5th Mar 2014 12:11
LONDON (Alliance News) - Online gambling and sports-entertainment company Sportech PLC Wednesday reported an increase in revenues and profits for the year 2013, as it shed its loss-making e-gaming business and pumped investment into its Sportech Racing and Digital unit.
But the group warned that it has had a tough start to 2014, as severe winter weather in the US has hindered its US operations.
Sportech reported a pretax profit of GBP5.2 million in 2013, compared with only GBP1.3 million in 2012. It said profits were driven by growth in its Sportech Racing and Digital business, offsetting a decline in football betting.
Revenue from continuing operations was slightly ahead at GBP110.3 million, up from GBP107.7 million a year earlier, with the group's US-based businesses now accounting for 60% of overall revenues.
"We remain well positioned for future growth in the US market and, with the strong cash flows from our Football Pools business, we have entered 2014 with confidence," said Chief Executive Officer Ian Penrose in a statement.
However the group warned that its US-based businesses have been hit by the countries harsh winter, with a trebling of race cancellations.
"The severe snow storms and extreme cold weather across the east coast of the US have resulted in the closure of our retail venues on several days this year, and there have been 170 race cancellations to date in 2014 compared to 54 in 2013. Whilst this has impacted on the performance of our US operations, the board remains confident in the Group's prospects for the full year ahead," the company said in a statement.
Despite the bad weather, Sportech said it remains well positioned for future growth in the US market and, with the strong cash flows from its football pools business, is confident for the year ahead.
Sportech said it spent a total of GBP22 million on capital investment and acquisitions during the year, an increase from GBP14.3 million in investments in 2012.
During the year, the group booked a total of GBP2.7 million in exceptional costs, a similar level to the prior year, a majority of which was made up of restructuring costs, as well as acquisition costs and costs in relation to its New Jersey licence.
Momentum has been building both offline and online for the group's Sportech Racing business, boosted by new horse race betting contracts with major gaming businesses in the US, Denmark and the UK, and the acquisition of eBet Online in December 2012. The group said the division performed well during the year, as it continues to invest in new online and mobile products to help drive customer revenues and cost efficiencies.
During 2013, Sportech also bought Data Tote Ltd, an on-track and online greyhound and horse race betting services provider in Europe, for GBP3.1 million, which it said will significantly strengthen its European horse-race betting operations.
Revenues from group's pools business for the period fell to GBP41.3 million, down from GBP42.9 million in 2012, which it said was primarily due to a GBP1.6 million decrease in the collector and overseas channels.
The company is in the process of modernising its football pools division, including system and process improvements, which has led to more costs savings and a fall in operational overheads.
In the first half of the year, an increase in spend per customer helped to offset a decline in player numbers, which continued into the second half of the year.
During the year the group commenced a distribution agreement with France-Pari to enable French residents to bet into football pools, which buoyed revenues during the period.
The group has been focusing its efforts on developing is multi-channel gambling strategy in the US, and investment in its US business is set to drive future growth for the company. It has already opened its new flagship betting and sports bar venue in the US state of Connecticut, and similar venues in California are due to open later this year. The group also entered a joint venture with Picklive Ltd back in September to launch a new gaming product targeted at the growing US fantasy sports market, with the website expected to go live mid this year.
Sportech sold its loss-making e-gaming business, consisting of the Vernons.com brand, to Netplay TV PLC in October for GBP3 million, after the division swung to a loss in the first half of the year, hit by increased market spend, which continued into the second half.
"This disposal followed a strategic review that concluded the business was not of sufficient scale ahead of the implementation of UK point of consumption tax, which would impact the business significantly," the company said in a statement Wednesday.
Sportech confirmed Wednesday that the chief operating officer of its consumer-facing business Ian Hogg has decided to leave the company at, or before, the end of the year for personal reasons, as he does not wish to increase his duties overseas.
The group said it is confident that the outcome of the GBP95 million VAT claim appeal in the UK due to be heard on April 29 and 30, will be in its favour. The VAT repayment claim, in respect of the "Spot the Ball" game, was successfully determined in the group's favour by the First-Tier Tax Tribunal in March last year, but HMRC is appealing the decision to the Upper Tribunal.
Sportech did not propose a dividend for the year, and said it will continue to assess when to commence the payment of a maiden dividend, taking into account its financial position, business performance and future growth opportunities.
Shares in the company were trading 1.1% lower Wednesday morning, at 89.00 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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