Sportech issues trading update

Online and land gambling group Sportech plc issued a trading update Tuesday covering the period 22 August to 10 November 2014.

Management reported:

* Trading in the Football Pools vertical is performing in line with expectations;

* Performance of in the company’s Venues and Racing and Digital divisions has been impacted by a reduction in amounts wagered in Connecticut and across the US racing industry, but due to a reduced net interest charge in the second half, Group adjusted profit before tax and earnings per share is expected to be market expectations;

* The company has continued to develop its Racing and Digital business in the period, responding to several industry tenders for contracts and continuing to invest in technology in the i-gaming business both in terms of talent and technology, in preparation for an entry into the New Jersey online gambling marketplace;

* The period under review has been unusually affected by changes to the Racing calendar, with a reduction in race days in September resulting in a sharp decline of 10.5 percent in amounts wagered, being partially offset by an increase of 2.7 percent in October against the prior year.

* Sportech is making good progress on its contract to supply Betfred’s Totepool business with a comprehensive suite of betting technology products both online and via mobile as well as its core Quantum tote system. The company describes this as a “significant project with revenues expected to exceed GBP 9 million.

* The company has submitted tender, presentation and follow up procedures to the Californian Horseracing Industry for a five year contract extension to continue processing the wagering at all of California’s racetracks, satellites, sports bars and wagering facilities. A decision is expected by the end of this year.

* Sportech’s JV with NYX, SNG Interactive, is on track to launch an online gaming platform in New Jersey in early 2015 as part of an agreement with Resorts Casino Hotel. This initial market entry supports the Group’s broader strategy to develop an online gaming business to be initially offered to existing racing and casino customers across the US as regulation permits.

* Growing revenues and margins are flowing from the company’s flagship restaurant, bar and betting facility in Bradley set up earlier this year. Start-up losses of GBP 300,000 have been incurred to date, and there are similar plans to build large facilities in Stamford, Connecticut, and in Norco and San Diego, California;

* The Venues business has seen betting volumes decline against prior year by 1.5 percent in the year to date, primarily due to macro industry trends together with the reduction in the amount wagered by certain VIP customers. This is in line with industry statistics overall and significantly better than similar facilities in the North East of America which have seen a 10 percent average decline. Sportech is focussed on actions to expand its distribution (Internet, mobile and new venues) and to manage the controllable cost base.

* The digital team at Sportech has been strengthened to enhance its capability across iGaming, fantasy sports and Internet betting on horseracing.

* In Football Pools, online player recruitment now accounts for over two-thirds of current recruitment activity, with new player recruitment for Classic Pools at 20,000 new players to date in 2014 compared to 11,000 in the same period of 2013.

* In October the company re-launched footballpools.com on its proprietary ‘Turnstile’ platform, into which Sportech has integrated NYX’s existing gaming platform, enabling new customers and around 240,000 existing direct channel customers to manage their accounts online, facilitating cross-sell opportunities to a wide range of pools and casino games. The new website has been built with a ‘mobile first’ approach using responsive design. Mobile and tablet already accounts for over half of the usage of the site.

* The company has launched a brand new single match pool betting product – MatchXtra – which offers fixed-odds style betting opportunities on Premier League and televised football matches. MatchXtra is currently offering around 50 matches per week and circa 500 markets, with the offering set to expand and grow in the coming months.

* In September, the VAT Upper Tribunal ruled in favour of Her Majesty’s Revenue & Customs in HMRC’s appeal case relating to a VAT repayment claim on the “Spot the Ball” game. This followed the initial ruling last year of the First-tier Tribunal in Sportech’s favour. The Group expects to repay the GBP 93 million it received from HMRC following the initial ruling at the end of November, but management coinfirms that the company is to appeal.

The Board of Sportech says it is confident that good progress is being made and that the right people and products are in place to ensure a successful future.

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