SPO.L Regulatory News (SPO)

27 Jan 2005 07:00

Sportech PLC27 January 2005 Sportech PLC Pre-Close Statement Sportech PLC ("Sportech" or "the Company"), owner of Littlewoods Gaming, todayissues the following pre-close statement relating to the financial year ended 31December 2004. Preliminary results for the year will be announced on 31 March2005. Summary Sportech's established businesses within its Soft Gaming and Betting Divisionsgenerated expected revenues for 2004 in the region of £500m (2003: £330.4m). Thecompany also has a strong strategic position in the emerging interactive gamingmarket. Sportech expects to announce profits for the 2004 financial year, beforegoodwill, taxation and exceptional restructuring costs, in the region of £9.0m,in line with market expectations. Soft Gaming Division Football Pools accounts for the majority of Sportech's profits and freecashflow. Performance of Football Pools and associated products is in line withmarket expectations. Scratchcard revenues for 2004 are expected to be in theregion of £1m, in line with 2003, generating an operating loss of £0.6m.Although this loss is lower than 2003, the Board has decided to exit scratchcardoperations by the end of the first half of 2005, in order to ensure focus oncore activities that will deliver profits and cashflow. Betting Division Losses from the Betting Division in 2004 will be lower than 2003, broadly inline with market expectations. Our key action plans are on track and we areencouraged by improvements in the underlying trading from casino, poker andtelephone betting. It is noteworthy that the Division delivered EBITDAprofitability in November and December. Full year gross win will beapproximately 65% ahead of 2003, driven by strong growth from casino, poker andtelephone betting. Despite unfavourable sporting results, gross win in thesecond half of 2004 was marginally higher than in the first six months, andsports-book margins for the year will be approximately 8.5%, which is within ourexpected range. Approximately 50% of the total gross win was derived from nonsports-book activity including casino, poker and fixed odds games. Thisincreasing trend is expected to improve further the Betting Division's overallperformance during 2005 and future resilience in the event of unfavourablesporting results. During the second half of 2004 we have also taken action to further reduce theBetting Division cost base. The telephone-betting model has been improved by themove, in late October 2004, to in-house call handling. This move is on track todeliver annualised call handling cost savings in excess of £1m, offset by nonrecurring exit costs in 2004 and 2005, relating to the previous outsourcingcontract. The Division has benefited from strong profitable growth in on-line casino andpoker products, with revenues approximately 125% higher than 2003, and theintroduction of fixed odds games. Future growth prospects are enhanced by theplanned launch of a Bet Direct branded casino and poker offer in the secondquarter of 2005 to be supplied by BOSS media. ITVi Gaming The exclusive long-term interactive gaming and betting partnership with ITVcommenced in March 2004, with the objective of enhancing future growthopportunities across our Soft Gaming and Betting Divisions. The initialLittlewoods Gaming ITVi service, including customer registration/accountmanagement, games and betting commenced in June 2004. To date the service hasrelied on red button interactivity only, whereas future developments areexpected to encompass other interactive return paths.The service has attracted over 25,000 customer registrations via ITVi red buttonaccess points to date, however active customer numbers and average gross winlevels per active customer have remained low during this initial phase of thecontract. Both ITV and Sportech remain fully committed to the ITVi opportunityand the existing service will have increased red button prominence and promotionin the coming months, whilst good progress is also being made on new productdevelopments. A stream of full screen gaming products will launch in March, andin conjunction with ITV, we are considering additional opportunities presentedby the proposed dedicated ITV gaming channel and the integration of betting/gaming propositions within prime and night time ITV programming. Whilst forwardlevels of customer activity and gross win levels remain difficult to quantify,we have taken actions to ensure that the cost base and overall cash requirementsin 2005 are materially lower than those in 2004. Roger Withers, acting Managing Director, said: "We recognise the importance of our established Soft Gaming and Bettingbusinesses and remain keenly focused on these core activities. The BettingDivision is growing and on track to deliver profits in 2005, whilst the SoftGaming Division is underpinned by our Football Pools business, which continuesto generate significant free cashflow. "We also remain excited by the longer-term opportunities for growth and forincreasing our share of the interactive gaming market. Although ITVi activitylevels have been low to date, the strong growth in gross win and customernumbers across our internet and Sky based betting offer, demonstrates what wecan achieve in this new market. This confidence is reinforced by our strongrelationship with ITV and joint vision for the future. - ends - For further information: Suzanne Judge 0151 288 3059Sportech PLC David Rydell/Charlotte KirkhamBell Pottinger Corporate & Financial 020 7861 3232 This information is provided by RNS The company news service from the London Stock Exchange