An International
Betting Technology Business
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Annual Report and Accounts 2020
STRATEGIC REPORT
HIGHLIGHTS
REVENUE1
£20.0m
2019: £33.6m
ADJUSTED EBITDA1
£(2.3)m
2019: £1.6m
GROSS PROFIT1
£10.5m
2019: £18.3m
LOSS BEFORE TAX1
£(10.6)m
2019: £(9.7)m
(LOSS)/PROFIT FROM DISCONTINUED OPERATIONS
ADJUSTED CASH AT 31 DECEMBER2
£(2.6)m
2019: £1.0m
£16.8m
2019: £13.0m
1.
2.
From continuing operations.
Excluding customer balances and including cash held by discontinued operations.
FINANCIAL OVERVIEW
Continuing operations:
Revenues fell 41% to £20.0 million due to
Discontinued operations:
Revenues fell 17% to £25.8 million due to
COVID-19 restrictions on trading.
COVID-19 restrictions on trading.
Group:
Statutory loss for the year was
£12.8 million (2019: £14.5 million).
Adjusted EBITDA loss of £2.3 million (2019:
Adjusted EBITDA fell to £4.6 million
Cash net of customer balances and
profit of £1.6 million), management having
taken action to mitigate COVID-19
impact.
(2019: £5.9 million), management having
taken action to mitigate COVID-19 impact.
Adjusted loss before tax was £0.8 million
Adjusted loss before tax increased to
(2019: profit of £1.2 million).
£5.2 million (2019: £2.0 million).
including cash held by assets held for sale
was £16.8 million (2019: £13.0 million).
This includes the £6.2 million deposit from
BetMakers Technology Group Ltd.
Capex related to continuing operations
was £0.4 million (2019: £0.4 million) and
discontinued operations £2.0 million
(2019: £3.4 million).
GROUP DEVELOPMENTS
Corporate: Executed agreements to sell (a) Global Tote Business
with proposed transaction to BetMakers Technology Group Ltd; (b)
Bump 50:50, and (c) to dispose of a freehold property in New Haven,
Connecticut. In aggregate providing estimated net cash of £36.1
million upon completion from these transactions, all three expected to
complete in H1 2021.
Tote: Delivered further growth within international Tote pool
commingling, and executed contract extensions with key international
partners. Completed an integration with Lottery providers to facilitate
betting on racing through Lottery points of sale and successfully
launched new terminal software to deliver cost and capital
efficiencies. Completed delivery of a new digital platform to UK Tote
Group and launched a new mobile betting option. All of this ultimately
supported the proposed sale of the business in December 2020.
Bump 50:50: Continued record-setting client acquisition, with
emphasis on online raffles and non-sports charities, ultimately
resulting in a sale of the business, announced February 2021.
Venues: COVID-19 severely impacted the business resulting in a
28% decline in total retail betting handle versus 2019, mitigated to an
extent by a 72% growth in online handle. The required focus on cost
management continued. The Group is engaging with the Governor’s
office following statements that appear to deny Sportech equal rights
to a Connecticut State Sports Betting licence. Legal opinions have
been sought and provided to the Connecticut Administration. The
Board will appraise shareholders as events develop.
Lottery: Working with core partner to deliver online growth
opportunity.
Other: Reduced Group capex by 37% and materially reduced
separately disclosed items.
We are an
international betting
technology business.
Sportech delivers technology and
service solutions to gaming companies,
sports teams, racetracks, casinos and
lottery clients across 35 countries
and owns and operates sports gaming
venues in Connecticut, United States.
CONTENTS
Strategic Report
Overview
Business Model and Strategy
Chairman’s Statement
Operating Review
Financial Review
s172 Statement
2
4
6
8
12
18
Corporate Governance
Financial Statements
Directors and Officers
Risk Management
Viability Statement
Corporate Social
Responsibility Report
22
23
27
28
Consolidated Financial
Statements
Company Financial
Statements
Advisors and Corporate
Information
76
134
142
Corporate Governance Report 30
Report of the
Remuneration Committee
Directors’ Report
Report of the Auditors
39
62
67
1
FINANCIAL STATEMENTS
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Overview
Sportech at a
glance
COVID-19 created unprecedented
challenging conditions for our
businesses and the industries we serve.
We continue to take the necessary
actions to safeguard the Group and
to progress our strategic agenda. In
line with this, the Group took steps to
generate tangible investor returns by
exiting certain businesses and assets,
advancing the sale of the Racing and
Digital division’s Global Tote Business to
BetMakers, the sale of the Bump 50:50
raffle business to Canadian Bank Note,
and the disposal of a freehold property
in Connecticut.
Despite the challenging global environment, our
performance in 2020 was better than initially forecast
in March 2020, with Sportech delivering on key 2020
performance metrics, namely cash generation from
operational activities, effective capex management,
and delivery of a more efficient lower operational cost
base going forward, resulting in only a modest cash
outflow since the outbreak of COVID-19.
We continue to evaluate further investment prospects
within the Connecticut Venues business to support
expanded gaming opportunities. Management and
personnel in our US headquarters in Connecticut
remain fully motivated to be part of that state’s
expanded gaming solution.
I am encouraged by the resilience shown by the
business in facing the challenges of 2020. My gratitude
goes to those dedicated professionals who will be
transferring to new owners in 2021 and my thoughts
remain with the families of those colleagues we lost to
this pandemic.
Richard McGuire
Chief Executive Officer
2
Sportech Venues
The operator of legal pari-mutuel betting in the State of
Connecticut under an exclusive and in perpetuity licence,
Sportech Venues offers online, mobile, call centre and retail
betting with venues located across major population centres.
Key locations within the network offer food and beverage
services in premium restaurant and sports bar environments.
With 11 venues in operation currently, the Division has the
licensing to expand to 24 venues.
Sportech Venues is well positioned to offer legal online and
in-venue Sports Betting in Connecticut should the state
progress appropriate licensing.
Revenue
(£m)
2020
2019
17.1
28.6
Adjusted EBITDA
(£m)
(1.1)
2.2
Capital Expenditure
(£m)
–
0.2
In the table above, prior year figures are at constant currency.
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Sportech Lottery
Sportech Racing and Digital –
Discontinued Operations
Sportech Racing and Digital’s continuing operations,
Sportech Lottery, includes a supplier of technology
solutions to the global regulated Lottery industry. Sportech’s
proprietary Lottery platforms have been servicing Lottery
clients for over 24 years and process US$103 million (2019:
US$165 million) in handle annually for licensed Lottery
clients. Lottery handle totals for 2020 were significantly
impacted by COVID-19 related closures.
Sportech Racing and Digital’s discontinued operations
consists of a prominent supplier of technology solutions to the
global regulated betting industry and of electronic raffles to
sports, entertainment and non-profit charitable organisations.
In 2020, the Division sought to strengthen and enhance
its global position in Tote betting by leveraging its gaming
licences, technology platforms, global client relationships, and
investment. It also continued expanding its Bump 50:50 client
base of charitable foundations seeking innovative fundraising
platforms, including platforms for online raffles.
Sportech’s proprietary betting solutions processed an
estimated US$9 billion in handle in 2020 for licensed Tote
clients in 35 countries (2019: US$12.2 billion). Bump 50:50
increased its total client base to 168 clients by year’s end.
Betting handle, and in particular raffle jackpot, totals for 2020
were significantly impacted by COVID-19 related closures.
Locations
Atlanta, Athlone, Bristol UK, Chester UK, Connecticut,
New Jersey, Singapore and Toronto.
Revenue
(£m)
2020
2019
2.9
4.7
Revenue
(£m)
2020
2019
25.8
31.2
Adjusted EBITDA
(£m)
1.0
2.7
Adjusted EBITDA
(£m)
4.6
5.9
Capital Expenditure
(£m)
0.4
0.1
Capital Expenditure
(£m)
2.0
3.4
In the table above, prior year figures are at constant currency.
3
FINANCIAL STATEMENTS
Business Model and
Strategy
THE GROUP’S STRATEGIC AIMS FOR 2021 INCLUDE:
1. Deliver significant capital return(s) to shareholders.
2. Strategically position to play our part in the State of Connecticut’s expanded
gaming initiative.
3. Evaluate and execute further corporate opportunities, delivering tangible
investor returns.
4. Materially reduce the corporate cost base.
5. Assess organic and complimentary growth opportunities that deliver
superior returns.
Through 2020 the Group maintained its international focus
with clients in 35 countries and the majority of operations in
the US (Connecticut, Georgia, New Jersey), the UK (Bristol,
Chester), Ireland (Athlone), and Canada (Toronto). Most of
the Group’s underlying earnings are now in USD and Euro.
The Group does not currently hedge against its USD or Euro
earnings, but reports exchange differences.
Sportech navigated the well-documented global challenges
of 2020. Having restructured the business, strengthened
its capital reserves, and reduced currency exposure, it is
well positioned to execute the five core strategies noted
above. Following completion and settlement of announced
corporate transactions, the Group will initiate a tender offer to
shareholders and buyback shares, precise details of which will
be disclosed at an appropriate time.
Sportech is an international betting technology
business that provides and operates betting
technology solutions for some of the world’s
best-known gaming companies, sports teams,
racetracks, casinos and lottery clients, as well as
owning and operating its own gaming venues in
Connecticut, United States.
The Group focuses on regulated markets worldwide and
seeks to achieve long-term shareholder returns by leveraging
Sportech’s heritage, gaming licences, technologies, client
relationships, investor engagement and smart capital
deployment.
The Group also maintains a strong focus on driving
operational efficiencies throughout its businesses. Where
appropriate, this includes exiting certain businesses and
assets to generate both tangible investor returns and
proceeds that can be used to deliver growth, including
in the existing Connecticut Venues business where the
Company hopes to position for potential gaming expansion
opportunities.
In 2020, the Group agreed the sale of the Racing and Digital
division’s Global Tote Business to BetMakers Technology
Group Ltd and the sale of Bump 50:50 to Canadian Bank
Note Company Limited. These transactions are anticipated
to close in H1 2021 and mark a significant change in the
Group‘s operations and underlying business. The dedicated
men and women engaged in these business lines will be
transferring with the businesses. Each buyer demonstrated
the highest levels of professionalism and integrity throughout
and we know these businesses, and our people departing,
will be in good hands.
4
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
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VENUES
LOTTERY
Sportech Venues operates legal betting on racing and jai
alai under an exclusive in-perpetuity licence in the State
of Connecticut. It offers omni-channel betting through
venues, web, mobile and phone, and holds the right to
expand to up to 24 locations. The Division continues to
pursue strategies to deliver a return on the significant
capital invested in developing our venues and digital
platforms that appeal to and reach a wider clientele.
The Group and senior management are actively
engaged in pursuing a Sports Betting licence to
complement its Tote betting, in venue and online.
Sportech is ready to deliver Sports Betting to
Connecticut consumers as it seeks a resolution that
promotes equal licensing to each of the State’s four
existing gaming partners.
Sportech has been providing draw-based Lottery
platforms and services – including central systems,
agent ePOS terminals, game development, and on-
going maintenance and support – for over 24 years.
The Group is currently pursuing opportunities with
private and national lotteries, drawing on the Sportech
brand and legacy in the global regulated Lottery
market, along with our new range of Lottery products,
digital gaming platforms and expertise, to offer
enhanced Lottery capabilities.
5
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Chairman’s
Statement
I am pleased to once again address you as Sportech PLC’s Chairman of the Board.
2020 was a challenging year for all and I consider it a privilege to be leading the
Sportech team in this transformational era.
2020 presented challenges that none of us could have
foreseen but I am happy to report that the Sportech team
took the necessary immediate steps to protect the Group’s
assets and execute a reformed strategic plan.
The Group began 2020 focused on implementing the
strategic plan we outlined at the start of the year. This included
leveraging cost containment strategies applied across the
Group in 2019; launching new products, and enhancing our
operational platform; continuing to campaign for a Sports
Betting licence in Connecticut; and evaluating corporate
opportunities to deliver tangible investor returns.
One element of this plan included bolstering the Board, and
the Group announced in March the appointment of a new
Non-Executive Director. An exhaustive search was conducted
for an individual bringing extensive technology experience and
we were delighted to appoint Ben Warn, who also stepped up
to chair the Remuneration Committee.
In Connecticut, legislation to close loopholes that were being
exploited by unlicensed online operators went into effect in
late 2019, and our Connecticut team continue to work with
the State regulator to recapture revenue and taxes.
In February, Racing and Digital introduced a new terminal
software line to the industry at the prestigious Asian Racing
Conference and secured contract extensions with key clients
in the US. Sportech’s international commingling service
delivered solid improvement in H1, growing our international
commingling pools and extending international commingling
contracts with key clients, including UK Tote Group and New
York Racing Association. Hong Kong Jockey Club took steps
early in 2020 to race ‘behind closed doors’, which continues
through to time of this writing, March 2021, providing high
quality racing product for Sportech’s global commingling
clients worldwide.
The global pandemic forced the industries we serve to enter
various degrees of closure, impacting every aspect of our
Group and significantly altering the course of our business.
The Group’s 2019 focus on costs and processes and an
increase in investment and capacity in digital, resulted in a
more streamlined, digital-focused organization that was better
prepared to combat the business impacts of the pandemic.
6
The financial reporting for 2020 will be more complex to follow
as we exclude the contribution from the significant businesses
held as ‘assets for sale’ at year end, whilst not reducing many
of the corporate costs associated with managing the larger
Group. As we progress through 2021 we are scaling back
the corporate cost base to be more reflective of the smaller
Group, following the completion of the sale of the Global Tote
Business and Bump 50:50.
On a constant currency basis, revenue from continuing
operations declined 40% to £20.0 million. Adjusted1 EBITDA
from continuing operations declined by £3.9m to a loss of
£2.3 million. Revenue in discontinued operations declined
17% to £25.8 million and EBITDA from discontinued
operations fell by £1.3m to £4.6m.
With the onset of the pandemic, management immediately
established a COVID-19 response team to develop and
implement plans to protect employees, clients and operations.
The team enacted policies to move critical operations from in-
person to remote work, adjust resources to shifting demand,
and provide support to team members who were directly
impacted by client closures.
Our Connecticut Venues implemented a voluntary closure of
all retail betting and food and beverage operations in March
followed by a state mandated closure that persisted until late
July. As of March 2021, operations are still on a dramatically
reduced capacity. Wagering shifted significantly to digital
platforms; resources were reallocated to address this shift and
handle increased 43% year on year. Four venues in smaller
markets were closed; the Division retains the ability to open
up to 24 locations if and when conditions are suitable for
expansion.
With the Connecticut 2020 legislative session cut short by
the pandemic, there was no legislation passed to legalise
Sports Betting, but we continued to maintain a scaled back
advocacy campaign, engaging media through op-ed pieces
and communicating with lawmakers.
Despite the challenges of the pandemic, the Racing and
Digital team delivered an integration to support the sale of
racing bets through vast lottery networks, rolled out new
terminal and digital products, and secured contract renewals
with key clients including UK Tote Group, TVG, Monmouth
Park, Veikkaus and Danske Spil.
1.
Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation,
separately disclosed items and share option charges; a full reconciliation to
EBITDA is given in note 1.
Bump 50:50’s clients were similarly impacted by the
pandemic. With no spectator sporting events, Bump’s shift
toward non-stadium digital platforms and progressive jackpots
on traditional 50/50 raffles, and their move into the non-
sports related charities market, positioned them to adjust to
the pandemic’s disruption. With in-person fundraising events
virtually prohibited, Bump 50:50 remained focused on building
value, increasing its client base by 70%, to 168 clients. Almost
all of that growth came from non-sporting related non-profits
offering online raffles. Bump also began to prepare for the
post-pandemic environment, integrating with Paysafe to offer
safe touchless in-person payments and signing contracts
for in-stadia and digital raffles with teams such as the Texas
Rangers (MLB®), Florida Panthers (NHL®) and Las Vegas
Raiders (NFL®).
In the second half of 2020, focus shifted to the delivery of
tangible investor returns and investment in businesses poised
for long term growth.
In December 2020, the shareholders supported the Board’s
recommendation to sell the Global Tote Business to Australia
based BetMakers Technology Group Ltd. and in January
2021 to sell Bump 50:50 to Canadian Bank Note Company
Limited. These transitions will significantly alter the Group
going forward, generating tangible investor returns whilst we
continue to evaluate further investment prospects within the
Connecticut Venues business and in global Lottery.
These agreed sales represent a strong vote of confidence
in the technology, strategy and talent in both of these
businesses. The buyers are well respected, growth-oriented
firms who excel in their areas of concern and the Board is
confident that the businesses, and our valued team members,
will flourish under their new ownership. We wish them well,
with our thanks.
At the start of Connecticut’s 2021 legislative session in
January, the Board – anticipating that this session would
see Governor-led expanded Gaming initiatives – redoubled
its efforts, seeking to secure a Sports Betting licence with
a progressive marketing and public relations campaign. As
I write this, the Governor’s office has announced the initial
outline of a plan to expand Gaming within Connecticut.
We are seeking clarity on the details, which, based on an
unfavourable initial summary, may require further action
to vigorously defend our interests in Connecticut should
the process and proposed gaming expansion be deemed
unconstitutional and prejudicial to our interests. We will keep
shareholders apprised of developments in this legislative
session, which ends in June 2021.
The Group’s risk management strategy considers risks
arising from each area of the business and principal risks to
the Group are described in detail in the “Risk Management”
section of the Annual Report. The Board took swift action
to address the impact of the global COVID-19 pandemic,
particularly in the US where we have consumer venues and
the majority of our employees. The Board implemented
strategies to manage the cost base, secure staff safety and
meet the needs of continuing client operations. The Group
remains in dialogue with clients, regulators and the State of
Connecticut to manage future risks associated with global
pandemic. The Group continues to view the potential risks
associated with Brexit to be immaterial to the business due to
the primarily North American focus of our business operations.
Sportech PLC enters 2021 as a business in transformation,
seeking to deliver significant returns to investors from
the proposed sale of the Global Tote and Bump 50:50
businesses, and with new opportunities to further invest in
emerging gaming opportunities in Lottery and in Connecticut
Venues, including Sports Betting.
I join the rest of the Board in extending thanks to our clients
and customers for placing their trust in Sportech as a partner
in the dynamic global gaming industry. We offer our heartfelt
thanks as well to our employees worldwide, who have
persevered in the face of unprecedented professional and
personal challenge to help sustain our business and execute
strategies to generate shareholder value.
Giles Vardey
Chairman of the Board
31 March 2021
7
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS
Operating
Review
2020 was a year of challenge and change as Sportech collectively sought to
navigate the well documented issues the pandemic brought. In 2019, the Group
initiated a focus on accountability and relocated investment capital to digital
opportunities across all business lines; this strategy supported the Group
during 2020.
COVID-19 restrictions had a material impact on performance
due to the Group’s reliance on sporting events to generate
revenue. The Group was, in prior years, seriously exposed
to sporting events occurring, sporting stadia, bars and
restaurants being open, and personnel and customers
enjoying travel freedom. As we all know, that changed
dramatically in early 2020 and the Board took immediate
action to protect all stakeholder interests.
The Group structure was tested, and decisive steps were
taken to ensure continued commitment to our clients and
the safety of our personnel, and to protect the Group’s asset
base. A focus on operational efficiency, cash generation and
online growth across all business units during the period
resulted in the Group’s adjusted cash (i.e. excluding customer
cash) increasing from £13.0 million at 31 December 2019
to £16.8 million at 31 December 2020. This includes the
BetMakers’ non-refundable initial deposit (£6.2 million). It
also includes adjusted cash (i.e. excluding customer cash)
of £5.5 million held within discontinued operations which will
remain within the Group following completion of the disposals,
subject to adjustments for debt-like items and working capital.
The Group’s 2020 strategy included the evaluation and
execution of material corporate opportunities, delivering
tangible investor returns. During 2020 and into 2021, in line
with strategy, the Group agreed certain sales to generate
tangible investor returns, whilst continuing to evaluate further
investment prospects within the Connecticut Venues business
to support potential expanded gaming opportunities. The sale
of Racing and Digital’s Global Tote Business to BetMakers is
progressing as is the transition of the Bump 50:50 business to
Canadian Bank Note Limited.
These two transactions and the sale of the Group’s New
Haven property are expected to close in H1 2021. The
estimated aggregate net cash from corporate transactions
is £36.1 million and the Board will continue to engage with
shareholders to assess the optimal use of capital.
During 2020, the Board received unsolicited interest from a
potential suitor to acquire the entire Group. The Board shared
certain information with the party as part of a focused due
diligence exercise. However, having considered the full terms
and conditions of their final proposal, the Board concluded
that it did not adequately value the businesses and prospects
of Sportech, in the light of both the execution risk attached
and the Group’s strategy to deliver tangible shareholder value.
It is notable that the dedication and successes delivered by
management and personnel within the Global Tote Business
and Bump 50:50 in driving their respective businesses
attracted the attention of numerous suitors during 2020,
resulting in acceptable valuations for each and positioning the
Group well to deliver on its strategic objectives during 2021.
During 2020, capital and net cash position became more
crucial metrics than EBITDA. The Group continued to focus on
core performance metrics, including a 37% capex reduction
and a 77% reduction in separately disclosed items (excluding
those related to agreed disposals), and repositioned itself to
create a significant liquidity base to take advantage of growth
opportunities within existing and complimentary business
lines, whilst delivering the clear prospect of returning capital to
investors.
As the Group transitions into 2021, opportunity conversion,
profitability and capital repatriation will continue to be key
metrics. It is difficult to provide meaningful guidance on the
future outlook given uncertainty around the timing of when
sporting events will return in full and the potential impact of
further lockdowns. However, management remain confident
in the quality of the Group’s products, our services and our
strategy, and in the strength of the Company balance sheet to
help deliver in the medium term.
8
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
During 2020 the Group delivered the following notable
achievements:
• Delivered significant business contract growth during
the period.
•
Reduced Group capex by 37%.
• Materially reduced separately disclosed items.
• Delivered 43% growth from Connecticut online retail
initiative.
• Delivered 26% growth from International commingling
Tote handle.
In 2020, Sportech had two operating divisions: (1) Racing and
Digital (including Lotteries and Bump 50:50) and (2) Venues. In
recent months the Group has agreed sales for the Global Tote
and Bump 50:50 parts of Racing and Digital. This has made
way for a new division, Sportech Lotteries, which remains in
the continuing Group. We will highlight below some of the
achievements from those businesses held for sale before we
delve a little deeper into Venues and the Lotteries business.
RACING AND DIGITAL – GLOBAL TOTE
Sportech’s ‘Racing and Digital – Global Tote’ is a leading
supplier of technology and services to the global horseracing
betting industry, with systems that processed an estimated
US$9 billion in 2020 betting handle for clients across
35 countries.
Developments during the year:
•
Introduced new digital terminal software suite for
teller ePOS, self-service, mobile and roaming teller,
supporting a more flexible hardware strategy to deliver
cost efficiencies and reduction in capital intensive
investment. The division also progressed its terminal
project, identifying and demonstrating an impressive
new terminal hardware line that will not only streamline
capex and improve efficiency, but will also provide an
innovative and engaging end user experience.
•
The Tote Superpool combined the betting pools on
Royal Ascot races generated by UK Tote Group with
Tote betting from global outlets and the Royal Ascot
pools hosted by the Hong Kong Jockey Club. Despite
no on-track contribution to the pools as a result of
COVID-19 restrictions, the 2020 Tote Superpool
generated £137 million in handle, up from £92 million in
2019. This year, Sportech facilitated the expansion of
Superpools to all 36 races.
•
Extended commingling and core Tote services
agreements with UK Tote Group.
• Completed a key integration project for Danske Spil,
providing expansion of horseracing wagers via their
network of SG lottery terminals, leading to further
wagering footprint expansion.
•
•
•
•
Extended contract and deployed Tote Service Layer
for Finnish client Veikkaus who will utilize Sportech’s
platform to offer horseracing wagering alongside
Sports Betting and Lottery from 4,500 points of sale, a
significant increase of 3,500 over the current level.
Joined the World Tote Association.
Successfully launched Tote betting services for live
races held at the historic Central Moscow Hippodrome
for client Pari Engineering Rus. Prior to launching Tote
for live racing, Sportech provided services to Pari
Engineering Rus for the operation of their OTB locations
and for commingling into international pools.
Brought the popular French Quinté+ pool to Denmark
through Danske Spil’s DanToto off-track betting venues,
web and mobile channels.
BUMP 50:50
Bump 50:50’s electronic raffle technology and service solution
helps foundations maximise their charitable fundraising efforts
with 50:50 and progressive jackpot raffles offered in-stadia
and online that result in jackpots that are divided equally
between the foundation and the drawing winner. Bump
50:50 clients include foundations associated with some of
the biggest brands in professional and collegiate sports,
entertainment special events, and philanthropic organisations.
Developments during the year:
In 2020, Bump 50:50 built on previous successes and further
expanded into non-sports markets, with new raffle variations
and the introduction of online potential across several states,
which continued to deliver growth opportunities and future
revenue diversification.
The leadership team was further strengthened, and Bump
50:50 assembled an unmatched group of specialists who,
combined, bring decades of direct experience in the sports,
raffle and non-profit fundraising sector. This team has been
pivotal to the growth of Bump 50:50; its dedication to client
service and product innovation aligned with the highest level
of integrity continues to deliver impressive results and stronger
client relationships.
Digital progress continued with the deployment of new
contactless payment technology; Paysafe and Bump 50:50
brought to market the charitable raffle space’s first fully
integrated contactless payments solution. As fans return
to stadiums, Bump 50:50’s partners will enable the safe
in-person purchase of raffle tickets using card tap-and-pay
technology.
Significant client growth, core new licences and initial success
with online progressive jackpots led to various parties
approaching the Group to acquire the unit, resulting in the
announced sale in Q1 2021.
9
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Operating
Review continued
SPORTECH VENUES
Sportech Venues offers legal betting on horseracing,
greyhound racing and jai alai through both online and venue-
based operations across the State of Connecticut under an
exclusive and perpetual licence.
£’000
Wagering revenue
Food and beverage revenue
Total revenue
Contribution
Contribution margin
Adjusted operating expenses
Adjusted EBITDA
Capex
2020
15,596
1,472
17,068
8,133
47.7%
(9,218)
(1,085)
29
Constant
currency
2019
24,217
4,348
28,565
13,858
48.5%
(11,631)
2,227
199
Developments during the year:
COVID-19 shuttered most racing and sporting events, and
the Division’s retail properties, for almost six months. Sportech
Venues sustained pared back operations and continued to
offer limited content through digital platforms. To protect
employees and customers, the business voluntarily closed
in-person betting at the Connecticut venues; this was followed
immediately by a State-mandated closure that extended over
five months.
Management diverted full attention to digital and online
services, deploying new digital marketing and CRM tools
which increased Connecticut retail online handle by 43%,
but could not compensate sufficiently for venue closures.
Including non-Connecticut retail clients, online retail handle
increased 72%, with online representing 33% of total retail
handle in 2020. Restaurants and in-person venues remain
capacity limited and some venues in smaller locations were
permanently closed as result of the impact of COVID-19 on
the business and coinciding lease maturities.
During the shortened 2020 legislative session in Connecticut,
management campaigned vigorously in support of expanded
gaming legalisation and for Sportech to be part of the
solution to offer online and retail Sports Betting in the State.
The Division undertook a multi-level campaign of lobbying,
advertising, and targeted public relations. Management and
employees also attended numerous public hearings and
delivered testimony to relevant General Assembly committees.
10
Despite our efforts and those of other licensed Connecticut
gaming operators, the State did not enact expanded gaming
legislation in the abbreviated 2020 legislative session,
due primarily to disputed claims of exclusivity under prior
agreements by the two recognised Tribal entities.
Given the importance of Sports Betting licensing to our
Venues business and the Group, we continue to be
proactively engaged in seeking a solution to break the
impasse during the 2021 legislative session which adjourns
on 9 June 2021. Our online campaign can be found at
www.sportsbettingforct.com. The Group is engaging with the
Governor’s office following statements that appear to deny
Sportech equal rights to a Connecticut State Sports Betting
licence. Legal opinions have been sought and provided to the
Administration and the Board will appraise shareholders as
events develop.
The business entered into an agreement to sell a freehold
property in New Haven, Connecticut. When concluded,
the proceeds will create further investment capital for the
Connecticut business, specifically for pursuing Group strategy
in appropriate positioning of Sportech interests within the
Governor’s announced expanded gaming initiatives, and will
also further strengthen Group liquidity. The Company has
commenced a search for an appropriate new location for the
New Haven retail branch and North American HQ offices.
Looking forward
Managing a physical retail operation is clearly challenging in
this environment. The Group remains focused on managing
the fixed cost base and are assessing options to enhance
profitability via a combination of lower product costs and
improved licence revenues in 2021.
Sportech’s position on the expansion of gaming in
Connecticut and our credentials as a viable partner to deliver
legal Sports Betting in the State, were well established through
our lobbying and communication efforts in recent years. The
Group intensified these efforts during the Connecticut General
Assembly’s 2021 legislative session, which commenced in
January, as expanded gaming in the State is being developed.
The Group continues to work with the State’s legislators and
established licensed gaming operators to seek a solution to
deliver a comprehensive legal and regulatory framework for
expanded gaming initiatives in 2021 and beyond.
Being part of the Connecticut gaming expansion initiative
remains a key priority in 2021; it remains a complex situation,
however we are fully engaged in working with all parties to
seek an appropriate solution and have prepared investment
capital to protect our position and play our role in Connecticut
State gaming expansion.
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
SPORTECH LOTTERIES
Sportech has been providing draw-based Lottery platforms
and services for over 24 years. In 2019, the Group acquired
Lot.to Systems Limited, which had an iLottery, CRM, and
games management platform, to complement our successful
draw based games. The Group is pursuing opportunities with
private and national lotteries, drawing on the Sportech brand
and legacy along with our new range of products and digital
expertise to offer enhanced Lottery capabilities.
£’000
Services revenue
Contribution
Contribution margin
Adjusted operating expenses
Adjusted EBITDA
Capex
2020
2,898
2,082
71.8%
(1,107)
975
351
Constant
currency
2019
4,745
3,520
74.2%
(825)
2,695
130
Developments during the year:
It was a challenging year for the unit as the current core
Lottery revenue stream is predominantly sales via physical
retail outlets, the vast majority of which closed for several
months during 2020 due to the COVID-19 outbreak.
Revenues declined 39% versus 2019, however a return to
some semblance of normality in Q4 saw revenues versus Q4-
2019 only 5% lower.
The Group joined the North American Association of State
and Provincial Lotteries, ‘NASPL’.
The Board will continue to evaluate further investment in
partnership opportunities, build on our core foundations, and
further enhance our product suite through collaboration and
digital innovation.
GROUP OUTLOOK
There is little doubt that the pandemic tested our organisation,
however Sportech employees are professionals who work
with incredible passion and purpose and the Board continues
to be inspired by their dedication to improve in every area.
Providing a long-term projection with any degree of certainty
in this environment is challenging and unrealistic, however
having negotiated several corporate transactions during
the last 12 months, when completed, the Group will have
reduced investors’ risk and simplified the structure and the
opportunities ahead.
During 2019 and 2020, Sportech enhanced its global
credentials and expanded the reach of Quantum™ System,
providing seamless connectivity between our diverse clients
and partner racecourses around the world as never before.
We invested time during the year assessing our entire product
range and user experience and commenced development
of a digital software platform that changed the way we
approached terminal hardware and capital investment going
forward. This strategic map ultimately resulted in certain
businesses becoming attractive acquisitions for others
and, in line with our strategy of delivering tangible returns
to shareholders, we progressed that interest to the deals
announced.
The Group continues to make significant strides in challenging
cultural behaviours and business practices that perhaps
focused on previous financial metrics rather than promoting an
entrepreneurial ownership ethos; this shift ultimately resulted in
some of the benefits noted at the start of this section.
The 2021 management team will reduce in number as we
complete corporate transactions, however an emphasis on
accountability and ownership culture will prevail.
A summary of our strategic objectives for 2021 includes:
1. Deliver significant capital return(s) to shareholders.
2. Strategically position to play our part in the State of
Connecticut’s expanded gaming initiative.
3. Evaluate and execute further corporate opportunities,
delivering tangible investor returns.
4. Materially reduce the corporate cost base.
5. Assess organic and complimentary growth opportunities
that deliver superior returns.
I am encouraged by the resilience shown by the business in
facing the challenges of 2020. My gratitude goes to those
dedicated professionals who will be transferring to new
owners in 2021 and my thoughts remain with the families of
those colleagues we lost to this pandemic.
The Board and management remain fully engaged and
focused on protecting shareholder value and managing
opportunity effectively and responsibly through these turbulent
times.
Richard McGuire
Chief Executive Officer
31 March 2021
11
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Financial
Review
INCOME STATEMENT – DETAILED VIEW
£’000
Service revenue
F&B revenue
Total revenues
Cost of sales
Gross profits
Marketing and distribution costs
Contribution
Contribution margin %
Adjusted operating expenses (net)3
Impact of FX on reported earnings
Adjusted EBITDA
Separately disclosed items (net)
Non-cash items:
Share option charges – normal
Share option charges – accelerated
Depreciation
Impairment of property, plant and equipment and right-of-use asset
Amortisation
Amortisation of acquired intangibles
Total – non-cash items
LBIT
Net finance charges
LBT
Taxation
Result after taxation – continuing operations
Result after taxation – discontinued operations
Loss for the year
Adjusted loss before tax for the year from continuing operations1
2020
18,494
1,472
19,966
(9,432)
10,534
(319)
10,215
51.2%
Restated
Reported
20192
Constant
Currency
2019
29,176
4,395
33,571
(15,228)
18,343
(839)
17,504
52.1%
28,962
4,348
33,310
(15,108)
18,202
(824)
17,378
52.2%
(12,513)
(15,855)
(15,734)
5
1,649
–
(2,298)
(229)
(347)
–
(1,793)
(4,349)
(485)
(509)
(7,483)
(10,010)
(557)
(10,567)
297
(10,270)
(2,562)
(12,832)
(5,177)
–
1,649
(1,003)
(676)
(746)
(2,413)
(5,020)
(250)
(467)
(9,572)
(8,926)
(735)
(9,661)
(5,793)
(15,454)
990
(14,464)
(2,040)
1.
2.
Adjusted loss before tax for the year from continuing operations is the aggregate of adjusted EBITDA, normal share option charges, depreciation,
amortisation (excluding amortisation of acquired intangibles), and normal finance charges (see note 1 for reconciliation).
The 2019 reported results are restated to exclude discontinued operations, the results of which are aggregated and shown as discontinued operations
below result after taxation – continuing operations.
3.
Adjusted operating expenses exclude depreciation, amortisation, impairments, share option charges and separately disclosed items.
12
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
REVENUE – CONTINUING OPERATIONS
£’000
Lotteries service revenue
Total Sportech Lotteries
Venues wagering revenue
Venues F&B revenue
Total Sportech Venues
Total revenues
2020
2,898
2,898
15,596
1,472
17,068
19,966
Restated
Reported
2019
4,745
4,745
24,431
4,395
28,826
33,571
Constant
Currency
2019
4,745
4,745
24,217
4,348
28,565
33,310
Revenue from continuing operations was down 40% on a constant currency basis. In Sportech Lotteries, our customer in
the Dominican Republic did not run draws during April, May or June 2020 due to restrictions on opening hours of shops and
kiosks, and experienced curfew restrictions in other times of the year. In Venues, our land-based operation was shuttered for
over three months and following reopening had venue capacity restrictions imposed, causing revenue reductions. Our online
offering remained open throughout 2020 and customers migrated from in person to online wagering, bolstering revenue slightly.
Recovery commenced in H2 2020 but with supressed trading conditions.
ADJUSTED EBITDA
£’000
Sportech Lotteries
Sportech Venues
Central costs
Adjusted EBITDA before sports betting investment
Sports betting investment
Adjusted EBITDA
Reported
2019
Constant
currency1
2019
2,695
2,228
(1,501)
3,422
(1,773)
1,649
2,695
2,227
(1,522)
3,400
(1,756)
1,644
2020
975
(1,085)
(1,927)
(2,037)
(261)
(2,298)
Revenue reductions impacted EBITDA although mitigating actions were taken, such as use of furlough schemes, rent abatement
requests and general freeze on operating expenses to the extent possible. During the COVID-19 lockdowns, the Group did
maintain employee health benefits for furloughed staff. The increase in central costs was a result of the change in focus of staff
away from Sports Betting to COVID-19 operations management, and increased legal costs related to agreements with staff and
landlords.
Sports Betting investment represents the time and cost the Group has incurred seeking to secure a Sports Betting licence
in the State of Connecticut and also in seeking partnerships across the rest of the US in Sports Betting. In 2020, it includes
lobbying in Connecticut and other external costs only. In 2019 these costs were lobbying costs, additional staff costs, travel and
consultants, and also included an allocation of senior management time; £699k external, £1,074k internal, being payroll and
travel, of which £482k was in respect of Executive Directors.
DISCONTINUED OPERATIONS
On 24 December 2020 Sportech PLC shareholders approved the disposal of the Global Tote Business, being the Group’s B2B
Racing and Digital division, excluding its Bump 50:50 business, Lottery operations and retail racing website for a purchase
price of £30.9 million. An initial payment of £6.18 million was received from the acquirer, BetMakers Technology Group Ltd
(“BetMakers”), on 29 December 2020. This receipt is unconditional and non-refundable.
In January 2021, the Group signed a purchase and sale agreement to sell the Bump 50:50 business after completing months of
negotiations with the buyer, Canadian Bank Note Company Limited.
13
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Financial
Review continued
In accordance with IFRS 5, these businesses have been treated as assets held for sale. As at the balance sheet date, the
sales were deemed to be highly probable, and the disposals signal a departure from major business lines in which the Group
previously operated. Accordingly, they have also been treated as discontinued operations in these financial statements.
Completion of the disposal of the Tote business is conditional upon (a) BetMakers having received regulatory approval or
waivers in a form acceptable to the purchaser (acting reasonably) in respect of each of the licences, authorisations, approvals
and permits held by the Disposal Group, which are necessary for the continued operation of the business; and (b) no material
adverse change having occurred in the period between the date of the agreement and the earlier of (a) completion, and (b) 30
April 2021.
Completion of the Bump 50:50 sale is the earlier of the buyer receiving regulatory approval or waivers in a form acceptable to
the purchaser (acting reasonably) in respect of each of the licences, authorisations, approvals and permits held by Bump or
31 July 2021, whichever comes first.
The table below shows the results of the discontinued operations.
£’000
Revenue
Costs
Adjusted EBITDA
Depreciation and amortisation
Profit on disposal of assets
Separately disclosed items
Finance costs
Loss before tax
Taxation
Loss after tax
Global Tote
Group
2020
25,052
(19,525)
5,527
(5,083)
–
(1,159)
(113)
(828)
(528)
Bump
50:50
2020
703
(1,598)
(895)
(291)
–
(65)
45
(1,206)
–
(1,356)
(1,206)
Total
2020
25,755
(21,123)
4,632
(5,374)
–
(1,224)
(68)
(2,034)
(528)
(2,562)
Global Tote
Group
2019
29,210
(23,618)
5,592
(4,323)
1
(137)
16
1,149
(241)
908
Bump
50:50
2019
2,002
(1,703)
299
(241)
–
–
24
82
–
82
Total
2019
31,212
(25,321)
5,891
(4,564)
1
(137)
40
1,231
(241)
990
Revenue performance was down on 2019 due to forced closure of many racetracks and OTB’s in the early months of the
COVID-19 pandemic. Our racing customers were not required to pay our monthly service fees and our variable revenue was
severely hit. During this time the Group furloughed a significant number of its Racing employees to reduce the potential impact
of COVID-19. Our digital offerings, however, did well as a few tracks remained open during the pandemic and continued to
grow. Once racing had resumed, our Global Tote Business recovered and maintained a reduced cost base, improving EBITDA
performance. Bump 50:50 was unable to generate in-stadia revenues from ticket sales due to crowds being banned from
attending sporting events across North America. Bump 50:50 continues to be impacted but is maintaining some revenues via
online 50:50, the introduction of a new online-only progressive jackpot raffle product, and significant gains in non-profit charity
clients that do not rely on sporting events.
In addition to the discontinued operations above, the Board agreed final terms for the disposal of our New Haven freehold
property in Connecticut, USA for consideration of circa £4.4 million (US$6.0 million). The sale and purchase agreement includes
a leaseback clause, whereby Sportech shall lease back the property for a period not to exceed 18 months from the date of
closing. The lease will have a monthly rental of circa £37k (US$50k) per month.
As such, the net book value of the land and buildings at the property of £1.2 million has been classified as held for sale and
separately disclosed outside of property, plant and equipment within assets held for sale.
14
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020 SEPARATELY DISCLOSED ITEMS
£’000
Continuing operations
Included in operating costs:
Restructuring and redundancy costs
Onerous contract provisions and other losses resulting from exit from Californian operations
Losses from Striders Sports Bar (S&S JV)
UK defined pension scheme buy-out
Acquisition costs – Lot.to Systems Limited
Costs in relation to Spot the Ball VAT refund (note b)
Costs in relation to legacy tax disputes (net of provision release)
One off start-up costs of new ventures, including new venue builds and joint ventures
Corporate activity costs (note a)
Costs in relation to exiting the Group’s interests in India (note c)
Discontinued operations
Included in operating costs (note d)
Included in finance costs
Interest accrued on corporate tax potentially due and unpaid at the balance sheet date on STB
refund received in 2016 and interest paid on VAT settlement
Restated
Reported
2019
2020
–
–
–
2
–
44
–
–
118
65
229
87
(184)
249
570
51
15
(152)
266
81
20
1,003
1,224
137
233
1,686
151
1,291
The costs in the table above have been restated to exclude the separately disclosed items incurred within the discontinued
operations.
The Group continues to focus on resolving legacy issues and reducing ongoing separately disclosed items. The majority of
separately disclosed items in 2020 have related to the corporate activity including the ultimate agreed disposals of the Global
Tote Business, Bump 50:50, and our New Haven freehold property.
Corporate activity costs (note a)
Costs incurred during the year in relation to the approach by Standard General LLP to acquire the entire equity of Sportech PLC
and other corporate activity.
Costs in relation to the STB refund (note b)
Advice continues to be received in relation to the corporate tax filings in relation to the Spot the Ball VAT refund in 2016.
Costs in relation to the Group’s interests in India (note c)
The Group has been required to defend a claim for costs from the joint venture partner in India and is also incurring costs in
relation to dissolving the holding company of the joint venture in Mauritius, the issue is ongoing.
Costs within discontinued operations (note d)
Mainly legal, accounting and tax advice plus other costs directly incurred in relation to the disposal of the Global Tote Business
and the disposal of Bump 50:50. Costs exclude bonuses for Group employees amounting to approximately £1.1m, which are
conditional and payable on completion of the transaction. Any costs for work to be undertaken by advisors in 2021 are also
excluded.
15
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Financial
Review continued
TAXATION
The current tax credit for the year was £719k being mainly a prior year adjustment for overpaid tax in the UK in relation to the
tax paid on the Football Pools trade and assets disposed of in 2017 net of withholding taxes paid in the US from overseas
contracts. The deferred tax charge for the year was £950k; relating to the reversal of timing differences being offset by a write
down of the deferred tax asset in the US following a review of prospects of recoverability. The Group has a recognised deferred
tax asset of £4k and unrecognised gross timing differences of £35,745k, being tax losses carried forward. The Board expects
the losses to be utilised against profits on disposal of the discontinued operations in the US, however accounting prevents the
anticipation of such utilisation in the recognition of deferred tax assets unless there is sufficient certainty over the availability of
future suitable taxable profits.
Tax paid in the year of £686k in continuing operations is mainly withholding taxes in the US, a further £343k was paid by
discontinued operations.
The Group’s current tax liability includes a provision for uncertain tax liabilities of £4.6 million in relation to corporation tax on the
2016 VAT refund. The Group is working with HMRC to resolve the issue. The Group had a current tax receivable balance of £1.4
million as at 31 December 2020 in relation to an overpayment from prior years. The refund was received in February 2021.
The Group’s deferred tax asset of £4k represents timing differences expected to reverse within five years. The Group has
a deferred tax liability of £94k at 31 December 2020 which is deferred tax recorded against intangibles recognised on the
acquisition of Lot.to Systems Limited in 2019.
16
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020 CASH FLOW
The Group’s cash flow for the year is as follows (including discontinued operations):
£’000
Adjusted EBITDA – continuing operations
Adjusted EBITDA – discontinued operations
Total Adjusted EBITDA
Payment of lease liabilities including interest
EBITDA after lease payments
Add:
Less:
Sportech Racing BV Sale
Initial payment from BetMakers Group
Other Acquisition, disposal, and JV items
Capitalised software
Property plant and equipment (net of
proceeds from sales)
Separately disclosed items (net)
Working capital and other
Tax paid and interest, net
FX impact
Net cash flows in year
Opening cash, excluding customer balances
Closing cash, excluding customer balances
2020
(2,298)
4,632
2,334
(1,655)
679
–
6,180
(500)
(1,650)
(753)
(484)
1,552
(1,100)
(72)
3,852
12,985
16,837
2019
1,649
5,891
7,540
(1,879)
5,661
236
–
(913)
(2,648)
(1,168)
(1,731)
545
(1,318)
(407)
(1,743)
14,728
12,985
Cash inflow, excluding movement in customer balances in the year was £3,852k. An initial, unconditional, non-refundable
payment from BetMakers Technology Group Ltd was received on 29 December 2020 turning the cash outflow for the year into
a cash inflow.
Cash outflow for the year of £2,328k (excluding BetMakers’ Initial payment) was similar to prior year despite the COVID-19
pandemic and restricted trading conditions, due to tight cost control, use of government employment support facilities and
effective working capital management.
Thomas Hearne
Chief Financial Officer
31 March 2021
17
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS
SECTION 172
STATEMENT
Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and other
matters in their decision making. The Directors continue to have regard to the interests of the Group’s employees, customers
and suppliers and other stakeholders, the impact of its activities on the community, the environment and the Group’s reputation
for good business conduct, when making decisions. In this context, acting in good faith and fairly, the Directors consider what is
most likely to promote the success of the Group for its members in the long term. We explain in this annual report, and below,
how the Board engages with stakeholders.
•
•
•
•
Relations with key stakeholders such as employees (and wider workforce e.g contractors), shareholders, regulators,
customers, local communities and suppliers are considered in more detail in the Corporate Responsibility Report on
page 28.
The Directors are fully aware of their responsibilities to promote the success of the Company in accordance with section
172 of the Companies Act 2006. To ensure the Group is operating in line with good corporate practice, all Directors review
all of the reports in the Annual Report as well as the scope and application of section 172. The Board is encouraged to
reflect on how the Group engages with its stakeholders and consider opportunities for enhancement in the future. As
required, the Senior Legal Counsel and Company Secretary will provide support to the Board to help ensure that sufficient
consideration is given to issues, factors and stakeholders the Directors consider relevant in complying with s172(1)(a)-(f)
and how they have formed that opinion.
The Board regularly reviews the Group’s principal stakeholders and how it engages with them. This is achieved through
information provided by management and also by direct engagement by all of the Group’s Directors with stakeholders
themselves.
The Board continuously enhances its methods of engagement with the workforce. In that regard, the Chairman of the
Board regularly reaches out to staff and management via a Board update and actively encourages dialogue and feedback.
The Chair and Independent NED at the time both visited US operations in 2019, meeting customers as well as employees
in field operations, Venues and human resources. This helps the Board hear directly from staff on their approach to
the “Challenge Everything” philosophy and open direct lines of communication. No such visits took place in 2020 due
to COVID-19, although during 2020, to ensure employee engagement and assist with employee wellness during the
COVID-19 pandemic, an employee intranet was created and rolled out for all employees to access including the Chair and
NEDs.
• We aim to work responsibly with our stakeholders, including suppliers, and the anti-corruption and anti-bribery, equal
opportunities and whistleblowing policies are reviewed annually and updated where required.
18
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020 The key Board decisions made in the year are set out below:
Significant events/
decisions
Key s172 matter(s)
affected
Actions and impact
Disposal of
Sportech’s “Global
Tote” and “Bump
50:50” groups
Shareholders,
employees, customers,
regulators
The COVID–19
Pandemic
Employees,
Customers,
Shareholders
• Shareholder consultation took place in accordance with regulatory
requirements.
• Employee talent management and retention programme was created and
implemented, and ongoing employment opportunities were a key consideration
in choosing a sale partner.
• Continuity of service to customers was also a key consideration in determining
a sale partner as well as the “good-standing” of the purchasers and therefore
their likelihood of assuming licences.
• Key suppliers were notified of the prospective change in ownership following
announcement of the disposal.
• As a result of the pandemic and various governments’ mandated closure of our
and our customers’ facilities, the Company furloughed employees. Employee’s
health benefits were maintained and government programs were utilised to
ensure employees were compensated to the extent possible.
• Costs were reduced as much as possible in order to ensure the long-term
viability of the Company.
Downturn in the
Pari-mutuel sector
Customers
• Customers have been consulted in relation to how the Company’s technology
could be used to reduce overhead costs, with a focus on digital offerings.
Customers, employees
Expansion of
the product
management
department
Share option
participation
Employees,
shareholders
• The Company’s product offering is being updated and diversified to assist
customers to generate more revenue from eCommerce. The Company
used race days during the COVID-19 pandemic, where audience sizes were
restricted, to re-enforce how digital offerings could be used to maintain or
expand revenue opportunities at less cost than traditional methods.
• Customer consultation in relation to the Company’s roadmap has increased
to ensure that products developed match customer needs, with a focus on
expanding digital offerings versus traditional brick and mortar offerings.
• The development teams have been consulted and trained to work with an
expanded product management department.
• The existing VCP continues to operate, however given the change in structure
of the Group following disposals the Board concluded that the introduction of
any new LTIP should be postponed until the future structure of the Group is
known and appropiate incentives can be implemented.
19
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Corporate
Governance
22
23
27
28
30
39
62
67
Directors and Officers
Risk Management
Viability Statement
Corporate Social Responsibility Report
Corporate Governance Report
Report of the Remuneration Committee
Directors’ Report
Report of the Auditors
2
.
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
Directors and
Officers
RICHARD MCGUIRE
Chief Executive Officer
TOM HEARNE
Chief Financial Officer
Nationality and residence:
Date appointed to the board:
Date appointed Chief Executive:
UK
August 2016
July 2019
Richard has expertise in capital markets and the leisure and
gaming industries and has held a number of non-executive
directorships. Prior to joining Sportech, Richard was Chairman
at Timeweave PLC, the joint owner of TurfTV. He also held the
position of Non-Executive Director at Mitchells and Butlers
PLC, one of the largest operators of restaurants and bars in
the UK.
Nationality and residence:
Date appointed to the board:
Canada
May 2018
Tom has extensive experience in the fields of digital
technology and sports media, with a long track record
of driving growth, increasing profitability, and executing
successful M&A transactions. Prior to joining Sportech,
Tom was CFO for theScore, a sports digital media focused
company, and he has held multiple CFO and Director roles
within numerous companies.
GILES VARDEY
Non-executive Chairman of the Board, Chairman
of the Nomination Committee and Chairman of the
Remuneration Committee to 1 June 2020
Nationality and residence:
Date appointed to the board:
Date appointed Chairman:
UK
December 2017
July 2019
Giles brings more than 35 years of business and boardroom
experience, latterly in non-executive roles at public and private
companies, including President and CEO of Fidelity Brokerage
Services. He also held senior investment banking positions at
firms including Salomon Brothers, County NatWest and Swiss
Bank Corporation. His gaming industry experience includes
the role of Non-Executive Chairman of Trident Gaming Limited
from 2005 to 2008.
Committees: Audit Committee to 1 June 2020, Nomination
Committee, Remuneration Committee
CHRIS RIGG
Independent Non-Executive Director,
Senior Independent Director and Chairman of the
Audit Committee
Nationality and residence:
Date appointed to the board:
UK
January 2019
Chris has considerable business and boardroom experience
in executive roles at public and private companies. He
has previously held both non-executive and executive
directorships at quoted companies including Clinigen Group
PLC and Quantum Pharma PLC. During his time at Quantum
Pharma, Chris held a number of senior positions including
Group Strategic Director, Chief Financial Officer, and Chief
Executive Officer.
Committees: Audit Committee, Nomination Committee,
Remuneration Committee
BEN WARN
Independent Non-Executive Director and Chairman of the Remuneration Committee from 1 June 2020
Nationality and residence:
UK
Date appointed to the board:
June 2020
Ben is a digital specialist bringing over 20 years’ experience in senior commercial, business development and marketing roles
within the betting and gaming industry. His passion is combining sports content with technology to create new products, drive
revenue and increase user engagement. Ben has held Senior Executive positions with Ukbetting PLC, Rank Interactive, and Sky
Betting and Gaming, the most recent being at the Perform Group, where he was CEO of their Gaming Division.
Committees: Audit Committee, Nomination Committee, Remuneration Committee
22
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Risk
Management
IDENTIFYING RISK
The Group’s risk management strategy is to consider risks arising from each area of the business through a top-down approach.
This is considered the most appropriate approach given the Board is closely involved with the day-to-day activities of the trading
entities and given the relatively small size and geographical spread of the Group.
MEASURING RISK
The Board has established and approved a risk appetite statement which is reviewed and updated annually and has been
distributed to the management teams of the operating segments. This statement, which has been reviewed by the Board during
the year, provides guidance on the Group’s appetite for risk across business areas and supports the management teams in
determining the appropriate balance of risk and return within their businesses.
The Board assesses risk and formally updates the Group risk register annually. Risks are measured in relation to their mitigated
likelihood and their prospective impact were they to arise, in accordance with the following risks matrix:
Risks matrix
High
t
c
a
p
m
I
Medium-High
Medium-Low
Low
4
3
2
1
8
6
4
2
12
9
6
3
Low
Medium
High
Mitigated likelihood
Principal risks to the Group are considered to be those risks identified by the Board as having an overall rating of six or higher or
an impact of four despite the low level of mitigated likelihood.
EMERGING RISK
The Board considers emerging risks at each Board meeting through open discussion. The Board seeks to proactively deal with
emerging risks by anticipating emerging risks and opportunities and responding by assessing threats that may develop into risks
to the Group. The Board considers emerging risks at each Board meeting through open discussion and annually focusses on
strategy including emerging risks and opportunities. The Board also formally assesses emerging risks annually in the dedicated
Risk Management Board meeting. In addition, local senior management regular team meetings are encouraged to openly
discuss emerging risks to their operating divisions and feedback to the Board. A new principal risk was identified during the
year being Global Pandemics as a result of the impacts on the Group of the COVID-19 pandemic during 2020. The Board is
also assessing emerging risks which are as a result of the disposals agreed in 2020/21, such as the reduced size of the Group’s
operations and reduction in diversity of revenue streams. The Board has not identified any specific new principal risks resulting
from the structural changes to date.
23
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT Risk
Management continued
The table below shows the principal risks identified by the Board, an assessment of those risks including the potential impact of
such risks and the mitigating activities that the Group carries out to reduce the likelihood and impact of such risks.
Risk area
Description
Mitigation
Mitigated
rating
The Group holds numerous licences worldwide.
The loss or inadvertent breach of any such
licence could have a significant impact on the
Group’s ability to continue to trade within that
and other jurisdictions and could result in fines
and imprisonment of Group personal as well as
impacting the Group’s reputation.
Data protection
Sportech holds personal data of customers. If
the Group’s security systems and controls were
breached the Group would be subject to fines,
adverse media and reputational damage.
Horserace wagering as a product has challenges
to delivering growth. Following the US Supreme
Court’s decision in 2018 allowing states to
introduce Sports Betting there is an additional
competitive risk to discretionary consumer
spending on betting opportunities as states roll
out Sports Betting choice to consumers.
The Group is dependent on the sale of
technology-led products and the effective delivery
of services through such products.
Group revenue is at risk if the technology
products do not remain competitive or experience
failures. These failures can include product issues
or issues with our data centres, where we service
our customers from.
Any disaster at our data centres could cause
significant outage times.
More and more products are being consumed
on mobile devices which are in their infancy in the
pari-mutuel world.
The Group’s General Counsel oversees
regulatory and legal compliance worldwide.
The Group engages third-party specialist
legal counsel as appropriate and specialist
local advice is available as may be required.
The Group continuously reviews its data
protection policies and trains staff on data
protection procedures, providing updated
training where appropriate. There are robust
firewalls, anti-spyware and virus-detection
programs, strong encryption, authentication
and password controls in place to reduce
risk.
New products are being innovated and
refreshed. The Group continues to invest
in international simulcasting technology
and is pursuing new client opportunities
and markets to further diversify revenue
opportunities.
The Group is developing new Sports Betting
products to compete where appropriate.
The Group has developed mobile
applications and industry-leading self-service
betting terminals. The recent acquisition of
digital specialist group Lot.to Systems will
enhance our client delivery across each
business line.
Significant investment is made in technology
annually and the Group employs skilled
and experienced system developers and
operators. The Company is continuously
reviewing and updating its disaster recovery
plan to mitigate any potential downtime.
4
9
6
Regulatory
Product
Technology
24
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020 Risk area
Description
Mitigation
Mitigated
rating
Client
concentration
and industry
competition
Whilst the Group has a broad base of business
clients and no client accounts for more than
10% of group revenue, there are certain clients
within the Group, which if lost, could have a more
significant impact on net contributions and Group
profits.
Competition for gambling revenues is emerging
in North America from more casino openings and
European operators entering the market.
If US states do not enforce their own laws they
invite non-regulated competition. Advance
Deposit Wagering has permeated the industry in
the US without regulatory challenge. Sportech
has the exclusive licence to take pari-mutuel
bets in Connecticut and pays state taxes on
all revenues. Non-regulated ADW operators
do not pay any state taxes leaving Sportech
disadvantaged.
Foreign
Exchange
The bulk of the business is generated in North
America.
Our European business is conducted via an Irish
company. The Group’s results are reported in
GBP.
If Sportech is not sufficiently geared up to take
advantage of the opportunities in Sports Betting
it may fail to gain a foothold in the market and
deliver returns on investment.
Failure to
implement
Sports Betting
strategy
following the
repeal of PASPA
We constantly assess our competition
and strategy and use our global licence
positioning, regulatory status and trading
reputation to secure business.
The Group, where possible, seeks to enter
long-term contracts with customers to
secure revenue streams, however, this is not
always possible, and a significant proportion
of the Group’s revenues are variable.
The Group continues to lobby the states to
enforce their laws in pain of losing taxation
revenues.
In 2019 Connecticut passed a law to
protect the Group’s exclusive pari-mutuel
licence from external parties. The Group is
continuing negotiations with the external
parties to enforce its licence rights, having
made agreements with some parties in 2020.
The Group seeks to create natural
hedges wherever possible, and considers
hedging instruments to mitigate significant
fluctuations. In the longer term the Group will
regularly keep under review whether it should
change its reporting currency to USD.
With the repeal of Sports Betting prohibition
in the United States in 2018, US states
now have the option to introduce intra-
state Sports Betting and many states are
considering legalising Sports Betting. At the
end of 2020, 21 states have legalised Sports
Betting and are operational, a further five
states have passed legislation but are not yet
operational. It is anticipated that more states
will follow in 2021, including Connecticut.
The Group is investing heavily to convert
opportunities in this arena and deliver a
competitive product to our consumer
business in Connecticut and to our business
clients across the US. It is a competitive
landscape however and there is risk to
successful execution and return on capital
investment.
9
6
9
25
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Risk
Management continued
Risk area
Description
Mitigation
Mitigated
rating
Global
Pandemics
For our service and sales revenue, we rely
on our customers’ racetracks and our
Venues locations to be open. Most of our
customers shut down their operations and
suspended horse racing for some period
of time during the COVID-19 pandemic
in 2020, with a few notable exceptions.
All North American sporting leagues also
suspended operations and games from
mid-March 2020 through the middle of
Q3 2020.
The result was reduced tote fees and
racing revenues in our Racing and
Digital business, the closure of all of our
venues in Connecticut (our online offering
continued to trade), and the suspension of
raffles almost entirely in our Bump 50:50
business.
Some of our customers started resuming
operations in June 2020, and more were
reopening in July and August. We began
opening Venues locations in late July
and early August, and sporting events
are taking place, but generally without
audiences.
We saw the return of the impact of the
Pandemic through winter 2020/2021,
and expect further disruptions in our
clients’ operations throughout 2021 and
potentially into 2022.
The Board took action to manage the Group’s cost
base, cutting costs and effectively managing cash
where possible. This included the furloughing of
approximately 550 staff, mostly in field operations
and at our Venues locations. We suspended
all travel and closed all of our offices. We also
renegotiated rent payments on our office and
Venues locations. Where available, the Group availed
themselves of government programs to supplement
employee wages and salaries. The Group remained
in constant dialogue with customers and maintained
digital operations. The remaining staff worked from
home, mainly in field operations and our Quantum™
Data Centre, research and development, and
finance and administrative functions.
A pandemic response team was put in place,
comprising executive and senior management, who
met regularly via online tools available to coordinate
the Group response to the pandemic.
Our operations and human resource teams created
employee portals for employee wellness and support
during the pandemic and implemented “COVID-
safe” reopening plans. Our online, mobile and phone
betting platforms remained available throughout the
crisis and saw significant growth.
The Group delivered a significant reduction in
operational costs in 2020 to partially offset severe
revenue declines, and we sought support from
governments globally where available. Determined
vigilance of the cost base will continue whilst
operating efficiently and effectively during staggered
reopening.
The Bump team had launched a new online
progressive jackpot in early 2020, before the
pandemic started, and has focused on sales
initiatives and targeted growth from within the ‘not
for profit’ charitable sector outside of sport.
Despite core divisions reopening, there remains
uncertainty to when all businesses will return to full
operational capacity. Management will continue
to focus on delivering a compelling international
product to our clients, resulting in additional long-
term contracts, and ultimately providing core long
term growth beyond the prevailing global situation.
The risk of further waves which results in local or
more widespread “lockdowns”, or a new pandemic,
remains and management have the tools in place to
react proportionately once again.
8
26
Viability
Statement
I
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G
C
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P
O
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T
The Board has assessed the prospects of the Group over a longer period than the 12 months required by the going concern
requirements of the UK Corporate Governance Code (the ‘Code’). This longer-term assessment process supports the Board’s
statements on both viability, as set out below, and going concern, made on page 64. The Board conducted this review for a
period up to December 2023, which was selected for the following reasons:
i. The Group’s strategic review process generally covers a three-year period.
ii. The Group’s operations are underpinned by largely stable businesses and medium-term contracts, allowing for sufficient
certainty to forecast results for this length of time.
The most recent strategic review (completed 31 March 2021) considered the Group’s cash flows, earnings, leverage and
other key financial ratios over the period as well as market conditions generally, the renewals of significant customers, and
the anticipated completion of disposals of the Global Tote Business, Bump 50:50 and the New Haven property. The market
conditions continue to indicate declines in bricks and mortar handle on horseracing in the US offset by online growth. The
renewals in the forecast represent a significant element of the Group’s EBITDA.
The scenarios were subject to sensitivity analysis which involved flexing a number of the main assumptions underlying the
forecast (including failure of disposals to complete/buyer default, customer attrition, handle decline and variable revenue
reduction as well as cash flow impacts of higher capex, tax and separately disclosed items and further impacts from restrictions
placed on trading as a result of the continuing COVID-19 pandemic), both individually and in unison.
The assumptions included the impact of the potential occurrence of the Group’s principal risks (set out on page 23) and the
effectiveness of available mitigating actions. We did not include the potential to raise finance given the Group’s debt-free current
status nor any potential upside from the Group potentially acquiring a sports betting licence in Connecticut, USA.
Following the completion of the anticipated disposals in 2021, the Group will have a substantial amount of cash on balance
sheet. The Board will continue to engage with shareholders to assess the optimal use of capital.
Based on the results of the analysis, the Directors have a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities, as they fall due, over the period of their assessment and will continue to assess the impact of
global pandemics on the business and its cash flows.
On behalf of the Board
Thomas Hearne
Director
31 March 2021
27
GOVERNANCEFINANCIAL STATEMENTS
Corporate Social
Responsibility Report
The Group endeavours to act responsibly for all its
stakeholders, including not only its shareholders, employees,
and its customers but also the wider public, regulators and
the environment.
The Group’s divisions hold licences to permit the provision
of business-to-business services for pari-mutuel betting on
horse and greyhound racing in over 30 jurisdictions in the
Americas and Europe. Licences for business-to-consumer
activity for the same products are held in Connecticut,
Oregon and North Dakota.
The Group Chief Legal Officer ensures the Group meets its
policy of maintaining the highest standards of compliance and
integrity. The Group also employs security and compliance
staff whose primary role is to ensure that our customers are
treated fairly, that our advertising is compliant with advertising
standards and codes, that the young and vulnerable are
prevented from accessing our products, and that abuse
and illegal behaviour are identified and stopped. All gaming
products are subject to age restrictions and age verification
software is used by the Group where appropriate.
Whilst the Company, and a number of its subsidiaries,
are incorporated in the UK, the bulk of the operations are
based in North America where standards and regulation are
different to the EU. The Group therefore has to balance all
its obligations under all the jurisdictions it operates in, which
imposes strains on its cost base which we aim to mitigate
through efficiencies wherever possible.
Beginning in 2018 and continuing to date, the Company took
comprehensive measures, under the direction of its Chief
Legal Officer and Compliance Director, to ensure that its
various business and operating units were in compliance with
new data privacy rules, including but not limited to GDPR
in the EU and CCPA in California, and are further extending
the best policies and practices to all divisions of the Group,
regardless of geographic location.
In response to the COVID-19 pandemic, Sportech took
a proactive approach to protect the health and safety of
its employees and customers. More specifically, Sportech
took actions both unilaterally and in collaboration with
governmental orders and officials to either modify or
temporarily suspend certain activities worldwide in response
to the pandemic. Throughout 2020 and continuing today,
the Group protected and maintained its various licensing and
compliance functions.
ENVIRONMENT AND STREAMLINED
ENERGY AND CARBON REPORTING
(“SECR”)
The Group recognises its responsibility to achieve good
environmental practice and continues to strive to improve
its environmental impact. We have implemented the SECR
required reporting for year-end reports commencing on or
after 1 April 2019 for the first time and as such are disclosing
the Group’s UK energy use and carbon emissions.
The nature of our business results in the principal
environmental impact arising from energy and paper
consumption (scope 2), the Group has no direct emissions
from owned assets (scope 1).
Wherever possible, waste consumable materials are recycled
or disposed of in a manner most suitable to reduce any
impact on the natural environment. The Group’s business
practices encourage the use of technology to facilitate
information, data collection and dissemination, which has led
to reduced demand for paper resources. All employees are
encouraged to participate in the implementation of this policy
and suppliers of consumable products are encouraged to
be environmentally friendly, wherever practical. The Racing
and Digital division, including the Bump 50:50 business,
works to deploy technologies for account wagering, mobile,
and tablet-based betting at racetracks, off-track betting
locations, and sports stadiums that eliminate or minimise
the use of paper betting slips and tickets for betting and
raffles. In 2019 the Group made online voting at Company
meetings its default method. Shareholders may still vote
by paper proxy if they desire, although this move towards
online voting has saved printing and posting large number of
proxy forms which are never used. Since the introduction of
paperless voting, no paper form proxies have been requested
and all voting has been recorded electronically. The Group
also continues to advocate to its shareholders the use of
electronic communications via its website. Shareholders
can request to receive communications electronically
and be notified by email by contacting the Registrar at
shareholderenquiries@linkgroup.co.uk.
The Company has, for some time, had a large number of
team members who telecommute. Due to the COVID-19
pandemic, this expanded; the vast majority of the Group’s
employees worked from home and all non-essential business
travel was suspended during times of high infection rates.
This vastly reduced the Group’s carbon footprint from travel
(scope 3 emissions) which the Group will endeavour to keep
low in future years.
28
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020 The Company has obligations under the UK Companies Act
2006 (Strategic Report and Directors’ Report) Regulations
2013 (“the 2013 Regulations”) and the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018 (“the 2018 Regulations”) to report
on greenhouse gas (“GHG”) emissions. The Group has
calculated an intensity ratio for 2020 of 68.9 which is 3,150
tonnes of CO2 divided by the Group’s total revenue including
discontinued operations of £45.7m, compared to a prior
year ratio of 72.6, which is calculated as 4,700 CO2 tonnes
divided by revenue of £64.8m. On a constant currency basis,
the prior year intensity ratio would have been 73.4. Therefore,
on a constant currency basis the Group’s intensity ratio has
decreased by 6.1% due to closure of venues, a milder winter
in Connecticut and a drive to decrease energy usage.
The Group’s global GHG emissions in the year ended 31
December 2020 were 4,873,000 kHr, 63,995 kWh of which
were in the UK, which is 1.3% of the Group’s total emissions.
The emissions and energy data noted above has been
collated, calculated and presented using the methodology
set out in WRI / WBCSD The Greenhouse Gas Protocol:
A Corporate Accounting and Reporting Standard (Revised
Edition), March 2004, including separate guidance on Scope
2 and Scope 3 emissions.
SOCIAL AND COMMUNITIES
The Group remains focused on supporting good causes
in the communities where our customers live and our
businesses operate, and identifying further opportunities to
continue this support.
Through its Bump 50:50 subsidiary, the Group has raised
over US$10m for sports and other philanthropic organisation
foundations in the US and Canada in 2020 (2019: US$21m),
including those associated with the Chicago Cubs, Las Vegas
Golden Knights, Tampa Bay Lightning, and the Hospital for
Sick Kids Foundation.
EMPLOYEES
The Board is acutely aware of the vital contribution of
employees to the future success of the business. It
recognises the importance of providing employees with
information on matters of concern to them, enabling
employees to improve their performance and make an active
contribution to the achievement of the Group’s business
objectives. This is accomplished through formal and informal
briefings and meetings. Employee representatives are
consulted regularly on a wide range of matters affecting
their interests.
The Group has an employee newsletter “Sportech in
Focus” to reflect the progressive transparency, training, and
development programmes that are in place within
the business.
In 2020, with an enhanced need to keep in communication
with employees around the world during the pandemic, the
Company introduced an employee-only website to share
information about the Company’s response to COVID-19
and general company information. The site makes available
forums that employees can use to engage with one another
on topics of interest.
The Group is committed to equality of opportunity and dignity
at work for all, irrespective of race, colour, creed, ethnic or
national origins, gender, marital status, sexuality, disability,
class or age. It ensures that recruitment and promotion
decisions are made solely on the basis of suitability for
the job. Information on gender diversity is contained in the
Corporate governance report on page 30.
It is the policy of the Group to comply with the requirements
of the UK Disability and Equality Act 2010 and the Americans
with Disabilities Act in offering equality of opportunity to
disabled persons applying for employment, selection being
made on the basis of the most suitable person for the job
in respect of experience and qualifications. Training, career
development and promotion are offered to all employees on
the basis of their merit and ability.
Every effort is made to continue to employ, in the same or
alternative employment, and where necessary to retrain
employees who become disabled during their employment
with the Group.
The Group proactively addresses health and safety
management, and it has a programme of risk identification,
management and improvement in place. The Board receives
a report in respect of health and safety across all of its
businesses at each Board meeting.
With the outbreak of the pandemic, Sportech provided
necessary accommodations to protect workers including
remote work where feasible, enhanced cleaning regimens,
provision of hygiene products for frequent cleaning and
sanitising hands, and provision of personal protective
equipment. Documents outlining standards for personal
protection and safe COVID-19 prevention practices were
shared extensively via company email, the employee website,
in team meetings and with posters mounted in common
spaces to ensure that all employees were informed of and
in compliance with local guidelines for the prevention of the
spread of COVID-19.
During the pandemic shut-downs, the Group continued to
provide all furloughed workers in the US with health benefits
and our Human Resources personnel provided extensive
support to furloughed workers across multiple states and
countries as they sought to access government resources
available to them.
29
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT 174723 Sportech Annual Report 2020 A Corporate Governance.qxp_174723 Sportech Annual Report 2020 A Corporate Governance 14/05/2021 14:45 Page 30
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Corporate Governance Report
The search consultancy Wheale Thomas Hodgins PLC
(“WTH”) undertook the search for a new non-executive
director. WTH has no connection to the Company or the
Directors. The Board was mindful of its responsibility to
appoint an individual who achieved the appropriate balance
of skills, experience, independence and knowledge of the
Company to enable them to discharge their respective duties
and responsibilities effectively.
Sportech is committed to a high standard of corporate
governance and, throughout the financial year ended
31 December 2020, has complied with the provisions of the
2018 UK Corporate Governance Code (the ‘Code’), save as
described in the paragraphs below. A copy of the Code is
publicly available from www.frc.org.uk. It is the policy of the
Board to manage the affairs of the Company in accordance
with the principles of the Code so far as the Board is able
and believes it is practicable.
Director Status
Giles Vardey Non-executive Chairman from 2 July
2019 (NED from 17 November 2017
to 2 July 2019). Not independent.
Chris Rigg NED. Independent. Senior
Independent Non-executive Director.
Ben Warn NED. Independent.
Richard McGuire Chief Executive Officer from
2 July 2019 (Executive Chairman
from 13 November 2018 to 2 July
2019). Not independent.
Thomas Hearne Chief Financial Officer. Not
independent.
The Company had one Independent Director until Ben Warn
was appointed to the Board on 1 June 2020. Following the
appointment of Ben Warn the Company has been compliant
with the Code in its requirements to have at least half the
Board (excluding the Chairman) being Independent Non-
executive Directors and to have two Independent directors
as members of the Remuneration, Audit and Nomination
Committees. Giles Vardey stepped down from chair of
Remuneration Committee and also stepped down from the
Audit Committee on the appointment of Ben Warn. The
Chairman chairs the Nomination Committee.
30
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174723 Sportech Annual Report 2020 A Corporate Governance.qxp_174723 Sportech Annual Report 2020 A Corporate Governance 14/05/2021 14:45 Page 31
BOARD LEADERSHIP AND COMPANY
PURPOSE
The Board believes it is effective and entrepreneurial and
believes its main role is to promote the long-term sustainable
success of the Company, generating value for shareholders
and contributing to wider society. The Board has established
the following:
Company’s purpose Generate sustainable value for
shareholders whilst contributing to
the wider community.
Company values • Leadership: The courage to
shape the future.
• Accountability: Responsibility for
actions.
• Passion: Committed to
excellence.
• Diversity: All are included and
Strategy
Culture
valued.
• Quality: What we do, we do well.
Up until December 2020, the focus
was on regulated betting markets
worldwide to achieve long-term
tangible shareholder returns by
reinforcing and maintaining our
global position in pari-mutuel
betting. The Company seeks to
leverage its history, gaming
licences, technologies, and
customer relationships to deliver
competitive solutions to a fast-
changing global betting market as
well as promoting our Lottery and
iLottery solutions. From 2021, we
continue with the same strategy
albeit having exited the technology
provision to the racing market in the
US and Europe.
The Board sets the culture within
the Group from the top down,
acting with integrity, leading by
example and promoting our culture
which is open, inclusive and
encouraging and demands
excellence in execution in all areas
of our operation. The Board and
senior management ensure the
culture within the Group is aligned
with the Company’s strategy and
values by incorporation in strategy
discussions.
The Board aims to provide the necessary resources for the
Company to meet its objectives and measures performance
against them. The Board has also established a framework
of prudent and effective controls, which enable risk to be
assessed and managed. See Risk Management section of
this annual report on page 23.
Shareholders and other stakeholders
There is regular dialogue with shareholders through a
planned programme of investor relations which includes
formal presentations of the Group’s results by members of
the Board. Meetings also take place with institutional
investors and analysts as required and there is regular
communication with shareholders through the Annual and
Interim Reports and Sportech’s corporate website
(www.sportechplc.com). There are also other opportunities,
outside of close periods, to enter into dialogue with
shareholders. The Non-executive Directors have taken steps
to develop an understanding of major shareholders’ views of
the Company (in particular, in relation to any areas where the
Non-executive Director has responsibility through their role
as Chair or a member of a committee) through face-to-face
contact, analyst and broker briefings.
All stakeholders can and are welcome to question the Board
at the AGM both formally and informally. Management meet
with and have regular dialogue with stakeholders including
gaming regulators, Pension Trustees and Unions.
Management have an “open door” policy to any other
stakeholders wishing to communicate with the Group.
The Board ensures that workplace policies and practices are
consistent with the Company’s values and support its long-
term sustainable success. Group HR undertake regular
reviews of policies and report to the Board accordingly. The
Company has a confidential whistleblowing process which all
employees have access to. In addition, Board members and
senior management encourage open conversations on all
matters of concern.
Significant votes against 2020 AGM resolutions
All resolutions at the 2020 AGM held on 26 June 2020 were
voted by way of a manual poll. This follows best practice and
allows the Company to count all votes rather than just those
of shareholders attending the meeting.
As recommended by the Code, all resolutions were voted
separately and the voting results, which included all votes
cast for, against and those withheld, together with all proxies
lodged prior to the meeting, were indicated at the meeting
and the final results were released to the London Stock
Exchange as soon as practicable after the meeting. The
announcement was also made available on the Company’s
corporate website. As in previous years, the online voting
and the announcement of the voting results made it clear
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Corporate Governance Report continued
that a ‘vote withheld’ was not a vote in law and would not be
counted in the calculation of the proportion of the votes for
or against the resolution.
The Board recognised the high level of votes against in
relation to the Directors’ Remuneration Report (resolution 2 –
6.91% against) and the reappointment of Giles Vardey
(resolution 4 – 13.75% against) at the 2020 AGM. We
understood that concerns were raised about the termination
payments relating to the length of notice to former directors.
The Board acknowledged this, as it was also raised at the
prior year AGM, and has subsequently agreed a shorter
notice period (six months) for the current CEO.
Engagement with the workforce
The Executive Directors work closely with the whole
workforce, regularly visiting operating sites and attending
local management meetings. Non-executive Directors also
visit operating sites once or twice a year and engage with
the workforce directly.
The Chairman sends out update briefings to the management
team at least quarterly, referencing the activities of the Board
and any changes in strategy or focus. He is available to
contact at any point via email, telephone or in person to
discuss any matters of concern employees may have.
The Group has a quarterly newsletter (“Sportech in focus”)
which informs the workforce of key events that have
happened, achievements made, changes in key staff and
has a section each quarter focussing on a particular staff
member, the work in the Group, their working history and
also their interests. Given the size of the Group and the close
working relationships between Board members and the
workforce, the Board considers that the activities in place to
address workforce engagement are sufficient. The Group
also has a “Sportech Champion” award scheme where
managers/supervisors nominate employees for high level of
delivery and achievement. Cash awards are granted
quarterly and then an overall annual winner is announced.
The newsletter and the Champion award seek to inform the
workforce, create a culture of inclusion and drive for
excellence.
During 2019 the Group started a series of web meetings for
employees called the “5Ws”, being Who, What, Where,
When and Why. A business/topic is selected and a
presenter/presenters talk attendees through the intricacies of
the area in focus, which may be a completely different
business to that which the attendee works in or has contact
with, but the aim is to spread knowledge and inform the
workforce about the Group in order to create cohesive
working and deliver excellence.
In 2020, a Sportech employee intranet was launched with
information for employees and a forum to communicate on a
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wide range of Company related and personal issues, further
information can be found in the Corporate Social
Responsibility Report on page 28. The Chief Executive
regularly sent out communications to the workforce during
2020 in response to the COVID-19 pandemic and the
impacts on both the Company and individual employees.
Conflicts of Interest
The Board has a procedure in place to deal with situations
where a Director has a conflict of interest, as required by the
Companies Act 2006. As part of this process, the members
of the Board prepare a list of other positions held and all
other conflict situations that may need authorising either in
relation to the Director concerned or his or her connected
persons. The Board considers each Director’s situation and
decides whether to approve any conflict situations, taking
into consideration what is in the best interests of the
Company and whether the Director’s ability to act in
accordance with his or her wider duties is affected. Each
Director is required to notify the Company Secretary of any
potential or actual conflict situations requiring authorisation
by the Board. Such authorisations are reviewed annually.
Director concerns
Where Directors have concerns about the operation of the
Board or the management of the Company that cannot be
resolved, their concerns are recorded in the Board minutes.
On resignation, a Non-executive Director provides a written
statement to the Chairman, for circulation to the Board, if
they have any such concerns.
DIVISION OF RESPONSIBILITIES
The Chairman leads the Board and is responsible for its
overall effectiveness in directing the Company. Where
possible he has not previously been CEO of the Company
and is independent on appointment. He is required to
demonstrate objective judgement and promote a culture of
openness and debate. The Chairman also facilitates effective
contribution of all Non-executive Directors, and ensures that
Directors receive accurate, timely and clear information.
The Company aims to have at least two Independent Non-
executive Directors on the Board to ensure no one individual
or small group of individuals dominates the Board’s decision-
making. There is clear division of responsibility between
leadership of the Board (which is the Chairman’s role) and
the executive leadership of the Company’s business, which
is the responsibility of the Chief Executive Officer.
When considering the appointment of Non-executive
Directors, the Nomination Committee considers whether the
prospective Non-executive Director has sufficient time to
meet their board responsibilities and provide constructive
challenge, strategic guidance, offer specialist advice and
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hold management to account. The Chairman reviews the
time availability of Non-executives on an on-going basis. The
Board endeavours to be composed of half independent and
half non-independent directors excluding the Chairman. One
Independent Director is appointed Senior Independent
Director and acts as a sounding board to the Chairman and
serves as an intermediary for the other directors and the
shareholders.
The Independent Directors meet at least annually, led by the
Senior Independent Director without the Chairman present
to appraise the Chairman’s performance and on other
occasions as necessary. Non-executives have a prime role in
appointing and removing Executive Directors and scrutinise
and hold to account the performance of management and
individual Executive Directors against agreed performance
objectives. The Chairman holds meetings with the Non-
executive Directors without the Executive Directors present.
The Board, supported by the Company Secretary, ensures it
has the policies, processes, information, time and resources
it needs in order to function effectively and efficiently. All
Directors have access to the advice of the Company
Secretary, who is responsible for advising the Board on all
governance matters. The appointment and removal of the
Company Secretary is a matter for the whole Board.
The Board of Directors is responsible for the management of
the business of the Company and its long-term success. It
may exercise all the powers of the Company subject to the
provisions of relevant statutes and the Company’s Articles.
The Articles, for example, contain specific provisions and
restrictions regarding the Company’s power to borrow
money. A copy of the Articles is available on the Company’s
website.
Matters reserved for the decision of the Board include:
i)
ii)
iii)
iv)
v)
vi)
Strategy and management: overall management and
oversight of operations, approval of long-term
objectives, commercial strategy, annual budgets, major
changes in nature and scope of the business of the
Group, entry into significant new business areas and
the approval of any actions which would require
shareholder approval;
Structure and capital: approval of major changes to the
Group’s capital structure, corporate structure,
management structure control structure and changes
to the Company’s listing or status as a PLC;
Financial reporting and controls: approval of preliminary
announcements of interim and annual results, annual
report and accounts, dividend policy, declaration of
dividends, and significant changes to accounting
policies and changes in accounting reference date for
any material member of the Group;
Approval to enter into significant contracts;
All communications with shareholders; and
Board memberships, appointments and the
remuneration of Directors and senior management.
The responsibilities outlined above are agreed by the Board.
The Company maintains Directors and Officers insurance
cover.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Corporate Governance Report continued
BOARD MEETINGS
The Board meets regularly, remotely or in person. Certain matters are considered at all Board meetings, including a business
update, a financial update, a legal update, a technology update, business development opportunities and operational issues.
Papers for each scheduled board meeting are usually provided within the week before the meeting and Directors unable to
attend Board meetings have an opportunity to raise and discuss any issue with the Chairman or any Executive Director. The
meetings held in the year were as follows:
Remuneration Audit Nomination
Main Board Committee Committee Committee
Number of meetings during 2020: 17 3 3 1
Executive Directors
Richard McGuire 17 – – –
Thomas Hearne 17 – – –
Non-executive Directors
Giles Vardey Stepped down from Audit Committee
on 1 June 2020 17 2 (2) 1 (1) 1
Chris Rigg 16 3 3 1
Ben Warn Appointed 1 June 2020 11 (11) 1 (1) 2 (2) – (–)
Note: number in brackets represents maximum number of meetings that could have been attended due to appointment or resignation dates.
BOARD COMMITTEES
The Committees of the Board are:
•
•
•
Nomination Committee
Audit Committee
Remuneration Committee
Nomination Committee
The Nomination Committee currently comprises the Non-
executive Chairman and the Non-executive Directors and is
chaired by Giles Vardey.
The Chairman of the Board does not Chair the Committee
when it is dealing with the appointment of their successor.
Objectives
The Committee’s main objectives are to lead the process for
any new appointments to the Board, whether Executive or
Non-executive, make recommendations to the Board in
relation to the same, evaluate the balance of skills, knowledge
and experience on the Board, consider any matters relating to
the continuation in office of any Director at any time, review
Committee memberships, and formulate plans for succession.
When making recommendations for new appointments, the
Committee considers other demands on prospective
Directors’ time and prior to appointment significant
commitments are disclosed with an indication of the time
involved. Full-time Executive Directors are not permitted to
hold more than one non-executive directorship in a FTSE
100 company or other significant appointments.
The Committee, in its recommendations to the Board,
acknowledges that diversity extends beyond the boardroom
and supports management in their efforts to build a diverse
organisation throughout the Group. Out of a workforce of
approximately 564 employees, 35% are female and out of
17 members of senior management 29% are female.
The Committee endorses the Company’s policy to attract and
develop a highly qualified and diverse workforce, to ensure
that all selection decisions are based on merit and that all
recruitment activities are fair and non-discriminatory. Although
at present there are no female Board members, the
Committee acknowledges the importance of diversity,
including gender, to the effective functioning of the Board.
Furthermore, the Board acknowledges the recommendations
of the Davies Report, and supports the principle of improving,
in particular, gender imbalance, both at a Board level and
throughout its businesses. Subject to securing suitable
candidates, when recruiting additional Directors and/or filling
vacancies that arise when Directors do not seek re-election,
the Board seeks to appoint new Directors who fit the skills
criteria and gender balance that is in line with the Company’s
policy.
The Board continues to focus on encouraging diversity of
business skills and experience, and also recognises that
Directors with diverse skill sets, capabilities and experience
gained from different geographic and cultural backgrounds
enhances the Board. The Board believes that a diverse
workforce in essential for the Group to achieve its strategic
objectives and without the ideas, outlook and skills from
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varying backgrounds and experiences, the Group will fail to
deliver the requirements of its customers.
Activities
The Nomination Committee’s activities are underpinned by
the principle that all appointments be made on merit, against
objective criteria and with due regard to the benefits of
diversity on the Board. Accordingly, the Committee prepares
a description of the role and capabilities required for a
particular appointment. Notably, during the year under
review, the Committee recommended to the Board:
•
the appointment of Ben Warn as Non-executive
Director with effect from 1 June 2020.
Audit Committee
The Audit Committee currently comprises the Independent
Non-executive Directors (Chris Rigg – Chair of the
Committee). Ben Warn was appointed to the Committee on
1 June 2020 and Giles Vardey stepped down as of this date.
The Committee is scheduled to meet at least three times a
year. The Committee’s main responsibilities include reviewing
the Annual Report and Accounts and the Interim Report.
This includes considering significant financial reporting issues
and judgements as contained within. The Committee
reviews, and challenges where necessary, the consistency
and changes to accounting policies, methods used to
account for significant and unusual transactions, whether the
Company has followed appropriate accounting standards
and the clarity of disclosure in the Company’s financial
statements. Further to this, the Committee has delegated
authority from the Board to review the effectiveness of
internal controls, the Company’s whistleblowing procedures
and the need for an internal audit function, as well as the
scope, extent and effectiveness of such systems and
procedures.
The Group acknowledges that the Corporate Governance
Code was breached from 2 July 2019 until 1 June 2020, in
relation to the requirement for the Chairman not to be a
member of the Audit Committee. Following the appointment
of Ben Warn, Giles Vardey stood down from the Committee
and rectified the breach. Members of the senior finance team
are regularly invited to attend Committee meetings.
Financial reporting
The primary role of the Committee in relation to financial
reporting is the review of (in conjunction with both
management and the external Auditor) the appropriateness
of the half-year and annual financial statements
concentrating on, amongst other matters:
•
consistency of the Annual Report as a whole and
ensuring it presents a fair, balanced and
understandable picture of the Company as well as
providing shareholders with the information necessary
to assess the Company’s performance, business
model and strategy;
•
•
the quality and acceptability of accounting policies and
practices;
the clarity of the disclosures and compliance with
financial reporting standards and relevant financial and
governance reporting requirements;
• material areas in which significant judgements have
been applied or there has been discussion with the
external Auditor; and
•
any correspondence from regulators in relation to
financial reporting.
The Committee considered internal reports from the senior
finance staff together with the external Auditor’s report in
their half-year review and annual audit of the Group’s
financial reporting function.
The primary areas of judgement considered by the
Committee in relation to the 2020 financial statements were:
•
•
•
•
•
•
risk of misstatement on revenue recognition;
disposal accounting and discontinued operations;
the assumptions underlying impairment testing of the
Group’s intangible assets;
the recoverability of deferred tax assets;
the exposure to tax liabilities; and
the assumptions underlying impairment testing of the
Company’s investment in Sportech Group Holdings
Limited.
In order to be comfortable with the consistency, fairness and
accuracy of these financial statements the following was
undertaken in relation to these key areas of judgement:
•
•
•
detailed review of customer contracts and re-
performance of revenue calculations;
challenge of requirements of IFRS 5 for classification as
held for sale and discontinued operations;
detailed review and discussion of models and forecasts
used for impairment testing and review of recoverability
of deferred tax assets; and
•
scenario analysis.
In testing assets for impairment, the key assumptions
underpinning their value-in-use were discount rates and
growth rates applied to projected earnings. These
assumptions are inherently judgemental. The Committee
considers those judgements in light of regular updates
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Corporate Governance Report continued
received on business plans and performance against targets,
and has challenged management as to their rationale for
recognising impairments in the current year. In addition, the
Committee considers the findings of the work carried out by
the Auditor in these areas.
In reviewing the exposure to potential tax liabilities, the Audit
Committee reviews the key assumptions and liaises with its
external advisors to understand the range of possible
outcomes given changes arising from particular judgements.
Correspondence from tax authorities, if any, is also reviewed.
The reasonableness of management’s judgement is also
considered with respect to the work of the Auditor.
In assessing the carrying value of the Company’s investment
in Sportech Group Holdings Limited, the Committee
reviewed financial projections for all divisions and sales
values used. The projections are inherently judgemental and
the ongoing impact of the COVID-19 pandemic is difficult to
predict. The Committee robustly challenged management on
the assumptions included in the models.
External audit
The Committee is responsible for the relationship with the
external Auditor. The Committee considers the nature and
extent of non-audit services provided by the Auditor in order
to maintain objectivity and have access to applicable
technical expertise to obtain value for money. In order to
avoid the objectivity and independence of the external
Auditor becoming compromised, the Committee has a
formal policy governing the engagement of the external
Auditor to provide non-audit services.
This policy precludes the external Auditor from providing
certain services such as internal audit work or accounting
services and as of 1 January 2017, tax advice and any
advisory service which ultimately has an impact, material in
size, on the treatment of items in the financial statements.
The Group complies with the new ethical standards which
also require that fees for non-audit services do not exceed
70% of the average of the audit fee for the prior three years,
prospectively from 1 January 2017. For all other services the
Board must approve spend on discrete projects in excess of
£10k. The Committee is regularly updated on the ‘spend to
date’ with the external Auditor and also with other financial
advisers. The Committee also notes and takes due account
of the ethical guidelines issued in December 2019 which
“whitelist” services an Auditor can provide.
The external Auditor is also subject to professional standards
that safeguard the integrity of their auditing role. The
Committee remains confident that the objectivity and
independence of the external Auditor are not in any way
impaired by reason of the audit and non-audit services which
they provide to the Group. Moreover, the Committee is
satisfied that such work is best handled by them, either
36
because of their knowledge of the Group or because they
have been awarded it through a competitive tendering
process. In addition, the independence of the Auditor is
safeguarded by the use of separate teams for individual
assignments such as acquisition due diligence and the audit
being subject to internal quality control procedures. A
breakdown of non-audit fees charged by the Auditor is
disclosed in note 7 in the Notes to the financial statements.
The Company paid non-audit fees of £24k to the Auditor in
2020 for an interim review (2019: £11k). Fees in relation to
corporate activity of £50k were paid during 2020 and £110k
were accrued but unpaid as at 31 December 2020 (2019:
£50k accrued but unpaid).
Effectiveness
The effectiveness of the external audit process is dependent
on appropriate audit risk identification and at the start of the
audit cycle the Company receives from the external Auditor a
detailed audit plan (‘Audit Strategy Memorandum’),
identifying their assessment of these key risks. For 2020 the
significant and elevated risks identified were in relation to:
•
•
•
revenue recognition;
intangible asset impairment; and
Investment impairment (Company only).
The Committee meets with the external Auditor without
management present at each meeting to provide additional
opportunity for open dialogue and feedback. Matters
typically discussed include the Auditor’s assessment of
business risks and management activity thereon; the
transparency and openness of interactions with
management; confirmation that there has been no restriction
in scope placed on them by management; independence of
their audit; and how they have exercised professional
scepticism. The Chairman of the Audit Committee also has
regular discussions with the external audit partner outside
the formal Committee process.
Appointment and reappointment
The Committee considers the reappointment of the external
Auditor, including the rotation of the audit partner each year,
and also assesses their independence on an ongoing basis.
The external Auditor are required to rotate the audit partner
responsible for the Group audit every five years. The lead
BDO audit partner, Kieran Storan, has performed the role
since 2019 and therefore will be required to rotate off the
Sportech audit in 2024. BDO LLP have been the Company’s
external Auditor since 2019. A competitive tender process
will be conducted as and when the Committee sees fit and
in any event prior to 2029. The Committee will keep the
appointment of the external Auditor under annual review.
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Internal control and internal audit
The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness. This responsibility
has been delegated to the Audit Committee. On this basis,
there is an ongoing process for identifying, evaluating and
managing significant risks faced by the Group. Such a
system is designed to manage rather than eliminate the risk
of failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material
misstatement or loss. Controls are monitored by
management review. Data consolidated into the Group’s
financial statements is reconciled to the underlying financial
systems. A review of the consolidated data is undertaken by
management to ensure that the true position and results of
the Group are reflected through compliance with approved
accounting policies and the appropriate accounting for non-
routine transactions.
The Group performs an annual strategy and budgeting
process and the Board approves the annual Group budget
as part of its normal responsibilities. The Group results are
reported monthly to the Board. Regular reforecasts are
undertaken and are produced for the Board whenever
significant financial trends are identified in the periods
between the quarterly assessments.
The Audit Committee reviews the effectiveness of the internal
control environment of the Group, excluding that of the
Group’s joint ventures. It receives reports from the external
Auditor, which include recommendations for improvement.
The Audit Committee’s role in this area is confined to a high-
level review of the arrangements for internal control.
Significant risk issues are referred to the Board for
consideration. The principal risks facing the Group and the
mitigating actions taken by the Board and management are
included on pages 23 through 26 of the Strategic report.
To manage lower-level risks, a risk management programme
was put in place and supported by a business control and
risk self-assessment process and a business continuity plan.
The risk management programme places responsibility on
managers to identify risks facing each business unit and for
implementing procedures to mitigate these risks. The risk
appraisal process is regularly reviewed by the Board and
complies with the UK Corporate Governance Guidance. The
Audit Committee and Board have reviewed the effectiveness
of the internal controls of the Group for the year ended
31 December 2020 and up to the date of approval of the
Annual Report and Accounts. This review covers controls in
areas of finance, operations, risk management and
compliance.
and nature of the Group there was no such requirement. The
central Group Finance function continues to undertake
certain work of an internal audit nature and reports its
findings to the Audit Committee. The Committee will
continue to assess the need for specific internal audit
reviews and an ongoing internal audit strategy during the
coming months. Given the absence of an internal audit
function, the Group’s external Auditor considers and
assesses the suitability of the overall control environment of
the Group, including documenting and commenting to the
Board on the general IT controls and other controls in place
as well as reviewing and commenting to the Board on the
other controls being implemented by the Group.
Whistleblowing policy
The Company is committed to providing a safe and
confidential avenue for all employees within the Group to
raise concerns about serious wrongdoings. The Company
also acknowledges the requirements of the UK Corporate
Governance Code (the ‘Code’) in this regard which states
that the Audit Committee should review arrangements by
which staff of the Group may, in confidence, raise concerns
about possible improprieties in matters of financial reporting
or other matters. An appropriate policy which encourages
and enables staff to raise any such concerns has been in
place throughout the year. No instances of serious
wrongdoing were reported to the Audit Committee during
the period.
Remuneration Committee
The Remuneration Committee of the Board comprised the
Chairman and the Non-executive Director during the year
until 1 June 2020 when Ben Warn was appointed to the
Board. From his appointment date, Ben Warn has chaired
the Committee and Giles Vardey stepped down from the
Committee.
The purpose of the Committee is to ensure that the
remuneration together with the terms and conditions of
employment of Executive Directors and senior Executives, is
sufficient to recruit and retain individuals of the calibre
required to ensure profitable growth of the business. The
Remuneration report is set out on pages 39 to 61.
BOARD PERFORMANCE EVALUATION
The Board is satisfied that each Director continues to show
the necessary commitment allocates sufficient time to
discharge their duties and continues to be an effective
member of the Board in respect to their skills, expertise and
business acumen.
The Group does not have an internal audit function. The
Audit Committee has considered the use of an internal audit
function during the year but considers that due to the size
The annual Board Evaluation process, was supported by the
Company Secretary, and concluded in April 2020. The
performance of Non-executive Directors and the functioning
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Corporate Governance Report continued
of the Committees was also appraised as part of this
evaluation process. The process involves all Directors
completing an anonymous online questionnaire set by the
Company Secretary and returned direct to them, who
summarises the results and feeds back to the Board. The
aim of the process is to ensure the roles are being carried
out properly (and as expected), procedures are adhered to
and to have an open discussion on the overall functioning of
the Board. The evaluation covered all key board duties. The
results were analysed and following the discussions, a
number of proposed recommendations were made,
including; a clear succession plan is to be developed; the
additional NED appointment should chair the Remuneration
Committee; and a plan for stakeholder engagement is to be
developed. The Board agreed to take the recommendations
forward for implementation.
INVESTORS
The Board endeavours to ensure the Annual Report and
accounts, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for
shareholders to assess the Company’s position,
performance, business model and strategy, and welcomes
feedback from shareholders on its content.
On behalf of the Board
Ben Harber
Company Secretary
SGH Company Secretaries Limited
31 March 2021
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Report of the Remuneration Committee
LETTER FROM THE CHAIR OF THE REMUNERATION COMMITTEE
Dear Shareholder
As Chair of Sportech’s Remuneration Committee, I am
pleased to present the Directors’ Remuneration Report for
the financial year ended 31 December 2020.
I was appointed to the Board as an Independent Non-
executive Director on 1 June 2020 and assumed the role of
Chair of the Remuneration Committee. As such, Giles Vardey
stepped down from Chair of the Committee. I would like to
thank Giles for his service as Chair of this Committee and for
the support since my appointment. Although I have not
served on a remuneration committee prior to my
appointment I have held senior executive positions including
within publically owned entities. I have received an in-depth
hand over from the previous Chair and training and support
for the Committee’s advisors. Given the size of the Group
and the limited Board membership, which requires each
non-executive to Chair a committee, the Board concluded
that to ensure the correct skills and knowledge on the Board
from an industry perspective that my appointment to Chair of
the Remuneration Committee was appropriate given
guidance and support was available from the independent
advisors in relation to remuneration matters.
This report comprises three sections: the Remuneration
Committee Chair’s Statement; the Remuneration Policy
Report, which sets out the proposed policy for the next three
years commencing with the year ending 31 December 2021,
and the Annual Report on Remuneration which describes
how the shareholder approved Directors’ remuneration
policy was implemented for the year ended 31 December
2020.
At the 2021 Annual General Meeting (“AGM”), the Company
will be asking shareholders to vote on two resolutions:
•
•
the binding vote of the Directors’ Remuneration Policy,
which subject to shareholder approval will formally
become effective as at the date of the AGM; and
An advisory vote on the Annual Report on Directors’
Remuneration, which provides details of the
remuneration earned by Directors for performance in
the year ended 31 December 2020.
Proposed amendments to our Directors’
Remuneration Policy for 2021
The current directors’ remuneration policy received binding
shareholder approval at the General Meeting on 24 May
2017 and came into formal effect from that date and has
been implemented through to the present time. The approval
of the Policy and how it has been implemented has been
strongly supported by shareholders over the life of the Policy.
Regulatory requirements are that remuneration policies
should be subject to a binding vote every three years and
the Board had intended to put a revised policy to
shareholders for approval at the 2020 AGM. However, the
Resolution was removed from the meeting due to the
continuing changes in the Group’s structure and long-term
strategy. The Committee had intended to gain shareholder
approval for a revised policy before the end of 2020,
however, the significant impact of the disposal of the Global
Tote division on the Group’s structure led the Committee to
conclude that it would be more appropriate to allow time for
further consideration of the details of the remuneration policy
going forward and therefore to seek approval for the revised
policy at the AGM in 2021. The Committee acknowledges
that this delay to approval of a revised policy results in the
Company not being compliant with the regulations. It is
therefore seeking to rectify this by approval of a revised
policy at the 2021 AGM that it hopes will receive strong
support.
The Committee has reviewed current arrangements in light
of the evolving strategy for the business over the lifetime of
the new policy and developments in remuneration
governance and best practice. The policy has been
thoroughly reviewed and updated this year. The Board and
the Remuneration Committee value shareholder interaction
and spoke with many of our key shareholders during 2020
on the changes proposed. The intention is for the new policy
to operate over the three-year period to 2023. The principal
change is that no long-term incentive scheme will be
operated at this time. The Board will continue to monitor this
closely and if it is considered appropriate to reintroduce an
LTIP a revised policy will be put to shareholders in a binding
vote. An overview of the proposed 2021 policy changes is
set out below, with full details on pages 42 to 53.
Policy changes at a glance
•
Simplification of the remuneration structure; removing
the LTIP; and
•
introduction of a two-year post-cessation shareholding
requirement.
Performance and remuneration for 2020
The COVID-19 global pandemic has had a material impact
on the performance of the Company. Sportech is reliant on
sporting events to generate revenue. Owing to the focus on
operational efficiency, cash generation, and diverting
attention to online products, the Group's cash resources
were protected as far as possible. Management took difficult
decisions to furlough staff across North America and Europe
whilst operations were closed, but ensured benefits
(particularly health insurance in North America) were
continued. Redundancies were kept to a minimum following
end of furlough periods. Cash generation was our key metric
for 2020.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Report of the Remuneration
Committee continued
Tom Hearne of 10% of maximum and 15% of maximum,
respectively for that element.
Strategic measures relating to successful completion of
long-term contracts set by the Remuneration Committee
resulted in 5% of maximum being payable to Richard
McGuire and 0% to Tom Hearne.
This resulted in bonuses of £207,650 and CAD227,370
being paid to Richard McGuire and Tom Hearne,
representing 55% and 85% of the maximum entitlement
respectively.
The Committee considers that this level of outturn is
appropriate given the other actions taken by the Board
during the year and is reflective of the wider business
performance and rewards received by other employees and
no discretion was applied in determining the level of payout.
VCP
No awards under the existing VCP were made during 2020
and no awards vested.
Implementation of remuneration policy for 2021
The remuneration package for our Executive Directors will
continue to be made up of base salary, plus pension
contributions and benefits, and, subject to stretching
performance conditions, an annual bonus paid in cash. As
discussed above, the Board does not currently intend to
grant awards of long-term incentives to Executive Directors.
We remain focussed on taking the appropriate steps during
the current pandemic that will protect the interests of all our
key stakeholders and best ensure the long-term strength of
the business. We will be taking the following approach to the
implementation of the remuneration policy for the year
ending 31 December 2021:
•
•
Salary – Salary levels will remain frozen. Richard
McGuire’s basic annual salary will remain at the
reduced level of £300,000. Tom Hearne’s basic annual
salary will remain at CAD$357,000 (approximately
£210,000) for 2021.
Pension – Richard McGuire receives a pension
contribution of 5% of salary, while Tom Hearne does
not participate in the pension plan. Pension
contributions for the majority of the UK workforce are
between 6% and 8%.
Outlined below, the Remuneration Committee and
management has taken a number of actions in order to
ensure that the impact of the pandemic on our business and
its employees has been shared equitably (including
significant reductions to salaries beyond the level at other
companies) whilst ensuring that management was
incentivised and rewarded for preserving value for
shareholders.
Salary
The Committee considered whether there was a need to
reduce the remuneration of Executive Directors in light of the
pandemic. Richard McGuire voluntarily reduced his salary by
50% for a six-month period beginning April 2020. Thereafter
he volunteered a permanent reduction to £300,000. Giles
Vardey also voluntarily reduced his fees by 50% to £60,000
per annum from 1 April to 31 August 2020. These reductions
go beyond those seen at other companies and reflect the
seriousness with which the Board have sought to ensure
that the impact of the pandemic was shared equitably. For
2021 and beyond, the Remuneration Committee is
cognisant of the anticipated reduced scale of the business
and are in discussions with Directors regarding fixed
compensation should the scale of operations reduce further.
Annual bonus
Given the extraordinary circumstances applying to the
Company in 2020, the Committee felt it was critical to
prioritise preservation of the Group’s assets for shareholders.
As a result, targets linked to year-end net cash and the cash
generated from disposals accounted for the majority of the
bonus and strategic objectives accounted for the balance.
In order to incentivise the maximisation of the cash
generated from disposals and therefore the preservation of
value for shareholders, the cash generation goal was based
on part of each senior manager’s bonus being linked to a
share of a notional pool of 3.5% of proceeds from any sale
of any divisional or business disposals commenced during
2020 and subject to each participant’s maximum bonus
opportunity and performance against other goals. The
successful approval of the disposal of the Global Tote
Business to BetMakers Technology Group Ltd for £30.9m
during the year resulted in awards to Richard McGuire and
Tom Hearne of 40% and 70% of their maximum bonus
opportunity, respectively. These bonuses remain conditional
on completion of the disposal in 2021 and will be paid
immediately following.
In addition, management’s determined control of costs
resulted in the maximum year end net cash target being
exceeded, resulting in payments to Richard McGuire and
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•
•
•
Bonus – In light of the ongoing COVID-19 pandemic
and previously announced corporate divestments the
2021 target setting has been delayed until there is
greater clarity. Similar to 2020, and in accordance with
the new policy, the company will not be operating any
long-term incentives. It is intended that the majority of
the 2021 bonus will be designed to incentivise Group
valuation growth subject to appropriate hurdles and a
cap on the value of potential payments.
Long-term incentives – The proposed Policy does
not include a long-term incentive. This will be kept
under review.
Shareholding requirements – The in-post
shareholding requirement will remain at 200% of salary
for the CEO and 150% of salary for other Executive
Directors. A two-year post-employment shareholding
requirement will be introduced at the level of the in-post
requirement, or the actual shareholding on departure if
lower.
The Board is satisfied that the policy provides a good
balance between potential rewards to executive directors on
the one hand, and, on the other, measures and targets
which are appropriately stretching and that are aligned with
the delivery of the overall success of the Company.
The Committee ensures compliance with the new Corporate
Governance Code which was effective from 1 January 2019.
In particular, with regards to enhanced Remuneration
Committee remit and post-employment shareholdings
amongst other changes. We consider we are compliant with
the Code following the Remuneration Policy being updated,
which will be put to shareholders for approval at the 2021
AGM.
On behalf of the Committee, I thank shareholders for their
support last year and hope you will be able to continue to
support the resolutions on our directors’ remuneration report
and policy at the 2021 AGM.
Ben Warn
Non-executive Director and Chair of the Remuneration
Committee
31 March 2021
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Remuneration report
FOR THE YEAR ENDED 31 DECEMBER 2020
DIRECTORS’ REMUNERATION POLICY
This Remuneration Report has been prepared in accordance
with the provisions of the Companies Act 2006 and
Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations
2013 (as amended) (the “Regulations”), the UK Corporate
Governance Code (the “Code”) and the Financial Conduct
Authority’s Listing Rules and takes into account the
accompanying Directors’ Remuneration Reporting Guidance
and the relevant guidelines of shareholder representative
bodies.
The policy contained in this part will be subject to a binding
vote at the AGM to be held on 29 June 2021 and will take
effect immediately upon receipt of such approval from
shareholders.
This Directors’ Remuneration Policy provides an overview of
the Company’s policy on directors’ pay that it is anticipated
will be applied in 2021 and will continue to apply until the
2023 AGM subject to any revised policy being approved by
shareholders. It sets out the various pay structures that the
Company will operate and summarises the approach that
the committee will adopt in certain circumstances such as
the recruitment of new directors and/or the making of any
payments for loss of office.
The Remuneration Committee seeks to ensure executives’
remuneration is aligned with the strategic direction the Board
has agreed and serves to drive that strategy forward, whilst
in turn ensuring the Group’s compliance with laws and
regulations at all times and giving consideration to impacts
on other stakeholders, including employees and the
environment. It is considered that structuring the policy with
base salaries and benefits enhanced by short-term
incentives will bring the largest benefits to the Group and its
stakeholders at this time.
The primary objective of the remuneration policy is to
promote the long-term success of the Company. In working
towards the fulfilment of this objective the Committee aims
to: (i) establish a competitive remuneration policy for the
Executive Directors; and (ii) align Senior Executives’
remuneration with the interests of shareholders and other
stakeholders, including customers and employees. In
connection with this, the Committee aims to ensure that the
remuneration packages offered to Executive Directors and
Senior Executives:
•
•
•
•
•
incorporate a significant element of performance-
related pay linked to the achievement of challenging
performance criteria that are aligned with the Group’s
strategy and with increasing shareholder value, but
remain appropriate given the Group’s risk profile;
provide a total remuneration offering at “target” levels of
performance that is competitive in the relevant market;
incentivise performance beyond “target” levels, to be
achieved by offering a significant proportion of
remuneration to be delivered through incentive related
pay;
create a strong alignment between the interests of
senior management and the sustained delivery of
shareholder value;
follows the following broad principles when considering
the design, implementation and assessment of
remuneration in line with the recommendations set out
in Provision 40 of the 2018 UK Corporate Governance
Code:
–
–
–
Clarity: The Committee fully discloses all
remuneration arrangements for Executives
annually in the Remuneration Report in the Annual
Report and Accounts and sets clearly defined
targets which are aligned to our strategy;
Simplicity: The Committee seeks to keep
structures as simple as possible to enable
operation and understandability for shareholders.
The main elements of remuneration in the new
policy are base salary, benefits and pension and
annual bonus;
Risk: The Committee reviews the remuneration
policy, and in particular any performance-related
pay scheme structures, on an annual basis to
ensure that it continues to operate within the
agreed risk framework of the Group. The
Committee ensures that an effective system of
control and risk management is in place with
regards to remuneration, which includes access
to the Audit Committee to discuss matters of
operational and financial risk and mitigation is
provided through malus and clawback provisions.
The Committee is satisfied that the policy does
not encourage, or reward for, undue risk taking;
are competitive and attract, retain and motivate
Executives of the right calibre;
reflect their responsibility and experience within the
business;
•
•
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
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ESG: The Committee ensures that performance-
related pay structures will not raise environmental,
social or governance (“ESG”) risks by
inadvertently motivating irresponsible behaviour.
More generally, regarding the overall remuneration
structure, there is no restriction on the Committee
which prevents it from taking into account
corporate governance on ESG matters;
Predictability: The Committee fully discloses all
remuneration structures and potential reward
outcomes and discretions in the policy. It
endeavours to ensure that no excessive awards
result from the policy, with individual caps to
participation in our incentive plans and that
incentives drive behaviours in line with Group
strategy and the interests of all stakeholders
(see below);
Proportionality: The Committee strives to link
individual rewards to the delivery of strategy, long-
term performance of the Company and to ensure
poor performance is not rewarded. Claw back
provisions are included in the policy; and
Alignment to culture: The Company is currently
advocating “challenge everything”, driving a
culture to never be satisfied and also challenge
what is done, why and how. This is in place to
drive efficiency, excellence and innovation. The
remuneration structures across the Group aim to
support this ethos and drive the purpose, values
and strategy through the Group from top to
bottom.
•
•
•
take due account of pay and employment conditions
elsewhere in the Group;
provide the foundation for overall reward and
remuneration structures at senior management levels;
and
provide an appropriate balance between non-
performance-related and performance-related pay.
Changes to the remuneration policy approved by
shareholders at the 2017 AGM
During 2020, the Committee undertook a review of the
existing remuneration policy taking account the Group's
strategic objectives and developments in the executive pay
environment and the requirements of the 2018 UK Corporate
Governance Code. A key aim of the review was to ensure
that Senior Management are appropriately rewarded and
incentivised going forward to drive the business forward over
the forthcoming Policy period. The current Policy already
contains a number of features that are in line with the
updated Code. The primary proposed change to the current
policy is that no new long-term incentives can be granted.
The Committee will continue to monitor this closely and if it
becomes appropriate to reintroduce an LTIP in the future, a
revised policy will be put to shareholders at that time.
Additionally, to reflect developments in market practice over
the past three years we will introduce a post-cessation
shareholding requirement. From 2021 Executive Directors
will have a requirement to hold shares to the value of the
shareholding guideline that applied at the cessation of their
employment for two years post-cessation; or, in cases where
the individual has not had sufficient time to build up shares
to meet their guideline, the actual level of shareholding at
cessation. This requirement will apply to shares acquired on
the vesting of awards under the VCP and under any future
discretionary share plan. Any shares purchased by an
Executive will not count towards the requirement.
Remuneration for Executive Directors
The main component parts of the remuneration packages for
Executive Directors are detailed in the table on pages 44 to
48, which should be read in conjunction with the
recruitment/promotion policy on page 52, and the “Detailed
remuneration policy for 2021” section of the Annual report
on remuneration, which starts on page 53.
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Remuneration report continued
Proposed Executive Directors' remuneration policy
The following table summarises each element of our proposed Remuneration Policy for the Executive Directors, explaining how
each element operates. The Policy will become formally effective following shareholder approval at the 2021 AGM, with those
parts of the Policy applicable to the annual bonus applying for the full 2021 financial year. If approved, this Policy supersedes
that approved by shareholders in 2017. Awards made under the existing approved Policy remain subject to the provisions of
that Policy.
Amendments to
previous policy
– No changes
proposed.
Remuneration element and
purpose
Operation
Opportunity
Performance metrics
A broad-based
assessment of individual
and Company
performance is
considered as part of any
salary review.
Base salary
To attract and retain key
individuals.
Reflects the relevant skills
and experience in role.
– Salary increases are
normally reviewed
annually with any
changes effective from
1 January
– The current salaries
are set out in the
Annual Report on
Remuneration on
page 53.
– Salaries are set by the
Committee taking
account of
performance,
experience,
responsibilities,
relevant market
information, internal
reference points and
the level of workforce
pay increases.
– There is no maximum
but salary increases
will typically be
commensurate with
those of the wider
workforce (in
percentage of salary
terms) as well as
reflective of the overall
financial performance
of the Group.
– If there are significant
changes in
responsibility or a
change in scope,
increases may exceed
this level.
– New joiners, where
pay is initially set
below market levels,
may experience larger
increases as their
salary is progressed
towards the market
rate, based on their
development in the
role and subject to
satisfactory
performance.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Remuneration element
and purpose
Pension
To provide cost-effective,
yet market competitive,
retirement benefits.
Benefits
To provide cost-effective,
yet market competitive,
benefits.
Operation
Opportunity
Performance metrics
Amendments to
previous policy
– In line with general
Not applicable.
– No changes
proposed, Executive
Director provision
already below general
workforce.
– No changes
proposed.
workforce, up to 8% of
salary, or such other
amount from time to
time, for UK Executive
Directors.
– Only basic annual
salary is pensionable
– There is no maximum
Not applicable.
limit but the
Committee reviews the
cost of the benefits
provision on a regular
basis to ensure that it
remains appropriate.
– Participation in the
all-employee share
plans is subject to the
limits set out by
HMRC.
– Contribution to a
personal pension
arrangement or cash
in lieu of pension by
way of a salary
supplement.
Benefits typically include
a combination of the
following:
– Car or car allowance
for travel.
– Family cover private
health insurance.
– Life insurance cover.
Benefits such as
relocation allowances
may also be offered if
considered appropriate
and reasonable by the
Committee.
Executive Directors will
be eligible for any other
benefits which are
introduced for the wider
workforce on broadly
similar terms and where
Executive Directors are
recruited from overseas,
benefits more tailored to
their geographical
location may be
provided.
Executive Directors are
also eligible to participate
in any all-employee share
schemes operated by the
Company, in line with
prevailing HMRC
guidelines (where
relevant), on the same
basis as for other eligible
employees.
Any reasonable
business-related
expenses (including tax
thereon) can be
reimbursed.
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Remuneration report continued
Remuneration element
and purpose
Annual bonus plan
To motivate Executive
Directors and incentivise
the achievement of key
financial and strategic
goals and targets over
the financial year.
Amendments to
previous policy
– The previously
approved policy has
matured and
shareholders will be
presented with an
updated policy to
consider at the 2021
Annual General
Meeting.
Operation
Opportunity
Performance metrics
– The previously
approved policy has
matured and
shareholders will be
presented with an
updated policy to
consider at the 2021
Annual General
Meeting.
– Bonus is typically paid
in cash, but may be
paid in shares at the
discretion of the
Remuneration
Committee.
– Performance
conditions are set by
the Committee based
on current conditions
and strategic goals.
– Based on the
achievement of
performance metrics
with a sliding scale
from a threshold to
maximum level of
performance.
– Levels of award are
determined by the
Committee after the
year end based on
performance against
the targets set.
– Bonus payments are
at the ultimate
discretion of the
Committee and the
Committee retains an
overriding ability to
ensure that overall
bonus payments
reflect its view of
corporate performance
during the year when
determining the final
bonus amount to be
awarded.
– Malus and clawback
provisions may be
applied in the event of
circumstances such as
material misconduct
and/or an error in the
calculation of the
bonus payable.
The majority of the bonus
will normally be based on
financial measures such
as capital structure,
corporate activity, cash
position, profit-based
Group targets (and
divisional targets as
defined to meet annual
corporate objectives).
A minority of the bonus
will normally be based on
Group strategic
objectives and/or
personal objectives
tailored to the
achievement of the
Group strategic goals.
The minimum proportion
of the maximum bonus
that may become
payable at the threshold
performance level where
financial targets are set
will be 0% of that part of
the bonus. Bonuses
above this level are
earned on a graduated
basis to the maximum
performance level. Where
strategic targets are set,
it is not always
practicable to operate
targets that can be
assessed using a
graduated scale.
The Committee retains
the ability in exceptional
circumstances to adjust
targets and/or set
different measures and
alter weightings for the
annual bonus if certain
events occur which
causes it to determine
they are no longer
appropriate and a
change is required to
ensure they achieve their
original purpose and are
not materially less difficult
to satisfy.
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Remuneration element
and purpose
Executive share
ownership
To align Executive
Directors’ and
shareholders’ interests.
Operation
Opportunity
Performance metrics
In-post requirement
In-post requirement
Not applicable.
– 200% of salary for the
Chief Executive and
150% of salary for
other Executive
Directors.
– The Chief Executive is
expected to hold an
investment of at least
200% of base salary in
the Company, other
Executive Directors are
expected to hold
150% of base salary in
the Company.
– Newly appointed
Executive Directors
would normally be
expected to achieve the
required shareholding
within a 5-year period of
appointment to the
Board.
– Executive Directors are
expected to retain at
least 50% of net
awards under any
Company long-term
incentive plans to
achieve the
shareholding, until the
target shareholding is
attained.
– In the event where an
Executive Director has
not met the
shareholding
requirement within an
appropriate time period,
the Committee will
consider requiring part
of the bonus award to
be taken in shares.
Post-cessation
requirement
Post-cessation
requirement
– Executive Directors are
also required to
maintain their
shareholding
requirement or the
actual shareholding on
departure, if lower, for
two years post-
cessation of
employment.
– 200% of salary for the
Chief Executive and
150% of salary for
other Executive
Directors (or the actual
shareholding on
departure).
Amendments to
previous policy
– Introduction of a
timeframe under
which executives are
to build the in-post
shareholding
requirements.
– Introduction of post-
cessation
shareholding
requirement.
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Remuneration report continued
Remuneration element
and purpose
Operation
Opportunity
Performance metrics
Amendments to
previous policy
Not applicable.
– No changes
proposed.
The post cessation
shareholding will apply
to shares (net of tax)
acquired from the VCP
or any other
discretionary share
plan introduced in
future. Any shares
purchased by an
Executive will not
count towards the
requirement.
– Fee levels are reviewed
on a regular basis and
are set based on
expected time
commitments,
responsibilities and in
the context of the fee
levels in companies of
a comparable size and
complexity and
reflecting the onerous
obligations of
international racing
regimes.
– Any increase in fees
will also take account
of increases in salaries
across the workforce.
– Fees are normally paid
monthly in cash. Any
reasonable business-
related expenses can
be reimbursed, and
hospitality/travel or
other benefits linked to
performance of the
role may also be met
by the Company
including any tax
thereon.
– The Non-executive
Chairman’s fee and
Non-executive
Directors' fees are set
out in the Annual
report on remuneration
on page 53.
– There is no prescribed
maximum fee or fee
increase. Any increase
will be guided by
changes in market
rates, time
commitments and
responsibility levels.
Any increase in fees
may be above those of
the wider workforce (in
percentage terms) in
any particular year,
reflecting the periodic
nature of any review
and changes to time
commitments and/or
responsibilities.
Non-executive
Director fees
To attract and retain
high-calibre Non-
executive Directors.
To set remuneration by
reference to the
responsibilities and time
commitment undertaken
by each Non-executive
Director.
The Group is a highly
regulated and licensed
entity in various
jurisdictions and Non-
executive Directors are
subject to personal
licensing assessments
and if appropriate
consents by numerous
US authorities.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
restructuring events, major changes in the Group’s
capital structure and special dividends); and
•
whether malus and/or clawback shall be applied to any
award and, if so, the extent to which they shall apply.
Clawback and malus
No clawback and malus clauses apply to current bonus
schemes, however such clauses are in place in the currently
operating VCP. In the event of any new LTIP being
implemented, malus and clawback terms will be included.
Legacy arrangements
For the avoidance of doubt, any commitments entered into
by the Group prior to the approval and implementation of the
Policy outlined above may be honoured, even if they are not
consistent with the Policy prevailing at the time the
commitment is fulfilled.
Choice of performance measures
The choice of the performance metrics applicable to the
annual bonus scheme reflects the Committee’s belief that
any incentive compensation should be appropriately
challenging and tied to both the delivery of targets relating to
key financial measures that support the Company’s strategic
objectives and individual and/or strategic performance
measures intended to ensure that Executive Directors are
incentivised to deliver across a range of objectives for which
they are accountable. The Committee has retained some
flexibility on the specific measures which will be used to
ensure that any measures are fully aligned with the strategic
imperatives prevailing at the time they are set.
Discretions retained by the Committee in
operating variable pay schemes
The Committee operates the Group’s incentive plans per
their respective rules and consistent with normal market
practice, the Listing Rules and HMRC rules where relevant,
including flexibility in a number of regards relating to the
operation and administration. The extent of such discretion is
set out in the relevant plan rules These include:
•
•
•
•
•
•
•
•
•
•
•
•
who may participate in the plans;
timing of awards and payments;
the size of an award (within the limits noted in the
Policy Table), and when and how much should vest;
setting the performance criteria and respective
weightings of performance conditions;
who receives an award or payment;
determining whether to pay a bonus in cash or shares;
in exceptional circumstances, determining that a share-
based award (or any dividend equivalent) shall be
settled (in full or in part) in cash;
dealing with a change of control or restructuring of the
Group;
determining whether a participant is a good/bad leaver
for incentive plan purposes and whether and what
proportion of awards vest;
whether, and to what extent, pro rating shall apply in
the event of cessation of employment as a 'good
leaver' or on the occurrence of corporate events;
determining the outcome of any performance
conditions including overriding formulaic outcomes
where these are inappropriate;
any adjustments required to awards in certain
circumstances (for example rights issues, corporate
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Remuneration report continued
Executive Director reward scenarios for 2021
The remuneration package comprises both fixed elements (base salary, pension and benefits) and performance-based variable
pay (annual bonus). In accordance with the regulations, total remuneration for each Executive Director for a minimum, target,
maximum and maximum + 50% share price growth performance is presented in the chart below.
£618
£618
49%
49%
£468
32%
£318
100%
68%
51%
51%
)
s
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
R
£700
£600
£500
£400
£300
£200
£100
£0
£367
£367
43%
43%
£289
27%
£211
100%
73%
57%
57%
Minimum
Target
Maximum
Max with 50%
share price
growth for LTI
Minimum
Target
Maximum
Max with 50%
share price
growth for LTI
Chief Executive Offi cer
Chief Financial Offi cer
Fixed pay
Annual bonus
Long-term incentives
The following assumptions have been made:
Executive Director Date of Service Contract Notice Period*
•
•
•
•
Minimum – fixed pay (salary as at 1 January 2021),
benefits (as paid in 2020) and pension).
Target – fixed pay plus annual bonus paying out at 50%
of the maximum.
Maximum – fixed pay plus annual bonus paying out in
full.
Maximum + 50% share price growth – based on
annual bonus paying out in full.
Policy on contracts of service
Details of the service contracts and letters of appointment in
place as at 31 December 2020 for Directors are as follows.
Richard McGuire 24.08.16 6 months
Tom Hearne 04.05.18 12 months
* It is the Committee’s policy for the notice periods of Executive Directors
to be twelve months or less.
Copies of the Executive Directors’ service contracts are
available for inspection at the office of the Company
Secretary.
The Non-executive Directors have letters of appointment
which provide for notice by either party giving to the other
not less than three months’ notice in writing. The Company
may also terminate by making a payment in lieu of notice.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Date of
Non-Executive Director Letter of Appointment Notice Period
Giles Vardey 04.12.17 3 months
Chris Rigg 01.01.19 3 months
Ben Warn 01.06.20 3 months
Policy on Termination
In the event of termination, the Committee’s policy is that
payments on cessation should reflect the specific
circumstances prevailing. In general, it would be the
Committee’s policy to make a payment in lieu of notice
where necessary, limited to base salary and benefits. To the
extent that an individual might otherwise seek to bring a
claim against the Company in relation to the termination of
their employment (e.g. for breach of contract or unfair
dismissal), the Committee retains the right to make an
appropriate payment in settlement of such potential or actual
claims.
Payments in connection with any statutory entitlements (for
example, in relation to redundancy) may be made as
required.
The Committee may also provide assistance toward
reasonable legal fees and outplacement services or other
reasonable costs connected with the termination. The
Committee reserves the right to award to an Executive
Director a bonus in respect of the period of the year in which
notice of termination had not been served and, in certain
exceptional circumstances, in respect of any period following
receipt of notice of resignation that the individual remained in
employment, subject to the appropriate performance
measures being achieved. The determination of any share
incentive vesting would be subject to the rules of the relevant
plan, but in general where an individual is a good leaver (e.g.
death, injury or disability, retirement, redundancy, transfer of
business outside of the Group and any other reason the
Committee decides) their awards would vest on the original
vesting date, unless the Committee decides the award
should end on the cessation date and remain subject to the
appropriate performance measures being achieved and time
pro rating (unless the Committee decides it is inappropriate
to apply time pro rating).
The Committee would intend to apply the above policy for
any new appointment, which may include the ability to make
phased payments with mitigation. Copies of the Executive
Directors’ service contracts are available for inspection on
request to the Company Secretary. The CEO contract
requires six months’ notice in writing.
Policy on external appointments
Sportech PLC recognises that its Directors are likely to be
invited to become Non-executive Directors of other
companies and that such exposure can broaden experience
and knowledge, which will benefit the Company. Executive
Directors are therefore allowed to accept Non-executive
appointments provided that these do not interfere with their
ability to perform their duties at Sportech and retain any fees
earned, with the Board’s prior permission, if these are not
likely to lead to conflicts of interest.
Other employees’ pay
The Committee does not consult with employees directly on
matters of Executive remuneration. However, the Committee
is aware of the disconnect which can be created if Executive
Director remuneration is set in isolation. The Committee
therefore regularly interacts with the senior operational
executives and monitors pay trends and conditions across
the workforce. In particular, the Committee is made aware of
general salary increases, general benefit provision and the
proposed level of annual bonuses. Pay levels and elements
of remuneration differ by level but the broad themes and
philosophy remain consistent across the Group.
•
•
•
•
•
Salaries are reviewed annually with increases ordinarily
(in percentage of salary terms) in line with those of the
wider workforce.
Annual bonus – provisions are based on core
objectives and corporate initiatives aligned to long-term
Group success.
Eligibility for benefits varies by level and local market
practice.
Pension contribution levels for Executive Directors are
currently below those of the majority of the UK
workforce.
The Committee is also responsible for reviewing the
participants of long-term incentive plans and
participation levels in any employee plan.
For information on “employee voice”, see page 32 of the
Corporate Governance Report.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Remuneration report continued
Policy on Executive Director recruitments/promotions
New Executive Director remuneration arrangement will be based on the limits of the prevailing approved Directors’
Remuneration Policy. In relation to an external executive recruitment or an internal promotion the Committee will follow the
principles outlined in the table below.
Element of remuneration
Policy
Base salary
Salary levels will be set based on:
• the particular experience, knowledge and skill of the individual;
• market rates for comparable positions in companies of a similar size and complexity; and
• internal Company relativities.
Where considered appropriate the Committee may wish to set the initial salary below the market rate
but with the view to make a series of planned phased increases, potentially above those of the wider
workforce as a percentage of salary, to achieve the desired market positioning over time. Any increases
would be subject to the individual’s continued development and performance in the role.
Benefits
A new appointment would be offered the same benefits package (or equivalent in line with local market
practice) as that provided to current Executive Directors.
Where considered necessary, the Committee may be required to pay certain relocation expenses, legal
fees and other costs incurred by the individual in relation to their appointment.
Pension
Annual bonus
A defined contribution or cash supplement (or equivalent in line with local market practice) at up to the
level provided to the general workforce.
The Committee would envisage the annual bonus for any new appointment operating as set out in the
Policy Table for current Executive Directors.
Buy-out awards
However, the Committee may consider it necessary (depending on timing and the nature of the
appointment) to set different tailored performance measures for the initial bonus year.
To facilitate an external recruitment, it may be necessary to buy out remuneration which would be
forfeited on the appointee leaving their previous employer. When determining the quantum and
structure of any buy-out awards the Committee will, where possible, use a consistent basis, taking into
account the form of remuneration (cash or shares), timing horizons and the application of any
performance criteria. Any buy-out awards will be addition to the limits set out above.
Buy-out awards, if used, will be granted using the Company’s existing share plans to the extent
possible, although awards may also be granted outside of these schemes if necessary and as
permitted under the Listing Rules.
The fee structure and quantum for Non-Executive Director appointments will be based on the prevailing Non-Executive Director
fee policy.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Statement of consideration of shareholder views
The Committee is mindful of the concerns of shareholders and stakeholders and considers an open and constructive dialogue
with investors to be vitally important to establishing a successful remuneration policy which is considered fair by both
Executives and shareholders.
The Committee will consult with major investors whenever material changes to the policy are proposed. In the development of
the new policy the Committee has consulted with its major shareholders. The Committee also welcomes investor feedback and
will consider views raised at the AGM and during regular meetings throughout the year and this, plus any additional feedback
received from time to time, is considered as part of the Committee’s annual review of remuneration policy. The Committee also
closely monitors developments in institutional investors’ best practice expectations.
ANNUAL REPORT ON REMUNERATION
Application of the Remuneration Policy for 2021
Basic annual salary
The Committee has reviewed base salaries for 2021 taking into account market conditions and potentially reduced operational
demands and determined that no increase be awarded to Executives. In addition, the voluntary reduction in Richard McGuire’s
salary to £300,000 will remain in effect. For reference, full-time salaries across the Group were increased by an average of 1.0%.
The base salaries for 2021 are as follows:
Director 2021 2020 % change
Chief Executive Officer1 £300,000 £400,0002 (25)%
Chief Financial Officer CAD$357,000 CAD$357,000 –
1Until March 2020, Richard McGuire was paid in USD through the North American payroll using an exchange rate of 1.4 USD to 1 GBP. From April 2020,
Richard McGuire was paid in GBP through the UK payroll.
2Richard McGuire agreed to reduce his base salary to £200,000 per annum from 1 April 2020 to 30 September 2020 and agreed to reduce his base salary
to £300,000 per annum from 1 October 2020.
Performance related bonus
Details of the 2021 bonus scheme for Executive Directors
are currently still being finalised, with full details planned to
be set out in advance of the 2021 Company Annual General
Meeting.
Richard McGuire’s and Tom Hearne’s performance related
bonuses will be based on Group financial performance and
delivering on Group strategic objectives, specifically growth
in the valuation of the Company assets, which would include
any capital returns made to shareholders during 2021.
Details of the structure, metrics and weightings of measures
will be disclosed before the 2021 Annual General Meeting.
Any bonus achieved is typically payable in cash.
Pension arrangements
For Richard McGuire the Company pension contribution level
is 5% of base salary; £4,000 is paid into a SIPP and the
balance as cash in lieu. The Company matches to a limit of
50% of the first 6% of Canadian Directors’ contributions up
to a maximum of CAD$8,000. No Company contributions
are made since Tom Hearne makes no contributions.
Company pension contributions for the majority of the UK
workforce are currently between 5% and 8% of salary.
Other benefits
Richard McGuire and Tom Hearne are entitled to the
following other main benefits; private health and disability
insurance for themselves, their spouse and children and life
insurance for themselves.
Long Term Incentive
No long-term incentive awards will be granted.
Non-executive Directors’ fees
The Non-executive Director fee for 2021 is £60,000 which is
unchanged since May 2017. This is intended to cover all
Board duties and no separate Committee fees are payable.
The fees of the Non-executive Directors are set to take
account of the time commitment and complexity of the role
reflecting, in particular, the onerous international regulatory
environment for Sportech and that Board meetings will be
held in both the US and the UK, necessitating additional
travel and time commitments.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Remuneration report continued
Application of the shareholder-approved 2017
Remuneration Policy for 2020
There were no deviations from the procedure for the
implementation of the remuneration policy in the year.
Single total remuneration figure for the Directors
(audited)
Details of the remuneration for each Director in office during
the financial year ended 31 December 2020 are given in the
table below. The bonus figure includes amounts awarded for
the successful approval of the disposal of the Global Tote
Business to BetMakers Technology Group Ltd, £151,400 for
Richard McGuire and £108,150 for Tom Hearne. This
element of the bonus is included in the single figure table for
FY2020 as the performance target for this element of the
bonus was substantially met in 2020 given shareholder
approval was obtained having completed contractual
negotiations, due diligence and the required regulatory
process. The completion of the disposal remains contingent
on the buyer obtaining relevant licences and payment of this
element of the bonus has been deferred until completion of
the disposal. In the event the disposal does not complete,
this would be reflected in the single figure table disclosures
for FY2021. The remaining bonus amounts of £56,250 for
Richard McGuire and £23,202 for Tom Hearne will be paid in
March or April 2021.
Directors’ remuneration for 2020
Total Total
fixed variable
Fees/ Taxable remune- remune- 2020
Year of salary benefits Pension ration Bonuses ration Total
appointment £000 £000 £000 £000 £000 £000 £000
Executive Directors
Richard McGuire 2017 275 3 20 298 208 208 506
Tom Hearne 2018 206 3 – 209 131 131 340
Non-executive Directors
Giles Vardey 2017 95 – – 95 – – 95
Chris Rigg 2019 60 – – 60 – – 60
Ben Warn (appointed to the
Board 1 June 2020) 2020 35 – – 35 – – 35
Aggregate emoluments 671 6 20 697 339 339 1,036
– Richard McGuire was paid a basic annual salary of £400,000 per annum with effect from 1 January 2020 until 31 March 2020. Richard voluntarily
reduced his salary by 50% for a six month period beginning April 2020. Thereafter annual salary was reduced to £300,000 from 1 October 2020. He was
paid in US dollars during Q1 2020, translated at an exchange rate of 1.4.
– The Company paid 8% of base salary paid for pension benefits for Richard McGuire from 1 January 2020 to 30 September 2020 and 5% of base salary
from 1 October onwards, £4,000 of which was paid into his SIPP and the balance being paid in cash in lieu of pension contributions.
– Richard McGuire was entitled to a car allowance until 30 September 2020, which he waived.
– Tom Hearne was paid a basic salary of CAD$357,000 during the year, an average exchange rate of 1.731 has been used to translate to Sterling in the
above table.
– No company pension contributions were made for Tom Hearne.
– Richard McGuire;s bonus was based on a salary of £400,000 for 9 months to October 2020 and 3 months at £300,000.
– Tom Hearne’s bonus was based on a converted salary of £206,000.
– Giles Vardey voluntarily reduced his fees to £60,000 per annum from 1 April 2020 to 31 August 2020.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Directors’ remuneration for 2019
Total Total
fixed variable
Fees/ Taxable remune- remune- 2019
Year of salary benefits Pension ration Bonuses ration Total
appointment £000 £000 £000 £000 £000 £000 £000
Executive Directors
Richard McGuire 2017 400 42 – 442 80 80 522
Tom Hearne 2018 216 3 – 219 42 42 261
Non-executive Directors
Giles Vardey (appointed
Non-executive Chairman
on 2 July 2019) 2017 90 – – 90 – – 90
Chris Rigg (appointed to the
Board 1 January 2019) 2019 60 – – 60 – – 60
Aggregate emoluments 766 45 – 811 122 122 933
– Richard McGuire was paid a basic annual salary of £400,000 per annum with effect from 1 January 2019. He was paid in US dollars translated at an
average rate for the year of 1.2669.
– The Company pays 8% of base salary into a defined contribution pension scheme, however in 2019 Richard waived the right to this benefit.
– Richard also waived his entitlement to a car allowance.
– Tom Hearne was paid a basic salary of CAD$357,000 during the year, an average exchange rate of 1.694 has been used to translate to Sterling.
– Giles Vardey was an Independent Non-executive Director with fees of £60,000 per annum until his appointment to Non-executive Chairman on 2 July
2019 when his fee was increased to £120,000 per annum.
b.
Net cash at 31 December 2020 of at least 8.0m,
the award to be linear between £8.0m and
£9.0m.
(ii)
Strategic objectives aligned with Group strategic goals.
Including, the delivery of core new business
opportunities and the extension of key contracts.
Performance related bonus (audited)
The maximum bonus potential for the Chief Executive Officer
for the 2020 financial year was 100% of basic salary, and for
the Chief Financial Officer was 75% of basic salary with the
majority of the bonus based on financial measures.
Given the extraordinary circumstances applying in 2020, the
Committee determined that bonuses for the Executive
Directors and other senior management should reward
objectives that improve the Company’s cash position, with a
particular emphasis on maximising cash generation from
disposals. For each Executive Director, their performance
related bonus was therefore based on:
(i)
Financial measures:
a.
Cash generation: Subject to the maximum bonus
opportunity under the approved Remuneration
Policy, Executive Directors participated along with
other employees in a pool of 3.5% of the value of
any disposals or transfer of assets realised during
the year. The allocation from the pool was based
on individual engagement and level of involvement
in any successful transaction. Any transaction
being subject to Board, and in certain cases
shareholder, consent.
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Remuneration report continued
Richard McGuire Tom Hearne
Weighting Outturn Weighting Outturn
Financial
Cash generation
Net cash at
31 December 2020
Successful disposal of
Global Tote for £30.9m
Stretch performance of
£9.0m exceeded
65% 40% 70% 70%
10% 10% 15% 15%
Strategic Delivery of core new
business and extension
of key contracts 25% 5% 15% 0%
The table below summarises the overall bonus result.
Individual
Total bonus: % Maximum (% salary payable)
Chief Executive Officer (Richard McGuire)
55% out of the maximum entitlement (55% of salary payable)
Chief Financial Officer (Tom Hearne)
85% out of the maximum entitlement (64% of salary payable)
The Committee considers that the level of incentives paid to Executive Directors reflects both the Company and individual
performance during the year.
Pension arrangements (audited)
The Company did not pay into a defined contribution scheme for Tom Hearne in 2020. The Company paid £4,000 into a SIPP
for Richard McGuire during the year and paid the balance in cash in lieu of pension contributions of 8% of base salary paid
through to 30 September 2020 and 5% of base thereafter. This is in line with that available to the majority of the UK workforce,
currently between 5% and 8% of salary.
Long Term Incentive Plans (“LTIPs”) (audited)
LTIP awards granted during 2020
Value Creation Plan (“VCP”)
No awards were granted to Executive Directors during 2020.
Directors’ share-based incentives
The share-based incentives held by the Directors are as follows:
VCP
The following table shows VCP awards outstanding at the start of the year, awarded during the year and remaining outstanding
at the end of the year.
As at Awarded As at
1 January during 31 December
2020 the year 2020 % of
Date of grant Units Units Units bonus pool
Ian Penrose 24.07.17 5,000 - 5,000 25%
Mickey Kalifa 24.07.17 2,500 - 2,500 12.5%
Andrew Gaughan 24.07.17 2,500 - 2,500 12.5%
Richard McGuire 11.09.19 900 - 900 4.5%
Tom Hearne 29.06.18 1,250 - 1,250 6.25%
Total 12,250 - 12,150 60.75%
The performance period for the VCP Award comprises the five years commencing on 1 January 2017. The award size to
Richard McGuire was determined taking due account of fact that he would be joining the scheme part way through its five-year
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
life. The VCP provides Participants, including the Executive Directors, with a pool of ordinary shares with a value equal to 20% of
any cumulative shareholder value created above a compound hurdle rate of 8% per annum. This will be measured from a base
ordinary share price of 95 pence, being the base level of the 2017 LTIP award (subsequently exchanged for entry to the VCP),
as at the start of the Performance Period.
The Committee will have the discretion to settle, up to 50% of Awards in cash.
A clawback provision is in place whereby the Committee may require a Participant to transfer to the Company all or some of the
ordinary shares acquired, or pay certain amounts to the Company, in the period of two years following the vesting of an Award,
where the Committee determines that one or more of the following trigger events have occurred:
(a)
(b)
the discovery of a material misstatement resulting in an adjustment in the audited consolidated accounts of the
Company or the audited accounts of any Group company; and/or
action or conduct of a Participant which, in the reasonable opinion of the Committee, amounts to fraud or gross
misconduct.
Ian Penrose and Mickey Kalifa’s entitlement to the VCP shares will reduce pro rata to maturity, following their departure from the
Company as set out in the 2017 report. Andrew Gaughan's entitlement to the VCP will reduce pro rata to maturity as set out in
the 2019 report.
Director interests and shareholding guidelines (audited)
The following table shows Directors' interests in the Company along with the percentage of the shareholding guideline that is
currently met:
Total Total % of guideline
shareholding at shareholding at PSP award Share met by
31 December 31 December held ownership 31 December
Director 2019 2020 unvested guideline 2020
Richard McGuire 1,000,000 1,100,000 – 200% 88.6%
Tom Hearne 25,000 25,000 – 150% 5.1%
Giles Vardey – – – N/A N/A
Chris Rigg – – – N/A N/A
The total shareholding which counts towards the measurement of the guideline is calculated on the basis of legally owned
shares plus vested LTIP awards (net of tax). The percentage of guideline met is based on the annual base salary and the higher
of the acquisition cost of the total shareholding or the current market value of the total shareholding. Once an Executive Director
meets the required holding, the Executive Director is only required to retain additional shares equivalent to the value of any
increase in base salary.
Exit payments (audited)
No other exit payments were made to Directors during the year.
Payments to past Directors (audited)
No other payments were made to former directors during the year.
Payments to third parties
No payments were made to third parties for making available the services of any of the Directors during 2020.
The disclosures on Directors’ remuneration set out on page 54 commencing with the table of Directors’ remuneration for 2020
to page 57 up to this statement have been audited as required by the Regulations.
External directorships
Richard McGuire and Tom Hearne do not hold any external directorships.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Remuneration report continued
REVIEW OF PAST PERFORMANCE
Performance graph and Chief Executive pay chart
The graph below shows the TSR (share value movement plus reinvested dividends) over the ten years to 31 December 2020 of
shares in Sportech PLC compared with that of a hypothetical holding in the FTSE SmallCap Index. The FTSE Small Cap Index is
considered to be an appropriate comparator group for assessing Sportech’s TSR as it provides a well-defined, understood and
accessible benchmark and is the index most closely aligned to Sportech PLC.
Total shareholder return
Source: Datastream
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
The following table sets out the Chief Executive Officer’s total remuneration (single figure of remuneration), together with annual
bonus and LTIP awards as a percentage of the maximum available, for the current financial year and the preceding nine years:
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Remuneration before LTIPS (£000) 502 542 575 515 517 1,2331 6093 2684 5225 506
LTIPS (£000) – 233 836 158 – – 223 – – –
Total remunerations (£000) 502 775 1,411 673 517 1,233 832 268 522 506
Annual bonus 50.0% 25.0% 40.0% 21.25% 20.5% 39.2%2 40.0% – 20.0% 55.4%
LTIP vesting – 62.0% 82.7% 29.7% – – 50.0% – – –
1 Including exceptional bonus of £637,000.
2 Excluding exceptional bonus.
3 Excluding loss of office and pay in lieu of notice payments of £520,000.
4 Relates to Andrew Gaughan, all prior years related to Ian Penrose.
5 Relates to Richard McGuire and all future years.
Annual percentage change in the remuneration of directors and employees
The table below shows the percentage change in the annual remuneration from the prior year for all Directors and the average
full-time salaried employee
Salary/fees Benefits Bonus
change (%) change (%) change (%)
Executive Directors
Richard McGuire(1)(2) (31.25) (92.86) 106
Tom Hearne – – 212
Non-Executive Directors
Giles Vardey(3) (5.56) n/a n/a
Chris Rigg(4) – n/a n/a
Ben Warn(5) n/a n/a n/a
Comparator group
Group full time employees (0.09) 17.17 57.40
1. Richard McGuire was paid a basic annual salary of £400,000 per annum with effect from 1 January 2020 until 31 March 2020. Richard voluntarily
reduced salary by 50% for a six month period beginning 1 April 2020. Thereafter annual salary was reduced to £300,000 from 1 October 2020.
2. Richard was entitled to a car benefit until 30 September 2020, however he waived this entitlement. Benefits consist of private health and disability
insurance for himself, spouse and children and personal life insurance.
3. Giles Vardey voluntarily reduced his fees to £60,000 per annum from 1 April 2020 to 31 August 2020.
4. Chris Rigg joined the Board on 1 January 2019.
5. Ben Warn was appointed to the Board on 1 June 2020.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Remuneration report continued
Relative importance of spend on pay
2020 2019
£000 £000 % change
Staff costs – continuing operations 6,785 9,329 (27)
Staff costs – discontinued operations 11,282 17,689 (36)
Staff costs – Total Group 18,067 27,018 (33)
Distributions to shareholders – – N/A
The majority of our employees are based in North America, with only approximately 37 employees in the UK. As a result, our
average number of UK employees does not meet the threshold requirement for publication of CEO pay ratio information. Given
the numbers of employees in the UK versus those overseas and the fact that the roles located in the UK are principally involved
in the operation of our head office, European finance function and a small operation in relation to UK Greyhound Totes and
lottery platform development, the ratio produced by comparing CEO remuneration with that of our UK workforce is likely to be
misleading. As such, the committee has decided not to publish this information this year.
Shareholders' vote on remuneration
At the last Annual General Meeting on 26 June 2020, votes on the Directors’ remuneration report were cast as follows:
In favour Against Withheld
To approve the Directors' Remuneration Report for the year ended 91,253,851 6,772,603 13,249,113
31 December 2019 (93.09%) (6.91%)
Votes on the Directors’ remuneration policy and VCP were cast at the General Meeting held on 24 May 2017 as follows:
In favour Against Withheld
To approve the Directors' Remuneration Policy 113,839,245 21,634,427 nil
(84.03%) (15.97%)
To approve the rules of the Sportech PLC Value Creation Plan 113,839,245 21,634,427 nil
(84.03%) (15.97%)
The Board noted the votes recorded against the Remuneration Policy at the previous AGM, identified shareholders’ comments
and clarified certain issues around values attributed to departing senior executives. The Board and Remuneration Committee
continue to value shareholder engagement and welcome the opportunity to debate, with shareholders, any points within this
Annual Report.
Committee activity
The Committee’s Terms of Reference are available from the Company Secretary and can be found on the Company’s website at
www.sportechplc.com/investors/corporate-governance.
See the Corporate Governance Report for number of Committee meetings held and attended.
Chris Rigg and Ben Warn satisfied the independence condition on their respective appointments as Non-Executive
Director.
Giles Vardey was an Independent Non-executive Director until his appointment to Non-executive Chairman. Following the
appointment of Ben Warn, Giles Vardey stepped down as Chair of the Remuneration Committee and Ben Warn was
appointed chair.
None of the Committee has any personal financial interest (other than as a shareholder), conflicts of interest from cross-
directorships or day-to-day involvement in the running of the business.
The Chief Executive Officer is invited to attend meetings although he is not present when matters affecting his own
remuneration are discussed. The Company Secretary or their nominee acts as secretary to the Committee.
•
•
•
•
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Approval
This report was approved by the Remuneration Committee
and signed on its behalf by:
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Key activities of the Committee:
review the ongoing appropriateness and relevance of
the Remuneration Policy;
review of best practice;
assessment and approval of bonus awards for
achievement of FY2020 targets;
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review the operation of the bonus plan and approval of
bonus measures and targets for 2021;
Ben Warn
Non-executive Director and Chairman of the Remuneration
Committee
consideration of the operation of a long-term variable
pay incentive;
31 March 2021
review of base salaries for the Executive team;
review the policy for shareholding requirements, both
in-employment and post cessation; and
approval of changes to remuneration terms for Richard
McGuire and Giles Vardey.
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The Committee’s recommendations in 2020 and early 2021
were all accepted and implemented by the Board.
Remuneration Committee advisors
Wholly independent advice on executive remuneration was
received from the Executive Compensation practice of Aon
PLC, up until October 2020 when Alvarez and Marsal Tax
and UK LLP (“A&M”) were appointed as advisors to the
Committee. Aon PLC advised during the year under review
on the drafting of the DRR and the revised remuneration
policy including the structure of the LTIP to be issued going
forward, A&M continued this advisory role from their
appointment date. Aon and A&M are members of the
Remuneration Consultants Group and are signatories to its
Code of Conduct. Aon nor A&M has a connection with
Sportech. The terms of engagement with Aon and A&M are
available from the Company Secretary on request. The fees
of Aon PLC in relation to the services provided by them to
the Company during the financial year were £23,920
(excluding VAT), the fees of A&M during the financial year
were £nil (excluding VAT).
The Committee reviews its relationships with external
advisers on a regular basis and believes that no conflicts of
interest exist and that the advice they are provided with
remains independent and objective.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Directors’ Report
The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2020.
General information of the Company can be found in the Accounting Policies on page 82.
The Strategic report and Corporate Governance report are set out on pages 2 to 38. This Directors’ report does not include
information on trading in the year or principal risks. As set out under section 414C(11) of the Companies Act 2006, this
information is included on pages 2 to 18 of the Strategic report.
DIRECTORS AND THEIR INTERESTS IN THE SHARES OF THE COMPANY
The Directors who held office at 31 December 2020 and up to the date of signing these financial statements (unless otherwise
stated), had beneficial interests in the share capital of the Company as shown below.
At 31 March At 31 December 31 December
2021 2020 2019
Number Number Number
Richard McGuire 1,100,000 1,100,000 1,000,000
Thomas Hearne 25,000 25,000 25,000
Giles Vardey – – –
Chris Rigg – – –
Ben Warn (appointed 1 June 2020) – – –
Details of Value Creation Plan awards held by the Directors are set out in the Remuneration report on pages 56 to 57.
DIRECTORS’ THIRD-PARTY INDEMNITY PROVISIONS
During the year, qualifying indemnity insurance was provided to the Directors. Such insurance remained in force throughout the
year and up to the date of signing the financial statements. No claim was made under these provisions.
EMPLOYEES
Details of the Company’s policy on equal opportunities for disabled employees and employee involvement are set out in the
‘Employees’ section of the Corporate social responsibility report on page 29.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
SUBSTANTIAL SHAREHOLDINGS
22 March 2021 31 December 2020
Ordinary shares % of issued Ordinary shares % of issued
of 20p share capital of 20p share capital
Lombard Odier Asset Management (Europe) Ltd 50,707,504 26.87 50,245,385 26.62
North Atlantic Smaller Companies Investment Trust PLC 22,000,000 11.66 22,000,000 11.66
Mr Richard I Griffiths and entities 15,519,094 8.22 15,519,094 8.22
Artemis Investment Management LLP 12,576,421 6.66 13,366,421 7.08
Schroder Investment Management 10,312,045 5.46 10,312,045 5.46
Oryx International Growth Fund 10,000,000 5.30 10,000,000 5.30
HSBC Securities 8,801,561 4.66 8,314,641 4.41
Band of America Merrill Lynch 8,408,708 4.46 8,282,294 4.39
Citigroup as principal 6,162,724 3.26 – –
Deutsche Bank – – 6,255,226 3.31
Total of substantial shareholdings 144,488,057 76.55 144,295,106 76.45
All other shareholdings 44,263,200 23.45 44,456,151 23.55
Total shares in issue 188,751,257 100.00 188,751,257 100.00
DIVIDEND
No dividend is proposed for 2020 (2019: £nil).
ENVIRONMENTAL MATTERS
The Corporate Social Responsibility report provides information with respect to the Group’s impact on the environment and can
be found on page 28. We have implemented the SECR required reporting for year-end reports commencing on or after 1 April
2019 for the first time and as such disclosure of the Group’s UK energy use and carbon emissions can be found in the Strategic
report on page 29.
CORPORATE GOVERNANCE
The Group’s statement on corporate governance is set out on pages 30 to 38 and forms part of this Directors’ report.
RESPECT FOR HUMAN RIGHTS
Sportech is committed to respecting human rights as embodied in the Universal Declaration of Human Rights and its two
corresponding covenants, The International Covenant on Civil and Political Rights and The International Covenant on Economic,
Social, and Cultural Rights. We endeavour to ensure that we do not infringe on human rights, avoid complicity in the human
rights abuses of others, and comply with the laws of the countries in which we do business.
ANTI-CORRUPTION AND ANTI-BRIBERY MATTERS
Sportech is committed to conducting business in an ethical and honest manner, and is committed to implementing and
enforcing systems that ensure bribery is prevented. Sportech has zero-tolerance for bribery and corrupt activities. We are
committed to acting professionally, fairly, and with integrity in all business dealings and relationships, wherever in the world we
operate.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Directors’ Report continued
approximately one-third of the share capital of the
Company in issue at the date of this document.
Certain of the Company’s share incentive schemes contain
provisions that permit awards or options to vest or become
exercisable on a change of control in accordance with the
rules of the schemes.
GOING CONCERN
The Group’s forecasts and projections, which have been
prepared as described on page 27 were reviewed and
approved by the Board. On the basis of this review, the
Board has a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities as
they fall due over the period to June 2022. Accordingly, it is
deemed appropriate to prepare the financial statements on a
going concern basis for the financial year ended 31
December 2020. Following the completion of agreed
disposals in 2021, the Group will realise significant cash, the
Board will continue to engage with shareholders to assess
the optimal use of capital.
FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks:
•
•
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liquidity risk;
credit risk; and
foreign exchange risk.
Where appropriate the Group uses derivative financial
instruments to hedge certain risk exposures. Details of the
policy for each of the above risks can be found in note 27 of
the consolidated financial statements.
DISCLOSURE OF INFORMATION TO THE
AUDITOR
So far as each Director is aware, at the date of the approval
of the financial statements there is no relevant audit
information of which the Company’s Auditor is unaware.
Each Director has taken all the steps that they ought to have
taken as a Director in order to make themselves aware of
any relevant audit information and to establish that the
Group and Company’s Auditor is aware of that information.
The Auditor, BDO LLP, has indicated their willingness to
continue in office, and a resolution for their reappointment
will be proposed at the Annual General Meeting.
Sportech will constantly uphold all laws relating to anti-
bribery and corruption in all the jurisdictions in which we
operate. We are bound by the laws of the UK, including the
Bribery Act 2010, in regards to our conduct both at home
and abroad.
Sportech recognises that bribery and corruption are
punishable by up to ten years of imprisonment and a fine. If
our company is discovered to have taken part in corrupt
activities, we may be subjected to an unlimited fine, be
excluded from tendering for public contracts, and face
serious damage to our reputation. It is with this in mind that
we commit to preventing bribery and corruption in our
business, and take our legal responsibilities seriously.
SIGNIFICANT AGREEMENTS
There are a number of agreements that take effect, alter or
potentially terminate upon a change of control of the
Company following a takeover bid, such as commercial
contracts and employees’ share plans. None of these are
deemed to be individually significant in terms of their
potential impact on the day-to-day running of the business
of the Group as a whole, however, the Group operates under
a number of licences in various territories awarded to it by
regulatory bodies. In the event of a change of control, certain
regulatory bodies retain the right to preapprove the acquirer
in order for a change of control to be permitted.
There are no clauses in any of the Directors’ contracts that
are triggered by a change of control of the Company.
SHARE CAPITAL AND AUTHORITY TO
ISSUE SHARES
The Company has one class of ordinary shares. The nature
of the holdings of the Company’s individual Directors and
individually significant shareholders are disclosed on
page 63. There are no restrictions on the transfer of shares.
As part of the resolutions approved at the 2020 AGM,
shareholders’ authority was given to the Directors to:
(i)
allot shares in the Company and grant rights to
subscribe for or convert any security into shares in the
Company (“Rights”) up to an aggregate nominal
value of £12,583,417. This represents approximately
one-third of the share capital of the Company in issue
at the date of this document.
And in line with the Share Capital Management Guidelines
issued by the Investment Association:
(ii)
allot shares in the Company and grant Rights up to a
further aggregate nominal value of £12,583,417 in
connection with a rights issue. This amount represents
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the group financial
statements and have elected to prepare the company
financial statements in accordance with international
accounting standards in conformity with the requirements of
the Companies Act 2006 and in accordance with
international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the
European Union. Under company law the Directors must not
approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and Company and of the profit or loss for the Group
and Company for that period.
In preparing these financial statements, the Directors are
required to:
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•
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether they have been prepared in accordance
with international accounting standards in conformity
with the requirements of the Companies Act 2006 and
in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union, subject
to any material departures disclosed and explained in
the financial statements;
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business; and
prepare a director’s report, a strategic report and
director’s remuneration report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable
accuracy at any time the financial position of the company
and enable them to ensure that the financial statements
comply with the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the annual
report and accounts, taken as a whole, are fair, balanced,
and understandable and provides the information necessary
for shareholders to assess the group’s performance,
business model and strategy.
WEBSITE PUBLICATION
The Directors are responsible for ensuring the annual report
and the financial statements are made available on a
website. Financial statements are published on the
Company’s website in accordance with legislation in the
United Kingdom governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and
integrity of the Company's website is the responsibility of the
Directors. The Directors' responsibility also extends to the
ongoing integrity of the financial statements contained
therein.
DIRECTORS’ RESPONSIBILITIES
PURSUANT TO DTR4
The Directors confirm to the best of their knowledge:
•
•
The Group financial statements have been prepared in
accordance with international accounting standards in
conformity with the requirements of the Companies Act
2006 and in accordance with international financial
reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union
and Article 4 of the IAS Regulation and give a true and
fair view of the assets, liabilities, financial position and
profit and loss of the Group; and
The annual report includes a fair review of the
development and performance of the business and the
financial position of the group and the Parent
Company, together with a description of the principal
risks and uncertainties that they face.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Directors’ Report continued
ANNUAL GENERAL MEETING (“AGM”)
The Notice convening the AGM of the Company on 29 June
2021 will be sent to shareholders by 4 June 2021. In
accordance with good corporate governance practice, each
Director will voluntarily stand for re-election in line with the
provisions of the Corporate Governance Code. The profiles
of those Directors appear on page 22. Resolutions will also
be proposed at the AGM to receive the Accounts and the
Directors’ and Independent Auditor’s Reports, to approve
the Remuneration Policy set out on pages 42 to 53, to
approve the Remuneration Report set out on pages 53 to
61, to reappoint the Auditor and to authorise the Directors to
determine their remuneration.
On behalf of the Board,
Ben Harber
Company Secretary
SGH Company Secretaries Limited
31 March 2021
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Independent auditor’s report
to the members of Sportech PLC
OPINION ON THE FINANCIAL
STATEMENTS
In our opinion:
•
•
•
•
•
the financial statements give a true and fair view of the
state of the Group’s and of the Parent Company’s
affairs as at 31 December 2020 and of the Group’s loss
for the year then ended;
the Group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006;
the Group financial statements have been properly
prepared in accordance with international financial
reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union;
the Parent Company financial statements have been
properly prepared in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006 and as
applied in accordance with the provisions of the
Companies Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006; and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Sportech PLC (the
‘Parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 December 2020 which comprise the
consolidated income statement, the consolidated statement of
comprehensive income, the consolidated and company
balance sheet, the consolidated and company statement of
changes in equity, the consolidated and company statement of
cash flows and notes to the financial statements, including a
summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation
is applicable law and international accounting standards in
conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, and as regards the Parent Company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s
responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis
for our opinion. Our audit opinion is consistent with the
additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we
were appointed by the Board on 29 August 2019 to audit
the financial statements for the year ending 31 December
2019 and subsequent financial periods. The period of total
uninterrupted engagement including retenders and
reappointments is 2 years, covering the years ending 31
December 2019 to 31 December 2020. We remain
independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. The non-audit
services prohibited by that standard were not provided to the
Group or the Parent Company.
CONCLUSIONS RELATING TO GOING
CONCERN
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group
and the Parent Company’s ability to continue to adopt the
going concern basis of accounting included:
•
•
•
•
Management’s assessment of going concern: we
obtained an understanding of the process undertaken
by management to prepare the going concern
assessment and how the impacts of Covid-19 on the
business had been evaluated and incorporated into the
forecasts.
Assessment of assumptions within the cashflow
forecasts: we challenged the key assumptions used in
the forecasts including revenue, the impact of disposal
of held for sale operations and the impacts of COVID-
19 with reference to current year and post year-end
financial results.
We tested the numerical accuracy of the model used to
prepare the forecasts.
Sensitivity analysis: evaluation of management’s
sensitivities over the Group’s cashflows to changes in
the significant inputs and assumptions used. The
analysis considered reasonably possible adverse
effects that could arise as a result of a decrease in
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Independent auditor’s report
to the members of Sportech PLC continued
AN OVERVIEW OF THE SCOPE OF OUR
AUDIT
Our Group audit was scoped by obtaining an understanding
of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed
the risk of management override of internal controls,
including assessing whether there was evidence of bias by
the Directors that may have represented a risk of material
misstatement.
We identified 25 separate components making up the
Group, of which five were deemed significant components
that required a full scope audit given their contribution to the
Group’s revenue and net assets (Sportech Racing, Racing
Dominican Republic, Sportech Venues CT, Racing
Technology Ireland and Sportech Plc). This work, combined
with the work performed over consolidation journals and
intergroup eliminations accounted for 90% of group revenue
(2019: 86%) and 89% of Group net assets (2019: 93%).
All audit work was performed by the Group audit team. Our
work on the remaining components comprised analytical
procedures and certain tests of detail. Together this provided
the evidence required for our opinion on the Group financial
statements.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
trading related to continuing activities assuming the
disposal of assets held for sale completing in the going
concern period and other downside scenarios and the
impact on cash should the completion of the held for
sale assets not occur in the going concern period.
•
Disclosures: evaluation of the adequacy of the
disclosures in relation to the specific risks posed and
scenarios the Group has considered in their going
concern assessment.
Based on the work we have performed, we have not
identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast
significant doubt on the Group’s and Parent Company’s
ability to continue as a going concern for a period of at least
twelve months from when the financial statements are
authorised for issue.
In relation to the Parent Company’s reporting on how it has
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
Directors’ statement in the financial statements about
whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
OVERVIEW
Coverage 90% (2019: 86%) of Group revenue
89% (2019: 93%) of Group net assets
Key audit matters
2020 2019
Appropriateness of
revenue recognition P P
Impairment of
Investments: P P
Parent Company Only
Uncertain tax provisions P
Impairment of intangible
assets P
Key audit matters in relation to uncertain
tax provisions and impairment of intangible
assets present in 2019 are no longer
considered to be key audit matters
because the related uncertainties
now have been resolved
Materiality Group financial statements as a whole
£204,000 based on 0.5% of revenue (2019:
£204,000 based on 2.7% of EBITDA before
exceptional items and expenses)
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Key audit matter
Appropriateness of revenue recognition
The Group recognises revenue from a number of revenue
streams. The details of the accounting policies applied during
the year are set out in note 2 of the financial statements.
There is a risk that revenue is incorrectly calculated and
recognised due to the different underlying contracts with
customers and the variations in contract terms for each
contract.
Additionally, as the Group enters into new contracts there
may be separate elements in the contract that requires
application of different revenue recognition policies.
How the scope of our audit addressed the key audit
matter
We completed the following audit procedures:
Revenue from rendering of services
• Reviewed the Group’s revenue recognition policies
against the requirements of applicable accounting
standards, challenging and where necessary
corroborating to supporting documentation the key
judgements made by management, which related to
compliance with customer contracts including
commission rates.
• Selected a sample of contracts and agreed key terms,
recalculated commission and verified to underlying
records, to check that revenue had been recognised in
accordance with the contract and the requirements of
applicable accounting standards.
• Using data analytic techniques we recalculated the
expected income earned under a sample of contracts
from wagering data captured in the groups IT systems
and reconciled this to the amounts recorded in the
nominal ledger.
Revenue from food and beverage sales
• Performed a reconciliation of revenue recorded in the
nominal listing to the cash receipts for the full year, using
sales system reports to support the existence of revenue
and verification of items included in the reconciliation.
• Obtained reports from the sales system for a random
sample of sites and months, which we used to verify the
revenue per these sales reports were correctly recorded
in the nominal listing.
All revenue streams
• Reviewed manual and automated journal entries to
revenue nominal ledger codes, to identify any unusual
journal entries which may indicate fraud or error in
revenue recognition.
• Performed cut-off procedures on transactions around
the year-end with reference to supporting
documentation, to verify the recording of revenue in the
appropriate accounting period.
Key observations
Nothing has come to our attention as a result of performing
the above procedures that causes us to believe that revenue
recognition is inappropriate.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Independent auditor’s report
to the members of Sportech PLC continued
Key audit matter
Impairment of Investments: Parent Company only
In accordance with the requirements of relevant accounting
standards, management have performed an impairment
review on investments in the current year. The details of the
accounting policies applied during the year are set out in
Note 2 of the financial statements.
The impairment review is based on the expected future
performance of the trading entities in the US and Europe
and requires management to exercise significant judgement
in determining the underlying assumptions used in the
impairment review which have material impact on the
resultant calculations. Therefore we considered this to be an
area of focus for our audit.
How the scope of our audit addressed the key audit
matter
We completed the following audit procedures:
Checked that the cash flows used to assess the
recoverability of the parent company investments were
consistent with those used in the recoverability of Intangibles
assets model. Additionally, consideration was given to the
values expected to be received on the completion of
disposals of assets held for sale to confirm that these would
also not give rise to an impairment.
Challenged the key assumptions used in the impairment
model which included the following:
• Assessment of the discount rate used to calculate the
present value of future cash flows by involving our
internal valuations expert to determine the
appropriateness of the discount rate used across the
CGUs.
• Assessed the historical accuracy of the directors
forecasts previously used in the impairment model
against actual outturn to assess the reasonableness of
current forecasts.
• Challenged management on the growth rates used in
the model for particular revenue streams such as Venues
and sought detailed explanations from management to
support revenue projections taking into account
historical performance, post year-end trading against
budget and post balance sheet events.
• Performed sensitivity analysis over the assumptions
used in the model such as flexing the discount rate and
growth rates used in the model in order to evaluate the
levels of headroom available over the CGUs in
reasonable and worst case scenarios.
Considered publically available information and other
information obtained during our audit work to determine
whether there were any contradictory pieces of information
or other potential indicators of impairment that were not
identified by the directors.
Key observations
Nothing has come to our attention as a result of performing
the above procedures that the assumptions made by
management in their impairment review was inappropriate.
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OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude
by which misstatements, including omissions, could
influence the economic decisions of reasonable users that
are taken on the basis of the financial statements.
Based on our professional judgement, we determined
materiality for the financial statements as a whole and
performance materiality as follows:
In order to reduce to an appropriately low level the
probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to
determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Group financial statements
Parent company financial statements
2020
Materiality
£204,000
Basis for determining
materiality
0.5% of Revenue
Rationale for the
benchmark applied
We have changed the
basis on which we have
determined materiality
in the current period
from EBITDA before
exceptional items and
expenses to revenue to
reflect the volatility in
EBITDA results arising
from the impact of
COVID-19 with a
negative EBITDA
arising in 2020.
2019
£204,000
2020
£40,000
2019
£75,000
2.7% of EBITDA before
exceptional items and
expenses
2019 Adjusted EBITDA
is considered to be the
primary measure used
by the shareholders in
assessing the
performance of the
Group.
0.1% of net assets
We consider an asset
based measure to
reflect the nature of the
Company which acts
as a parent holding
company for the
Group’s investments to
be most relevant.
4% of EBITDA before
exceptional items and
expenses
2019 Adjusted EBITDA
is considered to be the
primary measure used
by the shareholders in
assessing the
performance of the
Group.
Performance
materiality
£142,800
£132,600
£28,000
£48,750
Basis for determining
performance
materiality
70% (2019: 65%) based on our assessment of past misstatements and management’s attitude
towards proposed adjustments. The performance materiality percentage was increased from 65% to
70% given that 2019 was our first year as auditors.
Component materiality
We set materiality for each component of the Group based
on a percentage of between 20% and 55% of Group
materiality dependent on the size and our assessment of the
risk of material misstatement of the group financial
statements. Component materiality ranged from £40,000 to
£110,000.
In the audit of each component, we further applied
performance materiality levels of 70% of the component
materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to
them all individual audit differences in excess of £10,200
(2019: £6,000). We also agreed to report differences below
this threshold that, in our view, warranted reporting on
qualitative grounds.
OTHER INFORMATION
The directors are responsible for the other information. The
other information comprises the information included in the
annual report other than the financial statements and our
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Independent auditor’s report
to the members of Sportech PLC continued
auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to
be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that
there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the Directors’
statement in relation to going concern, longer-term viability
and that part of the Corporate Governance Statement
relating to the parent company’s compliance with the
provisions of the UK Corporate Governance Statement
specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit.
OTHER COMPANIES ACT 2006
REPORTING
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain
opinions and matters as described below.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the statement of directors’
responsibilities the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
Going concern and longer-
term viability
•
•
The Directors' statement with regards to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified set out on page 64;
and
The Directors’ explanation as to its assessment of the entity’s prospects, the period this
assessment covers and why the period is appropriate set out on page 27.
Other Code provisions
• Directors' statement on fair, balanced and understandable set out on page 65;
• Board’s confirmation that it has carried out a robust assessment of the emerging and
principal risks set out on page 23;
•
•
The section of the annual report that describes the review of effectiveness of risk
management and internal control systems set out on page 37; and
The section describing the work of the audit committee set out on page 35.
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to
cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE
AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
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Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic report and the Directors’ report for the financial
year for which the financial statements are prepared is consistent with the financial
statements; and
the Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
environment obtained in the course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Matters on which we are
required to report by
exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ remuneration
report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to
detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is detailed
below:
•
•
We gained an understanding of the legal and regulatory
framework applicable to the Group and the industry in
which it operates, and considered the risk of acts by
the Group being contrary to applicable laws and
regulations, including fraud. We focused on laws and
regulations that could give rise to a material
misstatement in the financial statements, including, but
not limited to, the Companies Act 2006, UK listing
rules, UK Corporate Governance Code, Gaming
Regulation and Licences and tax legislation.
We assessed the susceptibility of the Group’s financial
statements to material misstatement, including how
fraud might occur by understanding where there was a
susceptibility of fraud. We also considered performance
•
•
•
•
targets and management remuneration incentives and
how they could influence management to manage
reported revenue and earnings.
We obtained an understanding of the procedures and
controls that the Group has established to address
risks identified, or that otherwise prevent, deter and
detect fraud. Where the risk was considered to be
higher, we performed audit procedures to address
each identified fraud risk.
Based on the understanding obtained we designed
audit procedures to identify non-compliance with the
laws and regulations, as noted above. This included
enquiries of in-house legal counsel, management, the
Audit Committee, review of Board minutes, and
correspondence with legal advisors and regulators.
We tested manual and automated journal entries,
including those to revenue, focusing on journal entries
containing characteristics of audit interest, and year
end consolidation journals.
We tested and challenged the key estimates and
judgements made by management in preparing the
financial statements for indications of bias or
management override when presenting the results and
financial position of the group.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Independent auditor’s report
to the members of Sportech PLC continued
•
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members and remained alert to any indications of
fraud or non-compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from
the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Parent Company’s
members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the Parent
Company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent
Company and the Parent Company’s members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Kieran Storan (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
31 March 2021
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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FINANCIAL
STATEMENTS
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142
Consolidated Financial Statements
Company Financial Statements
Advisors and Corporate Information
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Consolidated Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2020
Restated
2020 2019
Note £000 £000
Revenue 2 19,966 33,571
Cost of sales 3 (9,432) (15,228)
Gross profit 10,534 18,343
Marketing and distribution costs 3 (319) (839)
Contribution 10,215 17,504
Operating costs 3 (20,225) (26,430)
Operating loss (10,010) (8,926)
Finance costs 8 (568) (787)
Finance income 8 11 52
Loss before tax from continuing operations (10,567) (9,661)
Tax – continuing operations 9 297 (5,793)
Loss for the year – continuing operations (10,270) (15,454)
(Loss)/profit after taxation from discontinued operations 11(a), 11(b) (2,562) 990
Loss for the year (12,832) (14,464)
Attributable to:
Owners of the Company (12,832) (14,464)
Basic (loss)/earnings per share attributable to owners of the Company
From continuing operations 12 (5.4)p (8.2)p
From discontinued operations 12 (1.4)p 0.5p
Total 12 (6.8)p (7.7)p
Diluted (loss)/earnings per share attributable to owners of the Company
From continuing operations 12 (5.4)p (8.2)p
From discontinued operations 12 (1.4)p 0.5p
Total 12 (6.8)p (7.7)p
Adjusted loss per share attributable to owners of the Company
Basic 12 (2.2)p (0.9)p
Diluted 12 (2.2)p (0.9)p
See note 1 for a reconciliation of the above statutory income statement to the adjusted performance measures used by the
Board of Directors to assess divisional performance.
Prior year comparatives have been adjusted for discontinued operations.
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Consolidated Statement of
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
Note £000 £000
Loss for the year (12,832) (14,464)
Other comprehensive (expense)/income:
Items that will not be reclassified to profit and loss
Actuarial loss on retirement benefit liability 26 (344) (399)
Deferred tax on movement on retirement benefit liability 19 88 117
(256) (282)
Items that may be subsequently reclassified to profit and loss
Currency translation differences (77) (1,682)
Total other comprehensive expense for the year, net of tax (333) (1,964)
Total comprehensive expense for the year (13,165) (16,428)
Attributable to:
Owners of the Company (13,165) (16,428)
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Consolidated Balance Sheet
AS AT 31 DECEMBER 2020
2020 2019
Note £000 £000
ASSETS
Non-current assets
Goodwill 13 604 604
Intangible fixed assets 14 7,343 14,935
Property, plant and equipment 15 5,077 17,676
Right-of-use assets 16 1,133 6,312
Trade and other receivables 18 156 499
Deferred tax assets 19 4 990
Total non-current assets 14,317 41,016
Current assets
Trade and other receivables 18 1,517 7,603
Inventories 20 120 2,616
Current tax receivable 9 1,442 –
Cash and cash equivalents 21 11,821 15,565
14,900 25,784
Assets classified as held for sale 11 27,671 –
Total current assets 42,571 25,784
TOTAL ASSETS 56,888 66,800
LIABILITIES
Current liabilities
Trade and other payables 22 (14,104) (12,853)
Provisions 23 (321) (579)
Lease liabilities 24 (823) (843)
Financial liabilities 25 - (500)
Current tax liabilities 9 (4,700) (4,880)
Deferred tax liabilities 19 (94) (89)
(20,042) (19,744)
Liabilities directly associated with assets classified as held for sale 11 (7,507) –
Total current liabilities (27,549) (19,744)
Net current assets 15,022 6,040
Non-current liabilities
Retirement benefit liability 26 – (1,079)
Lease liabilities 24 (3,059) (6,881)
Deferred tax liabilities 19 – (93)
Provisions 23 (1,121) (1,026)
Total non-current liabilities (4,180) (9,079)
TOTAL LIABILITIES (31,729) (28,823)
NET ASSETS 25,159 37,977
EQUITY
Ordinary shares 29 37,750 37,350
Other reserves 16,539 16,872
Retained earnings (29,130) (16,645)
TOTAL EQUITY 25,159 37,977
The financial statements on pages 76 to 193 were approved and authorised for issue by the Board of Directors on 31 March 2021 and were signed on its behalf by:
Richard McGuire Thomas Hearne
Director Director
Company Registration Number: SC069140
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Consolidated Statement of
Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2020
Other reserves
Capital Foreign
Ordinary redemption Other exchange Retained
shares reserve reserve reserve earnings Total
£000 £000 £000 £000 £000 £000
At 1 January 2020 37,750 10,312 (382) 6,942 (16,645) 37,977
Comprehensive (expense)/income
Loss for the year – – – – (12,832) (12,832)
Other comprehensive items
Actuarial loss on defined benefit pension liability* – – (256) – – (256)
Currency translation differences – – – (77) – (77)
Total other comprehensive items – – (256) (77) – (333)
Total comprehensive items – – (256) (77) (12,832) (13,165)
Transactions with owners
Share option charge – – – – 347 347
Total transactions with owners – – – – 347 347
Total changes in equity – – (256) (77) (12,485) (12,818)
At 31 December 2020 37,750 10,312 (638) 6,865 (29,130) 25,159
*Net of deferred tax
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Consolidated Statement of
Changes in Equity continued
FOR THE YEAR ENDED 31 DECEMBER 2019
Other reserves
Capital Foreign
Ordinary redemption Other exchange Retained
shares reserve reserve reserve earnings Total
£000 £000 £000 £000 £000 £000
At 1 January 2019 37,350 10,312 (414) 8,537 (3,636) 52,149
Adjustment for adoption of IFRIC 23 (note 9) – – – – 1,562 1,562
Adjustment for adoption of IFRS 16 Leases net of tax – – – – (1,442) (1,442)
Restated at 1 January 2019 37,350 10,312 (414) 8,537 (3,516) 52,269
Comprehensive (expense)/income
Loss for the year – – – – (14,464) (14,464)
Other comprehensive items
Actuarial loss on defined benefit pension liability* – – (282) – – (282)
Reserve transfer – – – 87 (87) –
Currency translation differences – – – (1,682) – (1,682)
Total other comprehensive items – – (282) (1,595) (87) (1,964)
Total comprehensive items – – (282) (1,595) (14,551) (16,428)
Transactions with owners
Share option charge – – – – 1,422 1,422
Shares issued in relation to the acquisition of Lot.to
Systems Limited (note 29) 400 – 314 – – 714
Total transactions with owners 400 – 314 – 1,422 2,136
Total changes in equity 400 – 32 (1,595) (13,129) (14,292)
At 31 December 2019 37,750 10,312 (382) 6,942 (16,645) 37,977
*Net of deferred tax
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Consolidated Statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
Note £000 £000
Cash flows from operating activities
Cash generated from operations, before separately disclosed items 30 3,928 7,478
Interest received 13 62
Interest paid (84) (24)
Tax paid 9 (1,029) (1,356)
Net cash generated from operating activities before separately disclosed items 2,828 6,160
Cash inflows – separately disclosed items 4 – 90
Cash outflows – separately disclosed items 4 (484) (1,821)
Cash generated from operations 2,344 4,429
Cash flows from investing activities
Investment in joint ventures and associates 17 – (184)
Disposal of Sportech Racing BV (net of transaction costs) – 236
Consideration paid for Lot.to Systems Limited, net of cash acquired 25 (500) (729)
Receipt of Initial Payment for disposal of Global Tote 6,180 –
Proceeds from sale of property, plant and equipment 15 – 1
Investment in intangible fixed assets 14 (1,650) (2,648)
Purchase of property, plant and equipment 15 (753) (1,169)
Net cash generated from/(used in) investing activities 3,277 (4,493)
Cash flows used in financing activities
Principal paid on lease liabilities 24 (1,316) (1,399)
Interest paid on lease liabilities 24 (339) (480)
Cash used in financing activities (1,655) (1,879)
Net increase/(decrease) in cash and cash equivalents 3,966 (1,943)
Effect of foreign exchange on cash and cash equivalents (72) (407)
Cash and cash equivalents at the beginning of the year 15,565 17,915
Cash and cash equivalents at the end of the year 19,459 15,565
Less cash held by assets held for sale 11 (7,638) –
Group cash and cash equivalents at the end of the year 21 11,821 15,565
Represented by:
Cash and cash equivalents 21 11,821 15,565
Less customer funds – continuing operations 21 (465) (2,580)
Adjusted net cash at the end of the year 21 11,356 12,985
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements
FOR THE YEAR ENDED 31 DECEMBER 2020
GENERAL INFORMATION
Sportech PLC (the ‘Company’) is a company domiciled and incorporated in the UK and listed on the London Stock Exchange.
The Company’s registered office is Collins House, Rutland Square, Edinburgh, Midlothian, Scotland EH1 2AA. The consolidated
financial statements of the Company as at and for the year ended 31 December 2020 comprise the Company, its
subsidiaries, joint ventures and associates (together referred to as the ‘Group’). The principal activities of the Group are the
provision of pari-mutuel betting (B2C) and the supply of wagering technology solutions (B2B). On 2 December 2020 the Group
agreed the disposal of its supply of wagering technology solutions group, the “Global Tote division” and on 31 January 2021
agreed the disposal of its Bump 50:50 operation (see note 11).
GOING CONCERN
As discussed in the Directors’ report on page 64, the Directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements. Following the completion of agreed disposals in 2021, the Group will
realise significant cash, the Board will continue to engage with shareholders to assess the optimal use of capital.
BASIS OF ACCOUNTING
These financial statements have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. The financial statements have been prepared under the
historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities.
The Group’s accounting policies have been set by management and approved by the Audit Committee.
The preparation of financial statements in conformity with IFRSs requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount,
event or actions, actual results ultimately may differ from those estimates.
Amounts presented in the financial statements have been rounded to the nearest £1,000.
CRITICAL JUDGEMENTS AND ESTIMATES
Critical judgements and estimates have been made in the following areas:
Assets held for sale and discontinued operations
The Board is required to consider the requirements of IFRS 5 Non-current Assets Held for sale and Discontinued Operations as
to whether the assets of any disposal group or asset which is potentially going to be disposed of, should be classified as Held
for Sale. In general, the following conditions must be met for an asset (or 'disposal group') to be classified as held for sale:
•
•
•
•
•
•
management is committed to a plan to sell;
the asset is available for immediate sale;
an active programme to locate a buyer is initiated;
the sale is highly probable, within 12 months of classification as held for sale (subject to limited exceptions);
the asset is being actively marketed for sale at a sales price reasonable in relation to its fair value; and
actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn.
In addition, a discontinued operation is a component of the Group that either has been disposed of, or is classified as held for
sale, and
(a)
(b)
represents a separate major line of business or geographical area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
(c)
is a subsidiary acquired exclusively with a view to resale.
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The Board has applied judgement and concluded that the Global Tote business and the Bump 50:50 operation are held for sale
and considered to be discontinued activities. The Group has also agreed the disposal of its freehold property in New Haven,
Connecticut, USA known as “Sports Haven” and the Board considers this asset to be held for sale as at 31 December 2020.
As such the results of the Global Tote and Bump 50:50 have been presented separately in the income statement and the prior
year comparatives have also been restated to present the results separately. The assets and liabilities associated with the
divisions as well as the net book value of the Sports Haven property have been presented separately as assets held for sale and
as liabilities directly associated with held for sale assets as appropriate.
Carrying value of Sportech Venues tangible and intangible assets
To determine whether an impairment of the tangible or intangible assets held by the Sportech Venues division has occurred, the
Group considered in isolation the assets and leasehold improvements at its sports bar venue in Stamford, Connecticut and then
the assets (tangible and intangible) of the cash generating unit (“CGU”) as a whole. The key assumptions used in estimating
future cash flows for value-in-use measures, for both the stand-alone venue and the CGU as a whole were:
Stamford alone:
–
–
–
handle and food and beverage (“F&B”) earnings achieved since the venue’s opening in June 2017 and the likely growth
achievable in the next four years;
costs of sale percentages and overhead cost levels achievable; and
the length of the lease during which the venue would be operated.
CGU as a whole:
–
–
–
–
rates of industry handle growth/decline impacting the retail and online product;
the enforcement by the State of Connecticut of the Company’s exclusive rights to operate online wagering and the CGU’s
ability to drive value from its exclusivity in the State;
the impact of restructuring on costs the CGU incurs and retention of handle via transfer between venues or onto digital;
and
discount rate, which appropriately reflect the risks associated with the CGU.
These assumptions, and the judgements of management that are based on them, are subject to change as new information
becomes available. Economic conditions and government policy changes can also impact on the assumption and discount
rates applied, which are reviewed annually. Further details are disclosed within notes 14 and 15 of the Annual Report.
Tax
The Group’s activities in recent periods have resulted in material tax liabilities crystallising. The ultimate tax liability due, in all
instances, is subject to a degree of judgement. The judgements which are made are done so in good faith, with the aim of
paying the correct amount of tax at the appropriate time. Management work diligently with the Group’s external financial
advisors in quantifying the anticipated accurate and fair tax liability which arises from material one-off events such as the Spot
the Ball legal case and the disposal of the Football Pools (see notes 9 and 28).
A critical judgement for the current year is the use of capital losses to offset the Spot the Ball gain, and the uncertainty of this
results in a provision of £4.6m for corporation tax and £0.5m of interest thereon. The provision is included in the current tax
liability, except that the calculated interest has been included in finance costs and accruals. The Group does not believe any
provision is required for associated penalties.
The Group has modelled its tax projections to assess the recoverability of its deferred tax assets in the US. Those projections
require judgement and if the forecasts are not achieved, the recoverability of the deferred tax assets may be in doubt.
In addition, the Irish Revenue have assessed the Group for €106k for income tax allegedly underpaid in relation to subsistence
claims of Irish field crew. Management believe that this assessment is incorrect and that all subsistence claims paid were made
without tax deduction in accordance with relevant regulations. An appeal is being pursued and no provision has been recorded
in these financial statements.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Valuation and useful life of intangible assets acquired with Lot.to Systems Limited
The Group identified and valued the intangible assets acquired with Lot.to Systems Limited during the prior year. Judgement
was used to value the intangibles based on a markup of cost to develop being applied, and to define their useful life over which
the cost would be amortised to the income statement. The remaining difference between the net assets identified and the cost
of acquisition has been recorded as goodwill. The valuations and decisions taken by management on useful lives inherently
contain judgements. No adjustments were made during the hindsight period to 31 January 2020.
Onerous contract provision and other losses arising from exit from California operations
The Group recorded a provision in 2017 against its contractual arrangements in the state of California following its decision to
exit its operations. During 2019 the venue in San Diego was closed and negotiations with the landlord commenced to agree a
settlement, together with negotiations with a second landlord on another site.
Management has reassessed the provisions to exit these arrangements in the light of current information and believes the level
of provision is the Group’s most likely obligation. Given the nature of the disputes, there is judgement which has been applied by
management in agreeing the level of provision required and the ultimate settled amount could be more or less than that
provided.
A summary of more important Group accounting policies follows. These policies have been applied consistently to all the years
presented.
(a) Subsidiaries
Subsidiaries are all entities over which the Group has control. Control of an entity is deemed to exist when the Group is exposed
to, or has rights to, variable returns through its power over that entity. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are
fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control
ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The consideration
transferred for the acquisition of a subsidiary is the fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange. The consideration transferred includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Contingent consideration is recognised at fair value at the acquisition date and
remeasured at each balance sheet date until settlement. The revaluation amount is debited/credited to the income statement in
the period in which the estimated fair value is increased/decreased. Acquisition related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the
identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income statement.
Transactions between subsidiaries are performed on an arm’s-length basis. Inter-company transactions, balances and
unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but
considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
(b) Equity accounted investees
The Group equity accounts for any investees which are considered to be either a joint venture or an associate.
A joint venture is an entity which is jointly controlled by the Group and one or more venturers under a contractual agreement. An
associate is an entity in which the Group has no control nor joint control, but bears significant influence over that entity. In both
cases, the Group holds its interest in the entity on a long-term basis.
The Group’s share of post-acquisition profits and losses made by the investee is recognised in the income statement and its
share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of
losses in an equity-accounted investee equals or exceeds its interest in that entity, including any other unsecured receivables,
the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture.
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Unrealised gains on transactions between the Group and its equity accounted investees are eliminated to the extent of the
Group’s interest in that entity. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred. The accounting policies of the investee have been changed where necessary to ensure consistency with
the policies adopted by the Group.
(c) Revenue
The Group generally recognises revenue at a point in time when it transfers control over a product or delivers a service to a
customer. The following is a description of principal activities (separated by reportable segment), from which the Group
generates its revenues.
Sportech Venues:
This division operates betting venues in the state of Connecticut, USA and a website for online wagering from Connecticut
residents under an exclusive and perpetual licence. Its revenues are derived from handle (betting stakes) net of return to bettors
for wagering on horse and greyhound racing and jai alai and customer incentives and is recognised on the day the event takes
place. Betting stakes for future events that have not taken place at the balance sheet date are deferred. It also generates
revenue from:
Other revenue type
Recognition policy
Providing a full turn-key service for the operation of
racebooks at casinos
Food and beverage sales in venue
Programme sales
Revenue is a percentage of handle processed through the
racebooks and services included are settlement, negotiating
fee structure with tracks and audio visual and other equipment
provision in some cases. Revenue is recognised when the
performance obligation is met which is on the day the event
occurs. Customer bonuses are netted off revenue as earned.
Costs of obtaining a new contract are expensed to the income
statement. Income is invoiced monthly and due within a
month, therefore there is no significant financing element.
Contracts are generally three to five years in length and have
several month notice periods.
Revenue is recorded at the price charged for the goods on the
date the food/beverage is provided.
Revenue is recorded as the goods are transferred to the
customer.
Rental of space in venues for parties/events
Revenue is recorded on the date of the event.
Sale of lottery tickets on behalf of the state lottery
ATM transaction fees
Sportech retains a percentage of the ticket sales, revenue is
recorded at the time the ticket is sold
Fee are recognised on each transaction, recorded as the
transaction occurs.
Parking lot rental for events e.g. carnival, rodeo
Revenue recorded as each event occurs.
Sportech Racing and Digital:
This division provides pari-mutuel wagering services and systems worldwide, principally to the horseracing industry. It derives its
revenues from various contractual models as follows:
North America
Contracts with tote customers are structured based on the supply of a turn-key service where both hardware and services are
provided throughout the period of the contract. Revenue is generated over the contract term from; the provision of our tote
software, operation of the tote for the customer and maintenance of the hardware and software in use. If there is a sale of
hardware or software upfront, which is rare and generally not material to the contract as a whole, then this is recognised when
the risks and rewards transfer to the customer, generally following the receipt of an acceptance form or confirmation of delivery.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
The service fees are either fixed monthly fees, percentages of handle through the tote software or a combination of both and
most contracts have fixed monthly “minimums”. Revenue is recognised as the obligations under the contract are met.
Europe and rest of world
In Europe and the rest of the world the sales model is different in that most sales are for an upfront system and hardware and
revenue is recognised when performance obligations have been satisfied. Sales which involve significant customisation are
recognised on a percentage of completion basis. Where contracts are long-term development projects for bespoke software
delivery to a customer, revenue is recognised over time using the inputs method (labour hours expended) for progress towards
complete satisfaction calculations.
Following initial delivery of hardware and software, we then generate revenue from maintenance services (of the hardware and
software) and in some cases operation of the tote. The value of revenue delivered under service contracts is generally based on
either a percentage of amounts wagered or on a predetermined fixed amount depending on contract terms. Revenue is
recognised as the obligations under the contract are met.
Under multiple performance condition arrangements, revenue is allocated to the various elements based on the standalone
selling prices determined by the price charged when the same element is sold separately, and revenue is recognised on the
separate components of the contract in accordance with the revenue recognition policy above for that item or service.
Bump 50:50
Bump 50:50 contracts are principally service contracts where revenue is recognised over the contract term in line with the
supply of services, revenue is generally a percentage of the total raffle takings.
(d) Deferred income
Deferred income includes the value of stakes placed prior to the end of the financial period in respect of competitions and
sporting events held subsequent to the end of the financial period and income received in advance of a service or product being
delivered.
(e) Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of
the operating segments, has been identified as the Board which makes strategic and operational decisions.
The Group has identified its business segments as follows:
Continuing operations
–
–
–
Sportech Lotteries: provision of lottery software and services worldwide;
Sportech Venues: off-track betting venue management; and
Corporate costs: central costs relating to the overall management of the Group.
Discontinued operations
–
Sportech Racing and Digital: provision of pari-mutuel wagering services and systems worldwide principally to the
horseracing industry and provision of 50:50 lottery software and services.
(f)
Taxation
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet
date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation
and establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is
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not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that,
at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority, on either the same or different taxable entities, where there is an intention to settle the balances on a net basis.
The Group applies IFRIC 23 Uncertainty over Income tax treatments in 2019. IFRIC 23 provides guidance on the accounting for
current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The
interpretation requires; the group to determine whether uncertain tax treatments should be considered separately, or together as
a group, based on which approach provides better predictions of the resolution; the group to determine if it is probable that the
tax authorities will accept the uncertain tax treatment; and if it is not probable that the uncertain tax treatment will be accepted,
measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better
predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax
authorities will examine amounts they have a right to examine and have full knowledge of all related information when making
those examinations
(g) Foreign currencies
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the ‘functional currency’). The consolidated financial statements are
presented in Sterling (£), which is the Company’s functional currency and the Group’s presentation currency.
Transactions and balances
Transactions in foreign currencies are translated into the functional currency at the rate of exchange ruling at the date of the
transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance
sheet date. Foreign exchange gains and losses, resulting from the settlement of such transactions and from the translation at
year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income
statement, except where deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income
statement within finance income or costs. All other foreign exchange gains and losses are presented in the income statement
within operating profit.
Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
–
–
–
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the rate on the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
(h) Property, plant and equipment
Property, plant and equipment are carried at historical cost less accumulated depreciation and any impairment. Cost includes
the original purchase price of the asset and the costs attributable in bringing the asset to its working condition for its intended
use and any associated borrowing costs. Assets in the course of construction are not depreciated until the asset is completed.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within
administrative expenses in the income statement.
Assets in the course of construction are capitalised when first brought into use and depreciated from this date.
(i) Depreciation
Depreciation is provided on a straight-line basis to write off the cost of property, plant and equipment down to residual value
over their anticipated useful lives as following period:
Owned land Not depreciated
Long leasehold and owned buildings Over 25 years
Short leasehold land and buildings Over the period of the lease
Plant, equipment and other fixtures and fittings Between 3 and 12 years
Assets in the course of construction are not depreciated until they are ready for use.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
(j) Right-of-use assets and lease liabilities
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and
increased for:
•
•
•
lease payments made at or before commencement of the lease;
initial direct costs incurred; and
the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the
leased asset (typically leasehold dilapidations).
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate. Generally, the Group uses its incremental borrowing rate in the jurisdiction in which the asset resides as the
discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It
is remeasured when there is a change in the future lease payments arising from a change in an index or rate, a change in the
estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment
of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not
to be exercised.
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include
renewal options and break clauses. The assessment of whether the Group is reasonably certain to exercise such options
impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised.
(k) Goodwill
Goodwill arising on consolidation represents the excess of the fair value of consideration given over the fair value of the
separately identifiable net assets acquired. Goodwill arising on acquisitions before the date of transition to IFRSs (4 January
2005) has been frozen at the previous UK GAAP net book value at the date of transition, subject to being tested for impairment
annually at the year end date.
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Goodwill is allocated to specific CGUs for the purpose of impairment testing. The allocation is made to the CGU that is
expected to benefit from the business combination in which the goodwill arose.
Goodwill is carried at cost less accumulated impairment losses.
(l)
Intangible fixed assets
Intangible fixed assets are held at cost less accumulated amortisation and impairment. Amortisation is charged on a straight-line
basis over the estimated useful life of the intangible fixed asset.
Software
Externally acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their estimated useful lives or contractual period if shorter (six to ten years).
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets when the following criteria are met:
–
it is technically feasible to complete the software product so that it will be available for use;
– management intends to complete the software product;
–
–
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are
available; and
–
the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs
and an appropriate proportion of relevant overhead. Other development expenditure that does not meet these criteria are
recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset
in a subsequent period.
Software development costs are amortised over their estimated useful lives, which do not exceed 12 years.
Licences
Licences acquired in a business combination are recognised at fair value at the acquisition date. Licences that have a finite
useful life are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate
cost of licences over their estimated useful lives of 15 to 20 years. Licences with an infinite life (licences granted in perpetuity)
are held at cost or fair value at acquisition date and tested annually for impairment.
(m) Investments in subsidiaries
Investments in subsidiaries are carried at historic cost less any impairment. Annual impairment reviews are performed.
(n)
Impairment reviews
Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Goodwill and intangible assets with indefinite lives are
subject to an annual review for impairment in accordance with IAS 36 ‘Impairment of Assets’. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value-in-use. For the purpose of assessing impairments, assets are grouped
at the lowest levels at which there are separately identifiable cash flows. Any impairment losses are recognised in the income
statement in the year in which they occur. Any impairment loss recognised on goodwill is not reversed.
All other individual assets are tested for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. With the exception of goodwill, all assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist at each reporting date.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
(o) Pension obligation
The Group operates various pension schemes.
The schemes are generally funded through payments to insurance companies or Trustee administered funds, determined by
periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is
a pension plan under which the Group pays fixed contributions into a separate entity.
The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan
that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The asset or liability recognised in the balance sheet in respect of the defined benefit pension plan is the fair value of plan assets
less the present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are
denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the
related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to
equity in other comprehensive income in the period in which they arise. Past service costs are recognised immediately in the
income statement. Scheme curtailments are recognised immediately in profit or loss. Settlements of defined benefit schemes
are recognised in the period in which the settlement occurs.
For defined contribution plans, the Group pays contributions to privately administered pension insurance plans on a mandatory,
contractual or voluntary basis.
The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an
employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund
or a reduction in future payments is available.
(p) Financial instruments
(i)
Recognition
Trade receivable and debt securities issued are initially recognised when they are originated. All other financial assets and
liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instruments
Financial assets
(ii)
Classification
The Group classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through OCI or through profit or loss), and
those to be measured at amortised cost.
The classification depends on the Group's business model for managing the financial assets and the contractual terms of the
cash flows.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for
managing financial assets, in which case all affected financial assets are classified on the first day of the first reporting period
following the change in business model.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at FVTPL are expensed in profit or loss. Changes in the fair value of financial assets at FVTPL
are recognised in the statement of comprehensive income.
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Financial assets measured at amortised cost arise principally through the provision of services to customers (e.g. trade
receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using
the effective interest rate method, less provision for impairment.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
They are generally due for settlement within 365 days and are therefore all classified as current, those due after a longer period
are classified in non-current assets. Trade receivables are recognised initially at the amount of consideration that is
unconditional. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective interest method. Due to the short-term nature of the current
receivables, their carrying amount is considered to be the same as their fair value.
Other receivables consist of amounts generally arising from transactions outside the usual operating activities of the Group such
as the proceeds from disposal of investment. Due to the short-term nature of the other current receivables, their carrying
amount is considered to be the same as their fair value. For the majority of the non-current receivables, the fair values are also
not significantly different to their carrying amounts.
(iv) Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the financial asset.
The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either
all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not
derecognised.
(v)
Impairment
The Group assesses all types of financial assets that are subject to the expected credit loss model:
•
•
•
trade receivables
debt investments carried at amortised cost
cash and cash equivalents
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. Trade receivables are grouped based on their days past due.
The historical credit losses assessed are adjusted to reflect current and forward-looking information on macroeconomic factors
affecting the ability of the customers to settle the receivables.
Financial liabilities
(vi) Classification and measurement
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is
classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial
liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign
exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
(vii) Derecognition
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group
also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially
different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid
(including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
(viii) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and
only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net
basis or to realise the asset and settle the liability simultaneously.
(q) Share-based payments
The fair value of employee options awarded under the Value Creation Plan is calculated using the Black-Scholes model. The fair
value of employee PSP awards is valued using a stochastic (Monte Carlo) valuation model. In accordance with IFRS 2
‘Share-based Payment’, the resulting cost is charged to the income statement over the vesting period of the options/awards.
The total amount to be expensed is determined by reference to the fair value of the options/awards granted including any
market performance conditions, which are those that are based on Sportech PLC’s share price, and excluding the impact of any
service and non-market performance vesting conditions, being profitability and the individual remaining an employee over a
specified time period. At each balance sheet date, the Company revises its estimates of the number of options that are
expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a
corresponding adjustment to equity.
The charge in relation to employees who provide services to subsidiary companies is recharged to those subsidiaries. Where the
charge is not required to be settled in cash, the Company’s investment in that subsidiary is increased by the value of the charge
and a corresponding increase in equity is recognised in the subsidiary.
(r) Cash and cash equivalents
Cash and cash equivalents shown on the balance sheet represent cash in hand, cash in vaults and cash held in current
accounts, both owned by the Group and held on behalf of customers. Any bank overdrafts used by the Group are shown within
trade and other payables. Positive cash balances and overdrafts are only offset within cash and cash equivalents to the extent
that they form part of a cash-pooling arrangement implemented by the Group where the balances will be settled on a net basis.
(s) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current
liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the
balance sheet date.
(t)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment, being the difference between the assets’ carrying amounts and the present value of the
estimated future cash flows, discounted at the original effective interest rate. Individually significant receivables are considered
for impairment when they are past due or when other objective evidence is received that a specific customer will default or
delinquency in payment will arise. Any subsequent recovery of amounts written off is credited to the income statement.
(u) Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
(v)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first in, first out method. Net
realisable value is the estimated selling price in the ordinary course of business.
(w) Provisions
Provisions for onerous contracts, legal claims and dilapidations are recognised when the Group has: a present legal or
constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses where the
Group has no contractual obligation to deliver the service or product. Provisions payable over a period greater than 12 months
are discounted using an appropriate market risk-free discount rate.
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(x) Leases exempt from IFRS 16
The Group excludes leases with low-value assets (<£4,000 asset values) and leases with terms of less than 12 months from
IFRS 16 requirements to capitalise the lease and hold a corresponding liability on the balance sheet. Instead, payments made
under these leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis
over the period of the lease.
(y) Exceptional items
The Group defines separately disclosed items as those items which, by their nature or size, if not separately identified, would
distort the comparability of the Group’s results from year to year.
(z) Share capital and reserves
Ordinary shares are classed as equity. Incremental costs directly attributable to the value of new shares or options are shown in
equity as a deduction from the proceeds in the share premium account where the shares were issued at a premium or, where
issued at par or where the issue costs exceed the premium on the issue, to retained earnings.
The capital redemption reserve represents the nominal value of shares cancelled.
Other reserve includes the cumulative actuarial gains and losses charged/credited to this reserve in relation to defined benefit
pension schemes and also merger relief. Foreign exchange includes gains/losses arising on retranslating the net assets of
overseas operations Retained earnings includes cumulative net gains and losses recognised in the consolidated statement of
comprehensive income.
(aa) Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at
the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising
from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under
insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs
to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in
excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale
of the noncurrent asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue
to be recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are
presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose
of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the statement of profit or loss.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
(ab) New standards, amendments and interpretations adopted by the Group
A number of amendments to Standards have become effective for financial periods beginning on (or after) 1 January 2020 and
are therefore applicable for the 31 December 2020 financial statements. The amendments listed below have been included in
these consolidated financial statements (where applicable) as if they had been applied for the first time as at 1 January 2020.
New standards and amendments effective for periods beginning on or after 1 January 2020 and therefore relevant to these
financial statements:
Applicable for financial
Standard or interpretation year beginning on or after
Amendments to IAS 1 and IAS 8 Definition of Material 1 January 2020
Amendments to IFRS 3 Business Combinations: Definition of a Business 1 January 2020
Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform – Phase 1 1 January 2020
Amendments to references to the Conceptual Framework in IFRS standards 1 January 2020
All of the other pronouncements are relevant other than IFRS 7, but do not result in the accounting applied by the Group
changing.
(ac) New standards, amendments and interpretations not yet effective and not adopted by the Group
The following standards, amendments and interpretations are not yet effective and have not been adopted early by the Group.
Standard or interpretation Applicable
IFRS 17 Insurance Contracts 1 January 2023
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current 1 January 2023
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use 1 January 2022
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets:
Onerous Contracts — Cost of Fulfilling a Contract 1 January 2022
Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework 1 January 2022
Amendment to IFRS 4 Insurance Contracts – deferral of IFRS 9 1 January 2022
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 1 January 2021
Amendment to IFRS 16 Leases: COVID-19-Related Rent Concessions 1 June 2020
Annual Improvements to IFRS Standards 2018–2020 1 January 2022
IFRS 4, IFRS 17 and Interest Rate Benchmark Reform are not relevant to the Group.
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1. ADJUSTED PERFORMANCE MEASURES
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted EBITDA which
excludes the effects of expenditure management believe should be added back (separately disclosed items). The share option
expense is also excluded given it is not directly linked to operating performance of the divisions. Interest is not allocated to
segments as the Group’s cash position is controlled by the central finance team. This measure provides the most reliable
indicator of underlying performance of each of the trading divisions. This is considered the most reliable indicator as it is the
closest approximation to cash generated by underlying trade, excluding the impact of separately disclosed items and working
capital movements.
Adjusted EBITDA is not an IFRS measure, nevertheless although it may not be comparable to adjusted figures used elsewhere,
it is widely used by both the analyst community to compare with other gaming companies and by management to assess
underlying performance.
A reconciliation of the adjusted operating expenses used for statutory reporting and the adjusted performance measures is
shown below:
Restated
2020 2019
Note £000 £000
Operating costs per income statement (20,225) (26,430)
Add back:
Sports betting investment 2 261 1,773
Depreciation 15,16 1,793 2,413
Amortisation, excluding acquired intangible assets 14 485 250
Amortisation of acquired intangible assets 14 509 467
Impairment of property, plant and equipment and right-of-use assets 15,16 4,349 5,020
Share option charge, excluding acceleration of charge for departing management 29 347 676
Accelerated IFRS 2 charge for departing management 29 – 746
Separately disclosed items 4 229 1,003
Adjusted operating costs, pre sports betting investment (12,252) (14,082)
Adjusted EBITDA is calculated as below.
Restated
2020 2019
£000 £000
Revenue 19,966 33,571
Cost of sales (9,432) (15,228)
Gross profit 10,534 18,343
Marketing and distribution costs (319) (839)
Contribution 10,215 17,504
Adjusted operating income and costs (pre sports betting investment) (12,252) (14,082)
Adjusted EBITDA pre sports betting investment (2,037) 3,422
Sports betting investment (261) (1,773)
Adjusted EBITDA (2,298) 1,649
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Sports Betting investment represents the time and cost the Group has incurred on seeking to secure a Sports Betting licence in
the State of Connecticut and also in seeking partnerships across the rest of the US in Sports Betting. It includes lobbying costs
and consultants, and also in prior year, included an allocation of senior management time and travel. Of these costs, £261k
(2019: £699k) were external costs and £nil (2019: £1,074k) were internal (payroll and travel, of which £nil was in respect of
Executive Directors (2019: £482k)).
Adjusted profit is also an adjusted performance measure used by the Group. This uses adjusted EBITDA, as defined above as
management’s view of the closest proxy to cash generation for underlying divisional performance, and deducting share option
charges, depreciation, amortisation of intangible assets (other than those which arise in the acquisition of businesses) and
certain finance charges. This provides an adjusted profit before tax measure, which is then taxed by applying an estimated
adjusted tax measure. The adjusted tax charge excludes the tax impact of income statement items not included in adjusted
profit before tax.
Restated
2020 2019
£000 £000
From continuing operations:
Adjusted EBITDA (2,298) 1,649
Share option charge, excluding acceleration of charge for departing management (347) (676)
Depreciation (1,793) (2,413)
Amortisation (excluding amortisation of acquired intangibles) (485) (250)
Net finance costs (excluding certain finance costs – note 8) (254) (350)
Adjusted loss before tax (5,177) (2,040)
Tax at 20.2% (2019: 19.9%) 1,045 405
Adjusted loss after tax (4,132) (1,635)
Adjusted loss before tax from continuing operations prior to Sports Betting investment of £261k (2019: £1,773k) is £4,916k
(2019: £267k).
2020 2019
£000 £000
From discontinued operations:
Adjusted EBITDA 4,632 5,891
Depreciation (1,998) (2,184)
Amortisation (3,376) (2,380)
Net finance costs (excluding certain finance costs) (68) (92)
Adjusted (loss)/profit before tax (810) 1,235
Tax at 71.3% (2019: 19.5%) 577 (241)
Adjusted (loss)/profit after tax (233) 994
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2. SEGMENTAL REPORTING
Sportech Sportech Corporate
Lotteries Venues costs Group
2020 £000 £000 £000 £000
Revenue from food and beverage sales – 1,472 – 1,472
Revenue from rendering of services 2,898 15,596 – 18,494
Total revenue 2,898 17,068 – 19,966
Cost of sales (808) (8,624) – (9,432)
Gross profit 2,090 8,444 – 10,534
Marketing and distribution costs (8) (311) – (319)
Contribution 2,082 8,133 – 10,215
Adjusted net operating costs (note 1) (1,107) (9,218) (1,927) (12,252)
Adjusted EBITDA (pre sports betting investment) 975 (1,085) (1,927) (2,037)
Sports betting investment – (261) – (261)
Adjusted EBITDA 975 (1,346) (1,927) (2,298)
Share option charge – – (347) (347)
Depreciation (182) (1,595) (16) (1,793)
Amortisation (excluding amortisation of acquired intangible assets) (235) – (250) (485)
Segment result before amortisation of acquired intangibles 558 (2,941) (2,540) (4,923)
Amortisation of acquired intangibles (509) – – (509)
Impairment of property, plant and equipment and right-of-use assets – (4,349) – (4,349)
Separately disclosed items – (18) (211) (229)
Operating profit/(loss) 49 (7,308) (2,751) (10,010)
Net finance costs (557)
Loss before taxation from continuing operations (10,567)
Taxation 297
Loss for the year from continuing operations (10,270)
Loss after tax from discontinued operations (2,562)
Loss for the year (12,832)
Discontinued operations were within the Sportech Racing and Digital division which existed in prior years and to 31 December
2020 prior to classification as discontinued. The remaining businesses in the former Racing and Digital division now form a new
division “Sportech Lotteries”.
Sportech Sportech Corporate Assets held
Lotteries Venues costs for sale Group
£000 £000 £000 £000 £000
Segment assets (excluding investments and
intercompany balances) 2,943 13,681 12,593 27,671 56,888
Segment liabilities (excluding intercompany balances) (472) (8,659) (15,091) (7,507) (31,729)
Other segment items – capital expenditure
Intangible assets (continuing operations) 230 – – – 230
Intangible assets (discontinued operations) – – – 1,420 1,420
Property, plant and equipment (continuing operations) 121 29 – – 150
Property, plant and equipment (discontinued operations) – – – 603 603
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Sportech Sportech Corporate
2019 Lotteries Venues costs Group
Restated £000 £000 £000 £000
Revenue from food and beverage sales – 4,395 – 4,395
Revenue from rendering of services 4,745 24,431 – 29,176
Total revenue 4,745 28,826 – 33,571
Cost of sales (1,210) (14,018) – (15,228)
Gross profit 3,535 14,808 – 18,343
Marketing and distribution costs (15) (824) – (839)
Contribution 3,520 13,984 – 17,504
Adjusted net operating costs (note 1) (825) (11,756) (1,501) (14,082)
Adjusted EBITDA (pre sports betting investment) 2,695 2,228 (1,501) 3,422
Sports betting investment – (1,773) – (1,773)
Adjusted EBITDA 2,695 455 (1,501) 1,649
Share option charge, excluding acceleration of charge
for departing management – – (676) (676)
Depreciation (212) (2,169) (32) (2,413)
Amortisation (excluding amortisation of acquired intangible assets) (8) – (242) (250)
Segment result before amortisation of acquired intangibles 2,475 (1,714) (2,451) (1,690)
Acceleration of IFRS 2 charge for departing management – – (746) (746)
Amortisation of acquired intangibles (467) – – (467)
Impairment of property, plant and equipment – (5,020) – (5,020)
Separately disclosed items (net) – (342) (661) (1,003)
Operating profit/(loss) 2,008 (7,076) (3,858) (8,926)
Net finance costs (735)
Loss before taxation (9,661)
Taxation (5,793)
Loss for the year – continuing operations (15,454)
Net profit from discontinued operations 990
Loss for the year (14,464)
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Sportech
Racing and Sportech Corporate
Digital Venues costs Group
£000 £000 £000 £000
Segment assets (excluding investments and intercompany balances) 35,187 22,991 8,622 66,800
Segment liabilities (excluding intercompany balances) (7,892) (11,909) (9,022) (28,823)
Other segment items
Capital expenditure – Intangible assets:
Continuing operations 130 – 46 176
Discontinued operations 2,472 – – 2,472
Capital expenditure – Property, plant and equipment:
Continuing operations – 198 – 198
Discontinued operations 971 – – 971
Information by geographical area
Revenues from Revenues from
external customers external customers
Continuing operations Discontinued operations Non-current assets
2020 2019 2020 2019 2020 2019
£000 £000 £000 £000 £000 £000
United Kingdom 180 485 4,287 4,299 1,883 792
North and South America 19,786 33,001 15,774 20,927 12,434 39,751
Europe – 85 4,871 5,579 – 473
Other – – 823 407 – –
Total 19,966 33,571 25,755 31,212 14,317 41,016
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
3. EXPENSES BY NATURE
Reststed
2020 2019
Note £000 £000
Cost of sales
Tote and track fees 7,821 11,624
F&B consumables 528 1,325
Betting and gaming duties and licences 79 571
Repairs and maintenance cost of sales 48 87
Ticket paper 148 125
Programs 196 498
Outsourced service costs 561 853
Other cost of sales 51 145
Total cost of sales 9,432 15,228
Marketing and distribution costs
Marketing 294 819
Vehicle costs 16 –
Freight 9 20
Total marketing and distribution costs 319 839
Operating costs
Staff costs – gross, excluding share option charges 7,015 9,459
Less amounts capitalised (230) (130)
Staff costs - net 6,785 9,329
Property costs 2,865 2,984
IT & Communications 499 508
Professional fees and licences 2,160 2,333
Travel and entertaining 66 279
Banking transaction costs and FX 114 165
Other costs 24 257
Adjusted operating costs (including sports betting investment) 12,513 15,855
Share option charge, excluding accelerated charges 347 676
Acceleration of IFRS 2 charge for departing management – 746
Depreciation 15,16 1,793 2,413
Amortisation, excluding amortisation on acquired intangibles 14 485 250
Amortisation of acquired intangibles 14 509 467
Impairment of property, plant and equipment and right-of-use assets 15,16 4,349 5,020
Separately disclosed items 4 229 1,003
Total operating costs 20,225 26,430
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4. SEPARATELY DISCLOSED ITEMS
Restated
2020 2019
Note £000 £000
Continuing operations
Included in operating costs:
Redundancy and restructuring costs in respect of the rationalisation and
modernisation of the business – 87
Onerous contract provisions and other losses resulting from exit from Californian operations – (184)
Losses from Striders Sports Bar (S&S JV) – 249
Corporate activity costs 4(a) 118 81
Costs in relation to the Spot the Ball VAT refund 4(b) 44 15
Costs in relation to legacy tax disputes (net of provision release) – (152)
Lot.to Systems Limited acquisition costs – 51
One off start-up costs of new ventures, including new venue builds and joint ventures – 266
Costs in relation to exiting the Group’s interests in India 4(c) 65 20
UK defined benefit pension scheme buy-out 2 570
229 1,003
Discontinued operations
Included in operating costs 11 1,224 137
Total included in operating costs 1,453 1,140
Included in finance costs:
IInterest accrued on corporate tax potentially due and unpaid at the balance sheet date
on STB refund received in 2017 8 150 151
Interest paid on VAT settlement reached in 2019 8 83 –
233 151
Net separately disclosed items 1,686 1,291
(a) Corporate activity costs
Costs incurred during the year in relation to the approach by Standard General LLP to acquire the entire equity of Sportech PLC
and other corporate activity.
(b) Costs in relation to the Sport the Ball refund
Advice continues to be received in relation to the corporate tax filings in relation to the Spot the Ball VAT refund in 2016.
(c) Costs in relation to exiting the Group’s interests in India
The Group has been required to defend a claim for costs from the joint venture partner in India and is also incurring costs in
relation to dissolving the holding company of the joint venture in Mauritius, the issue is ongoing.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Below is a summary of cash (outflows)/inflows from separately disclosed items:
Reststed
2020 2019
£000 £000
Continuing operations – cash outflows from separately disclosed items
Redundancy and restructuring costs in respect of the rationalisation and
modernisation of the business (18) (661)
Expenses in relation to the UK defined benefit pension scheme “buy-out” (2) (336)
UK defined benefit pension scheme “buy-in” insurance contract purchased – (234)
Acquisition costs in relation to Lot.to Systems Limited – (51)
Costs in relation to the Spot the Ball VAT refund – (60)
Costs in relation to corporate activity (127) –
Costs in relation to legacy tax disputes (17) (68)
Transaction costs – disposal of Global Tote Business (16) –
One off start-up costs of new ventures, including new venue builds and joint ventures (224) –
Costs in relation to the Group’s lease in Norco, California – (70)
Costs in relation to exiting the Group’s interests in India (65) (20)
(469) (1,500)
Cash outflows from separately disclosed items – discontinued operations (net) (15) (231)
(484) (1,731)
5. EMPLOYMENT COSTS
Average number of monthly employees (full-time equivalents) including Executive Directors comprised:
Continuing Discontinued Total Continuing Discontinued Total
2020` 2020 2020 2019 2019 2019
Number Number Number Number Number Number
Continuing operations
Sales and marketing 4 12 16 4 13 17
Operations and distribution 121 203 324 207 272 479
Administration and management 26 13 39 27 5 32
Total employees 151 228 379 238 290 528
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Their aggregate remuneration comprised:
Continuing Discontinued
2020 2019 2020 2019
£000 £000 £000 £000
Wages and Salaries 6,207 8,709 9,636 13,975
Social security costs 463 560 1,061 3,172
Pension costs – defined contribution scheme (note 26) 115 60 364 351
Pension costs – defined benefit scheme (note 26) – – 221 191
Employee remuneration, excluding share option charges 6,785 9,329 11,282 17,689
Share option expense, including acceleration of IFRS 2 charge
for departing management 347 1,422 – –
Total remuneration 7,132 10,751 11,382 17,689
6. DIRECTORS AND KEY MANAGEMENT REMUNERATION
Directors Key management
2020 2019 2020 2019
£000 £000 £000 £000
Short-term employee benefits 757 978 796 1,067
Share-based payments 103 149 103 149
Accelerated IFRS 2 charge for departing management – 706 – 706
Pay in lieu of notice – 296 – 296
Post-employment benefits 20 2 20 2
Total remuneration 880 2,131 919 2,220
Details of individual Directors’ remuneration and share-based incentives granted are given in the Remuneration report on pages
53 to 61. This information forms part of the financial statements. Retirement benefits are accruing under defined benefit pension
schemes for nil Directors (2019: nil). No Directors exercised share options in the year (2019: nil).
In the above table includes approved bonuses for 2020 and excludes any bonus contingent on the completion of the disposal of
the held for sale assets (£221k, excluding employer’s taxes).
Key management is considered to be the Directors of the Company (Executive and Non-executive).
7. AUDITOR REMUNERATION
Fees paid to the Auditors of the consolidated financial statements during the period comprise:
2020 2019
£000 £000
Audit fees – previous auditor – 63
Audit fees – current auditor 354 269
Corporate finance services – current auditor 110 50
Other assurance services 24 11
Total fees 488 393
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
8. NET FINANCE COSTS
Restated
2020 2019
£000 £000
Continuing operations:
Finance costs:
Interest accrued and paid on tax liabilities (233) (151)
Interest on lease obligations (note 24) (265) (402)
Foreign exchange loss on financial assets and liabilities denominated in foreign currency (70) (210)
Unwinding of interest on discounted provisions (note 23) – (24)
Total finance costs (568) (787)
Finance income:
Interest received on bank deposits 11 49
Interest on defined benefit pension obligation (note 26) – 3
Total finance income 11 52
Discontinued operations (note 11) (68) 40
Net finance costs (625) (695)
Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in
note 1.
Restated
2020 2019
Continuing operations: £000 £000
Foreign exchange loss on financial assets and liabilities denominated in foreign currency (70) (210)
Interest accrued and paid on tax liabilities (233) (151)
Unwinding of interest on discounted provisions (note 23) – (24)
(303) (385)
9. TAXATION
The Group's tax charge from continuing and discontinued operations comprises:
2020 2019
£000 £000
Current tax:
Current tax on loss for the year 1,176 1,115
Adjustments in respect of prior years (1,895) 136
Total current tax (719) 1,251
Deferred tax:
Origination and reversal of temporary differences 169 (1,509)
Change in rates (1) 1
Adjustments in respect of prior years (204) 104
Derecognition of previously recognised deferred tax assets 986 6,187
Total deferred tax 950 4,783
Total tax charge 231 6,034
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2020 2019
£000 £000
Total tax (credit)/charge in continuing operations (297) 5,793
Total tax charge in discontinued operations 528 241
Total tax charge 231 6,034
The taxation on the Group’s loss before taxation differs from the theoretical amount that would arise using the weighted average
tax rate applicable to profits and losses of the consolidated entities as follows:
2020 2019
£000 £000
Loss for the year (12,832) (14,464)
Total tax charge 231 6,034
Loss before tax (12,601) (8,430)
Tax calculated at domestic tax rates applicable to (losses)/profits in the respective countries (2,669) (1,762)
Tax effects of:
– expenses not deductible for tax purposes net of income not taxable 449 1,382
– foreign taxes paid not provided for 835 –
– adjustments in respect of prior years – current tax (1,895) 136
– adjustments in respect of prior years – deferred tax (204) 104
– effect of change in rates (1) 1
– deferred tax not recognised during the year 2,730 –
– deferred tax not previously provided – (14)
– derecognition of previously recognised deferred tax assets 986 6,187
Total tax charge 231 6,034
US deferred tax assets were revalued downwards by £986k in 2020 (2019: £6,187k, predominantly foreign taxes paid in the
Dominican Republic), following a review of recoverability. Group cash flow forecasts were used and any assets not showing as
recoverable within five years were considered not recoverable and a valuation allowance was charged to the income statement.
These financial statements account for the change in the UK Corporation Tax rate from 17% to 19% based on enacted
legislation. Deferred tax in the UK is provided at 19%. There are no changes expected in the US federal income tax rate from the
current rate of 21%.
Included within the Group’s current tax liabilities is a provision of £4.6m for an uncertain tax position in relation to the treatment
of the gain included in the 2016 financial statements for the Spot the Ball VAT refund. Included in current tax receivable is £1.4m
in relation to a refund, which was subsequently received in February 2021, for overpaid tax in relation to the disposal of The
Football Pools trade and assets in June 2017.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
An analysis of the net current tax liabilities is as follows:
2020 2019
Note £000 £000
At 1 January 4,880 6,563
Release of provision – transition to IFRIC 23 – (1,562)
4,880 5,001
Charged to the income statement – continuing operations (1,012) 1,073
Charged to the income statement – discontinued operations 293 178
Paid during the year – continuing operations (686) (1,232)
Paid during the year – discontinued operations (343) (124)
Acquired with subsidiary – 3
Transferred to liabilities associated with assets held for sale 11 117 –
Foreign exchange movements 9 (19)
At 31 December 3,258 4,880
Included in:
Current assets (1,442) –
Current liabilities 4,700 4,880
3,258 4,880
10. ACQUISITION OF LOT.TO SYSTEMS LIMITED
On 1 February 2019, the Group acquired 100% of the issued share capital of Lot.to Systems Limited (“Lot.to”) a UK-based
digital gaming technology business. There were no changes during the period to the fair value assumptions applied at
acquisition in relation to the net assets acquired and consideration paid disclosed in the 2019 financial statements.
There was no contingent consideration payable. The shareholder loan was agreed to be repaid in three installments of £300k on
completion date, £500k by 31 March 2019 and £500k by 31 December 2019. The final installment was subsequently mutually
agreed to be paid on 2 January 2020.
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11. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
The net assets at 31 December 2020 of the identified disposal groups and asset held for sale, which have been presented on
the Group balance sheet as assets held for sale in current assets and liabilities directly associated with assets held for sale in
current liabilities, are as follows:
Bump Sports
Global Tote (Worldwide) Haven
Group Inc. property
Note 11a Note 11b Note 11c Total
Note £000 £000 £000 £000
Intangible fixed assets 14 4,309 235 – 4,544
Property, plant and equipment 15 6,675 207 1,166 8,048
Right-of-use assets 16 833 – – 833
Deferred tax assets 19 27 – – 27
Trade and other receivables 3,718 71 – 3,789
Inventories 2,675 – – 2,675
Income tax receivable 9 117 – – 117
Cash and cash equivalents 7,514 124 – 7,638
Total assets held for sale 25,868 637 1,166 27,671
Trade and other payables (5,186) (87) – (5,273)
Provisions 23 (7) – – (7)
Lease liabilities 24 (998) – – (998)
Retirement benefit liability 26 (1,229) – – (1,229)
Total liabilities directly associated with assets held for sale (7,420) (87) – (7,507)
11a) Global Tote Group
At 31 December 2020, the Board were of the view that the most probable route of realising future economic benefit through its
Global Tote Group was through a sale rather than continuing to operate it as part of the Sportech Group.
On 1 December 2020, a sale and purchase agreement was signed, and Sportech PLC shareholders approved the disposal of
the Global Tote division, being the Group’s B2B Racing and Digital division, excluding its lottery operations and retail racing
website, on 24 December 2020 for a total consideration of £30.9m (excluding debt and working capital adjustments). An initial
payment of £6,180k was received from the acquirer, BetMakers Technology Group Ltd (“BetMakers”), on 29 December 2020,
this receipt is unconditional and non-refundable.
In accordance with IFRS 5, this business has been treated as an asset held for sale. As at the balance sheet date, the sale was
deemed to be highly probable, and the disposal will signal a departure from a major business line in which the Group previously
operated. Accordingly, it has also been treated as a discontinued operation in these financial statements.
Completion of the disposal is conditional upon (a) BetMakers having received regulatory approval or waivers in a form
acceptable to the Purchaser (acting reasonably) in respect of each of the licences, authorisations, approvals and permits held by
the Disposal Group (including the Relevant US Licences), which are necessary for the continued operation of the Business; and
(b) no material adverse change having occurred in the period between the date of this Agreement and the earlier of
(a) Completion, and (b) 30 April 2021. As at the date of approval of these financial statements there have been no material
adverse matters and regulatory approvals or waivers have progressed such that the Board consider the completion of the
transaction to be virtually certain. The disposal group was previously included within the Racing and Digital segment.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
A reconciliation of the net loss of discontinued operations is shown below.
2020 2019
Global Tote Group: £000 £000
Revenue 25,052 29,210
Cost of sales, marketing and distribution and adjusted operating expenses (19,525) (23,618)
Adjusted EBITDA 5,527 5,592
Depreciation and amortisation (5,083) (4,323)
Profit on disposal of property, plant and equipment – 1
Separately disclosed items (1,159) (137)
Finance (costs)/income (113) 16
(Loss)/profit before tax (828) 1,149
Tax, excluding tax arising on disposal (528) (241)
(Loss)/profit after tax (1,356) 908
Net cash flow from operating activities 6,099 3,963
Net cash flow from investing activities (1,905) (3,141)
Net cash flow from financing activities (436) (457)
Net increase in cash generated by the disposal group 3,758 365
Separately disclosed items incurred in the period were redundancy and restructuring costs in respect of a rationalisation of this
business including a provision for dilapidation costs on an expiring lease (£155k) and disposal costs of £1,004k (2019:
redundancy and restructuring, £227k and settlement from IP claim net of costs of £90k). Completion is expected during H1
2021.
11b) Bump (Worldwide) Inc. (“Bump”)
At 31 December 2020, the Board were of the view that the most probable route of realising future economic benefit through its
Bump business was through a sale rather than continuing to operate it as part of the Sportech Group.
The Group had advanced discussions with a potential buyer through 2020 and the Board was committed to disposing of Bump
within 12 months. On 31 January 2021, a sale and purchase agreement was signed with Canada Bank Note Company, Limited
(“CBN”) for consideration of CAD$10.0m (c.£5.7m), which includes a contingent CAD$2.0m (c.£1.1m) earn out which is payable
if 2022 revenues are CAD$6.5m or greater.
In accordance with IFRS 5, this business has been treated as an asset held for sale. As at the balance sheet date, the sale was
deemed to be highly probable, and the disposal will signal a departure from a major business line in which the Group previously
operated. Accordingly, it has also been treated as a discontinued operation in these financial statements.
Completion of the disposal will occur on the earlier of CBN being satisfied that Bump has received the requisite waivers, new
licences, consents for change in ownership of the company, or transfer (as applicable) with respect to the Gaming Licences
designated as “required” in the SPA or 31 July 2021. The disposal group was previously included within the Racing and Digital
segment.
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A reconciliation of the net loss of discontinued operations is shown below.
2020 2019
Bump (Worldwide) Inc.: £000 £000
Revenue 703 2,002
Cost of sales, marketing and distribution and adjusted operating expenses (1,598) (1,703)
Adjusted EBITDA (895) 299
Depreciation and amortisation (291) (241)
Separately disclosed items (65) –
Finance income 45 24
(Loss)/profit before tax (1,206) 82
Tax, excluding tax arising on disposal – –
(Loss)/profit after tax (1,206) 82
Net cash flow from operating activities (801) 21
Net cash flow from investing activities (118) (302)
Net decrease in cash generated by the disposal group (919) (281)
Completion is expected during H1 2021 and at the latest 31 July 2021.
11c) Sports Haven land and building
At 31 December 2020, the Board were of the view that the most probable route of realising future economic benefit from its
freehold property at 600 Long Wharf Drive, Connecticut, USA was through a sale rather than continuing to occupy it as part of
the Venues Operating Segment.
An offer was received in H2 2020 and an SPA was signed between the parties on 13 November 2020 for Sportech to sell the
property. Final terms were agreed in early 2021, for consideration of £4.4m (US$6.0m).
The SPA includes a leaseback clause, whereby Sportech shall lease back the property for a period not to exceed 18 months
from the date of Closing. The lease will be triple net and have a monthly rental of US$50k per month.
The Board consider that the requirements of IFRS 5 have been met as at 31 December 2020, in particular that management are
committed to a plan to sell, the asset is available for immediate sale, an active programme to locate a buyer is initiated, the sale
is highly probable to complete within 12 months, the sale price is reasonable and actions required to complete the sale indicate
it is unlikely the plan will significantly change or be withdrawn. As such, the land and buildings at 600 Long Wharf Drive, with net
book value as at this date of £1,166k have been classified as Held for Sale and separately disclosed outside of property, plant
and equipment within Assets held for sale. The asset had previously been included in the Sportech Venues segment.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
12. (LOSS)/EARNINGS PER SHARE
(a) Basic
Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the Parent Company by
the weighted average number of ordinary shares in issue during the year.
Dis- Dis-
Continuing continued Total Continuing continued Total
2020 2020 2020 2019 2019 2019
£000 £000 £000 £000 £000 £000
(Loss)/profit attributable to the owners of the Company (10,270) (2,562) (12,832) (15,454) 990 (14,464)
Weighted average number of ordinary shares in issue
(’000) 188,751 188,751 188,751 188,543 188,543 188,543
Basic (loss)/earnings per share (5.4)p (1.4)p (6.8)p (8.2)p 0.5p (7.7)p
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. Where there is a loss attributable to owners of the Company, the earnings per
share is not diluted.
Dis- Dis-
Continuing continued Total Continuing continued Total
2020 2020 2020 2019 2019 2019
£000 £000 £000 £000 £000 £000
(Loss)/profit attributable to the owners of the Company (10,270) (2,562) (12,832) (15,454) 990 (14,464)
Weighted average number of ordinary shares in issue
(’000) 188,751 188,751 188,751 188,543 188,543 188,543
Dilutive potential ordinary shares N/A N/A N/A N/A N/A N/A
Total potential ordinary shares 188,751 188,751 188,751 188,543 188,543 188,543
Diluted (loss)/earnings per share (5.4)p (1.4)p (6.8)p (8.2)p 0.5p (7.7)p
The number of potentially dilutive shares not taken into account in respect of the VCP is unlimited.
Adjusted
c)
Adjusted EPS is calculated by dividing the adjusted loss after tax (as defined in note 1) attributable to owners of the Company
by the weighted average number of ordinary shares in issue during the year.
2020 2019
Weighted Weighted
Adjusted average Adjusted average
loss number of Per share loss number of Per share
after tax shares amount after tax shares amount
Continuing operations £000 £000 Pence £000 £000 Pence
Basic adjusted EPS (4,132) 188,751 (2.2)p (1,635) 188,543 (0.9)p
Diluted adjusted EPS (4,132) 188,751 (2.2)p (1,635) 188,543 (0.9)p
13. GOODWILL
Goodwill cost brought forward arose on two acquisitions i) eBet Online, Inc. in December 2012 of £5.5m “eBet” and ii) Lot.to
Systems Limited in February 2019 “Lot.to”. The eBet goodwill was impaired in full in 2016 following an impairment review. This
fully impaired goodwill is in the Sportech Racing and Digital division and as at 31 December 2020 was transferred to assets held
for sale. The Lot.to goodwill is in the Sportech Lotteries division within continuing operations and is attributable to the
knowledge and expertise of the workforce.
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Movements in the Group’s goodwill are shown below:
2020 2019
eBet Lot.to Total eBet Lot.to Total
£000 £000 £000 £000 £000 £000
Cost
At 1 January 5,548 604 6,152 5,548 – 5,548
Addition – Lot.to Systems Limited – – – – 604 604
Transferred to held for sale (5,548) – (5,548) – – –
At 31 December – 604 604 5,548 604 6,152
Accumulated impairment charges
At 1 January (5,548) – (5,548) (5,548) – (5,548)
Transferred to held for sale 5,548 – 5,548 – – –
At 31 December – – – (5,548) – (5,548)
Closing net book value – 604 604 – 604 604
14. INTANGIBLE FIXED ASSETS
Customer
contracts and
relationships Software Licences Other Total
2020 £000 £000 £000 £000 £000
Cost
At 1 January 2020 862 37,558 17,024 2,960 58,404
Additions – continuing operations – 230 – – 230
Additions – discontinued operations – 1,366 – 54 1,420
Transferred to held for sale (862) (33,801) (11,328) (3,014) (49,005)
At 31 December 2020 – 5,353 5,696 – 11,049
Accumulated amortisation
At 1 January 2020 862 29,938 13,178 3,715 47,693
Charge for year – continuing operations – 944 50 – 994
Charge for year – discontinued operations – 3,376 – – 3,376
Transferred to held for sale (862) (30,664) (12,349) (3,715) (47,590)
At 31 December 2020 – 3,594 879 – 4,473
Exchange differences at 1 January 2020 – 1,158 1,989 1,077 4,224
Movement in the year – (74) (201) (53) (328)
Transferred to held for sale – (1,084) (1,021) (1,024) (3,129)
Exchange differences at 31 December 2020 – – 767 – 767
Net book amount at 31 December 2020 – 1,759 5,584 – 7,343
Of the amounts capitalised in the year in continuing operations, £230k arose from capitalising staff costs for development
expenditure (2019: £130k). Of the amounts capitalised in the year in discontinued operations, £1,420k arose from capitalising
staff costs for development expenditure (2019: £1,904k). Amortisation has been included within operating costs.
Impairment - Licences
The Group holds a licence in perpetuity to offer pari-mutuel off-track betting in the State of Connecticut in the US for its Venues
division. This asset has a book value in USD at the reporting date, prior to any impairment that may be considered necessary, of
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
£5,545k (US$7,569k, 2019: £5,730k, US$7,569k). Given this licence is in perpetuity, the book value of the asset is not
amortised and the useful economic life allocated to the asset is indefinite.
As required by IAS 36, an impairment test has been carried out as at 31 December 2020. In testing for impairment, other assets
used solely to generate cash flows in the Venues CGU are also included, totalling £9,876k, US$13,479k (2019: £8,756k,
US$11,567k).
The recoverable amount of the asset has been determined based on a value-in-use calculation. The key base case assumptions
made in calculating the value-in-use were:
–
–
–
–
–
–
–
EBITDA forecasts assume year-on-year handle decline in the core operating business of 5% in 2021 and 1% per annum
thereafter and 1% decline into perpetuity;
3% increase in online handle in 2021, 5% in 2022, 2% in 2023 and 2024 and 2% into perpetuity;
61% increase in handle at our Stamford venue in 2021, 5% in 2022 and handle is assumed to remain flat thereafter and
into perpetuity (handle is assumed to be transferrable to other nearby venues or to online when the lease expires in May
2025);
a 90% increase in core F&B revenues, which excludes the Stamford venue, in 2021 reflecting recovery from COVID-19
restrictions, a 5% increase in 2022 and thereafter stable revenues into perpetuity;
F&B revenues at the Stamford venue are forecasted to increase by 93% in 2021, again reflecting recovery from COVID-19
restrictions, to increase a further 50% in 2022 and 32% in 2023 and remain flat thereafter to the expiry of the lease in May
2025;
capital expenditure was included in the cash flows at management’s best estimate of industry norm for reinvestment in
retail outlets of the kind under review; and
a post-tax discount rate of 10.5% (2019: 9.5%) was used representing a market-based weighted average cost of capital
appropriate for the Sportech Venues CGU. The pre-tax discount rate was 14.7% (2019: 13.3%).
The above assumptions are together considered by management to be the most likely trading performance outcome for the
CGU, having taken into account past experience and knowledge of the future trading environment.
Following the impairment review, the recoverable amount of those assets was deemed to be £10,967k and accordingly no
impairment was identified (2019: no impairment).
The below assumptions represent a reasonable downside case for sensitivity purposes. This would reduce the carrying value of
the trading assets in the business to £nil, being an impairment of £787k. The perpetual licence’s net realisable value is
considered to be in excess of its carrying value of £5,545k and therefore no impairment arises. The net realisable value of the
freehold property in Bradley, Connecticut is also considered to be in excess of its carrying value of £3,543k and therefore
similarly no impairment arises.
–
–
–
–
–
in 2021, extra income from enforcement of online exclusivity in Connecticut is only realised at 2020 levels;
opex savings in the plan are not achieved and restructuring savings not achieved;
Stamford’s handle remains at 2019 levels;
Online handle growth reduced to 1% per annum and into perpetuity; and
Stamford food and beverage achieves breakeven margin only through to the end of the lease.
For information, if a 2% increase in the post-tax discount rate to 12.5% was used in the Base Case model this would lead to an
impairment of £170k.
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Customer
contracts and
relationships Software Licences Other Total
2019 £000 £000 £000 £000 £000
Cost
At 1 January 2019 862 32,870 16,874 2,792 53,398
Additions – continuing operations – 176 – – 176
Additions – discontinued operations – 2,304 – 168 2,472
Acquired with subsidiary – 1,377 150 – 1,527
Transferred from property, plant and equipment – 831 – – 831
At 31 December 2019 862 37,558 17,024 2,960 58,404
Accumulated amortisation
At 1 January 2019 862 26,992 13,133 3,609 44,596
Charge for year – continuing operations – 672 45 – 717
Charge for year – discontinued operations – 2,274 – 106 2,380
At 31 December 2019 862 29,938 13,178 3,715 47,693
Exchange differences at 1 January 2019 – 1,447 2,225 1,077 4,749
Movement in the year – (289) (236) – (525)
Exchange differences at 31 December 2019 – 1,158 1,989 1,077 4,224
Net book amount at 31 December 2019 – 8,778 5,835 322 14,935
The Group undertook a review of its assets registers during the prior year and concluded that certain transfers between asset
categories was required in order to correctly define the nature of each asset and the associated accumulated depreciation.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
15. PROPERTY, PLANT AND EQUIPMENT
Long
Short leasehold Assets
leasehold and owned Fixtures in the
land and land and Plant and and course of
buildings buildings machinery fittings construction Total
2020 £000 £000 £000 £000 £000 £000
Cost
At 1 January 2020 299 16,274 11,785 5,423 74 33,855
Additions – continuing operations – – 121 – 29 150
Additions – discontinued operations – – 589 – 14 603
Transferred to held for sale (215) (7,965) (9,473) (1,870) (86) (19,609)
At 31 December 2020 84 8,309 3,022 3,553 31 14,999
Accumulated depreciation
At 1 January 2020 162 11,158 4,260 4,225 – 19,805
Charge for year – continuing operations – 401 203 382 – 986
Charge for year – discontinued operations 1 39 1,570 8 – 1,618
Transferred to held for sale (79) (8,790) (4,520) (1,974) – (15,363)
Impairment – 1,888 – 633 – 2,521
At 31 December 2020 84 4,696 1,513 3,274 – 9,567
Exchange differences at 1 January 2020 29 1,974 1,198 425 – 3,626
Movement in the year – (27) (24) (126) (2) (179)
Transferred to held for sale (29) (1,825) (1,846) (104) 2 (3,802)
Exchange differences at
31 December – 122 (672) 195 – (355)
Net book amount at
31 December 2020 – 3,735 837 474 31 5,077
Depreciation charges have been included in operating costs.
Impairment
Management considered that indicators of impairment of assets at the Stamford sports bar venue in Connecticut, USA had
arisen during the six months to 30 June 2020 based on its trading performance, the likely recovery from forced closure during
the COVID-19 pandemic and also changes to strategy in relation to closure of nearby venues. As a result, an impairment test
was carried out to determine the value-in-use of the assets at the venue. The carrying value of the assets at 30 June 2020, prior
to any impairment, was £2,521k. The following key assumptions were made in the value-in-use calculation:
–
–
–
–
–
The break clause will be activated to end the lease in June 2025 and the trade at the venue will terminate;
Handle was assumed to remain flat through the period at 2019 levels to June 2025;
F&B revenues are forecasted to remain flat through to June 2025 at management’s expected “post-pandemic” levels;
There will be no capital expenditure; and
a post-tax discount rate of 9.5% (2019: 9.5%) was used representing a market-based weighted average cost of capital
appropriate for the Sportech Venues CGU.
Following the impairment review, the recoverable amount of those assets was deemed to be £nil and accordingly an impairment
of £2,521k was identified and has been charged to the income statement within operating costs.
No further indicators of impairment of property, plant and equipment arose in the second half of the year.
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Long
Short leasehold Assets
leasehold and owned Fixtures in the
land and land and Plant and and course of
buildings buildings machinery fittings construction Total
2019 £000 £000 £000 £000 £000 £000
Cost
At 1 January 2019 246 16,249 10,952 5,323 1,016 33,786
Additions – continuing operations – – – 198 – 198
Additions – discontinued operations – – 931 2 38 971
Acquired with subsidiary – – – 1 – 1
Disposal – – (29) – (709) (738)
Transfer 53 25 (69) (101) (271) (363)
At 31 December 2019 299 16,274 11,785 5,423 74 33,855
Accumulated depreciation
At 1 January 2019 139 5,517 2,231 3,788 709 12,384
Charge for year – continuing operations 2 549 255 565 – 1,371
Charge for year – discontinued operations 21 – 1,803 10 – 1,834
Disposal – – (29) – (709) (738)
Transfer – 72 – (138) – (66)
Impairment – 5,020 – – – 5,020
At 31 December 2019 162 11,158 4,260 4,225 – 19,805
Exchange differences at 1 January 2019 36 2,326 1,470 494 609 4,935
Movement in the year (7) (352) (272) (69) (609) (1,309)
Exchange differences at 31 December 2019 29 1,974 1,198 425 – 3,626
Net book amount at 31 December 2019 166 7,090 8,723 1,623 74 17,676
The Group undertook a review of its asset registers during the year and concluded that certain transfers between asset
categories was required in order to correctly define the nature of each asset and the associated accumulated depreciation.
The impairment in 2019 arose on assets are the Stamford Sports bar in Connecticut, USA, based on its trading performance.
The carrying value of the assets following an impairment being charged to the income statement of £5,020k was £2,582k.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
16. RIGHT-OF-USE ASSETS
Short Long
leasehold leasehold
land and land and Plant & Fixtures and
buildings buildings Vehicles machinery fittings Total
2020 £000 £000 £000 £000 £000 £000
Cost
At 1 January 2020 2,711 4,987 237 – 40 7,975
Additions – continuing operations 304 – 29 – 13 346
Additions – discontinued operations 73 – 30 205 – 308
Transferred to held for sale (504) (630) (267) (205) – (1,606)
At 31 December 2020 2,584 4,357 29 – 53 7,023
Accumulated depreciation
At 1 January 2020 941 341 97 – 13 1,392
Charge for year – continuing operations 658 133 2 – 14 807
Charge for year – discontinued operations 151 74 97 58 – 380
Reassessment of lease term – 2,231 – – – 2,231
Impairment – 1,828 – – – 1,828
Transferred to held for sale (329) (150) (194) (58) – (731)
At 31 December 2020 1,421 4,457 2 – 27 5,907
Exchange differences at
1 January 2020 (74) (189) (6) – (2) (271)
Movement in the year (18) 268 (1) (3) – 246
Transferred to held or sale 12 21 6 3 – 42
Exchange differences at
31 December 2020 (80) 100 (1) – (2) 17
Net book amount at
31 December 2020 1,083 – 26 – 24 1,133
Depreciation charges have been included in operating costs.
Reassessment of lease assumption – break clause
Management had previously assumed that the break clause in the lease of the Stamford sports bar venue in Connecticut, USA
would not be exercised, and that the venue would be occupied until the expiry of the lease in May 2035. On 30 June 2020,
management took the decision that the most likely scenario was that the break clause would be exercised, and the lease
terminated in June 2025. As a result, the lease liability has been remeasured resulting in a reduction in the liability (see note 24)
and a corresponding reduction in the right-of-use asset.
Impairment
Management considered that indicators of impairment of the right-of-use assets of the Stamford sports bar lease in
Connecticut, USA had arisen during the period to 30 June 2020, based on its trading performance, the likely recovery from
forced closure during the COVID-19 pandemic and also changes to strategy in relation to closure of nearby venues. As a result,
an impairment test was carried out to determine the value-in-use of the right-of-use asset in relation to the lease at the venue.
The carrying value of the asset at 30 June 2020, prior to any impairment, was £1,827k. The following same key assumptions
were made in the value-in-use calculation as were used in the impairment test of the property, plant and equipment at the venue
(note 15).
Following the impairment review, the recoverable amount of those assets was deemed to be £nil and accordingly an impairment
of £1,828k was identified and has been charged to the income statement within operating costs.
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Further lease disclosures are given in note 24.
Short Long
leasehold leasehold
land and land and Fixtures and
buildings buildings Vehicles fittings Total
2019 £000 £000 £000 £000 £000
Cost
At 1 January 2019 – on transition to IFRS 16 2,685 4,987 237 26 7,935
Additions – continuing operations 26 – – 14 40
At 31 December 2019 2,711 4,987 237 40 7,975
Accumulated depreciation
Charge for year – continuing operations 763 266 – 13 1,042
Charge for year – discontinued operations 178 75 97 – 350
At 31 December 2019 941 341 97 13 1,392
Exchange differences arising during the year (74) (189) (6) (2) (271)
Net book amount at 31 December 2019 1,696 4,457 134 25 6,312
17. NET INVESTMENT IN JOINT VENTURES/ASSOCIATES
During the year, the Group held a 50% investment in Striders sports bar in San Diego, as part of the joint venture company S&S
Venues California, LLC. Striders is a food and beverage venue with on-site wagering facilities in California. It commenced trading
in February 2017 and ceased trading in December 2019.
a) Movements in the Group’s net investment in joint ventures and associates
2020
2019
S&S Venues Total S&S Venues Total
£000 £000 £000 £000
At 1 January – – – –
Additions – – 184 184
Income statement items:
Impairment – – – –
Share of loss after tax (see below) (28) (28) (1,213) (1,213)
Restriction of losses recognised 28 28 1,029 1,029
Net income statement charge – – (184) (184)
Exchange differences – – – –
At 31 December – – – –
The share of loss after tax (restricted to the level of investment made) of the S&S Venues joint venture has been charged to
separately disclosed items (see note 4), given the movement in provision for onerous contracts in relation to this joint venture,
equivalent to the losses incurred, has been released to separately disclosed items, the original provision having been recorded
through separately disclosed items in 2017.
Capital commitments and future obligations
b)
Sportech Venues Inc. is a guarantor for certain future obligations of S&S Venues California LLC. As the Group had decided to
exit California those commitments have been provided for in full. See note 23 for further details.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Summarised financial information of joint venture investments held at the reporting date
c)
Summarised financial information of the Striders bar in San Diego is presented as below:
2020 2019
£000 £000
Non-current assets 401 401
Current assets 69 68
Total assets 470 469
Current liabilities (259) (205)
Non-current liabilities (523) (684)
Total liabilities (782) (889)
Net liabilities (312) (420)
Revenue – 603
Expenses (57) (3,029)
Loss for the year (57) (2,426)
18. TRADE AND OTHER RECEIVABLES
2020 2019
£000 £000
Non-current
Trade receivables — 877
Less provision for impairment of receivables — (566)
Trade receivables – net — 311
Other receivables 156 188
Non-current trade and other receivables 156 499
Current
Trade receivables 778 5,712
Less provision for impairment of receivables (111) (309)
Trade receivables – net 667 5,403
Other receivables 62 834
Accrued income 292 363
Prepayments 496 1,003
Current trade and other receivables 1,517 7,603
Total trade and other receivables 1,673 8,102
The fair value of trade and other receivables is not considered to be different from the carrying value recorded above.
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Movements in the provision for impairment of receivables in the year is shown below:
2020 2019
£000 £000
At 1 January 875 1,569
Charged to the income statement – discontinued operations 362 32
Utilisation of provision — (720)
Transferred to held for sale (1,167) —
Foreign exchange movements 41 (6)
At 31 December 111 875
The carrying amounts of trade and other receivables are denominated in the following currencies:
2020 2019
£000 £000
Sterling 69 1,562
US Dollar 1,604 5,601
Euro — 415
Other — 524
Total 1,673 8,102
Trade receivables that are not more than three months past due are not considered impaired. As at 31 December 2020, £177k
(2019: £956k) of trade receivables were more than three months past due and not impaired. Management also considers that
these receivables are recoverable in full.
19. DEFERRED TAX
The movement on the net deferred tax balance is as follows:
Asset Liability Net
2020 2020 2020 2019
Note £000 £000 £000 £000
Net deferred tax asset at 1 January 990 (182) 808 5,979
Transition to IFRS 16 — — — (146)
Income statement (charge)/credit – continuing operations 9 (803) 88 (715) (4,720)
Income statement charge – discontinued operations (235) — (235) (63)
Business combination — — — (271)
Tax credited directly to other comprehensive income 88 — 88 117
Deferred tax transferred to assets held for sale 11 (27) — (27) —
Exchange differences (9) — (9) (88)
Net deferred tax asset at 31 December 4 (94) (90) 808
Included in:
Non-current assets 4 — 4 990
Current liabilities — (94) (94) (89)
Non-current liabilities — — — (93)
4 (94) (90) 808
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Deferred tax assets
Losses and Other
Capital foreign tax temporary
Pension allowances credits differences Total
£000 £000 £000 £000 £000
At 1 January 2019 226 829 3,311 1,613 5,979
Transition to IFRS 16 — — — (146) (146)
Income statement charge – continuing operations (277) (809) (3,236) (487) (4,809)
Income statement charge – discontinued operations (64) 1 — — (63)
Tax credited directly to other comprehensive income 117 — — — 117
Currency translation differences (2) 12 (75) (23) (88)
At 31 December 2019 — 33 — 957 990
Income statement charge – continuing operations — 4 — (807) (803)
Income statement charge – discontinued operations (88) (5) — (142) (235)
Tax credited directly to other comprehensive income 88 — — — 88
Transferred to assets held for sale — (27) — — (27)
Currency translation differences — (1) — (8) (9)
At 31 December 2020 — 4 — — 4
In addition to the deferred tax asset which has been recognised, the Group has not recognised further deferred tax assets on
gross timing differences in continuing operations of: £21,637k (2019: £26,143k) arising from unutilised trading losses and
carried forward foreign tax credits; £6,123k (2019: £6,230k) from capital tax allowances versus accounting charges; and
£7,985k (2019: £3,019k) from other short term timing differences. The Directors reviewed the recoverability of the deferred tax
assets in the US during the year and did not consider there is sufficient certainty of future profits against which these
losses/credits which could be offset due to expected future profit generation levels in this particular business units. The increase
in the deferred tax assets not recognised is due to this derecognition. The Directors expect a significant proportion of the tax
losses unprovided for to be utilised against profits on disposal of the discontinued operations in the US, however accounting
prevents the anticipation of such utilisation in the recognition of deferred tax assets.
Deferred tax assets are recognised when it is probable that future taxable profits will be generated against which assets can be
utilised. All deferred tax is expected to unwind in more than one year’s time.
Deferred tax liabilities
Other
temporary
differences Total
£000 £000
At 1 January 2019 — —
Business combination (271) (271)
Income statement credit – continuing operations 89 89
At 1 January 2020 (182) (182)
Income statement credit– continuing operations 88 88
At 31 December 2020 (94) (94)
The deferred tax liability was recognised on the acquisition of Lot.to Systems Limited, in relation to intangible assets identified.
All of the deferred tax liability is recorded in non-current liabilities.
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20. INVENTORIES
2020 2019
£000 £000
Work in progress — 70
Spare parts and raw materials including food and beverage — 2,329
Finished goods 120 217
120 2,616
The cost of inventories (food and beverage inventory) recognised as an expense and included in cost of sales amounted to
£528k (2019: £1,325k). Food and beverage inventory is included in finished goods. There was no provision for obsolescence
held against inventories at 31 December 2020 (2019: £455k). The provision for obsolete inventories within assets held for sale
as at 31 December 2020 is £528k.
21. CASH AND CASH EQUIVALENTS
2020 2019
Note £000 £000
Cash and short-term deposits 11,356 12,985
Customer funds 22 465 2,580
11,821 15,565
The fair value of cash and cash equivalents is not considered to be different from the carrying value recorded in the financial
statements.
Cash balances of £465k (2019: £2,580k) are held on behalf of customers in respect of certain online and telephone betting
activities (amounts deposited by telephone betting customers in Connecticut, USA are held in separate accounts). The
corresponding liability is included within trade and other payables (see note 22).
22. TRADE AND OTHER PAYABLES
2020 2019
Note £000 £000
Trade payables 3,581 6,083
Other taxes and social security costs 141 327
Accruals 3,737 3,519
Deferred income 6,180 344
Player liability 21 465 2,580
14,104 12,853
There is no difference between book values and fair values of trade and other payables. All amounts are due within one year.
Deferred income in 2020 is consideration received in advance not yet recorded in income related to an Initial Payment received
from BetMakers Technology Group Ltd for the potential acquisition of certain parts of the Racing and Digital division. The
amount is unconditional and non-refundable and will be recognised in income on completion of the disposal.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
23. PROVISIONS
Onerous Other
contracts Provisions Total
£000 £000 £000
At 1 January 2019 2,292 119 2,411
Derecognition on transition to IFRS 16 (214) — (214)
Utilised during the year (247) — (247)
Credit to the income statement – share of loss of JV (184) — (184)
Release to the income statement – discontinued operations — (109) (109)
Expense discount interest to the income statement 24 — 24
Currency differences (74) (2) (76)
At 1 January 2020 1,597 8 1,605
Utilised during the year (105) — (105)
Transferred to liabilities associated with assets held for sale — (7) (7)
Currency differences (50) (1) (51)
At 31 December 2020 1,442 — 1,442
Of which:
Current provisions 321 — 321
Non-current provisions 1,121 — 1,121
1,442 — 1,442
Provisions have been recognised where the Group has contractual obligations to provide services where the estimated
unavoidable costs to carry out the obligation exceed the expected future economic benefits to be received.
The Group has committed financial obligations arising from leases associated with its joint venture in California. The amounts
provided for represent management’s best estimate based on scenario analysis of what the Group is expecting to pay to settle
the liabilities. Management has estimated the expected liability for each site which is likely to be incurred. It is expected that
settlement will be reached for one site within 12 months and the second site within one to two years. Actual liabilities and
timings of cash flows could differ from management’s expectations. The probability-based scenario analysis showed a range of
expected liability from £1.2m to £2.0m. On transition to IFRS 16, provisions for onerous leases were derecognised and replaced
by lease liabilities.
24. LEASE LIABILITIES
2020 2019
Maturity analysis – contractual undiscounted cash flows £000 £000
Less than one year 1,085 1,685
Between 2 and 5 years 3,241 3,715
More than 5 years — 5,423
Total 4,326 10,823
The weighted average incremental borrowing rate applied to the lease liabilities was 5.75%, lowest rate being 2.75% and
highest rate of 8.45%.
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2020 2019
Lease liabilities included in the balance sheet £000 £000
Current 823 843
Non-current 3,059 6,881
Total 3,882 7,724
2020 2019
Movement in lease liability during the year Note £000 £000
At 1 January (2019 - on transition to IFRS 16) 7,724 9,445
New leases entered into 16 654 —
Reassessment of lease term 16 (2,231) —
Interest charged to the income statement – continuing operations 8 265 402
Interest charged to the income statement – discontinued operations 74 78
Lease rentals paid – continuing operations (1,219) (1,422)
Lease rentals paid – discontinued operations (436) (457)
Transferred to held for sale 11 (998) —
Movement as a result of foreign exchange 49 (322)
At 31 December 3,882 7,724
25. FINANCIAL LIABILITIES
2020 2019
£000 £000
Deferred consideration due within one year, recognised within:
Current liabilities — 500
Deferred consideration outstanding at the prior year balance sheet date represented amounts due for the acquisition of Lot.to
Systems Limited. The amount was paid in full in January 2020.
Movements on this financial liability in the year are as below:
2020 2019
£000 £000
At 1 January 500 —
Arising in the year — 1,300
Instalment payments made (500) (800)
At 31 December — 500
26. PENSION SCHEMES
The Group operates defined contribution schemes, and up until its buy-out and dissolution in December 2020, a funded defined
benefit scheme in the UK. Datatote and Lot.to employees contribute to a separate defined contribution scheme to that of
Sportech PLC employees. The Group operates a further funded defined benefit scheme in the US, two defined contribution
schemes in the US and a defined contribution scheme in Ireland.
Summary of pension contributions paid:
2020 2019
£000 £000
Defined contribution scheme contributions – continuing operations 115 60
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Defined contribution schemes
Continuing and discontinued operations
In the UK, employer contributions for Sportech are set at a maximum of 8% of pensionable salaries. A defined contribution
scheme for non-unionised employees, including eBet, is operated in the US, into which the Group contributes 37.5% of the first
6% of participant contributions. A further defined contribution scheme is available for unionised employees; the Group does not
make contributions into this scheme. A Registered Retirement Savings Plan (‘RRSP’) exists for employees in Canada. The
Group makes contributions to a limit of 50% of the first 6% of participant contributions.
Discontinued operations only
For employees in Ireland (of which there are 13), the Group contributes between 7.5% and 12.5% of salary, dependent on
length of service, into a defined contribution scheme. For employees in France and Turkey (of which there are one and seven
respectively), all pensions cover is provided through employer and employee social security contributions.
Summary of pension contributions paid:
2020 2019
£000 £000
Defined contribution scheme contributions – discontinued operations 364 351
Defined benefit schemes – discontinued operations
The Group has a defined benefit scheme in the US which is administered by an insurance company and provides retirement
benefits to employees who are members of a collective bargaining unit represented by the International Brotherhood of Electrical
Workers. Benefits are based on value times credited service.
The Group also retained a defined benefit pension scheme following disposing of certain business assets within the Football
Pools division in 2018. The scheme was formed on 6 April 2001 and was governed by a Definitive Trust Deed and Rules. It was
a Registered Pension Scheme under Chapter 2 of Part 4 of the Finance Act 2004. The scheme was contracted out of the State
Second Pension Scheme and was not open to new members. The assets of this scheme were held in an independent Trustee
administered fund. In March 2019, the Group agreed a buy-in of the scheme with Just Financial Services and the buy-out was
completed in November 2019 and as such the scheme was dissolved in December 2019.
The amounts recognised in the balance sheet within non-current liabilities in the prior year and within liabilities associated with
assets held for sale in the current year are as follows:
2020 2019
£000 £000
Fair value of plan assets 3,674 3,687
Present value of the scheme’s liabilities (4,903) (4,766)
Deficit in the scheme (1,229) (1,079)
There is a funding obligation in relation to the US defined benefit scheme whereby not less than 80% of the liability must be
represented by its assets. At the balance sheet date, that shortfall was £248k (2019: £126k) and will be settled during 2021.
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The figures below have been determined by qualified actuaries at the balance sheet date using the following assumptions:
US US UK
2020 2019 2019
Discount rate 2.5% 3.25% 1.9%
Rate of increase in salaries N/A N/A 3.3%
Rate of inflation N/A N/A 3.3%
Mortality table Pri-2012 Total Pri-2012 Total S2NxA
Dataset Dataset CMI 2018
(Employee/ (Employee/ projections
Retiree) with Retiree) with 1.5% per
Scale MP- Scale MP- annum long-
2020 2019 term rate of
improvement
The qualified actuaries who valued the scheme are Barnett Waddingham LLP for the UK and The Prudential Insurance
Company for the US scheme.
The movement in the net defined benefit obligation over the year is as follows:
Present Fair
value of value of
obligation plan asset Total
£000 £000 £000
At 1 January 2020 4,766 (3,687) 1,079
Income statement expense/(income) – discontinued operations:
– Current service cost 88 — 88
– Interest expense/(income) 147 (119) 28
– Administrative expenses — 105 105
235 (14) 221
Remeasurements:
– Currency exchange movements (256) 216 (40)
– Loss from change in actuarial assumptions 340 4 344
84 220 304
Contributions:
– Employer’s — (375) (375)
Payments from plans:
– Benefit payments (182) 182 —
At 31 December 2020 4,903 (3,674) 1,229
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
Present Fair
value of value of
obligation plan asset Total
£000 £000 £000
At 1 January 2019 6,722 (5,820) 902
Income statement expense/(income):
– Current service cost (discontinued) 191 — 191
– Interest expense/(income) (continuing) 49 (52) (3)
– Interest expense/(income) (discontinued) 183 (155) 28
– Administrative expenses (continuing) — 77 77
423 (130) 293
Remeasurements:
– Currency exchange movements (203) 161 (42)
– Loss/(gain) from change in actuarial assumptions 446 (47) 399
243 114 357
Curtailments (2,160) 2,442 282
Contributions:
– Employer’s — (755) (755)
Payments from plans:
– Benefit payments (462) 462 —
At 31 December 2019 4,766 (3,687) 1,079
Effect of change of assumptions on liability values
Under the adopted mortality tables, if the future life expectancy were to be decreased by one year the liabilities would decrease
by £11k.
If the discount rate were to be increased to 3.00% the liabilities would decrease by £223k.
Future commitments – employer contributions
The expected employer annual contributions to the schemes for the financial year ending 31 December 2021 amount to £440k
(year ended 31 December 2020: £454k).
Future commitments – benefit payments
Estimated future benefit payments for the next ten fiscal years for the US scheme are:
Less than 1 and 2 2 and 5 Over 5
a year years years years Total
£000 £000 £000 £000 £000
2020: US pension scheme 929 285 834 6,396 8,444
2019: US pension scheme 590 464 932 6,796 8,782
The weighted average duration of the US scheme is approximately 10.2 years (2019: 9.8 years).
Pension risks
Through its defined benefit pension plans, the Group is exposed to a number of risks, however now the UK plan is dissolved,
the Group is no longer subjected to inflation risk as benefits for members of the US scheme are fixed and funds are invested in a
guaranteed return investment. The remaining significant risks are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to the Pru Above Mean Curve; if plan assets
underperform this yield, this will create a deficit. The US pension scheme assets are invested in a guaranteed return fund. The
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plan purchases annuities under the GR-03607 contract at retirement. Under this contract, annuities are purchase based on a
table of fixed factors that are not subject to the rate environment at retirement, which removes volatility and risk on asset values.
Changes in the Pru Above Mean Curve
A decrease in the Above Mean Curve will increase plan liabilities.
Life expectancy
The plan’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in
the plans’ liabilities.
27. FINANCIAL INSTRUMENTS
Financial risk management policies and objectives
The key financial risks borne by the Group, and the policy of managing those risks, are outlined below:
Liquidity risk
The Group is exposed to liquidity risk and has to manage its cash requirements. In managing short term divisional liquidity risks,
cash flow forecasting is performed on a weekly basis in the operating entities and is aggregated by Group finance. This weekly
forecasting recognises committed short-term payables of the Group which are monitored and managed through regular
discussions with suppliers. Group Finance monitors rolling forecasts of the Group’s liquidity requirements to ensure each
operating entity has sufficient cash to meet operational needs. Cash surpluses are managed centrally by Group finance and
cash swept up/pushed down as cash surpluses/requirements arise.
Credit risk
The Group’s main exposure to credit risk is in accounts receivable in the Sportech Racing and Digital and Sportech Lotteries
segments and is influenced mainly by the individual characteristics of each customer. However, management also considers the
factors that may influence the credit risk of its customer base, including the default risk associated with the industry, country in
which customers operate. Credit risk is managed locally by assessing the creditworthiness of each new customer before
agreeing payment and delivery terms.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on
shared credit risk characteristics and the days past due. The expected loss rates are based on annual revenue and the
corresponding historical credit losses experienced over the past five years as annual percentages. On that basis, no loss
allowance as at 31 December 2020 (2019: £nil) was determined other than specific provisions for bad debts in trade
receivables.
The Group does not hold significant amounts of deposits with banks and financial institutions and the cash which is deposited is
spread over a few of financial institutions with Moody’s ratings of A or above (defined as upper-medium grade and subject to
low credit risk). Amounts held in cash for the Sportech Venues division are held in highly secure environments.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the Euro and US Dollar. Foreign exchange risk arises from transactions undertaken in foreign currencies, the
translation of foreign currency monetary assets and liabilities and from the translation into Sterling of the results and net assets
of overseas operations.
The Group continually monitors the foreign currency risks and takes steps, where practical, to ensure that the net exposure is
kept to an acceptable level. In doing so, the Group considers whether use of foreign exchange forward contracts would be
appropriate in fixing the economic impact of forecasted profitability. As at 31 December 2020, there were no outstanding
commitments on foreign exchange forward contracts (2019: none). The Group did not enter into any forward contracts during
the year (2019: the Group did not enter into any forward contracts).
The functional currencies of the individual entities in the Group is kept under review.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
The average rate for the US Dollar and Euro in both the current and previous reporting period are as outlined below.
2020 2019
Average Closing Average Closing
US Dollars 1.29 1.36 1.27 1.32
Euro 1.13 1.11 1.14 1.18
If the exchange rates in 2020 were comparable to those in 2019, loss after tax would have been £12,220k and the net assets
would have been £27,832k at 31 December 2020.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders, benefits for other stakeholders and to achieve an efficient capital structure to minimise the cost
of capital.
Financial assets and liabilities
At each reporting date, the Group had the following categories of financial assets and liabilities:
2020 2019
£000 £000
Financial assets measured at amortised cost 1,177 7,099
Financial liabilities measured at amortised cost (7,924) (13,009)
Maturity of financial liabilities
Except for lease obligations (see note 24) all non-derivative financial liabilities are all payable within twelve months.
28. CONTINGENCIES AND COMMITMENTS
Capital commitments
The Group had no contracts placed for capital expenditure that were not provided for in the financial statements at the current
or prior year end dates.
Operating lease commitments
The Group includes all leases on balance sheet as Right-of-use assets with a corresponding lease liability, other than leases
which are short leases (terms of 12 months or less) or low value leases (asset value of less than US$5,000). Leases that qualify
for these exemptions are included within the disclosures below.
The expenditure charged to the income statement was £67k (2019: £2k).
The future aggregate minimum lease payments under non-cancellable leases not accounted for elsewhere under IFRS 16, are
as follows:
2020 2019
£000 £000
No later than one year 50 2
Later than one year and no later than five years 10 15
Total 60 17
Other financial commitments
The Group continues to provide a performance guarantee bond in Turkey amounting to US$200k at 31 December 2020. This is
to facilitate provision of a customer service contract in the territory.
Contingent items
Tax
The Group’s activities in recent periods have resulted in material tax liabilities crystallising. The ultimate tax liability due, in all
instances, is subject to a degree of management judgement. The judgements which are made are done so in good faith, with
the aim of always paying the correct amount of tax at the appropriate time. Management work diligently with the Group’s
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external financial advisors in quantifying the anticipated accurate and fair tax liability which arises from material one-off events
such as the Spot the Ball legal case and the disposal of the Football Pools. Management have an open, transparent and
constructive relationship with tax regulators, and engage positively when discussing any difference in legal interpretation
between that of the Group and the regulators.
Certain contingent items exist at the reporting date with respect to tax liabilities as outlined below.
Irish subsistence claims
The Irish revenue have assessed the Group for €106k for income tax allegedly underpaid in relation to subsistence claims of Irish
field crew. Management believe that this assessment is incorrect and that all subsistence claims paid were made without tax
deduction in accordance with relevant regulations. An appeal is being pursued and no provision has been recorded in these
financial statements.
Other contingent items
M&A activity
Both the 2017 sale of the Football Pools division and the 2018 sale of the Group’s Venues business in The Netherlands have
customary seller warranties under the terms of the Sale and Purchase Agreements. Those warranties have been provided in
good faith by management in light of the probability of certain events occurring. The possibility of material claims being made
under the seller warranties in either deal is considered by management to be remote.
Legal
The Group is engaged in certain disputes in the ordinary course of business which could potentially lead to outflows greater than
those provided for on the balance sheet. The maximum possible exposure considered to exist, in view of advice received from
the Group’s professional advisors, is up to £0.5m (£2019: 0.5m). Management are of the view that the risk of those outflows
arising is not probable and accordingly they are considered contingent items.
29. ORDINARY SHARES
2020 2019
Authorised, issued and fully paid ordinary shares of 20p each ’000 £000 ’000 £000
At 1 January 188,751 37,750 186,751 37,350
New shares issued to satisfy acquisition of Lot.to Systems Limited — — 2,000 400
At 31 December 188,751 37,750 188,751 37,750
Potential issue of ordinary shares
The Performance Share Plan
Certain Executive Directors and senior Executives have been awarded grants to acquire shares in the Company under the PSP,
subject to performance conditions.
Movement in share awards in respect of the Performance Share Plan are shown below:
2020 2019
’000 ’000
Outstanding awards at 1 January — 2,037
Lapsed as a result of failure to meet performance conditions — (2,037)
Outstanding awards at 31 December — —
Performance conditions
The Remuneration Committee can set different performance conditions from those described below for future awards provided
that, in the reasonable opinion of the Committee, the new targets are not materially less challenging in the circumstances than
those described below. The Committee determines the comparator group for each award.
The Remuneration Committee may also vary the performance conditions applying to existing awards if an event has occurred
that causes the Committee to consider that it would be appropriate to amend the performance conditions, provided that the
Committee considers the varied conditions are fair and reasonable and not materially less challenging than the original
conditions would have been but for the event in question.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
The awards are at nil cost to the employee. Awards will normally vest on the third anniversary of the date of grant subject to the
participants’ continued employment within the Group and the satisfaction of the performance conditions noted below
2017 grant
The vesting of all of the award was dependent on the Company’s TSR over a fixed three-year period commencing 3 March
2017 relative to that of the FTSE Small Cap index (excluding investment trusts). For the purpose of calculating TSR, the base
figure is averaged over the six weeks preceding the start of the performance period and the end figure is averaged over the last
six weeks of the performance period.
A vesting schedule no less demanding than the following applied:
The Company’s TSR performance over the performance period relative to comparator index Extent of vesting
Equal to the index 25%
Between equal to the index and upper quartile Pro rata between 25% and 100%
Upper quartile or better 100%
In addition to the primary performance condition, the award was also subject to a financial underpin condition. It was
determined in March 2019 that none of the award would vest, accordingly all awards lapsed in 2019.
All PSP grants
Awards are valued using a Stochastic (Monte Carlo) valuation model. The fair value per award granted and the assumptions
used in the valuation calculation are as below:
March November March
Grant date 2017* 2016 2015
Exercise price £nil £nil £nil
Number of employees issued shares 14 19 25
Share price at date of valuation £0.988 £0.653 £0.667
Expected term (fixed) 2.67 years 3 years 3 years
Expected volatility 34.2% 43.0% 35.2%
Dividend yield 0% 0% 0%
Fair value of award £0.585 £0.433 £0.544
* The assumptions disclosed on the March 2017 award are those that were used when valuing the award at 21 July 2017 on creation of the VCP. It is this
valuation that triggers the financial statement impact of the awards in issue.
The weighted average remaining contractual life of outstanding awards under the PSP at 31 December 2020 was nil (2019:
nil). The weighted average exercise price of awards granted during the period was £nil (2019: £nil). PSP awards are not affected
by the risk-free rate input since no payment is required by the recipient and therefore no interest could be earned elsewhere.
The expected volatility is based on movements in the historical return index (share price with dividends reinvested) for the three
years prior to the award date. The dividend yield does not affect the fair value of the award as the rules of the PSP entitle a
participant to receive cash equal in value to the dividends that would have been paid on the vested shares in respect of
dividends paid during the vesting period and is therefore assumed to be 0%. See notes 5 and 6 for the total expense
recognised in the income statement for share options granted and PSP awards made to Directors and employees respectively
Value Creation Plan
On 24 May 2017, shareholders approved the creation of a new executive management incentive plan known as the Value
Creation Plan (VCP). Participants in the VCP were granted an Award giving them a future right to earn ordinary shares in the
Company based on the cumulative total shareholder return generated over the VCP performance period. The VCP provides
participants with a pool of ordinary shares with a value equal to 20% of any cumulative shareholder value created above a
compound hurdle rate of 8% per annum. However, in the event of a change of control that results in accelerated vesting in 2017
or 2018, or in the case of an Executive Director being deemed a “Good Leaver” (as defined in the VCP rules) in 2017 or 2018,
the compound hurdle rates for vesting will be 12% and 10% respectively.
Awards are expected to vest on the fifth anniversary of the deemed date of grant of the Award (for the existing awards,
1 January 2017) to the extent that any applicable performance conditions have been satisfied.
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Awards are valued using a Black-Scholes-Merton option pricing model. The fair value per award granted and the assumptions
used in the valuation calculation are as below:
Valuation date (date of award issues) 11 September 2019 29 June 2018 21 July 2017
VCP performance period start date 01 January 2017 01 January 2017 01 January 2017
End of vesting period 31 December 2021 31 December 2021 31 December 2021
Share price at period start date £0.978 £0.978 £0.978
Expected term 2.3 years 3.5 years 4.43 years
Expected volatility 40% 40% 35%
Dividend yield 0% 0% 0%
Risk free rate 0.47% 0.80% 0.51%
Fair value of each issued share in VCP £8 £279 £463
30. CASH GENERATED FROM OPERATIONS
Reconciliation of loss before taxation to cash generated from operations, before separately disclosed items:
2020 2019
Note £000 £000
Loss before tax – continuing operations (10,567) (9,661)
(Loss)/profit before tax – discontinued operations 11 (2,034) 1,231
Total loss before tax (12,601) (8,430)
Adjustments for:
Separately disclosed items (included in operating costs) 4 1,453 1,140
Depreciation and amortisation 14,15,16 8,161 7,694
Profit on sale of property, plant and equipment 15 — (1)
Impairment of assets 15,16 4,349 5,020
Net finance costs 8 625 695
Share option expense 347 1,422
Changes in working capital:
Decrease in trade and other receivables 2,791 734
Increase in inventories (179) (40)
Decrease in trade and other payables (1,060) (149)
Increase/(decrease) in customer funds 42 (607)
Cash generated from operating activities, before separately disclosed items 3,928 7,478
31. RELATED PARTY TRANSACTIONS
The extent of transactions with related parties of Sportech PLC and the nature of the relationships with them are summarised
below:
a.
b.
Key management compensation is disclosed in note 6.
The Group also invested cash into its joint ventures during the prior year as outlined in note 16, there was no cash invested
in 2020. There were no trading transactions between the Group and any of its joint ventures, and no amounts outstanding
at the reporting date.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the financial statements continued
32. RELATED UNDERTAKINGS
During the year, the Group held investments in related undertakings as follows:
Country of Registered Class of
Subsidiaries, excluding dormant companies incorporation address shares held Shareholding
Sportech Group Holdings Limited England & Wales 1 Ordinary 100%
Sportech Gaming Limited England & Wales 1 Ordinary 100%
Sportech Pools Limited England & Wales 1 Ordinary 100%
Sportech Pools Games Limited England & Wales 1 Ordinary 100%
Sportech Holdco 1 Limited England & Wales 1 Ordinary 100%
Sportech Holdco 2 Limited England & Wales 1 Ordinary 100%
Datatote (England) Limited England & Wales 1 Ordinary 100%
Lot.to Systems Limited England & Wales 1 Ordinary 100%
Playlot.to Limited* England & Wales 1 Ordinary 100%
Sportech Mauritius Limited Mauritius 2 Ordinary 100%
Sportech, Inc. United States 3 Ordinary 100%
Sportech Venues, Inc. United States 3 Ordinary 100%
eBet Technologies, Inc. United States 3 Ordinary 100%
Sportech Venues California, LLC United States 3 Ordinary 100%
Sportech Venues CA Holdco, LLC United States 3 Ordinary 100%
Sportech Games Holdco, LLC* United States 3 Ordinary 100%
Sportech Racing, LLC United States 4 Ordinary 100%
Bump Worldwide, Inc. Canada 5 Ordinary 100%
Sportech Racing Canada, Inc. Canada 5 Ordinary 100%
Sportech Racing Panama, Inc.* Panama 6 Ordinary 100%
Sportech Racing Limited British Virgin Islands 7 Ordinary 100%
Racing Technology Ireland Limited Ireland 8 Ordinary 100%
Autotote Europe GmbH Germany 9 Ordinary 100%
Sportech Racing GmbH Germany 10 Ordinary 100%
Sportech Racing Turkey Turkey 11 Ordinary 100%
Sportech Racing SAS France 12 Ordinary 100%
* Sportech Racing Panama, Inc. was dissolved on 6 January 2020. Sportech Games Holdco, LLC was dissolved on 25 September 2020, Playlot.to Limited
was dissolved on 19 January 2021.
Country of Registered Class of
Joint ventures and associates incorporation address shares held Shareholding
Sportshub Private Limited (non-trading) India 13 Ordinary 50%
S&S Venues California, LLC United States 3 Ordinary 50%
DraftDay Gaming Group, Inc (non-trading) United States 14 Ordinary 30%
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174723 Sportech Annual Report 2020 C Financial Statements.qxp_174723 Sportech Annual Report 2020 C Financial Statements 14/05/2021 13:59 Page 133
Country of Registered Class of
Dormant companies incorporation address shares held Shareholding
Sportech Trustees Limited* England & Wales 1 Ordinary 100%
Thepools.com Limited England & Wales 1 Ordinary 100%
C&P Promotions Limited England & Wales 1 Ordinary 100%
Pools Promotions Limited England & Wales 1 Ordinary 100%
Sportech Pools Competitions Company Limited England & Wales 1 Ordinary 100%
Bet 247 Limited England & Wales 1 Ordinary 100%
Pools Company Limited England & Wales 1 Ordinary 100%
Sportech Management Limited Scotland 15 Ordinary 100%
Sportech Pools Trustee Company Limited Scotland 15 Ordinary 100%
* Sportech Trustees Limited was dissolved on 13 October 2020.
Registered addresses
Number Country Address
1 England & Wales Icarus House, Hawkfield Close, Hawkfield Business Park, Whitchurch, Bristol, BS14 0BN
2 Mauritius Intercontinental Trust Limited, Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius
3 United States 600 Long Wharf Drive, New Haven, CT 06511
4 United States 1095 Windward Ridge Parkway, Suite 170, Alpharetta, GA 30005
5 Canada CSC North America Inc., 45 O’Connor Street, Suite 1600, Otawa, Ontario K1P 1A4
7 Panama Arias, Fabrega & Fabrega, Plaza 2000 Building, 50th Street, Panama
7 British Virgin Islands Trident Chambers, POB 146, Road Town, Tortola, British Virgin Islands
8 Ireland Unit 3, IDA Technology Park, Garrycastle, Athlone, Co. Westmeath, Ireland
9 Germany Nienhausenstrasse 42, 45883 Gelsenkirchen, Germany
10 Germany Katernbergerstrasse 107, 45327 Essen, Germany
11 Turkey AksuKosuyolu Cad. KalayciogluSitesi No: 19/1 Bakirkoy Istanbul
12 France 8 Rue des Freres Caudron, 78140 Velizy, Villacoublay, France
13 India Tower 2, 4th Floor, International Infotech Park, Vashi Railway Station, New Mumbai
14 United States Corporation Service Company, 2711 Centreville Road, Suite 400, Wilmington, DE 19808
15 Scotland Collins House, Rutland Square, Edinburgh, Midlothian, EH1 2AA
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Company Balance Sheet
AT 31 DECEMBER 2019
2020 2019
Note £000 £000
ASSETS
Non-current assets
Intangible fixed assets C5 503 775
Investment in subsidiaries C7 64,071 64,071
Trade and other receivables C8 6,621 2,846
Deferred tax assets 7 7
71,202 67,699
Current assets
Trade and other receivables C8 191 1,477
Income tax receivable 151 429
Cash and cash equivalents 10,597 5,699
10,939 7,605
TOTAL ASSETS 82,141 75,304
LIABILITIES
Current liabilities
Trade and other payables C9 (30,635) (21,977)
Net current liabilities (19,696) (14,372)
NET ASSETS 51,506 53,327
EQUITY
Ordinary shares 37,750 37,750
Other reserves 10,626 10,626
Retained earnings carried forward 3,130 4,951
TOTAL EQUITY 51,506 53,327
The loss after tax for the Company for the year was £2,168k (2019: £36,872k).
The Company financial statements on pages 134 to 141 were approved and authorised for issue by the Board of Directors on
31 March 2021 and were signed on its behalf by:
Richard McGuire Thomas Hearne
Director Director
Company Registration Number: SC069140
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Company Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2020
Other reserves
Capital
Ordinary redemption Other Retained
shares reserve reserve earnings Total
£000 £000 £000 £000 £000
At 1 January 2019 37,350 10,312 — 40,401 88,063
Comprehensive income
Loss of the year — — — (36,872) (36,872)
Transactions with owners
Share option charge — — — 1,422 1,422
New shares issues in relation to Lot.to Systems
Limited acquisition 400 — 314 — 714
At 31 December 2019 37,750 10,312 314 4,951 53,327
Comprehensive expense
Loss for the year — — — (2,168) (2,168)
Transaction with owners
Share option charge — — — 347 347
At 31 December 2020 37,750 10,312 314 3,130 51,506
The premium on the shares issued of £314k is recorded as a merger reserve in Other reserves.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Company Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2020
2020 2019
Note £000 £000
Cash flows from operating activities
Cash generated from operations, before separately disclosed items C11 5,002 2,355
Interest paid (118) (81)
Interest received 12 120
Tax paid 23 (9)
Net cash generated from operating activities before separately disclosed items 4,919 2,385
Cash outflows from separately disclosed items (232) (553)
Net cash generated from operating activities 4,687 1,832
Cash flows from investing activities
Dividends received 211 —
Investment in subsidiaries C7 — (4,390)
Investment in intangible fixed assets C5 — (46)
Net cash used in investing activities 211 (4,436)
Net decrease in cash and cash equivalents 4,898 (2,604)
Net cash and cash equivalents at the beginning of the year 5,699 8,303
Net cash and cash equivalents at the end of the year 10,597 5,699
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Notes to the Company Financial
Statements
C1. ACCOUNTING POLICIES
The accounting policies applied by the Company are consistent to those disclosed on pages 82 to 94 where applicable.
C2. RESULT OF COMPANY
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and have not
presented an income statement and statement of comprehensive income for the Company alone.
The individual income statement of Sportech PLC was approved by the Board on 31 March 2021.
C3. AUDITOR REMUNERATION
Fees payable to the Company auditors for the audit of these financial statements are £64k (2019: £60k). Other amounts payable
to the Company auditors during the year are disclosed in note 7 of the Group Consolidated Financial Statements.
C4. DIRECTORS AND KEY MANAGEMENT REMUNERATION
Directors Key management
2020 2019 2020 2019
£000 £000 £000 £000
Short-term employee benefits 757 978 796 1,067
Share-based payments 103 149 103 149
Accelerated IFRS 2 charge for departing management — 706 — 706
Pay in lieu of notice — 296 — 296
Post-employment benefits 20 2 20 2
Total remuneration 880 2,131 919 2,220
The Company had five employees at 31 December 2020 (2019: four).
Details of individual Directors’ remuneration and share-based incentives granted are given in the Remuneration report on pages
53 to 61. This information forms part of the financial statements. Retirement benefits are accruing under defined benefit pension
schemes for nil Directors (2019: nil). Nil Directors exercised share options in the year (2019: nil).
Key management is considered to be the Directors of the Company.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the Company Financial
Statements continued
C5. INTANGIBLE FIXED ASSETS
Software Total
2020 £000 £000
Cost
At 1 January 2020 18,103 18,103
Additions — —
At 31 December 2020 18,103 18,103
Accumulated amortisation
At 1 January 2020 17,328 17,328
Charged during the year 272 272
At 31 December 2020 17,600 17,600
Net book amount at 31 December 2020 503 503
Software Total
2019 £000 £000
Cost
At 1 January 2019 18,140 18,140
Additions 46 46
Disposal (83) (83)
At 31 December 2019 18,103 18,103
Accumulated amortisation
At 1 January 2019 17,142 17,142
Charged during the year 269 269
Disposal (83) (83)
At 31 December 2019 17,328 17,328
Net book amount at 31 December 2019 775 775
Software owned by the Company relates primarily to in-house developed proprietary pari-mutuel software serving racing
customers worldwide but also costs in relation to the implementation and customisation of the Group ERP system.
C6. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery Total
2020 £000 £000
Cost
At 1 January and 31 December 2020 183 183
Accumulated depreciation
At 1 January and 31 December 2020 183 183
Net book amount at 1 January and 31 December 2020 — —
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Plant and
machinery Total
2019 £000 £000
Cost
At 1 January 2019 224 224
Disposal (41) (41)
At 31 December 2019 183 183
Accumulated depreciation
At 1 January 2019 224 224
Disposal (41) (41)
At 31 December 2019 183 183
Net book amount at 1 January and 31 December 2019 — —
C7. INVESTMENTS IN SUBSIDIARIES
A full list of the Company’s subsidiaries and other related undertakings is included in note 32 of the Group Consolidated
Financial Statements.
At 31 December 2020, the Company held direct investments in the following entities:
Company Nature of business
Sportech Group Holdings Limited (“SGHL”) Holds investments in Group companies
Sportech Management Limited Dormant
Lot.to Systems Limited Lottery software supplier
The Company held a direct investment in Sportech Trustees Limited during the year until it was dissolved on 13 October 2020.
Movement in the book value of the Company's investments is shown below:
2020 2019
£000 £000
At 1 January 64,071 92,673
Addition — 2,014
Capital contributions — 4,390
Impairment — (35,006)
At 31 December 64,071 64,071
The addition in the prior year represents the acquisition of 100% of the ordinary share capital of Lot.to Systems Limited on
1 February 2019 for fair value consideration of £2,014k.
Analysis of capital contributions made:
2020 2020 2019 2019
£000 US$000 £000 US$000
2 January 2019 — — 1,891 2,400
5 March 2019 — — 345 450
26 March 2019 — — 1,149 1,500
31 May 2019 — — 1,005 1,300
Total — — 4,390 5,650
Each contribution was translated at the exchange prevailing at the time.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Notes to the Company Financial
Statements continued
The Directors considered the carrying value of the investments as at 31 December 2020 of £64,071k to be supported by the
underlying net assets and cash flows of the Group including those forecasts outlined in note 14 of the consolidated financial
statements. In the prior year it was concluded that as at 31 December 2019 the enterprise value of the subsidiaries of SGHL
amounted to £64,071k and as a result an impairment of £35,006k was charged to operating costs in the income statement.
Significant judgement is involved in forecasting the cashflows of the Group and if these forecasts are not achieved impairment to
the investment in SGHL would result. Principal risks of the Group are identified in the Risk Management section of the
Consolidated Financial Statements.
C8. TRADE AND OTHER RECEIVABLES
2020 2019
£000 £000
Non-current
Amounts owed by Group companies 6,621 2,846
Current
Amounts owed by Group companies 78 1,375
Other receivables 70 84
Prepayments 43 18
Current trade and other receivables 191 1,477
Total 6,812 4,323
Amounts due in more than one year are from:
2020 2019
£000 £000
Datatote (England) Limited 833 839
Sportech Inc. 2,996 —
Lot.to Systems Limited 1,337 600
Bump (Worldwide) Inc 175 177
Sportech Racing GmbH 1,280 1,230
6,621 2,846
Amounts owed by group companies due in more than one year have no fixed repayment date and carry interest charges of
Bank of England base rate plus 3%. Interest is charged quarterly in arrears and added to the loans. The Directors consider the
intercompany loans to be recoverable in full.
C9. TRADE AND OTHER PAYABLES
2020 2019
£000 £000
Trade payables 656 201
Amounts owed to Group companies 28,611 20,614
Social security and other taxes 29 20
Accruals 1,338 642
Deferred consideration — 500
Total 30,635 21,977
Amounts due to Group companies are repayable on demand and carry interest charges of Bank of England base rate plus 3%,
other than loans with the Football Pools companies. Interest is charged quarterly in arrears and added to the loans. It is
expected that the remaining loans with the Football Pools companies which are all now dormant, will be settled via dividend
payments during 2021. Given the expected settlement no interest has been charged on these payables during the year. The
payables to the Football Pools companies amount to £15,882k (2019: £13,925k).
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Deferred consideration was in relation to the acquisition of Lot.to Systems Limited on 1 February 2019. It was paid in full on
2 January 2020.
C10. CONTINGENCIES AND COMMITMENTS
Contingent items
The Company is exposed to certain contingent items for corporation tax, M&A activity and legal claims. Further details of those
are disclosed in note 28 of the Group Consolidated Financial Statements.
C11. CASH GENERATED FROM OPERATIONS
Reconciliation of profit before taxation to cash generated from operations, before separately disclosed items:
2020 2019
Note £000 £000
Loss before taxation (2,007) (36,732)
Adjustments for:
Investment income (211) —
Separately disclosed items 1,413 797
Amortisation of intangible assets C5 272 269
Impairment of investments C7 — 35,006
Finance costs 268 81
Finance income (12) (120)
Other finance expense 54 178
Share option charge 347 1,422
Changes in working capital:
Movement in trade and other receivables (2,489) 1,026
Movement in trade and other payables 7,367 428
Cash generated from operating activities, before separately disclosed items 5,002 2,355
C12. RELATED PARTY TRANSACTIONS
The Company had the following transactions with subsidiaries during the year:
2020 2019
£000 £000
Management charges received 624 631
Management charges paid (209) (65)
Royalty income received 1,463 1,967
Investment income 211 —
Interest paid on inter-company loan balances (153) (81)
Interest received on inter-company loan balances 119 71
The amount outstanding in relation to management charges at the balance sheet date was £178k (2019: £196k). All inter-
company transactions are on an arm’s-length basis.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2020
Advisors and Corporate Information
Stockbroker
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Principal bankers
Bank of Scotland PLC
10 Gresham Street
London EC4M 9AF
Wells Fargo
420 Montgomery Street
San Francisco, California 94104
Solicitors as to UK law
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London EC2A 2EW
Lawyers as to US law
Duane Morris LLP
1940 Route 70
East Suite 100
Cherry Hill, New Jersey 08003
Statutory auditors
BDO LLP
55 Baker Street
Marylebone
London W1U 7EU
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Any enquiries concerning your shareholding should be addressed to the Company’s Registrar. The Registrar should be notified
promptly of any change in a shareholder’s address or other details.
Tel: 0371 664 0300
E-mail: shareholderenquiries@linkgroup.co.uk
Company Secretary
SGH Company Secretaries Ltd
6th Floor
60 Gracechurch Street
London EC3V 0HR
Registered office
Sportech PLC
Collins House
Rutland Square
Edinburgh EH1 2AA
European head office
Sportech PLC
Icarus House
Hawkfield Business Park
Bristol BS14 0BN
North American head office
Sportech, Inc.
600 Long Wharf Drive
New Haven, Connecticut 06511
Company registration number
SC69140
Internet
The Group website can be found at www.sportechplc.com. This site is regularly updated to provide information about the
Group. The Group’s press releases and announcements can be found on the site.
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