TIDMSPO

RNS Number : 9355L

Sportech PLC

11 September 2023

11 September 2023

Sportech PLC

("Sportech" or the "Group" or the "Company")

Interim Results & Proposed Delisting

Sportech (AIM:SPO), an international betting technology business, is pleased to announce its interim results for the six months ended 30 June 2023 ("H1 2023" or the "period").

Summary

The Group has continued to deliver solid operational performance, marked by stable revenue growth and a renewed emphasis on margin enhancement. This strategic approach has led to a 7.2% increase in gross profit and a notably improved Adjusted EBITDA performance, in comparison to the same period of the previous year.

The Group's Adjusted EBITDA demonstrated positive momentum, reaching GBP0.9 million (GBP0.4 million in H1 2022). This improvement was fuelled by several key factors, most notably growth in contributions from US gaming and a sustained focus on optimizing operational and corporate costs.

In July 2023, the Group completed a share capital restructuring that helped to provide approximately 3,600 smaller shareholders with a cost effective exit. Additionally, the Company announced a meaningful return of capital to shareholders totalling GBP3.5 million, paid in August 2023, bringing the cumulative shareholder repayments to c.GBP46 million over the past two years and c.GBP121 million since 2017. Group cash (excluding customer balances) at the end of H1 2023 was GBP7.8 million and at the end of August 2023 was GBP3.6 million.

However, it is important to acknowledge the significant financial burden associated with maintaining a listing on the public markets, particularly given the Company's reduced size, following the successful implementation of the strategic drive to return capital to investors. In light of this, the Board will today also announce, subject to shareholder approval, a proposed cancellation of its ordinary shares to trading on AIM (the "Proposed Cancellation"). The background to and reasons for the Proposed Cancellation will be set out in a separate announcement, and if approved by shareholders, is expected to deliver significant future cost savings and strengthen the Company's financial position.

 
 
                                                 Constant      Actual 
                                                 Currency    Reported 
 Key Financials (GBP million)        H1 2023      H1 2022     H1 2022 
---------------------------------   --------  -----------  ---------- 
 Revenue                                13.5         13.4        12.6 
 Gross Profit                            7.4          6.9         6.5 
 Contribution(1)                         7.1          6.7         6.3 
 Adjusted EBITDA(2)                      0.9          0.4         0.3 
 Loss before tax from continuing 
  operations                           (0.3)        (0.9)       (0.8) 
 Adjusted loss before tax(3)           (0.3)        (0.4)       (0.4) 
 Distributions to shareholders             -          7.0         7.0 
 
   1.        Contribution is defined as gross profit, less marketing and distribution costs. 

2. Adjusted EBITDA is earnings from continuing operations before interest, taxation, depreciation and amortisation, share option charges, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.

3. Adjusted loss is the aggregate of Adjusted EBITDA, share option charges, depreciation, amortisation (excluding amortisation of acquired intangibles) and certain finance charges.

Richard McGuire, Executive Chairman of Sportech, said : "Despite delivering improving operational results announced today, the substantial financial cost associated with maintaining a public listing, given our current scale, and the increasing volatility in the market valuation is adversely impacting net returns and future prospects. Regrettably, in light of these circumstances, we find it necessary to take the difficult but pragmatic step of proposing delisting from the AIM market today."

For further information, please contact:

Sportech PLC enquiries@sportechplc.com

Richard McGuire, Executive Chairman

Clive Whiley, Senior Independent Director

Peel Hunt Tel: +44 (0) 20 7418 8900

(NOMAD and Corporate Broker to Sportech)

George Sellar / Andrew Clark / Lalit Bose

Group Operational Overview

Navigating Challenges and Seizing Opportunities: A Solid Performance in H1 2023

Amidst the intricacies of a predominantly physical retail business within a heavily regulated industry, the Group's performance in H1 2023 stands as a testament to resilience and strategic prowess. Overcoming the challenges inherent to delivering scalable growth in such an environment, the Company managed to deliver enhanced results in H1.

The Board has remained proactive in charting the path forward. Management continue to address the operational cost structure of the Group and expand operations beyond its historic major dependence on pari-mutuel wagering. In January 2023 the Company unveiled the divestiture of certain non-core assets. This strategic move coupled with the receipt of contingent proceeds resulting from a prior year disposal, resulted in both streamlining future operating costs and bolstering Group cash by a net amount of GBP1.5 million.

The dedication to positive initiatives, coupled with the cultivation of an efficient operational cost base, yielded a commendable outcome. Despite a modest yet steady revenue growth, the Group was pleased to achieve positive Adjusted EBITDA, a testament to the Group's prudent financial management.

Looking ahead to the latter half of 2023, operational focus remains resolute. Strengthening Company affiliations with betting partners, seizing scalable growth opportunities, and realigning non-operational costs to harmonize with the Group's scale stand out as pivotal objectives for the management team. We are committed to capitalizing on our strengths, adjusting the operational cost to manage growth prospects, and optimizing our performance within this intricate and opportunistic landscape.

 
                                     Revenue               EBITDA(1) 
 GBP'000                       H1 2023   H1 2022(1)   H1 2023   H1 2022(2) 
  Continuing operations 
                              --------  -----------  --------  ----------- 
 Venues                         12,651       12,442     1,923        1,612 
 Digital                           894          912      (24)        (101) 
 Corporate costs                     -            -   (1,030)      (1,125) 
                              --------  -----------  --------  ----------- 
 Total at constant currency     13,544       13,354       869          386 
 Exchange rate impact                -        (783)         -         (75) 
 Total reported                 13,544       12,571       869          311 
                              --------  -----------  --------  ----------- 
 

1.Adjusted EBITDA

2. 2022 numbers are at constant currency.

Sportech Digital

Following the 2021 sale of the core lottery contract and delivery of the contractual obligations the decision was taken to sell the remaining non-core lottery related assets in January 2023.

 
                                              Constant    Reported 
 Digital                                      Currency    Currency 
  GBP'000                          H1 2023     H1 2022     H1 2022 
                                  --------  ----------  ---------- 
 Service revenue                       857         912         857 
 
 Contribution                          354         378         355 
 Contribution margin                 41.4%       41.5%       41.4% 
 
 Adjusted operating expenses(1)      (379)       (479)       (462) 
                                  --------  ----------  ---------- 
 Adjusted EBITDA                      (24)       (101)       (107) 
                                  --------  ----------  ---------- 
 
 Intangible assets capex                 -          97          97 
 Tangible assets capex                   -          22          22 
                                  --------  ----------  ---------- 
 Total capex                             -         119         119 
                                  --------  ----------  ---------- 
 

1. Adjusted operating expenses exclude depreciation and amortisation, impairments and separately disclosed items as reported in note 1 of the Interim Financial Statements.

Sportech Venues

Sportech Venues operates nine gaming locations/venues in the State of Connecticut under an exclusive and in-perpetuity license for pari-mutuel betting and under agreement with the state lottery for sports betting. This section outlines the company's performance in key areas and highlights its strategies for growth.

Financial Performance:

Food and Beverage (F&B) Revenue:

In H1 2023, F&B revenue increased +10%, reaching GBP1.85 million, (H1 2022 GBP1.68m) demonstrating stability, until the anticipated return to normal office occupancy occurs.

Betting Handle:

The overall betting handle within venues increased by 2.2% to $101.8 million. This growth was primarily driven by a $5.1 million increase in gross sports betting handle, effectively offsetting the $2.9 million decline in pari-mutuel.

Betting handle represents the gross wagering by the Group retail customers in Pari-Mutuel (Tote) and Sports Betting. It is an essential Key Performance Indicator, however is not recorded as revenue within the Group. The Revenue recorded from pari-mutuel (pool betting) handle is the gross take out. Essentially the 'take out' is removed from the pool, and the remaining money returned to winning wagers. For Sports Betting the revenue contribution is precisely the 'commission' received from our sports betting arrangement with the Connecticut Lottery Corporation. Sports Betting handle is a core KPI, there is no direct relationship to profitability however as its risk-based fixed odds and the clear KPI remains the hold on the handle or simply the gross profit (Gross Gaming Revenue) which ultimately defines the Group sports betting commission/revenue.

Sports Betting:

Sportech offers sports betting in collaboration with the Connecticut Lottery Corporation (CLC). The net commission generated supports the Group's operational cost base. H1 2023 saw significant growth in retail sports betting handle (+10.6%) and gross profit (+39.5%). This achievement is notable, especially in the face of competition from neighbouring Massachusetts.

Risk Management:

Sportech reminds investors of the inherent risk in fixed odds sports betting compared to traditional pool betting (pari-mutuel). During the period, the Group managed approximately $50.1 million in retail sports betting handle, with a Sportech risk exposure of around $12.5 million. Despite challenges and a tough June when customers certainly enjoyed better Baseball results, the gross profit ('hold') stood at an impressive 10.2% of handle. The American Football season, which is the Group's busiest season, has now commenced bringing additional opportunity and risks to the Group.

Pari-Mutuel Betting:

While pari-mutuel betting across the estate handled $51.7 million, there was a decline of 5.3% compared to H1 2022. Physical locations remained stable, but Telebetting and online products faced increased competition from iCasino gaming and sports betting for the consumer discretionary betting dollar.

Strategic Outlook:

1. Contribution Margin: The contribution margin improved to 53.4% (compared to 50.8% in H1 2022). This positive trajectory is commendable, considering the costs associated with meeting sports betting requirements and enhancing infrastructure.

2. Operational Footprint: Sportech operates across eight leasehold premises and one freehold property in Connecticut, USA. The company is actively exploring opportunities to expand its product range and enhance promotion efforts.

Conclusion:

Sportech Venues' performance in H1 2023 demonstrates resilience and growth potential. The company's focus on sports betting, despite its inherent risks, has yielded support to date, offsetting the higher cost of operating a physical retail business. As the gaming landscape in Connecticut evolves with changes in sportsbook providers and competitive pressures, the Group remains committed to managing relationships and optimizing its operational and financial performance.

 
                                              Constant    Reported 
  Venues                                      Currency    Currency 
   GBP'000                         H1 2023     H1 2022     H1 2022 
                                  --------  ----------  ---------- 
 Wagering revenue                    9,786       9,997       9,412 
 F&B                                 1,852       1,682       1,584 
 Sports betting commission           1,012         763         718 
 Total revenue                      12,651      12,442      11,714 
 
 Contribution                        6,751       6,315       5,939 
 Contribution margin                 53.4%       50.8%       50.7% 
 
 Adjusted operating expenses(1)    (4,827)     (4,703)     (4,414) 
                                  --------  ----------  ---------- 
 Adjusted EBITDA                     1,923       1,612       1,525 
                                  --------  ----------  ---------- 
 
 Total capex                           120          15          15 
                                  --------  ----------  ---------- 
 

1. Adjusted operating expenses exclude depreciation and amortisation and separately disclosed items as reported in note 1 of the Interim Financial Statements.

Corporate Costs

Corporate costs reduced a further GBP0.1 million during the period. However the Board is acutely aware of the cost of maintaining a public company listing and has proposed today a delisting from AIM, which would significantly reduce corporate costs going forward if approved by shareholders and align costs as close as possible to the reduced size of the Group.

Separately Disclosed Items

The Group incurred costs of GBP0.1 million (H1 2022: GBP0.5 million) during the period, which are shown as separately disclosed items. H1 2023 items are associated with corporate activity, as the Group continues to assess and explore its strategic options.

Net Finance Costs

The Group has no debt. The Group had a net finance expense in continuing operations of GBP(0.2) million (H1 2022: GBP0.1 million), this was primarily the interest payable on lease liabilities.

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 2023 is (10)% (2022: (8.5%)). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates, the non-recognition of deferred tax on losses in the UK due to uncertainty of non-recovery as well as the utilization of previously unprovided tax assets in the US.

The Group has submitted an appeal to HMRC to contest the treatment of GBP4.6 million of taxation potentially due on the 2016 Spot the Ball refund. This amount was paid to HMRC, however in the event the Company is unsuccessful in its appeal there remains a potential c GBP0.7 million interest due. There is nothing held on the balance sheet in respect of the tax itself, the interest is accrued and if payable will be a cash outflow.

Net Cash

The Group held cash balances of GBP7.8 million, excluding customer balances (31 December 2022: GBP7.4 million) as of 30(th) June 2023. Post the period end the Group has repurchased c.GBP0.5 million of shares as part of the share restructuring and returned GBP3.5 million to shareholders in August 2023 via a capital return distribution. The updated cash balance at the end of August 2023 was c GBP3.6 million

Capital Expenditure

Capital expenditure ("Capex"), was controlled again in the period and amounted to GBP0.1 million (H1 2022: GBP0.1 million), whilst management anticipate higher Capex in H2 2023 due to upgrading security recording equipment and general heating and ventilation system improvements.

Shareholders' Funds

Shareholders' funds decreased by GBP0.8 million from 31 December 2022 to GBP13.2 million (31 December 2021: GBP14.0 million). The loss made in the period of GBP0.3 million is coupled with a reduction in reserves due to foreign exchange loss on translation of net assets denominated in Sterling over the period.

Going Concern

After making reasonable enquiries and forecasting the Group's cash flows with reasonable downside assumptions applied, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements.

Interim consolidated income statement

For the six months ended 30 June 2023

 
 
                                                                  Six months      Six months            Year 
                                                                       ended           ended 
                                                                     30 June         30 June           ended 
                                                                        2023                     31 December 
                                                                                        2022            2022 
                                                                 (Unaudited)     (Unaudited)       (Audited) 
                                                       Note           GBP000          GBP000          GBP000 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 Revenue                                                              13,544          12,571          26,004 
 Cost of sales                                          6            (6,183)         (6,043)        (11,847) 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 Gross profit                                                          7,361           6,528          14,157 
 Marketing and distribution costs                       6              (256)           (234)           (386) 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 Contribution                                                          7,105           6,294          13,771 
 Other income                                                              -             155        (14,803) 
 Operating costs                                        6            (7,231)         (7,390)             120 
 Operating loss                                                        (126)           (941)           (912) 
 Finance costs                                          8              (178)            (93)           (254) 
 Finance income                                         8                  -             232             232 
 Loss before taxation from continuing operations                       (304)           (802)           (934) 
 Taxation - continuing operations                                       (30)            (29)            (79) 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 Loss for the period from continuing operations                        (334)           (831)         (1,013) 
 Profit after taxation from discontinued operations                        -               -           1,183 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 (Loss)/ profit for the period                                         (334)           (831)             170 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 
 Attributable to: 
 Owners of the Company                                                 (334)           (831)             170 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 
 Basic (loss)/profit per share attributable 
  to owners of the Company 
 Total                                                  10            (0.3)p          (0.8)p            0.2p 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 
 Diluted (loss)/profit per share attributable 
  to owners of the Company 
 Total                                                  10            (0.3)p          (0.8)p            0.2p 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 
 Adjusted loss per share attributable to 
  owners of the Company 
 Basic                                                  10            (0.2)p          (0.4)p            0.2p 
 Diluted                                                10            (0.2)p          (0.4)p            0.2p 
----------------------------------------------------  -----  ---------------  --------------  -------------- 
 

See note 4 for a reconciliation of the above interim consolidated income statement to the adjusted performance measures used by the Board of Directors to assess divisional performance.

Interim consolidated statement of comprehensive income

For the six months ended 30 June 2023

 
 
                                                                         Six       Six months 
                                                                      months            ended 
                                                                       ended 
                                                                     30 June          30 June     Year ended 
                                                                        2023             2022    31 December 
                                                                                                        2022 
                                                                 (Unaudited)      (Unaudited)      (Audited) 
                                                                      GBP000           GBP000         GBP000 
-----------------------------------------------------------  ---------------  ---------------  ------------- 
 (Loss)/profit for the period                                          (334)            (831)            170 
 Other comprehensive expense: 
 Items that will not be reclassified to profit 
  and loss 
  Actuarial gain on retirement benefit liability                           -                -              - 
                                                                       (334)            (831)            170 
 Items that may be subsequently reclassified to 
  profit and loss 
  Currency translation differences - continuing operations             (529)              983          1,047 
 
 Total other comprehensive income/(expense) for 
  the period, net of tax                                               (529)              983          1,047 
-----------------------------------------------------------  ---------------  ---------------  ------------- 
 Total comprehensive income for the period                             (863)              152          1,217 
-----------------------------------------------------------  ---------------  ---------------  ------------- 
 
 Attributable to: 
 Owners of the Company                                                 (863)              152          1,217 
-----------------------------------------------------------  ---------------  ---------------  ------------- 
 
 
                                                             Other reserves 
                                                 ------------------------------------- 
 
                                                       Capital                 Foreign 
                                                    redemption                exchange 
                                       Ordinary        reserve      Other      reserve    Retained 
                                         shares                   reserve                 earnings    Total 
 Six months ended 30 June 2023           GBP000         GBP000     GBP000       GBP000      GBP000   GBP000 
-----------------------------------  ----------  -------------  ---------  -----------  ----------  ------- 
 At 1 January 2023 (audited)              1,000            888        314        3,372       8,465   14,039 
 Comprehensive income/(expense) 
  Loss for the period                         -              -          -            -       (334)    (334) 
 Other comprehensive items 
  Currency translation differences            -              -          -        (529)           -    (529) 
-----------------------------------  ----------  -------------  ---------  -----------  ----------  ------- 
 Total other comprehensive items              -              -          -        (529)           -    (529) 
-----------------------------------  ----------  -------------  ---------  -----------  ----------  ------- 
 Total comprehensive items                    -              -          -        (529)       (334)    (863) 
-----------------------------------  ----------  -------------  ---------  -----------  ----------  ------- 
 Transactions with owners 
  Dividend paid                               -              -          -            -           -        - 
-----------------------------------  ----------  -------------  ---------  -----------  ----------  ------- 
 Total changes in equity                      -              -          -        (526)       (334)    (863) 
-----------------------------------  ----------  -------------  ---------  -----------  ----------  ------- 
 At 30 June 2023 (unaudited)              1,000            888        314        2,823       8,151   13,176 
-----------------------------------  ----------  -------------  ---------  -----------  ----------  ------- 
 
 

Interim consolidated statement of changes in equity

For the six months ended 30 June 2023

 
                                                             Other reserves 
                                                 ------------------------------------- 
                                                                                             Retained 
                                                       Capital                 Foreign      earnings/ 
                                                    redemption                exchange    accumulated 
                                       Ordinary        reserve      Other      reserve         losses 
                                         shares                   reserve                                 Total 
 Six months ended 30 June 2022           GBP000         GBP000     GBP000       GBP000         GBP000    GBP000 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 At 1 January 2022 (audited)              1,000            888        314        2,325         15,295    19,822 
 Comprehensive expense 
  Loss for the period                         -              -          -            -          (831)     (831) 
 Other comprehensive items 
  Currency translation differences            -              -          -          983              -       983 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Total other comprehensive items              -              -          -          983              -       983 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Total comprehensive items                    -              -          -          983          (831)       152 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Transactions with owners 
  Dividend paid                               -              -          -            -        (7,000)   (7,000) 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Total transactions with owners               -              -          -            -        (7,000)   (7,000) 
 Total changes in equity                      -              -          -          983        (7,831)   (6,848) 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 At 30 June 2022 (unaudited)              1,000            888        314        3,308          7,464    12,974 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 

* Net of deferred tax.

 
                                                             Other reserves 
                                                 ------------------------------------- 
                                                                                             Retained 
                                                       Capital                 Foreign      earnings/ 
                                                    redemption                exchange    accumulated 
                                       Ordinary        reserve      Other      reserve         losses 
                                         shares                   reserve                                 Total 
 Year ended 31 December 2022             GBP000         GBP000     GBP000       GBP000         GBP000    GBP000 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 At 1 January 2022 (audited)              1,000            888        314        2,325         15,295    19,822 
 Comprehensive expense 
  Loss for the period                         -              -          -            -            170       170 
 Other comprehensive items 
  Currency translation differences            -              -          -        1,047              -     1,047 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Total other comprehensive items              -              -          -        1,047              -     1,047 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Total comprehensive items                    -              -          -        1,047            170     1,047 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Transactions with owners 
  Dividend paid                               -              -          -            -        (7,000)   (7,000) 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 Total transactions with owners               -              -          -            -        (7,000)   (7,000) 
 Total changes in equity                      -              -          -        1,047        (6,830)   (5,783) 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 At 31 December 2022 (audited)            1,000            888        314        3,372          8,465    14,039 
-----------------------------------  ----------  -------------  ---------  -----------  -------------  -------- 
 

* Net of deferred tax

Interim consolidated balance sheet

As at 30 June 2023

 
 
                                                                As at            As at           As at 
                                                              30 June          30 June     31 December 
                                                                 2023                             2022 
                                                          (Unaudited)             2022 
                                                                           (Unaudited)       (Audited) 
                                                Note           GBP000           GBP000          GBP000 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 ASSETS 
 Non-current assets 
 Goodwill                                                           -              604              87 
 Intangible fixed assets                         11             6,166            6,939           6,939 
 Property, plant and equipment                   12             4,165            4,409           4,522 
 Right-of-use assets                             13             4,315            4,813           5,042 
 Trade and other receivables                     14               167              176             177 
 Deferred tax asset                                                15                -              15 
 Total non-current assets                                      14,829           16,941          16,782 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 Current assets 
 Trade and other receivables                     14             1,685            1,393           1,978 
 Inventories                                                      146              140             146 
 Current tax receivable                                             2               54             228 
 Contingent consideration (gross receivable)                        -                -           1,229 
 Cash and cash equivalents                       15             8,240            8,588           7,811 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 Total current assets                                          10,073           10,175          11,392 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 TOTAL ASSETS                                                  24,902           27,116          28,174 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 LIABILITIES 
 Current liabilities 
 Trade and other payables                        16           (5,243)          (6,959)         (6,564) 
 Provisions                                      17                 -             (17)               - 
 Lease liabilities                               19             (927)            (678)         (1,155) 
 Current tax liabilities                                           43                -               - 
 Deferred tax liabilities                                           -                -               - 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 Total current liabilities                                    (6,127)          (7,654)         (7,935) 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 Net current assets                                             3.946            2,521           3,457 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 Non-current liabilities 
 Lease liabilities                               19           (5,620)          (6,477)         (6,200) 
 Deferred tax liabilities                                          21             (11)               - 
                                                              (5,559)          (6,488)         (6.200) 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 TOTAL LIABILITIES                                           (11,276)         (14,142)        (14,135) 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 NET ASSETS                                                    13,176           12,974          14,039 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 
 EQUITY 
 Ordinary shares                                                1,000            1,000           1,000 
 Other reserves                                                 4,022            4,510           4,574 
 Retained earnings                                              8,154            7,464           8,465 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 TOTAL EQUITY                                                  13,176           12,974          14,039 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 
 

Interim consolidated statement of cash flows

For the six months ended 30 June 2023

 
 
                                                           Six months       Six months            Year 
                                                                                 ended 
                                                                ended          30 June           ended 
                                                              30 June             2022     31 December 
                                                                                                  2022 
                                                                 2023      (Unaudited)       (Audited) 
                                                          (Unaudited) 
                                                Note           GBP000           GBP000          GBP000 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 From operating activities 
 Cash (used in)/generated from operations, 
  before separately disclosed items              18             (141)            (544)             119 
 Interest received                                                  -                -               - 
 Interest paid                                                      -                -               - 
 Tax refund received                                              150                -               - 
 Tax paid                                                        (43)          (4,843)         (5,083) 
 Net cash generated from/(used in) operating 
  activities before separately disclosed 
  items                                                          (34)          (5,387)         (4,964) 
 Cash inflows - other income                                        -              100               - 
 Cash outflows - separately disclosed 
  items                                          7               (99)          (1,219)         (1,457) 
 Cash used in operations                                        (133)          (6,506)         (6,421) 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 From investing activities 
 Disposal of LEIDSA contract (net of 
  cash disposed of and transactions costs)                          -               26               - 
 Contingent consideration in relation 
  to sale of Bump 50:50                                         1,012                -               - 
 Proceeds from sale of other intangible 
  assets                                                          500                -               - 
 Investment in intangible fixed assets           11                 -             (97)           (196) 
 Purchase of property, plant and equipment       12             (120)             (38)           (147) 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 Cash generated from/(used in) investing 
  activities                                                    1,392            (109)           (343) 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 From financing activities 
 Principal paid on lease liabilities             19             (579)            (622)         (1,127) 
 Interest paid on lease liabilities              19             (162)             (69)           (230) 
 Dividend paid                                                      -          (7,000)         (7,000) 
 Cash used in financing activities                              (741)          (7,691)         (8,357) 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 
 Net increase/ (decrease) in cash and 
  cash equivalents                                                519         (14,306)        (15,121) 
 Effect of foreign exchange on cash and 
  cash equivalents                                               (90)              527             565 
 Cash and Cash equivalents at beginning 
  of year                                                       7,811           22,367          22,367 
 Group cash and cash equivalents at 
  the end of the period                          15             8,240            8,588           7,811 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 
 Represented by: 
 Cash and cash equivalents                       15             8,240            8,588           7,811 
 Less customer funds                             15             (448)            (450)           (391) 
 Group cash and cash equivalents at 
  the end of the period                          15             7,792            8,138           7,420 
---------------------------------------------  -----  ---------------  ---------------  -------------- 
 
 
 

Notes to the consolidated interim financial statements

For the six months ended 30 June 2023

   1.      General information 

Sportech PLC (the "Company") is a company domiciled in the UK and listed on the London Stock Exchange's Alternative Investment Market ("AIM"). 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 2023 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 2023. The principal activities of the Group were the provision of pari-mutuel betting (B2C), the Group now operates nine retail venues and MyWinners.com offering pari-mutuel betting (and also betting through an arrangement with the Connecticut Lottery Corporation) as well as a pari-mutuel betting site, 123Bet.com.

The condensed consolidated interim financial statements were approved for issue on 9(th) September 2023.

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 2022 were approved by the Board of Directors on 17 April 2023 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.

   2.      Basis of preparation 

a. These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' and also in accordance with the measurement and recognition principles of UK adopted international accounting standards. 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 2022 which have been prepared in accordance with UK adopted international accounting standards.

b. After making reasonable enquiries and forecasting the Group's cash flows with reasonable downside assumptions applied, 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 condensed consolidated interim financial statements. The forecasts used in the analysis of the Group's ability to continue in operational existence for the foreseeable future include both the base plan and downside scenarios which although Sportech has no connections with Russia or Ukraine through its operations (no employees located there nor any customers or suppliers in the region), include assumptions taking into account macro-economic potential indirect impacts of the events unfolding including impacts of prices rising globally.

c. The preparation of condensed consolidated 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 judgements have been made by management with respect to the assumptions underpinning the Group's tax liabilities, the valuation of contingent consideration receivable and the carrying value of intangible fixed assets.

d. The principal risks and uncertainties for the Group remain the same as those detailed on pages 15 to 18 of the 2022 Sportech PLC Annual Report and Accounts, where descriptions of mitigating activities carried out by the Group are also outlined. Those risks are regulation, product popularity, third party technology, foreign exchange, political marginalisation in Connecticut and global pandemics.

   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 2023 that would impact the Group financial statements. Therefore, all 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 2022, as described in those annual financial statements.

The standards, amendments and interpretations that are not yet effective and have not been adopted early by the Group are listed in the 2022 Annual Report and accounts.

   4.      Adjusted performance measures 

The Board of Directors assesses the performance of the operating segments based on a measure of Adjusted EBITDA which excludes the effects of expenditure that management believes should be added back (separately disclosed items) and other income. The share option expense is also excluded given it is not directly linked to operating performance of the divisions. Interest is not allocated to segments as the Group's cash position is controlled by the central finance team. This measure provides the most reliable indicator of underlying performance of each of the trading divisions as it is the closest approximation to cash generated by underlying trade, excluding the impact of separately disclosed items and working capital movements.

Adjusted EBITDA is not an IFRS measure, nevertheless although it may not be comparable to adjusted figures used elsewhere, it is widely used by both the analyst community to compare with other gaming companies and by management to assess underlying performance.

A reconciliation of the adjusted operating expenses used for statutory reporting and the adjusted performance measures is shown below:

 
 
 
                                                              Six months       Six months            Year 
                                                                   ended            ended 
                                                   Note          30 June          30 June           ended 
                                                                                              31 December 
                                                                    2023             2022            2022 
                                                             (Unaudited)      (Unaudited)       (Audited) 
                                                                  GBP000           GBP000          GBP000 
----------------------------------------------  -------  ---------------  ---------------  -------------- 
 Operating costs per income statement                            (7,231)          (7,390)        (14,803) 
 Add back: 
  Depreciation                                   12,13               862              537           1,216 
  Amortisation, excluding acquired intangible 
   assets                                          11                 48              132             252 
  Amortisation of acquired intangible 
   assets                                          11                  -               29              29 
  Impairment of goodwill                                              88                -             517 
  Reversal of impairment of property, 
   plant and equipment                             12                  -                -           (190) 
  Loss on disposal of property, plant 
   and equipment                                   12              (103)              131             150 
  Separately disclosed items                       7                  99              578             657 
----------------------------------------------  -------  ---------------  ---------------  -------------- 
 Total adjusted net operating costs                              (6,236)          (5,983)        (12,172) 
----------------------------------------------  -------  ---------------  ---------------  -------------- 
 

Adjusted EBITDA is calculated as follows:

 
 
 
                                         Six months       Six months            Year 
                                              ended            ended 
                                            30 June          30 June           ended 
                                                                         31 December 
                                               2023             2022            2022 
                                        (Unaudited)      (Unaudited)       (Audited) 
                                             GBP000           GBP000          GBP000 
----------------------------------  ---------------  ---------------  -------------- 
 Revenue                                     13,544           12,571          26,004 
 Cost of sales                              (6,183)          (6,043)        (11,847) 
----------------------------------  ---------------  ---------------  -------------- 
 Gross profit                                 7,361            6,528          14,157 
 Marketing and distribution costs             (256)            (234)           (386) 
----------------------------------  ---------------  ---------------  -------------- 
 Contribution                                 7,105            6,294          13,771 
 Adjusted net operating costs               (6,236)          (5,983)        (12,172) 
----------------------------------  ---------------  ---------------  -------------- 
 Adjusted EBITDA                                869              311           1,599 
----------------------------------  ---------------  ---------------  -------------- 
 

Prior year comparatives for the period ended 30 June 2023 have been adjusted for discontinued operations related to the LEIDSA contract (prior full year comparatives were adjusted in the 2022 financial statements to exclude results of the Global Tote, Bump 50:50 business and LEIDSA).

Adjusted profit is also an adjusted performance measure used by the Group. This uses adjusted EBITDA, as defined above as management's view of the closest proxy to cash generation for underlying divisional performance, and deducting share option charges, depreciation, amortisation of intangible assets (other than those which arise in the acquisition of businesses) and certain finance charges. This provides an adjusted profit before tax measure, which is then taxed by applying an estimated adjusted tax measure. The adjusted tax charge excludes the tax impact of income statement items not included in adjusted profit before tax.

 
 
                                                         Six months      Six months      Year ended 
                                                              ended           ended 
                                                            30 June         30 June     31 December 
                                                               2023            2022            2022 
                                                        (Unaudited)     (Unaudited)       (Audited) 
 From continuing operations:                                 GBP000          GBP000          GBP000 
--------------------------------------------------  ---------------  --------------  -------------- 
 Adjusted EBITDA                                                869             311           1,599 
 Depreciation                                                 (862)           (537)         (1,216) 
 Amortisation (excluding amortisation of acquired 
  intangibles)                                                 (48)           (132)           (252) 
 Net finance costs (excluding certain finance 
  costs - note 8)                                             (162)            (69)           (230) 
--------------------------------------------------  ---------------  --------------  -------------- 
 Adjusted loss before tax                                     (203)           (427)            (99) 
 Taxation                                                      (30)              26            (79) 
--------------------------------------------------  ---------------  --------------  -------------- 
 Adjusted loss after tax                                      (233)           (401)           (178) 
--------------------------------------------------  ---------------  --------------  -------------- 
 
 
 
                                                          Six months      Six months      Year ended 
                                                               ended           ended 
                                                             30 June         30 June     31 December 
                                                                2023            2022            2022 
                                                         (Unaudited)     (Unaudited)       (Audited) 
 From discontinued operations:                                GBP000          GBP000          GBP000 
--------------------------------------------------  ----------------  --------------  -------------- 
 Adjusted EBITDA                                                   -           5,590           1,183 
 Depreciation                                                      -           (100)               - 
 Amortisation (excluding amortisation of acquired                  -            (75)               - 
  intangibles) 
 Net finance costs (excluding certain finance                      -            (24)               - 
  costs - note 8) 
--------------------------------------------------  ----------------  --------------  -------------- 
 Adjusted profit before tax                                        -           5,391           1,183 
 Taxation                                                          -         (1,234)               - 
--------------------------------------------------  ----------------  --------------  -------------- 
 Adjusted profit after tax                                         -           4,157           1,183 
--------------------------------------------------  ----------------  --------------  -------------- 
 
   5.      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 Board of Directors, which makes strategic and operational decisions.

The Group has identified its operating segments as outlined below:

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

- Sportech Digital - a pari-mutuel betting website and provision of lottery software and services;

- Corporate costs - central costs relating to the overall management of the Group and listing costs

The Board of Directors assesses the performance of the operating segments based on a measure of adjusted EBITDA as defined in note 4. 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.

 
                                                               Six months ended 30 June 
                                                                    2023 (Unaudited) 
-------------------------------------------------  ------------------------------------------------ 
 
                                                      Sportech     Sportech     Corporate 
                                                       Digital       Venues         costs     Group 
                                                        GBP000       GBP000        GBP000    GBP000 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Revenue from rendering of services                        894        9,786             -    10,680 
 Revenue from food and beverage sales                        -        1,852             -     1,852 
 Revenue from sports betting services                        -        1,012             -     1,012 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Total revenue                                             894       12,651             -    13,544 
 Cost of sales                                           (486)      (5,697)             -   (6,183) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Gross profit                                              407        6,954             -     7,361 
 Marketing and distribution costs                         (53)        (203)             -     (256) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Contribution                                              354        6,751             -     7,105 
 Adjusted operating costs                                (379)      (4,787)       (1,071)   (6,236) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Adjusted EBITDA                                          (24)        1,964       (1,071)       869 
 Depreciation                                                -        (862)             -     (862) 
 Amortisation (excluding amortisation of 
  acquired intangibles)                                   (15)            -          (33)      (48) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Segment result                                           (39)        1,102       (1,105)      (42) 
 Loss on disposal of Property, plant and 
  equipment                                                103            -             -       103 
 Amortisation of goodwill                                 (88)            -             -      (88) 
 Separately disclosed items                                  -         (10)          (89)      (99) 
 Operating (loss)/profit                                  (24)        1,093       (1,194)     (126) 
 Net finance income                                                                           (178) 
 Loss before taxation from continuing operations                                              (304) 
 Taxation - continuing operations                                                              (30) 
 Loss for the period                                                                          (334) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Other segment items - capital expenditure 
 Property, plant and equipment                               -          120             -       120 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 
 
                                                               Six months ended 30 June 
                                                                    2022 (Unaudited) 
-------------------------------------------------  ------------------------------------------------ 
 
                                                      Sportech     Sportech     Corporate 
                                                       Digital       Venues         costs     Group 
                                                        GBP000       GBP000        GBP000    GBP000 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Revenue from rendering of services                        857        9,412             -    10,269 
 Revenue from food and beverage sales                        -        1,584             -     1,584 
 Revenue from sports betting services                        -          718             -       718 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Total revenue                                             857       11,714             -    12,571 
 Cost of sales                                           (452)      (5,591)             -   (6,043) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Gross profit                                              405        6,123             -     6,528 
 Marketing and distribution costs                         (50)        (184)             -     (234) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Contribution                                              355        5,939             -     6,294 
 Adjusted operating costs                                (462)      (4,414)       (1,107)   (5,983) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Adjusted EBITDA                                         (107)        1,525       (1,107)       311 
 Depreciation                                              (6)        (518)          (13)     (537) 
 Amortisation (excluding amortisation of 
  acquired intangibles)                                   (69)          (1)          (62)     (132) 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Segment result                                          (182)        1,006       (1,182)     (358) 
 Amortisation of acquired intangibles                     (29)            -             -      (29) 
 Loss on disposal of Property, plant and 
  equipment                                                  -        (131)             -     (131) 
 Separately disclosed items                                  -        (307)         (271)     (578) 
 Other income                                                -          155             -       155 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 Operating (loss)/profit                                 (211)          723       (1,453)     (941) 
 Net finance income                                                                             139 
 Loss before taxation from continuing operations                                              (802) 
 Taxation - continuing operations                                                              (29) 
                                                                                           -------- 
 Loss for the period                                                                          (831) 
 Other segment items - capital expenditure 
 Intangible fixed assets                                    97            -             -        97 
 Property, plant and equipment                              22           15             1        38 
-------------------------------------------------  -----------  -----------  ------------  -------- 
 
 
                                                              Year ended 31 December 2022 
                                                                       (Audited) 
------------------------------------------  -------------------------------------------------------------- 
                                                                Sportech   Sportech   Corporate 
                                                                 Digital     Venues       costs      Group 
                                                                  GBP000     GBP000      GBP000     GBP000 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Revenue from rendering of services                                    -      1,974           -      1,974 
 Revenue from food and beverage sales                                  -      3,443           -      3,443 
 Revenue from sports betting services                              1,471     19,116           -     20,587 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Total revenue                                                     1,471     24,533           -     26,004 
 Cost of sales                                                     (944)   (10,903)           -   (11,847) 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Gross profit                                                        527     13,630           -     14,157 
 Marketing and distribution costs                                      4      (390)           -      (386) 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Contribution                                                        531     13,240           -     13,771 
 Adjusted net operating costs (note 1)                             (838)    (9,194)     (2,140)   (12,172) 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Adjusted EBITDA                                                   (307)      4,046     (2,140)      1,599 
 Depreciation                                                       (10)    (1,192)        (14)    (1,216) 
 Amortisation (excluding amortisation of 
  acquired intangible assets)                                      (162)          -        (90)      (252) 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Segment result before amortisation of 
  acquired 
  intangibles                                                      (479)      2,854     (2,244)        131 
 Amortisation of acquired intangibles                               (29)          -           -       (29) 
 Reversal of impairment of property, plant 
  and equipment                                                        -        190           -        190 
 Loss on sale of property, plant and 
  equipment                                                            -      (133)        (17)      (150) 
 Impairment of goodwill                                            (517)          -           -      (517) 
 Separately disclosed items                                            -      (307)       (350)      (657) 
 Other income                                                          -        120           -        120 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Operating (loss)/profit                                         (1,025)      2,724     (2,611)      (912) 
 Net finance costs                                                                                    (22) 
 Loss before taxation from continuing 
  operations                                                                                         (934) 
 Taxation                                                                                             (79) 
                                                                                                 --------- 
 Loss for the year from continuing 
  operations                                                                                       (1,013) 
 Profit after tax from discontinued 
  operations                                                                                         1,183 
                                                                                                 --------- 
 Profit for the year                                                                                   170 
------------------------------------------  ----------------------------  ---------  ----------  --------- 
 Other segment items - capital expenditure 
 Intangible fixed assets (continuing 
  operations)                                                        951     27,055         168        28,174 
 Intangible fixed assets (discontinued 
  operations)                                                       (50)   (12,831)     (1,254)      (14,135) 
 Property, plant and equipment (continuing 
  operations)                                                        196          -           -           196 
 Property, plant and equipment 
  (discontinued 
  operations)                                                          5        142           -           147 
------------------------------------------  ----------------------------  ---------  ----------  ------------ 
 
 
   6.      Expenses by nature 
 
 
                                                          Six months       Six months            Year 
                                                               ended            ended 
                                                             30 June          30 June           ended 
                                                                2023             2022     31 December 
                                                                                                 2022 
                                                         (Unaudited)      (Unaudited)       (Audited) 
                                                              GBP000           GBP000          GBP000 
---------------------------------------------  ----  ---------------  ---------------  -------------- 
 Cost of sales 
 Tote and track fees                                           5,248            5,266          10,208 
 F&B consumables                                                 586              536           1,144 
 Betting and gaming duties                                        48               54             125 
 Repairs and maintenance cost of sales                             6               15              28 
 Programs                                                        121              127             256 
 Cost of sales                                                   174               45              86 
 Total cost of sales                                           6,183            6,043          11,847 
---------------------------------------------------  ---------------  ---------------  -------------- 
 
 Marketing and distribution costs 
 Marketing                                                       250              224             368 
 Vehicle costs                                                     6               10              18 
 Total marketing and distribution costs                          256              234             386 
---------------------------------------------------  ---------------  ---------------  -------------- 
 
 Operating costs 
 Staff costs - gross, excluding share option 
  charges                                                      3,210            3,161           6,323 
 Less amounts capitalised                                          -             (89)           (171) 
---------------------------------------------------  ---------------  ---------------  -------------- 
 Staff costs - net                                             3,210            3,072           6,152 
 Property costs                                                1,420            1,201           2,688 
 IT & communications                                             240              301             628 
 Professional fees and licences                                  860              765           1,524 
 Insurance                                                       451              500             913 
 Travel and entertaining                                          32               41              94 
 Banking transaction costs and FX                                 38               48             107 
 Other costs                                                    (15)               55              66 
---------------------------------------------------  ---------------  ---------------  -------------- 
 Adjusted operating costs                                      6,236            5,983          12,172 
 Depreciation                                                    862              537           1,216 
 Amortisation, excluding amortisation of 
  acquired intangibles                                            48              132             252 
 Amortisation of acquired intangibles                              -               29              29 
 Impairment of goodwill                                           88                -             517 
 Loss on disposal of property, plant and 
  equipment                                                        -              131             150 
 Reversal of impairment of property, plant 
  and equipment                                                (103)                -           (190) 
 Separately disclosed items                                       99              578             657 
---------------------------------------------------  ---------------  ---------------  -------------- 
 Total operating costs                                         7,231            7,390          14,803 
---------------------------------------------------  ---------------  ---------------  -------------- 
 
   7.      Separately disclosed items 
 
                                                                         Six             Six           Year 
                                                                      months          months 
                                                                       ended           ended 
                                                                     30 June              30          ended 
                                                                                        June 
                                                                        2023            2022    31 December 
                                                                                                       2022 
                                                                 (Unaudited)     (Unaudited)      (Audited) 
                                                        Note          GBP000          GBP000         GBP000 
-----------------------------------------------------  -----  --------------  --------------  ------------- 
 Continuing operations 
 Included in operating costs : 
  Onerous contract provisions and other losses 
   resulting from 
  exit from California operations                        17                -            (69)          (120) 
  Redundancy and restructuring costs                                       -             330            414 
  Corporate activity                                                      86               8             57 
  Settlement of a contract                                                 -             304            304 
  Costs in relation to exiting the Group's interests 
   in India                                                               13               5              2 
 Total included in operating costs                                        99             578            657 
 
 Included in finance costs: 
   Interest accrued on corporate tax potentially 
    due and unpaid at the balance sheet date on 
    STB refund received in 2016                          8                 -              24             24 
 
 Total Separately disclosed items                                         99             602            681 
-----------------------------------------------------  -----  --------------  --------------  ------------- 
 
 
 Below is a summary of cash outflows from separately 
  disclosed items: 
                                                                         Six              Six            Year 
                                                                      months           months 
                                                                       ended            ended 
                                                                     30 June               30           ended 
                                                                                         June 
                                                                        2023             2022     31 December 
                                                                                                         2022 
                                                                 (Unaudited)      (Unaudited)       (Audited) 
                                                                      GBP000           GBP000          GBP000 
-----------------------------------------------------  ----  ---------------  ---------------  -------------- 
 Cash outflows from separately disclosed items: 
  Redundancy and restructuring costs                                       -            (242)           (414) 
  Costs in relation to corporate activity                               (86)              (8)            (49) 
  Costs in relation to the Group's onerous leases 
   in California                                                           -            (660)           (688) 
  Costs in relation to exiting the Group's interests 
   in India                                                             (13)              (5)             (2) 
 
  Settlement of a contract                                                 -            (304)           (304) 
  Cash outflows from separately disclosed items 
   (all Continuing operations)                                          (99)          (1,219)         (1,457) 
                                                                                            - 
 
 
   8.      Net finance costs 
 
 
                                                             Six months       Six months             Year 
                                                                  ended            ended 
                                                                30 June          30 June            ended 
                                                                                              31 December 
                                                                                                     2022 
                                                                   2023             2022        (Audited) 
                                                            (Unaudited)      (Unaudited) 
                                                   Note          GBP000           GBP000           GBP000 
------------------------------------------------  -----  --------------  ---------------  --------------- 
 Continuing operations: 
 Finance costs: 
  Interest accrued and paid on tax liabilities                        -             (24)             (24) 
  Interest on lease liabilities                     19            (162)             (69)            (230) 
  Total finance costs                                             (162)             (93)            (254) 
------------------------------------------------  -----  --------------  ---------------  --------------- 
 Finance income: 
  Foreign exchange gain on financial assets and 
   liabilities denominated in foreign currency                     (16)              232              232 
  Total finance income                                             (16)              232              232 
------------------------------------------------  -----  --------------  ---------------  --------------- 
 
 
 
 Net finance income                                               (178)              139             (22) 
------------------------------------------------  -----  --------------  ---------------  --------------- 
 

Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in note 4.

 
                                                                 Six months      Six months            Year 
                                                                      ended           ended 
                                                                    30 June         30 June           ended 
                                                                                                31 December 
                                                                                                       2022 
                                                                       2023            2022       (Audited) 
                                                                (Unaudited)     (Unaudited) 
 Continuing operations                                               GBP000          GBP000          GBP000 
-----------------------------------------------------------  --------------  --------------  -------------- 
 Foreign exchange gain on financial assets and liabilities 
  denominated in foreign currency                                      (16)             232             232 
 Interest accrued and paid on tax liabilities                             -            (24)            (24) 
-----------------------------------------------------------  --------------  --------------  -------------- 
                                                                       (16)             208             208 
-----------------------------------------------------------  --------------  --------------  -------------- 
 
   9.      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 2023 is (10)% (2022: (8.5%)). The movement is a result of a change in mix of profits/(losses) in jurisdictions with varying tax rates, the non-recognition of deferred tax on losses in the UK due to uncertainty of non-recovery as well as the utilization of previously unprovided tax assets in the US.

The Group has submitted an appeal to HMRC to contest the treatment of GBP4.6 million of taxation potentially due on the 2016 Spot the Ball refund. This amount was paid to HMRC, however in the event the Company is unsuccessful in its appeal there remains a potential c GBP0.7 million interest due. There is nothing held on the balance sheet in respect of the tax itself, the interest is accrued and if payable will be a cash outflow.

10. Earnings per share

 
                                                 2023                                  2022 
 Six months ended 30 June 
  (Unaudited)                     Continuing   Discontinued     Total   Continuing   Discontinued     Total 
-------------------------------  -----------  -------------  --------  -----------  -------------  -------- 
 Basic EPS 
 (Loss)/profit for the period 
  (GBP000)                             (334)              -     (334)        (831)              -     (831) 
 Weighted average no of shares 
  ('000)                             100,000        100,000   100,000      100,000        100,000   100,000 
-------------------------------  -----------  -------------  --------  -----------  -------------  -------- 
 Basic EPS                            (0.3)p              -    (0.3)p       (0.8)p              -    (0.8)p 
-------------------------------  -----------  -------------  --------  -----------  -------------  -------- 
 
 
                                                                       2022 
 Year ended 31 December 2022 (Audited)                  Continuing   Discontinued     Total 
-----------------------------------------------------  -----------  -------------  -------- 
 Basic EPS 
 (Loss)/profit attributable to owners of the Company 
  (GBP000)                                                 (1,014)          1,183       169 
 Weighted average no of shares ('000)                      100,000        100,000   100,000 
-----------------------------------------------------  -----------  -------------  -------- 
 Basic EPS                                                  (1.0)p           1.2p      0.2p 
-----------------------------------------------------  -----------  -------------  -------- 
 
 
                                                   2023                                 2022 () 
 Six months ended 30 June 
  (Unaudited)                       Continuing   Discontinued     Total   Continuing   Discontinued     Total 
---------------------------------  -----------  -------------  --------  -----------  -------------  -------- 
 Diluted EPS 
 (Loss)/profit for the period 
  (GBP000)                               (334)              -     (334)        (831)              -     (831) 
 Weighted average no of shares 
  ('000)                               100,000        100,000   100,000      100,000        100,000   100,000 
 Dilutive potential ordinary               N/A            N/A       N/A          N/A            N/A       N/A 
  shares ('000) 
---------------------------------  -----------  -------------  --------  -----------  -------------  -------- 
 Total potential ordinary shares 
  ('000)                               100,000        100,000   100,000      100,000        100,000   100,000 
---------------------------------  -----------  -------------  --------  -----------  -------------  -------- 
 Diluted EPS                            (0.3)p              -    (0.3)p       (0.8)p              -    (0.8)p 
---------------------------------  -----------  -------------  --------  -----------  -------------  -------- 
 
 
                                                          2022 
 Year ended 31 December 2022 
  (Audited)                                Continuing   Discontinued     Total 
---------------------------------    ---  -----------  -------------  -------- 
 Diluted EPS 
 (Loss)/profit for the year 
  (GBP000)                                    (1,014)          1,183       169 
 Weighted average no of shares 
  ('000)                                      100,000        100,000   100,000 
 Dilutive potential ordinary                      N/A            N/A       N/A 
  shares ('000) 
---------------------------------    ---  -----------  -------------  -------- 
 Total potential ordinary shares 
  ('000)                                      100,000        100,000   100,000 
----------------------------------------  -----------  -------------  -------- 
 Diluted EPS                                   (1.0)p           1.2p      0.2p 
----------------------------------------  -----------  -------------  -------- 
 

Adjusted EPS

Adjusted EPS is calculated by dividing the adjusted profit after tax attributable to owners of the Company, as defined in note 4, by the weighted average number of ordinary shares in issue during the year.

 
 
                                                 Six months       Six months       Year ended 
                                                      ended            ended 
                                                    30 June          30 June      31 December 
                                                       2023             2022             2022 
  Continuing operations                Note     (Unaudited)      (Unaudited)        (Audited) 
----------------------------------  -------  --------------  ---------------  --------------- 
 Adjusted loss after tax (GBP000)      4              (233)            (401)            (143) 
 Basic Adjusted EPS (pence)                          (0.2)p           (0.4)p           (0.1)p 
 Diluted Adjusted EPS (pence)                        (0.2)p           (0.4)p           (0.1)p 
----------------------------------  -------  --------------  ---------------  --------------- 
 
 

11. Intangible fixed assets

 
                                                             Six      Six months            Year 
                                                          months           ended 
                                                           ended 
                                                         30 June         30 June           ended 
                                                                                     31 December 
                                                                                            2022 
                                                            2023            2022       (Audited) 
                                                     (Unaudited)     (Unaudited) 
                                                          GBP000          GBP000          GBP000 
------------------------------------------  ----  --------------  --------------  -------------- 
 At 1 January                                              6,943           6,357           6,357 
 Additions                                                     -              97             196 
 Amortisation charge for period                             (48)           (161)           (281) 
 Disposal                                                  (393)               -             (5) 
 Movement as a result of foreign exchange                  (335)             646             671 
                                                  --------------  --------------  -------------- 
 Net book amount at end of period                          6,166           6,939           6,939 
------------------------------------------------  --------------  --------------  -------------- 
 

12. Property, plant and equipment

 
                                                       Six             Six            Year 
                                                    months          months 
                                                     ended           ended 
                                                   30 June              30           ended 
                                                                      June     31 December 
                                                                                      2022 
                                                      2023            2022       (Audited) 
                                               (Unaudited)     (Unaudited) 
                                                    GBP000          GBP000          GBP000 
------------------------------------------  --------------  --------------  -------------- 
 At 1 January                                        4,521           4,261           4,261 
 Additions                                             120              38             147 
 Disposal                                              (4)               -               - 
 Depreciation charge for period                      (239)           (215)           (433) 
 Loss on disposal                                        -           (131)           (133) 
 Reversal of impairment                                  -               -             190 
 Movement as a result of foreign exchange            (233)             456             490 
                                            --------------  --------------  -------------- 
 Net book amount at end of period                    4,165           4,409           4,522 
------------------------------------------  --------------  --------------  -------------- 
 

13. Right-of-use assets

 
                                                        Six months      Six months            Year 
                                                             ended           ended 
                                                           30 June         30 June           ended 
                                                                                       31 December 
                                                                                              2022 
                                                              2023            2022       (Audited) 
                                                       (Unaudited)     (Unaudited) 
                                              Note          GBP000          GBP000          GBP000 
------------------------------------------  ------  --------------  --------------  -------------- 
 At 1 January                                                5,041           4,657           4,657 
 Additions                                                     134               -             652 
 Depreciation charge for period                              (623)           (322)           (782) 
 Disposed of - exited lease early                                -            (17)            (17) 
 Movement as a result of foreign exchange                    (237)             495             533 
                                                    --------------  --------------  -------------- 
 Net book amount at end of period                            4,315           4,813           5,042 
--------------------------------------------------  --------------  --------------  -------------- 
 

14. Trade and other receivables

 
                                              As at           As at          As at 
                                                                       31 December 
                                                                              2022 
                                            30 June              30      (Audited) 
                                                               June 
                                               2023            2022 
                                        (Unaudited)     (Unaudited) 
                                             GBP000          GBP000         GBP000 
-----------------------------------  --------------  --------------  ------------- 
 Non-current 
   Trade and other receivables                  167             176            177 
 Current 
   Trade and other receivables                1,685           1,393          1,978 
 Total trade and other receivables            1,852           1,569          2,155 
-----------------------------------  --------------  --------------  ------------- 
 

15. Cash and cash equivalents

 
                                                   As at           As at          As at 
                                                                            31 December 
                                                                                   2022 
                                                 30 June              30      (Audited) 
                                                                    June 
                                                    2023            2022 
                                             (Unaudited)     (Unaudited) 
                                    Note          GBP000          GBP000         GBP000 
---------------------------------  -----  --------------  --------------  ------------- 
 Cash and short-term deposits                      7,792           8,138          7,421 
 Customer funds                       16             448             450            391 
 Total cash and cash equivalents                   8,240           8,588          7,811 
---------------------------------  -----  --------------  --------------  ------------- 
 

Customer funds are matched by liabilities of an equal value within trade and other payables (see note 16).

16. Trade and other payables

 
 
                                                          As at            As at           As at 
                                                                                     31 December 
                                                                                            2022 
                                                        30 June               30       (Audited) 
                                                                            June 
                                                           2023             2022 
                                                    (Unaudited)      (Unaudited) 
                                          Note           GBP000           GBP000          GBP000 
---------------------------------------  -----  ---------------  ---------------  -------------- 
 Trade payables                                           3,203            3,769           4,588 
 Other taxes and social security costs                      187              307             148 
 Accruals and other payables                                956            2,433           1,437 
 Player liability                           15              448              450             391 
 Total trade and other payables                           4,795            6,959           6,564 
---------------------------------------  -----  ---------------  ---------------  -------------- 
 

17. Provisions

 
                                                      Six             Six            Year 
                                                   months          months 
                                                    ended           ended 
                                                  30 June              30           ended 
                                                                     June     31 December 
                                                                                     2022 
                                                     2023            2022       (Audited) 
                                              (Unaudited)     (Unaudited) 
                                                   GBP000          GBP000          GBP000 
----------------------------------  ----  ---------------  --------------  -------------- 
 At beginning of period                                 -             736             736 
 Utilised during the period                             -           (660)           (677) 
 Released to the income statement                       -            (69)            (69) 
 Currency movements                                     -              10              11 
----------------------------------------   --------------  --------------  -------------- 
 Total provisions                                       -              17               - 
----------------------------------------   --------------  --------------  -------------- 
 Provisions are in relation to: 
 Current provisions                                     -               -               - 
 Onerous contracts                                      -              17               - 
----------------------------------------   --------------  --------------  -------------- 
 

18. Cash flow from operating activities before separately disclosed items

Reconciliation of (loss)/profit before taxation to cash flows from operating activities before separately disclosed items:

 
 
                                                                       Six months       Six months             Year 
                                                                            ended            ended 
                                                                          30 June          30 June            ended 
                                                                                                        31 December 
                                                                                                               2022 
                                                                             2023             2022        (Audited) 
                                                                      (Unaudited)      (Unaudited) 
                                                          Note             GBP000           GBP000           GBP000 
-----------------------------------------------------  ---------  ---------------  ---------------  --------------- 
 Total (loss)/profit before tax                                             (304)            (802)              249 
 Adjustments for: 
 Net Separately disclosed items (included in 
  operating costs)                                         7                   99              578              657 
 Other income (excluding profit on disposal 
  of Sports Haven)                                                              -                -            (120) 
 Depreciation and amortisation                          11,12,13              910              698            1,497 
 (Profit)/loss on disposal of property, plant 
  and equipment                                            12               (103)              131              150 
 Impairment/ (reversal of impairment) of assets          12,13                 88                -              327 
 Net finance charges                                       8                  162            (139)               22 
 Changes in working capital: 
 Increase in trade and other receivables                                      205            (180)          (1,476) 
 Increase in inventories                                                      (8)             (16)             (22) 
 Decrease in trade and other payables, excluding 
  player liabilities                                                      (1,274)            (809)          (1,101) 
 Increase/(decrease in player liabilities                  15                  83              (5)             (64) 
 Cash (used in)/generated from operating activities, 
  before separately disclosed items                                         (141)            (544)              119 
-----------------------------------------------------  ---------  ---------------  ---------------  --------------- 
 

19. Lease liabilities

 
                                                                   As at           As at          As at 
                                                                 30 June         30 June    31 December 
                                                                    2023            2022           2022 
                                                             (Unaudited)     (Unaudited)      (Audited) 
 Maturity analysis - contractual undiscounted cashflows           GBP000          GBP000         GBP000 
--------------------------------------------------------  --------------  --------------  ------------- 
 Less than one year                                                1,168             810          1,211 
 Between 2 and 5 years                                             2,660           3,000          2,615 
 More than 5 years                                                 4,201           5,093          4,824 
 Total                                                             8,030           8,903          8,650 
--------------------------------------------------------  --------------  --------------  ------------- 
 

The weighted average incremental borrowing rate applied to the lease liabilities was 4.16%, lowest rate being 4.00% and the highest being 5.75%.

 
                                                            As at           As at          As at 
                                                          30 June         30 June    31 December 
                                                             2023            2022           2022 
                                                      (Unaudited)     (Unaudited)      (Audited) 
 Lease liabilities included in the balance sheet           GBP000          GBP000         GBP000 
-------------------------------------------------  --------------  --------------  ------------- 
 Current                                                      927             678            923 
 Non-current                                                5,620           6,477          6,091 
 Total                                                      6,547           7,155          7,014 
-------------------------------------------------  --------------  --------------  ------------- 
 
 
                                                         Six months      Six months 
                                                              ended           ended     Year ended 
                                                            30 June         30 June    31 December 
                                                               2023            2022           2022 
                                                        (Unaudited)     (Unaudited)      (Audited) 
 Movement in lease liability during the        Note          GBP000          GBP000         GBP000 
  period 
--------------------------------------------  -----  --------------  --------------  ------------- 
 At 1 January                                                 7,355           7,014          7,014 
 Interest charged to the income statement       8               162              69            230 
 New leases entered into                        13              134               -            652 
 Lease rentals paid                                           (741)           (691)        (1,357) 
 Disposed of on settlement of lease dispute                       -               -              - 
 Disposal - early exit of lease                                   -            (23)              - 
 Movement as a result of foreign exchange                     (363)             786            816 
 At period end                                                6,547           7,155          7,355 
--------------------------------------------  -----  --------------  --------------  ------------- 
 

20. Related party transactions

The extent of transactions with related parties of the Group and the nature of the relationship with them are summarised below.

   a.   Key management compensation is disclosed below: 
 
                                                 Six             Six            Year 
                                              months          months 
                                               ended           ended 
                                             30 June              30           ended 
                                                                June     31 December 
                                                                                2022 
                                                2023            2022       (Audited) 
                                         (Unaudited)     (Unaudited) 
                                              GBP000          GBP000          GBP000 
------------------------------  ----  --------------  --------------  -------------- 
 Short-term employee benefits                    110             294             365 
 Pay in lieu of notice                             -             245             266 
 Post-employment benefits                          -              11               - 
 Total                                           110             550             631 
------------------------------------  --------------  --------------  -------------- 
 

21. Contingencies

Contingent items

Tax

The Group's activities in recent periods have resulted in material tax liabilities crystallising. The ultimate tax liability due, in all instances, is subject to a degree of management judgement. The judgements which are made are done so in good faith, with the aim of always paying the correct amount of tax at the appropriate time. Management work diligently with the Group's external financial advisors in quantifying the anticipated accurate and fair tax liability which arises from material one-off events such as the Spot the Ball legal case and the disposal of the Football Pools. Management has an open, transparent and constructive relationship with tax regulators, and engage positively when discussing any difference in legal interpretation between that of the Group and the regulators.

Penalties could potentially be imposed on the Group's corporation tax filing position for the STB VAT refund, however Management consider this possibility to be remote and therefore are not disclosing a contingent liability in relation to this item. The Group has paid on account GBP4.6m into its corporate tax account in order to cease the accruing of interest, which would be payable if the Group were to accept a restatement of the Sportech Pool's Limited 2016 tax return to tax GBP23.0m of the STB VAT refund as income not capital. Management believes that the filing position taken was the correct one. Post the period end, the Group appealed a 'closure notice' and lodged an appeal with HMRC.

Other contingent items are summarised as follows:

M&A activity

Both the 2017 sale of the Football Pools division, the 2018 sale of the Group's Venues business in The Netherlands, the 2021 sale of the Bump 50:50 and the 2021 sale of the Global Tote business have customary seller tax warranties under the terms of the Sale and Purchase Agreements. The possibility of material claims being made under the seller tax warranties in any of the deals is considered by management to be remote. In addition, the sale of Sportech Lotteries, LLC on 31 December 2021 has customary seller warranties under the terms of the Sale and Purchase Agreements. Those warranties have been provided in good faith by management in light of the probability of certain events occurring. The possibility of material claims being made under the seller warranties in the deal is considered by management to be remote.

Legal

The Group has been engaged in certain disputes in the ordinary course of business which could have potentially led to outflows greater than those provided for on the balance sheet. Management was of the view that the risk of those outflows arising was not probable and accordingly they were considered contingent items.

22. Statement on Rounding

The financial information presented in this report has been rounded to either whole numbers or the nearest decimal place. Rounding is employed for the purpose of simplifying complex numerical data and enhancing readability, while ensuring consistency and adherence to generally accepted accounting principles.

We believe that the rounded figures accurately represent the financial position and performance the Group and subsidiaries in accordance with applicable accounting standards. Materiality considerations have been taken into account, and rounding has not been used to obscure any significant financial information. It is important to note that the use of rounded figures may result in minor discrepancies when summing subtotals or totals.

For a complete understanding of the financial data presented herein, including the exact unrounded figures, interested parties are encouraged to refer to the underlying financial records and detailed notes to the financial statements.

Sportech is committed to maintaining transparency and compliance with relevant accounting standards, and we are available to provide additional information or clarification upon request.

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END

IR GPUQCBUPWGRU

(END) Dow Jones Newswires

September 11, 2023 02:00 ET (06:00 GMT)

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