SPO.L Regulatory News (SPO)

11 November 2014

Trading Update

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

Sportech PLC, one of the world's leading pool betting organisations, today issues the following trading update for the period from 22 August to 10 November 2014. 

Sportech's strategy is to build a leading position in the rapidly developing US and global betting industry. The Group's extensive activities in international pool and tote betting services for horse racing and football provide a regulatory and legal platform to support future growth across a wider range of gaming and entertainment opportunities, including iGaming, sports, fantasy sports, and slots. 

Whilst trading in the Football Pools is performing in line with our expectations, the performance of our Venues and Racing and Digital divisions has been impacted by a reduction in amounts wagered in Connecticut and across the US racing industry during the period. Nevertheless due to a reduced net interest charge in the second half, we expect Group adjusted profit before tax and earnings per share to be within the range of market expectations.

Sportech Racing and Digital

We have continued to develop our Racing and Digital business in the period, as we have responded to several industry tenders for contracts and we continue to invest in our technology, and in our iGaming business, both in terms of talent and technology, as we prepare for our entry into the New Jersey marketplace.

US thoroughbred racing industry data in the US shows that amounts wagered in the ten months to October is down 2% on 2013. The period under review has been unusually affected by changes to the Racing calendar, with a reduction in race days in September resulting in a sharp decline of 10.5% in amounts wagered, being partially offset by an increase of 2.7% in October against the prior year.

We are making good progress on our contract to supply Betfred's Totepool business with a comprehensive suite of betting technology products both online and via mobile as well as our core Quantum tote system. This is a significant project with revenues expected to exceed £9m from the system sale and ongoing maintenance over the duration of the contract. This sale highlights the strength of Sportech's market position and product offering following our recent investment, and we continue to develop prospective customers and sales. This includes a major sale of hardware and software to an international customer which is now likely to be concluded in 1Q 2015 rather than in the final quarter of 2014.

During the period we submitted our tender, presentation and follow up procedures to the Californian Horseracing Industry for a five year contract extension to continue processing the wagering at all of California's racetracks, satellites, sports bars and wagering facilities. A decision is expected by the end of this year with our existing agreement ending in September 2015.

Our joint venture with NYX, SNG Interactive, is on track to launch an online gaming platform in New Jersey in early 2015 as part of its agreement with Resorts Casino Hotel. This initial market entry supports the Group's broader strategic aim to develop an online gaming business to be initially offered to our existing racing and casino customers across the US as regulation permits.

Sportech Venues

Following the significant operating cost investment that we made in establishing the quality flagship restaurant, bar and betting facility in Bradley earlier this year, we are pleased that we are now seeing growing revenues and margins as the venue becomes established as a unique destination for watching big sporting events particularly NFL. Start-up losses of £0.3m have been incurred to date. Following the receipt of regulatory approvals to build similar large facilities in Stamford, Connecticut, and in Norco and San Diego, California, we are finalising the development plans, costs and schedules before commencing the building/conversion of these facilities.

Our Venues business has seen betting volumes decline against prior year by 1.5% in the year to date, primarily due to the macro industry trends together with the reduction in the amount wagered by certain VIP customers. Whilst disappointing, this is in line with industry statistics overall and significantly better than similar facilities in the North East of America which have seen a 10% average decline. Against this revenue backdrop, we are focussed on actions to expand our distribution (Internet, mobile and new venues) and to manage the controllable cost base, including the increased use of self-service betting terminals.

In our interim statement in August 2014, we highlighted the strengthening of our digital team, to enhance our capability across iGaming, fantasy sports and Internet betting on Horseracing. The improvements in our iGaming business have been noted above, whilst the improvements in MyWinners.com, our internet betting business, technology and product offering in Connecticut are progressing. We expect the improvements to continue into 2015, aided by further initiatives to ensure adherence to Cease and Desist letters that were issued by the Attorney General in June 2014 to all other operators in Connecticut.

Football Pools

The Football Pools is performing in line with management's expectations. New player recruitment for Classic Pools is continuing with 20,000 new players to date in 2014 compared to 11,000 in the same period of 2013. This has lead to a reduction in the rate of decline in overall players. Encouragingly, online player recruitment now accounts for over two-thirds of current recruitment activity.

As part of our ongoing modernisation project, in October we re-launched footballpools.com on our proprietary 'Turnstile' platform, into which we have integrated our partner NYX's existing gaming platform. This enables new customers and our approximate 240,000 existing direct channel customers to manage their accounts online, facilitating cross-sell opportunities to a wide range of pools and casino games. The new website has been built with a 'mobile first' approach using responsive design. Mobile and tablet already accounts for over half of the usage of the site.

In addition to the new website launch, and as part of our drive to add complementary and innovative products to our existing suite, we also launched a brand new single match pool betting product - MatchXtra - which offers fixed-odds style betting opportunities on Premier League and televised football matches. MatchXtra is currently offering around 50 matches per week and circa 500 markets, with the offering set to expand and grow in the coming months.

VAT Claim

In September, the Upper Tribunal ruled in favour of Her Majesty's Revenue & Customs ("HMRC") in HMRC's appeal case relating to a VAT repayment claim on the "Spot the Ball" game. This followed the initial ruling last year of the First-tier Tribunal in Sportech's favour. The Group expects to repay the £93m it received from HMRC following the initial ruling at the end of November.

As announced on 6 November, Sportech confirms that by 2 December it intends to submit to the Court of Appeal an Application for Permission to Appeal, and Notice of Appeal, in relation to the VAT repayment claim on the "Spot the Ball" game.

Outlook

Strategically the group continues to make good progress in its three divisions, and we are continuing to invest in ensuring that we have the products and people in place to enable us to take advantage of these opportunities. As a result, the Board remain confident for the future.

- Ends -

For further information, please contact:

Sportech PLC 020 7268 2400

Ian R Penrose, Chief Executive

Cliff Baty, Chief Financial Officer

Brunswick Group LLP 020 7404 5959

Mike Smith and Tom Williams

sportech@brunswickgroup.com

Investec Bank Ltd  020 7597 5970

Patrick Robb

Henry Reast

Peel Hunt LLP 020 7418 8900

Dan Webster

Richard Brown

About Sportech PLC

Sportech PLC is a sports gaming and entertainment company and one of the world's leading pool betting organisations, focusing on highly regulated markets worldwide. Sportech provides betting technology for football (soccer), horseracing and greyhound tracks. Sportech PLC processes over $13 billion in bets annually with a presence in 30 countries. Sportech is headquartered in London, England with operational offices in Liverpool, Bristol, Atlanta, Connecticut, California, New Jersey, Netherlands, Germany and Ireland. For more information about Sportech PLC, please visit www.sportechplc.com.