. We have transitioned our business away from the UK market which is encountering regulatory headwinds and await with interest the Supreme Court's decision in the US on the future of sports betting.

With our strong balance sheet and cash balances, we have the resources to fund attractive growth opportunities, meet ongoing commitments and deliver substantial returns to shareholders.

We have had a good first half, are trading in line with management expectations, and are looking forward to delivering further progress in 2017.

Ian Penrose

Chief Executive

24 August 2017

 Interim consolidated income statementFor the six months ended 30 June 2017

* Adjusted profit/(loss) before taxation is profit/(loss) before taxation, net (loss)/profit from discontinued operations, amortisation of acquired intangibles, impairment of assets, exceptional items, share of loss after tax and impairment of joint ventures and associates, and other finance (charges)/income.

Interim consolidated statement of comprehensive incomeFor the six months ended 30 June 2017

Interim consolidated balance sheetAs at 30 June 2017

Interim consolidated statement of cash flowsFor the six months ended 30 June 2017

Notes to the consolidated interim financial statementsFor the six months ended 30 June 2017

1. General information 

Sportech PLC (the "Company") is a company domiciled in the UK and listed on the London Stock Exchange. The Company's registered office is Collins House, Rutland Square, Edinburgh, Midlothian, Scotland EH1 2AA. The condensed consolidated interim financial statements of the Company as at and for the period ended 30 June 2017 comprise the Company, its subsidiaries, joint ventures and associates (together referred to as the "Group"). The Company's accounting interim reference date is 30 June. Consistent with the normal monthly reporting process, the actual date to which the balance sheet has been drawn up is to 2 July 2017 (2016: 3 July 2016). For ease of reference in these condensed interim financial statements, all references to the results for the period are for the period ended 30 June 2017 (2016: 30 June 2016) and the financial position at the same date. The principal activities of the Group since the disposal of the Football Pools on 26 June 2017 are now the provision of a tote technology platform to around 300 contracted parties (disclosed as segment "Racing and Digital"), and the operation, in Connecticut, California and the Netherlands, of licensed sports wagering venues (disclosed as segment "Venues").

The condensed consolidated interim financial statements were approved for issue on 24 August 2017.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 were approved by the Board of Directors on 2 March 2017 and delivered to the Registrar of Companies. The Report of the Auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

 These condensed consolidated interim financial statements have not been reviewed or audited.

2. Basis of preparation 

a. These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union. They do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2016 which have been prepared in accordance with IFRSs as adopted by the European Union.

b. The Group cancelled in full its committed revolving credit banking facilities totalling £50m in place with Bank of Scotland plc, Barclays Bank PLC and Royal Bank of Scotland plc in June 2017. The Group's forecasts and projections, which have been prepared for the period to December 2018, and considering reasonably possible changes in performance, show that the Group will be able to operate in surplus cash funds. Even with significant downside risks applied, the forecasts show that the Group would stay in significant surplus funds in the period under review. The sensitivities applied included handle shortfalls to forecast, lower level of terminal sales, lower rates of online growth, and increased capital expenditure.

After making reasonable enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

c. The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, significant judgments have been made by management with respect to the assumptions underpinning the Group's tax liabilities, the carrying value of intangible fixed assets, and the carrying value of contingent consideration receivable.

d. Restatement of previous periods

In accordance with IFRS 5, the historic results of the Football Pools division have been disclosed separately as those arising from a discontinued operation, given the loss of Sportech control over this division on 26 June 2017 with the sale to Op Capita. Items that were previously presented within the Football Pools division but are not discontinued include any income/costs in relation to the Spot the Ball claim. All assets and liabilities in relation to this historic claim, together with any potential future income/costs that may arise from the claim, are retained by the Group under the terms of the Sale and Purchase Agreement. Income and costs earned in previous periods from this claim have been reported within the Corporate costs segment in the Group's segmental analysis.

e. The principal risks and uncertainties for the Group remain the same as those detailed on pages 13 to 15 of the 2016 Sportech PLC Annual Report and Accounts, where descriptions of mitigating activities carried out by the Group are also outlined. Those risks include regulatory risks, product popularity, technological failure, and industry competition. The risks specifically detailed as relating to The Football Pools no longer apply to the Group, however, the Group remains exposed, in its continuing businesses, to the four categories of risk identified as they spanned The Football Pools and the other operations.

3. Accounting policies

There are no new standards or amendments to standards or interpretations that are mandatory for the first time for the financial year beginning 1 January 2017 that would impact the Group financial statements. Therefore, all other accounting policies applied in these condensed consolidated interim financial statements are consistent with those of the annual financial statements for the year ended 31 December 2016, as described in those annual financial statements.

The following standards, amendments and interpretations that are not yet effective and have not been adopted early by the Group are as follows:

A review of the impact of those new standards will be performed in the second half of 2017, and an analysis of this impact will be provided in the Annual Report for the year ended 31 December 2017.

4. Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee, which makes strategic and operational decisions.

The Group has identified its business segments as outlined below:

- Sportech Racing and Digital - provision of pari-mutuel wagering services and systems worldwide principally to the horseracing industry;

- Sportech Venues - off-track betting venue management; and

- Corporate costs - central costs relating to the Company in its capacity as the holding company of the Group.

The Executive Committee assesses the performance of the operating segments based on a measure of adjusted EBITDA which excludes the effects of non-recurring expenditure such as exceptional items and asset impairment charges. The share option expense is also excluded. Interest is not allocated to segments as the Group's cash position is controlled by the central finance team. Sales between segments are at arm's length.

5. Exceptional items

The net impact on the income statement for the six months ended 30 June 2017 as a result of exceptional items is a cost of £0.3m (six months ended 30 June 2016: £2.0m; year ended 31 December 2016: income of £84.7m), analysed as follows:

As disclosed in note 12, exceptional costs incurred in 2017 of £2.1m relating to the sale of the Football Pools are included within the net loss on disposal of discontinued operations in the six months ended 30 June 2017. The comparative costs incurred as a result of this disposal in the six months ended 30 June 2016 of £1.5m and the year ended 31 December 2016 of £4.4m are included within the Group's exceptional costs for those periods as disclosed above.

Exceptional cash outflows in the period include Football Pools transaction costs (£5.0m), fees payable in relation to the Spot the Ball VAT claim (£5.2m), the first instalment of contingent consideration payable for the 2015 acquisition of Bump Worldwide, Inc (£0.2m) and pre-construction costs for new venue builds (£0.1m). The exceptional cash inflow of £3.1m in the period is the final instalment owing to the Group in relation to the Spot the Ball VAT claim.

6. Employment costs - continuing operations

The below analyses the total staff costs incurred by the Group and their respective classification in the financial statements. This considers only the costs relating to the Group's continuing operations, and therefore excludes any costs incurred by the Football Pools.

7. Net finance charges/(income)

8. Taxation

Taxation is provided based on management's best estimate of the expected weighted average annual taxation rate for the full year. The estimated weighted average annual tax rate for the year ended 31 December 2017 is (3.68)% (2016 continuing operations: 23.3%). The decrease is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates and the exclusion of UK profits in the Football Pools, disclosed as discontinued, which are available for group relief against UK losses in the continuing group.

9. (Loss)/earnings per share

Adjusted EPS

The calculation of adjusted EPS is based on the adjusted profit after taxation attributable to owners of the Company from continuing operations. The adjusted tax rate of 14.2% (six months ended June 2016: 70.0%; year ended 31 December 2016: 58.3%) is based on management's best estimate of the underlying tax rate for the year on adjusted profits. As adjusted profit after taxation excludes the results of discontinued operations, adjusted EPS for the previous periods has been restated to reflect this.

10. Intangible fixed assets and property, plant and equipment

11. Net investment in joint ventures and associates

The Group held the following investments in active joint ventures and associates during the period:

Movements in the Group's net investments in joint ventures and associates in the period are outlined below:

12. Discontinued operations

(Loss)/profit from discontinued operations

Net (loss)/profit from discontinued operations includes the results of the Football Pools division prior to its disposal on 26 June 2017. This includes the trading results of the division in each of the respective periods, with the net post tax loss on disposal incurred in the six months ended 30 June 2017 also included in that period.

Included within expenses in the six months ended 30 June 2017 are £nil costs relating to the closure of the collector channel in 2016 (six months ended 30 June 2016: £2.4m; year ended 31 December 2016: £2.4m), non-cash impairment charges of £nil (six months ended 30 June 2016: £nil; year ended 31 December 2016: £42.5m) and £nil exceptional charges arising as a result of those asset impairments (six months ended 30 June 2016: £nil; year ended 31 December 2016: £1.0m).

Loss on disposal is calculated as follows:

The total sale proceeds of £86.5m represents an agreed purchase price of £83.0m plus amounts receivable in respect of working capital adjustments agreed under the terms of the Sale and Purchase Agreement dated 26 June 2017.

The taxation charge on disposal arises as a result of the disposal being a combination of the sale of shares of certain companies, the gain on which is tax free (substantial shareholding relief claimed) and the sale of the trade and assets of other companies. The sale of the trade and assets results in a capital gain on which tax is payable at 19.5%. The charge of £6.4m represents management's best estimate of the tax payable, however significant judgement is applied in the calculation and the charge may ultimately be higher than £6.4m.

Cash flows from discontinued operations