Final Results
04 March 2003 - 6:01PM
UK Regulatory
RNS Number:2309I
Sportech PLC
04 March 2003
Sportech PLC
Preliminary Results for the year ended
31 December 2002
Sportech PLC, the UK's leading home gaming company, and owners of Littlewoods
Gaming, today announced its preliminary results for the year ended 31 December
2002.
Highlights
* Profit before tax, amortisation of goodwill and exceptionals increased 69%
to #14.0m (2001: #8.3m).
* Profit before tax was #4.6m (2001: loss of #0.6m).
* Turnover increased by 7% to #195.3m (2001: #183.3m).
* Earnings per share, before amortisation of goodwill, increased to 2.0
pence (2001: 1.1 pence). Basic EPS was 0.5 pence (2001: loss of 0.5 pence).
* Operating cashflow increased to #18.1m (2001: #15.7m).
* Good progress in delivery of television gaming strategy:
* In-house expertise and technical infrastructure in place.
* Sky Active gaming service launched in December 2002.
* First ITV programme linked games expected to launch in Summer 2003.
* Further extension of product range and customer access:
* Littlewoodscasino.com launched in Q3 2002.
* Sainsbury's and Safeway in-store scratchcard products introduced in Q4
2002.
* LittlewoodsGameOn.com soft gaming site launched in Q4 2002.
Colin McGill, Managing Director, Sportech PLC said:
"We are delighted with the growth and profitability generated by our existing
businesses. Our continued investment over the last year in both product and
channel development now positions us to capitalise on the extensive new customer
access provided through television and retail outlets.
The strength and potential of our brand has been clearly demonstrated by the
quality of strategic partnerships agreed in the year."
Ends
Enquiries
Sportech
Suzanne Judge, Head of Corporate Communication 0151 288 3059
Bell Pottinger Financial
Jonathon Brill / Charles Reynolds 020 7861 3232
FINANCIAL REVIEW
I am pleased to report improved financial results for 2002, with the stronger
profits and operating cashflow being used to drive our strategy forward and
reduce our borrowings.
Turnover is up 7% to #195.3m, reflecting strong growth in sports betting
revenues.
Operating profit, before amortisation of goodwill and exceptional costs, is 27%
ahead at #22.2m. All areas of the business performed better than the equivalent
period last year and the first half of this year.
During the year we completed two major projects aimed at significantly improving
our operating capability whilst reducing costs. Scanning technology was
introduced whilst our main operating site in Liverpool was rationalised. The net
cost of these initiatives was #0.6m, reflecting a non operating exceptional
profit of #1.4m from a property disposal, offset by an operating exceptional
charge of #2.0m relating mainly to redundancies.
Profit before tax, amortisation of goodwill (#8.8m) and exceptionals (#0.6m)
increased by 69% to #14.0m. Profit before tax was #4.6m compared to a loss of
#0.6m in 2001. The effective rate of taxation is reduced to 13% reflecting the
impact of the property disposal profit, which will not be taxable and prior year
adjustments.
Earnings per share before amortisation of goodwill increased to 2.0 pence (2001:
1.1 pence). Basic EPS was 0.5 pence compared to a loss of 0.5 pence last year.
Net cash inflow from operating activities increased to #18.1m (2001: #15.7m)
after expenditure of #3.3m relating to the execution of the television and
internet gaming strategy. There was further capital investment of #1.7m relating
to the television and internet strategy.
Total capital expenditure during the year was #4.9m reflecting investment in the
Group's building infrastructure for its football pools operation and new head
office facilities, as well as substantial investment in the key television and
internet strategy. Disposal of surplus property generated #2.0m and the disposal
of the Pull Tab business generated #0.5m. After taking account of asset
disposals, net capital investment was #2.3m.
Following approval of the special resolution at the AGM, April 2002, and
confirmation from the Court of Session in Scotland, the company reconstructed
its capital on 23 December 2002. As a result, the company has been able to
reduce the deficit on the profit and loss account by the utilisation of the
#47.1m balance on the share premium account and the #0.9m balance on deferred
shares. Together with the retained profit for the year, this has resulted in a
balance on distributable reserves of #1.9m.
Bank loans were further reduced by #14.0m during the year to #119.9m.
OPERATING REVIEW
Football Pools
Operating profits before goodwill from the football pools increased by 10% to
#25.6m, (2001: #23.2m), reflecting significant improvement in operating
efficiencies, the reduction in the duty burden from April 2002 and a #0.4m
contribution from Zetters since its acquisition in August 2002. We have
continued to focus on our customer retention and recruitment programmes, further
reducing the like for like rate of decline in turnover in the second half of the
year to 14%.
The acquisition of the Zetters Football Pools business for net cash of #0.7m
delivered a customer base of 60,000. There has been no significant customer loss
as a result of the acquisition, and the business has performed in line with
expectations.
We continue to identify opportunities to rationalise the operational and
overhead base of the football pools whilst extending our distribution of this
product via television, internet and overseas businesses.
Sports Betting
Littlewoods Bet Direct telephone and internet betting continued to deliver
strong revenue growth, with turnover 60% higher, at #83.1m (2001:#51.8m). This
growth reflected the benefits of a level playing field arising from the
elimination of tax for customers in October 2001. As a result of the increased
betting volumes, operating losses were halved during the year to #2.0m compared
to 2001.
Customer numbers increased by 20% to 272,000, with average stakes per telephone
call up 23% to #36 and the average internet bet up 26% to #17. Following a
strong first half, gross win margins eased back in the second half, in line with
market trends, leading to a gross win margin for the full year of 10% (2001:
11%).
The commencement of a three year all weather racing sponsorship programme,
positioning the Littlewoods Bet Direct brand at more than one in five UK
televised horse racing events, significantly raised Littlewoods Bet Direct's
profile. The business continued to provide a variety of unique best and special
bet offers to customers, generating continued media exposure for the brand.
We are looking forward to the launch of our fixed odds service on the attheraces
television channel, and expect this additional customer access to further
stimulate growth and profitability.
Games and Lotteries
Operating profits before goodwill from Games and Lotteries increased by #0.4m to
#0.9m (2001: #0.5m), mainly due to the #0.5m profit from the sale of the Pull
Tabs lottery business, announced in September.
2002 was a period of significant transition for our soft gaming business as we
concluded a number of major new distribution arrangements, significantly
enhancing both on line and off line customer access, while withdrawing from low
growth marginal businesses such as Pull Tabs lotteries. Our focus has been on
interactive channels together with retail distribution.
Growth of on-line games has been underpinned by the launch of
LittlewoodsCasino.com, our on-line casino, which was launched in August 2002 and
is already trading profitably. We are encouraged by the levels of customer
interest in this product and plan to enhance the choice and quality of games
available in the first half of 2003.
Our plan to capture a larger share of the #500m scratchcard market* was boosted
by groundbreaking retail distribution deals with both Sainsbury's and Safeway
for the supply of own label scratchcards dedicated for specific charities such
as Comic Relief and Great Ormond Street Hospital. Extended trials with both
these supermarket groups are currently underway.
Interactive
Good progress has been made in the delivery of our television gaming strategy.
Increased investment has enabled us to build in-house expertise and further
develop our technical infrastructure.
Television
A close working relationship with ITV Network has been firmly established since
the signing of our exclusive gaming partnership in March 2002, and we look
forward to realising its significant commercial potential. The official
commencement date for this relationship, which can extend for 7 years, requires
a full interactive service to be available to support ITV broadcasting over a
major platform, such as Sky satellite, which now has over 6.6m household
subscribers. Carriage negotiations between ITV and BSkyB have now been
successfully concluded, and we expect to launch our first programme linked pay
to play games in summer 2003.
Our technical and service capabilities have already been tested successfully by
the launch of a number of games accessed from both Sky broadcast channels and
Sky Active in December 2002.
In addition, the ITV network provides the opportunity to promote games to both
digital and analogue viewers who can then choose to play via their TV or other
convenient response routes, such as telephone and internet.
* source: Mintel August 2002.
Internet
We have continued to develop innovative and entertaining internet gaming
products utilising a variety of instant win mechanics. These have included a
range of ITV Pop Rivals pay to win internet games and the recently launched
Formula One Fantasy league game, available at both ITV.com and our own soft
gaming site, LittlewoodsGameOn.com.
Outlook
In terms of strategic developments, the launch of programme linked gaming on ITV
will deliver our products to significant audience numbers later this year,
augmenting our Sky Active and internet offerings.
The profits and cashflow from our football pools business is expected to remain
strong, with further growth anticipated in our sports betting and games and
lotteries businesses.
We will continue to seek opportunities to extend our distribution to mass
markets, working with broadcasters, retailers and interactive platform
providers. We look to the future with confidence.
David Mathewson
Chairman
3 March 2003
Sportech PLC
Consolidated Profit & Loss Account
For the year ended 31 December 2002
Unaudited Audited
2002 2001
Notes #m #m
(restated)
Group turnover 3 195.3 183.3
Cost of sales (139.4) (129.3)
-------- --------
Gross profit 55.9 54.0
Net operating expenses (44.5) (45.4)
Operating profit before restructuring costs
and amortisation of goodwill 22.2 17.5
Exceptional - restructuring costs 4 (2.0) -
Amortisation of goodwill (8.8) (8.9)
Operating profit 11.4 8.6
Profit on sale of tangible fixed assets 4 1.4 -
Net interest payable and similar items (8.2) (9.2)
-------- --------
Profit/(loss) on ordinary activities before
taxation 3 4.6 (0.6)
Tax on profit/(loss) on ordinary activities 5 (1.7) (2.1)
-------- --------
Retained profit/(loss) for the financial
year 2.9 (2.7)
======== ========
Earnings per share 6
0.49p (0.45)p
Basic
======== ========
1.97p 1.05p
Pre amortisation of goodwill
======== ========
All operations are continuing.
Sportech PLC
Reconciliation of movement in group shareholders' funds
For the year ended 31 December 2002
Unaudited Audited
2002 2001
Notes #m #m
(restated)
Shareholders' funds at 1 January 2002 as previously reported 27.3 29.6
Prior period adjustment 2 1.3 1.7
-------- --------
Shareholders' funds at 1 January 2002 as restated 28.6 31.3
Profit/(loss) for the year 2.9 (2.7)
-------- --------
Shareholders' funds at 31 December 2002 31.5 28.6
======== ========
Statement of total recognised gains and losses
For the year ended 31 December 2002
Unaudited Audited
2002 2001
#m #m
(restated)
Total recognised gains and losses relating to the year 2.9 (2.7)
========
Prior period adjustment 2 1.3
--------
Total recognised gains and losses since last annual report 4.2
========
Sportech PLC
Consolidated Balance Sheet
As at 31 December 2002
Unaudited Audited
2002 2001
#m #m
(restated)
Fixed assets
Intangible assets 155.1 161.8
Tangible assets 8.5 7.2
-------- --------
163.6 169.0
-------- --------
Current assets
Stocks 0.1 0.2
Debtors - due within one year 8.3 5.7
Debtors - due after more than one year 1.0 1.6
Cash at bank and in hand 6.0 12.9
-------- --------
15.4 20.4
Creditors
Amounts falling due within one year (43.5) (42.9)
-------- --------
Net current liabilities (28.1) (22.5)
-------- --------
Total assets less current liabilities 135.5 146.5
Creditors
Amounts falling due after more than one year (104.0) (117.9)
-------- --------
31.5 28.6
======== ========
Capital and reserves
Called up share capital 29.6 30.5
Share premium account - 47.1
Profit & loss account 1.9 (49.0)
-------- --------
Total shareholders' funds
(including non-equity interests) 31.5 28.6
======== ========
Sportech PLC
Consolidated Cash Flow Statement
For the year ended 31 December 2002
Unaudited Audited
Notes 2002 2001
#m #m #m #m
Net cash inflow from operating activities 8 18.1 15.7
Returns on investments and servicing of finance:
Interest received 0.2 0.4
Interest paid (8.3) (10.2)
Purchase of interest rate cap - (0.9)
------ ------
Net cash outflow from returns on
investments and servicing of finance (8.1) (10.7)
Taxation (2.6) (4.3)
Capital expenditure and financial
investment:
Purchase of tangible fixed assets (4.1) (2.0)
Purchase of intangible fixed assets (0.8) -
Sale of tangible fixed assets 4 2.6 0.2
------ ------
Net cash outflow from capital expenditure
and financial investment (2.3) (1.8)
Acquisition of business: 7
Acquisition of Zetters pools business (1.4) -
Acquisition expenses (0.1) -
Net cash acquired with business 0.7 -
------ ------
Net cash outflow from acquisitions and
disposals (0.8) -
------ ------
Cash inflow/(outflow) before management
of liquid resources and finance 4.3 (1.1)
Financing:
Net loans repaid (14.0) (6.0)
------ ------
Net cash outflow from financing (14.0) (6.0)
------ ------
Decrease in net cash 9 (9.7) (7.1)
====== ======
Notes to the Preliminary Statement
For the year ended 31 December 2002
1. Basis of reporting
a) The preliminary results have been prepared on the basis of the
accounting policies set out in the group's 2001 financial statements,
with the exception that FRS 19, Accounting for Deferred Tax, has been
implemented as set out in note 2. The preliminary results have been
drawn up for the 52 week period from 5 January 2002 to 3 January 2003
(2001, 53 week period).
b) The preliminary results for the year ended 31 December 2002 are
unaudited.
The financial information on pages 6 to 15 does not amount to full
financial statements within the meaning of Section 240 of the Companies
Act 1985 (as amended).
2. Prior period adjustment
The Group has adopted FRS19, Accounting for Deferred Tax, in these preliminary
financial statements. Accordingly, full provision has been made for deferred
tax. Corresponding figures for 2001 have been adjusted to reflect this change in
accounting policy. A summary of the effect of this change is as follows:
2001 2001 2001 2002
Reported Change Restated Effect
#m #m #m #m
(Loss)/profit on ordinary activities before tax (0.6) - (0.6) -
Taxation (1.7) (0.4) (2.1) (0.6)
------- ------- ------- -------
(Loss)/profit on ordinary activities
after tax (2.3) (0.4) (2.7) (0.6)
======= ======= ======= =======
Earnings per share:
(0.39p) (0.06p) (0.45p) (0.10p)
Basic and diluted
======= ======= ======= =======
1.11p (0.06p) 1.05p (0.10p)
Pre-amortisation of goodwill
======= ======= ======= =======
Goodwill 162.1 (0.3) 161.8 -
======= ======= ======= =======
Deferred tax asset - 1.6 1.6 (0.6)
======= ======= ======= =======
P&L account at 1 January (48.0) 1.7 (46.3) -
(Loss)/profit for the year (2.3) (0.4) (2.7) (0.6)
------- ------- ------- -------
P&L account at 31 December (50.3) 1.3 (49.0) (0.6)
======= ======= ======= =======
3. Segmental reporting
2002 2001
#m #m
(restated)
Turnover
Football Pools 100.8 119.0
Sports Betting 83.1 51.8
Games and Lotteries 11.4 12.5
Interactive - -
------- -------
Total Littlewoods Gaming 195.3 183.3
Technology Patents - -
------- -------
195.3 183.3
======= =======
Profit/(loss) before taxation
Football Pools 25.6 23.2
Sports Betting (2.0) (4.0)
Games and Lotteries * 0.9 0.5
Interactive (2.3) (1.6)
------- -------
22.2 18.1
Total Littlewoods Gaming
- (0.6)
Technology Patents
------- -------
Operating profit before restructuring costs and
amortisation of goodwill 22.2 17.5
Restructuring costs ** (2.0) -
Amortisation of goodwill ** (8.8) (8.9)
------- -------
Operating profit 11.4 8.6
Profit on sale of tangible fixed assets 1.4 -
Net interest payable and similar items (8.2) (9.2)
------- -------
4.6 (0.6)
======= =======
* - included within this in 2002 is #0.5m surplus on sale of the Pull
Tabs lottery business
** - principally football pools
Net assets
Football Pools 48.8 43.2
Sports Betting (12.0) (10.6)
Games and Lotteries (2.1) (2.8)
Interactive (3.2) (1.2)
------- -------
Total Littlewoods Gaming 31.5 28.6
Technology Patents - -
------- -------
31.5 28.6
======= =======
All turnover and profits arise in the United Kingdom.
4. Net restructuring costs
2002 2001
#m #m
Restructuring costs - operating (2.0) -
Profit on sale of tangible fixed assets - non-operating 1.4 -
------- -------
(0.6) -
======= =======
During the year, the Group has introduced new technology for the marking of
football pools coupons. This technology is less labour and space intensive than
the technology it replaced. In consequence, there was a significant reduction in
staff requirements, and the restructuring costs of #2.0m comprise #1.8m of
redundancy payments and #0.2m of other costs. The smaller scale of new coupon
processing equipment also enabled processing to be concentrated in one of two
pools processing buildings. The surplus land and building were sold for
redevelopment generating proceeds of #2.0m and realising a gain on disposal of
#1.4m.
5. Taxation
2002 2001
#m #m
(restated)
Current tax
UK corporation tax @ 30% (2001, 30%) 3.2 1.7
Adjustments in respect of prior periods (2.1) -
------- -------
Total current tax 1.1 1.7
------- -------
Deferred tax
Current year 0.5 0.4
Adjustments in respect of prior periods 0.1 -
------- -------
Total deferred tax 0.6 0.4
------- -------
1.7 2.1
======= =======
The tax for the period is lower (2001 : higher) than the standard rate of
corporation tax in the UK (30%). The differences are explained below:
2002 2001
#m #m
Profit/(loss) on ordinary activities before tax 4.6 (0.6)
===== =====
Profit/(loss) on ordinary activities multiplied by the standard rate
of corporation tax in the UK of 30% (2001, 30%) 1.4 (0.2)
Effects of:
Goodwill write-off not deductible for tax purposes 2.6 2.7
Other permanent differences (0.3) 0.1
Origination and reversal of timing differences (0.5) (0.4)
Adjustments to tax in respect of prior periods (2.1) -
Fair value adjustments - (0.5)
-------- --------
1.1 1.7
======== ========
6. Earnings per Share
The calculations of earnings per share are based on the following profits and
numbers of shares.
2002 2001
(restated)
Earnings Weighted Per share Earnings Weighted Per share
average number amount average number amount
of shares pence of shares pence
#m '000 #m '000
Basic EPS excluding
goodwill amortisation 11.7 592,074 1.97p 6.2 592,074 1.05p
Effect of goodwill
amortisation (8.8) 592,074 (1.48p) (8.9) 592,074 (1.50p)
-------- -------- -------- -------- -------- --------
Basic EPS 2.9 592,074 0.49p (2.7) 592,074 (0.45p)
======== ======== ======== ======== ======== ========
7. Acquisition of Zetters pools business
On 29 August 2002 Sportech PLC acquired the Football Pools business of Zetters
International Pools Ltd. The purchase consideration was #1.4m satisfied by cash.
Goodwill arising on the acquisition of this business has been capitalised and
included within intangible fixed assets and amortised over 3 years. An analysis
of the acquisition is as follows:
Fair value
Book value adjustments Fair value
#m #m #m
Tangible fixed assets 0.2 - 0.2
Prepayments 0.2 - 0.2
Cash 0.7 - 0.7
--------- --------- ---------
Total assets 1.1 - 1.1
--------- --------- ---------
Trade creditors (0.2) - (0.2)
Accruals and deferred income (0.7) - (0.7)
--------- --------- ---------
Total liabilities (0.9) - (0.9)
--------- --------- ---------
Net assets acquired 0.2 - 0.2
========= =========
Acquisition costs (0.1)
Goodwill 1.3
---------
Discharged by cash 1.4
=========
The acquired business has contributed #1.8m to turnover and #0.4m to operating
profit.
8. Reconciliation of operating profit to operating cash flows
2002 2001
#m #m
Operating profit 11.4 8.6
Decrease in provisions - (1.8)
Depreciation on tangible fixed assets 2.4 2.2
Amortisation of goodwill 8.8 8.9
Amortisation of loan arrangement fee - 0.1
Surplus on disposal of tangible fixed assets (0.6) (0.1)
Decrease in stocks 0.2 -
(Increase)/decrease in trade debtors (0.3) 0.6
Decrease in other debtors 0.4 0.9
(Increase)/decrease in prepayments (2.6) 2.2
Increase in trade creditors 0.3 0.8
Decrease in other taxes (1.3) (0.3)
Decrease in accruals and deferred income (0.6) (6.4)
-------- --------
Net cash inflow from operating activities 18.1 15.7
======== ========
Included within cash balances is #2.0m (2001: #nil) of cash to which the Group
has restricted access. This relates to a deposit placed on the Isle of Man
during 2002 in connection with the on-line casino business. This cash can only
be accessed with the permission of the Isle of Man government.
9. Analysis and reconciliation of net debt
At 1 At 31
January 2002 Cash flow Other movement December 2002
#m #m #m #m
Cash at bank and in hand excluding charity 11.7 (7.4) - 4.3
cash balances
Bank overdrafts (2.9) (2.8) - (5.7)
------- ------- ------- -------
8.8 (10.2) - (1.4)
------- ------- ------- -------
Debt due within one year (15.9) 16.0 (16.0) (15.9)
Debt due after one year (117.9) (2.0) 15.9 (104.0)
------- ------- ------- -------
(133.8) 14.0 (0.1) (119.9)
------- ------- ------- -------
(125.0) 3.8 (0.1) (121.3)
======= ======= ======= =======
2002 2001
#m #m
Decrease in cash in period (9.7) (7.1)
Movement in charity cash (0.5) 0.4
-------- --------
Change in net debt resulting from cash flows (10.2) (6.7)
Net cash outflow from reduction in loans 14.0 6.0
Amortisation of loan arrangement fee (0.1) (0.1)
-------- --------
Movement in net debt for the period 3.7 (0.8)
At 1 January 2002 (125.0) (124.2)
-------- --------
At 31 December 2002 (121.3) (125.0)
======== ========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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