Sportech targets efficiencies

22 August 2018

Sportech will target “further operational efficiencies” whilst aiming to expand across the US and reposition its teams for a new strategic approach outside North America after the betting technology company posted flat interim financial results this (Wednesday) morning.

On a constant currency basis, sales in the first half of 2018 improved marginally year-on-year to £31.6m (€35.6m/$40.7m) from £31.2m, while gross profit edged up from £22.8m to £22.9m. Adjusted earnings, which included £490,000 of costs related to the company’s new sports betting division, fell from £3.4m to £2.8m.

“We continue to assess further operational efficiencies to maintain profit levels in the business,” CEO Andrew Gaughan said. “We also believe the market outside of North America is moving to more service-based contracts versus one-time sales contracts and are positioning our teams accordingly.”

With regard to the US market, Gaughan hailed the company’s partnership with Sportradar covering sports betting data, trading, risk management and technology platforms.

He also said that, having worked with key constituencies in Connecticut to secure the right to conduct sports betting as a licensed operator in the state, the company is “very well positioned to offer a competitive integrated sports and race betting solution in other US states”.

Analysts at Regulus Partners described the results as “solid if unexciting”.

However, they underlined the importance that all three of the company’s business streams are relevant to US sports betting.

“After the Netherlands disposal and a longer period of rationalisation, Sportech is now a business of three clear divisions: Connecticut-led B2C, global (if US-led on the topline) racing pools B2B, and US sports charity raffle B2B,” Regulus Partners said.

“We see Sportech as one of the few businesses that is small enough, bespoke enough and sufficiently well placed to deliver potentially transformational growth from US sports betting at group level.

“The key now, in our view, is to balance strategic speed and flexibility with high quality operational delivery; while this might sound challenging for a group with Sportech’s history, it now finally has an opportunity to rise to.”

In terms of Sportech’s outlook, the company said that it expects to see “continued softness in wagering revenue for the remainder of the year” at the Stamford, Connecticut location. “With the addition of our new food and beverage and group sales managers we expect further improvements, particularly in the 2019 financial year,” the company said.

With racing and digital, Sportech said that the shift in the market outside North America from primarily one-time sales contracts to long-term service-based contracts “will mean lower one-time sales revenues, but an increased and more consistent service revenue base”.

Sportech added: “We believe that we will have a strong direct-to-consumer sports betting offering in Connecticut and that we are very well positioned to offer our racing and digital customers a competitive integrated sports and race betting solution.

“Sports betting costs for 2018 should be in the range of £1.1m to £1.3m. Given the legislative windows of various states we would anticipate our sports betting revenues to begin in the second half of 2019.”