Sportech hit by impairment costs as losses widen in 2019

19 March 2020

Sportech has said that impairment costs related to a sports bar asset in Stamford, Connecticut, in the US meant losses widened in 2019, but the betting technology provider was able to report a year-on-year increase in total revenue.

Revenue for the 12 months through to 31 December 2019 amounted to £64.8m (€69.5m/$74.9m), up 2.1% from £63.5m in reported revenue in 2018. 

The Racing & Digital business was the primary source of income for the year, with revenue climbing 7.4% year-on-year to £36.5m. Service revenue in this segment was up 8.7%, but sales revenue slipped 17.7% to £1.4m.

Sportech racing & digital provides pari-mutuel betting technology and services to 287 racetracks, off-track betting networks, casino, lottery, and online operator clients, plus 147 commingling clients, in 38 countries and 36 US states.

Meanwhile, Sportech’s venues division saw revenue fall by 4.3% from £30.1m in 2018 to £28.8m. Wagering revenue was down 3.9% to £24.4m, while Sportech also saw food and beverage revenue fall 8.3% to £4.4m across the venues arm.

In terms of spending during the year, the cost of sales was reduced by 3.2% from £18.5m in 2018 to £17.9m, while marketing and distribution costs fell from £1.8m to £1.5m.

Adjusted costs were slightly up from £35.9m to £36.1m, due in part to Sportech spending more on staffing, with this rising 2.0% to £26.0m. Property costs were down to £3.6m, while other costs were also marginally down to £6.5m.

However, despite higher revenue and lower spending across the board, Sportech reported a loss before interest and tax of £7.7m, compared to £2.9m in 2018, due to impairment costs related to property, plant and equipment totalling £5.0m at its venue in Stamford, Connecticut.

When accounting for net finance charges totalling £695,000, loss before tax came in at £8.4m, up from £2.7m in the previous year. Combining this with £6.0m in tax payments net loss for the year stood at £14.5m, compared to £2.6m in 2018.

Sportech, however, did see an improvement in terms of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), with this increasing from £6.5m to £7.5m.

“We continue to progress our strategic agenda focused on driving further development of our group platforms following 2019 growth opportunity investments, whilst managing the inherent cost base,” Sportech chief executive Richard McGuire said.

“Despite the challenging retail environment and excluding some cost measures taken to reposition the Group, our performance in 2019 has been as expected.

“In particular, we have recorded positive progress with key performance metrics beyond, the typically focused, EBITDA measure; namely cash generation from operational activities, capex reductions and delivery of a lower operational cost base going forward.”

McGuire also referenced the ongoing situation regarding the global outbreak of novel coronavirus, saying that it is difficult to give accurate guidance with any certainty for the full-year. The business has already closed a number of its US venues in response to the outbreak.

“The situation remains highly uncertain, but clearly Covid-19 will have a significant impact on our business given certain of our businesses are dependent on sporting events continuing, even if behind closed doors,” McGuire said. “Understandably, the period of disruption is uncertain, but having strengthened our online capabilities during 2019 we are better positioned to deliver a broader service wherever possible.

“In this period of concern and uncertainty, we initiated a Sportech Covid-19 response task force and continue to work closely with our clients and our staff to ensure, as best we can, a combination of continuity where permissible and precautionary safety measures.”