An International
Betting Technology Business
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Annual Report and Accounts 2021
STRATEGIC REPORT
HIGHLIGHTS
REVENUE1
£22.9m
2020: £17.4m
ADJUSTED3 EBITDA1
£(1.8)m
2020: £[4.0]m
GROSS PROFIT1
£11.5m
2020: £8.7m
LOSS BEFORE TAX1
£(0.2)m
2020: £(11.9)m
PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS
ADJUSTED2 CASH AT 31 DECEMBER
£35.0m
2020: £[2.0]m
£21.9m
2020: £16.8m
1.
2.
3.
From continuing operations.
Excluding customer balances and including cash held by discontinued operations.
Excludes expenditure that management believe should be added back (separately disclosed items and share option charges) and other income.
FINANCIAL OVERVIEW
Continuing operations:
• Revenues recovered by 32% to
£22.9 million following strict COVID-19
restrictions on trading in 2020.
• Adjusted EBITDA loss of £1.8 million (2020:
£4.0 million), this excludes income from the
LEIDSA4 contract which was disposed of
on 31 December 2021.
• Loss before tax reduced to £0.2 million
(2020: £11.9 million).
4. Loteria Electrónica Internacional Dominicana S.A.
Discontinued operations:
• Revenues from the LEIDSA contract were £3.4 million
(2020: £2.6 million).
• LEIDSA adjusted EBITDA grew to £2.5 million (2020: £1.7
million), representing a recovery to almost 2019 levels
following 2020 COVID-19 impact.
• LEIDSA cash generated in the period from the contract
was £0.6 million and net disposal proceeds amounted to
£9.4 million (after disposal costs and including a working
capital settlement of £0.4.m received in 2022).
• The Global Tote and Bump 50:50 business disposals
agreed in late 2020 and early 2021 were completed in
June 2021 following a licensing transfer, revenues from the
discontinued businesses accrued to the Group during the
periods to completion.
GROUP DEVELOPMENTS
Group:
• Statutory profit for the year was
£34.6 million (2020: loss of £12.8 million).
• Cash net of customer balances was
£21.9 million (2020: £16.8 million also
including cash held by assets held
for sale).
• Capex related to continuing operations
was £0.2 million (2020: £0.3 million) and
to discontinued operations £1.4 million
(2020: £2.1 million).
• Disposals: The Group completed agreements entered into in late 2020 and
early 2021, to sell (a) the Global Tote Business to BetMakers Technology Group
Limited; (b) Bump 50:50 to Canadian Bank Note Company Limited, and (c) a
freehold property in New Haven, Connecticut (“CT”). It also entered into and
completed the sale of the terrestrial lottery contract with Lotteria Electronica
Internacionale Dominica S.A (“LEIDSA”) in the year. In aggregate providing a net
cash of £47.4 million to the Group.
• Corporate: In August, the Group moved its listing from the Main Market to the
Alternative Investment Market (“AIM”), which the Board believed was a more
appropriate venue for the Group’s reduced size. In October, the Group returned
£35.5m of cash to investors through a tender offer reducing the shares in issue
from 189m to 100m.
• Venues: COVID-19 continued to impact the business through the majority of
2021 resulting in a 28% decline in total retail betting handle versus 2019. The
focus on cost management to de-risk the business through the period continued.
• Sports Betting: The Venues business in Connecticut was ultimately left out of
the grant of sports betting licences by the State of Connecticut, which was a
huge disappointment to the Group. The State issued 10-year licences to the two
tribal casinos and the Connecticut Lottery Corporation (“CLC”). The latter being
exclusive for retail sports betting on non-tribal lands. Sportech agreed a deal in
August 2021 to become a distributor for CLC, offering sports wagering at each of
its venues, and the first bets were taken at the end of October 2021.
• Advanced Deposit Wagering: The MyWinners.com site is an element of the
Venues business serving CT residents with online pari-mutuel wagering. 123Bet.
com operates under an Oregon licence and is able to provide the same offering to
customers in multiple other States across the USA. Both businesses saw growth
as the COVID-19 restrictions in 2020 limited betting at physical venues, and that
level of trading has been maintained throughout 2021.
• Lottery: Work with LEIDSA to deliver their online retail proposition in the
Dominican Republic, which will eventually be operated by Inspired under a royalty
bearing licence, was started in the third quarter of 2021.
We are an operator and technology
supplier in the gambling market
Sportech is an operator and technology supplier in the gambling
market with two core businesses: In B2C, the Company operates
Sports Bars and other venues in the State of Connecticut USA where
it deploys its exclusive licence to offer pari-mutuel wagering in the
State and a distribution agreement with the Connecticut Lottery
Corporation to offer sports betting in the State. It also has the
exclusive licence to operate pari-mutuel betting online in Connecticut,
which it does under the MyWinners.com brand, and a general licence
for pari-mutuel betting online across the wider USA under the 123Bet.
com brand (the Connecticut business is known as Sportech Venues).
In B2C it offers the supply of a digital omni channel platform for
management of all gaming verticals. Its own in-house lottery module
is the core tenant of that platform and the main basis for sales
generation (this business is known as Sportech Digital).
CONTENTS
Strategic Report
Corporate Governance
Financial Statements
Overview
02
Directors and Officers
Business Model and Strategy 03
Risk Management
Chairman’s Statement
Operating Review
Financial Review
s172 Statement
04
05
08
13
15
16
20
Corporate Social
Responsibility Report
Corporate Governance Report 22
Report of the
Remuneration Committee
Directors’ Report
Report of the Auditors
28
41
45
Consolidated Financial
Statements
Company Financial
Statements
Advisors and Corporate
Information
53
109
IBC
1
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Overview
Sportech at a
glance
COVID-19 persisted in the USA throughout
2021 and affected the continuing operations
of the business accordingly with challenging
trading conditions for our Venues business.
We completed further actions to safeguard
the Group and progress our strategic agenda
with the completion of the disposals agreed
in the prior year and early 2021, as well as a
further disposal of our Dominican Republic
lottery contract, the move to AIM, and
return of value to shareholders through a
share buy-back. The operating base of the
Group, whilst now small, has consolidated
trading into profitable elements and, despite
COVID-19, provides a platform for future
growth and profitability.
Our performance in 2021 was in line with forecast, with
Sportech delivering on its key performance metrics
of cash management and further improving efficiency
in the operational cost base of the Group. The result
was a small cash inflow during the year as a result of
operations and, with sports betting coming in at the
end of the year, a healthy fillip to the prospects for the
future.
We will continue to evaluate prospects for new forms
of gaming in the Connecticut Venues business and
support the evolution of sports betting. The extra
footfall that sports betting is undoubtedly providing
will help us capitalise on all of our product offerings
and, post pandemic, the future of the business looks
both secure and the Group is likely to move to EBITDA
positivity in 2022 through to net cash generation in
2023.
The teams within the entire Sportech business are
invigorated by the change and operational focus
and are working incredibly hard to make Sportech
a valuable and successful business, my thanks and
congratulations go to each of them.
All of our thoughts remain with the families and friends
of our colleagues we have lost over the pandemic, and
we look forward to resetting our lives and business
through 2022.
Andrew Lindley
Chief Executive Officer
31 March 2022
22
Sportech Venues
DIVISION INFORMATION
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 from venues located across major population
centres. During 2021, the Division commenced a distribution
agreement with the Connecticut Lottery Corporation (CLC)
to offer sports betting in-venue. Key locations within the
network offer food and beverage services in premium sports
bar/restaurant environments. With 10 venues in operation
currently, the Division has the licences for 24 pari-mutuel
locations and CLC has 15 licences for sports locations.
Revenue
(£m)
Adjusted EBITDA
(£m)
Capital Expenditure
(£m)
2021
2020
21.9
1.4
—
16.2
(1.2)
—
In the table above, prior year figures are at constant currency.
Sportech Digital
Newly named Sportech Digital, includes a development team
who develop, service and operate the division’s digital omni
channel platform for gaming verticals including its own in-
house lottery module as the Group’s remaining B2B offering.
The businesses were previously included in the Sportech
Lotteries division which also included the LEIDSA contract.
Revenue
(£m)
Adjusted EBITDA
(£m)
Capital Expenditure
(£m)
2021
1.0
2020
0.3
(0.6)
(0.8)
0.2
0.2
In the table above, prior year figures are at constant currency.
Discontinued Operations
Discontinued operations consist of a prominent supplier of
technology solutions to the global regulated betting industry
(Global Tote) and an electronic raffles supplier to sports,
entertainment and non-profit / charitable organisations (Bump
50:50) as well as a lottery operating contract to a customer in
the Dominican Republic (LEIDSA). In 2021, the Divisions were
continued to be run by the Group until the transfer to new
ownership in each case was completed; with Bump 50:50
transferred on 2 June 2021, the Global Tote on 17 June 2021
and the sale of the lottery contract in the Dominican Republic
on 31 December 2021.
Revenue
(£m)
Adjusted EBITDA
(£m)
Capital Expenditure
(£m)
2021
2020
16.4
28.3
6.9
1.4
6.4
2.1
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Business Model and Strategy
THE GROUP’S STRATEGIC AIMS FOR 2022 INCLUDE:
1. Remit further free capital to shareholders.
2. Capitalise on the current and future expansion of gaming in the USA and in particular the State of
Connecticut.
3. Evaluate further corporate opportunities that deliver value and investor returns.
4. Reduce the corporate cost base in line with the reduced business structure and that of an AIM company.
5. Assess and take advantage of organic and complimentary growth opportunities that deliver high
quality returns.
Sportech remains an international betting
business that owns and operates gaming venues
in the State of Connecticut, USA, and faces the
worldwide market for the provision of technology
solutions in betting, gaming and lottery.
The Group seeks to achieve long-term shareholder value by
leveraging Sportech’s gaming licences and technologies,
as well as its brand heritage and client and regulatory
relationships.
Where appropriate, this includes investments and trading
opportunities that deliver immediate value to the asset base
and divestments that can generate both tangible investor
returns and/or proceeds that can be used to deliver growth.
In 2021, the Group exited a number of legacy business lines
that were leverageable best with significant new investment,
that a new owner could commit. In doing so, the business as
a whole and its shareholders’ positions were de-risked leaving
a streamlined and efficient base for growth.
A large number of Sportech colleagues engaged in the
businesses sold have transferred to the new owners and each
of them showed the highest levels of professionalism and
integrity throughout the process. Whilst Sportech was able
to achieve excellent value for each disposal it also ensured
that the intentions and robustness of each buyer was without
prejudice to those colleagues who, in every case, have moved
into safe hands. This was a key element of the success story
for each transaction.
The future then, will see a concentration on trading the
remaining business whilst remaining alive to opportunities in
line with stated strategy. Sportech has navigated the global
challenges of the COVID-19 pandemic and maintained strong
capital reserves. The environment seems to be optimistic for
a return to normality, or at least a ‘new normal’ where travel
and entertainment is available without onerous restrictions,
and Sportech is well positioned to take the business on into a
reinvigorated world.
VENUES
Having completed a wide-ranging restructuring, the Group
now has a strong focus on its Connecticut interests which
have benefitted during the year from the legalisation of sports
betting in the State, which took effect from October 2021,
and with that an additional product to support those provided
under its exclusive pari-mutuel licence and liquor / restaurant
licences in the State.
The US has few examples of sports bars which incorporate
betting on the main sporting events of the day and Sportech’s
unique position as a chain owner of what is, with the inclusion
of sports betting, a novel business with a new demographic of
customer, provides a demonstrable opportunity for growth.
Given this positioning, Sportech can become a beacon
example of what will undoubtedly become ubiquitous
business in the US as the race for online settles and the retail
opportunity comes into focus, adding further opportunity for
the future.
DIGITAL
ONLINE
Sportech Venues operates MyWinners.com1 online across
the State of Connecticut as a complimentary business to
the Venues, offering online pari-mutuel betting. The product
has seen steady growth over the period of the pandemic
and continues to grow. The focus for the coming year will be
upon strengthening the offer in terms of its user experience,
including better payments and customer service.
Additionally, Sportech operates 123Bet.com as a pan-USA
pari-mutuel online retail platform (where State local laws
allow). This business was assumed from a previous client in
2019 and handle has grown from c$2.7m in 2019 to c$10.1m
in 2021. It will receive the same focus as MyWinners to add to
the success of the two prior years.
LOTTERY
Sportech has been providing lottery platforms and services
for over 24 years. The disposal of the Dominican Republic
(LEIDSA) contract marked the end of the last of its direct
customer relationships in lottery, however the team, located
in Chester, England, remains a supplier of a digital lottery
platform to the buyer of the LEIDSA contract (ultimately for
that former client) under a royalty bearing arrangement and
the Group will continue to pursue opportunities with private
and national lotteries, drawing on the Sportech brand and
legacy to further leverage that technology and project
the division.
1. MyWinners.com revenues are included in the divisional breakdowns for Sportech
Venues.
33
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Chairman’s Statement
Dear Shareholder,
I am pleased again to address you as your Chairman after a year of both
challenge but, more importantly, transformation for your company.
Last year, we outlined the main strategic priorities of realising
value for our shareholders as well as pursuing opportunities to
enhance the quality of our businesses in Connecticut as the
State’s government considered the introduction of licensed
sports betting. We achieved most of our objectives in the
year of 2021 except obtaining a full sports betting licence.
Like every other business, we also continued to deal with
the challenges and consequent restrictions of the COVID
pandemic but an overall recovery from 2020 levels meant
more wagering activity and higher footfall in our venues
As previously announced, the Company’s management team
successfully sold our Global Tote business to Betmakers
Technology Group of Australia at the end of 2020 and
supported by shareholders. The transaction required a
number of regulatory approvals and was finally completed in
the middle of the year, realising over £30 million.
We also successfully agreed the sale of our charity raffle
business, Bump 50:50 to the Canadian Bank Note Company
in January 2021, realising c£5 million, and finally our lottery
contract in the Dominican Republic for £10 million to Inspired
Entertainment Inc. at the end of the year.
Clearly, these sales had a big impact on the size of the
Company’s business and activities and the management
team is now focused on reducing central costs in line with the
reduced size of our businesses.
As part of that strategy to adjust to the reduced size of the
business, the Company moved its London stock exchange
listing from the Main Market in July 2021 to the Alternative
Investment Market (AIM), which has a more flexible regime
for smaller capitalised companies. This was approved by
shareholders at the time.
These successful disposals enabled the Company to organise
a tender offer to shareholders in October 2021 returning over
£35 million. This also allowed the Company to reduce its
capital base by 47% so that there are now 100 million shares
in issue.
For several years, since the change in US federal legislation in
2018 to allow for sports betting, the Company had lobbied for
the granting of such a licence in Connecticut to complement
its sports bars and betting venues business in the State.
The Company already has an exclusive licence to offer pari
mutuel betting services in its venues and online. The State’s
government eventually granted three licences; one each to
the two Connecticut tribal casino businesses and one to the
State Lottery.
This was a very disappointing outcome but, by way of
consolation, the Company was able to obtain a ten-year
contract with the State Lottery to provide sports betting in our
venues. These services were launched in the last quarter of
2021 and so far, the results have been promising and will add
more value to our venues in 2022.
In the second half of the year, our Chief Executive Officer,
Richard McGuire and our Chief Financial Officer, Tom Hearne
both agreed to step down from their positions, as they had
achieved their major objectives in realising significant value
for shareholders. They both left the Company in September
to pursue new opportunities. They take our good wishes with
them for success in the future.
I want to thank both Richard and Tom for all their work in
helping the Company achieve the transactions listed above
and their contribution overall.
We were fortunate in promoting two internal executives to
replace both of them. Andrew Lindley, who was our Chief
Operating Officer, has become Chief Executive Officer and
Nicola Rowlands has become Chief Financial Officer. Both
Andrew and Nicola have ensured a smooth handover and
I am grateful to them both for taking the leadership of the
Company forward.
As we enter 2022, the Company’s focus is now to create
more value from its venues business in Connecticut and to
evaluate any further opportunities in the digital sphere.
We are saddened by the events unfolding in Ukraine which
have occurred after the end of the reporting period and
our thoughts are with all those affected. Sportech has no
connections through its operations with Russia or Ukraine;
we have no employees located there nor any customers or
suppliers in the region. We are however, monitoring closely
the effects of any inflationary pressure which may impact the
Group over the coming months.
I would like to thank all of our employees and Board
colleagues for their continued hard work through a period
of rapid and dramatic change for the Company, and to our
shareholders and stakeholders who have supported all
the changes we have made. Above all, I want to thank our
customers, who are the lifeblood of any business, as we seek
to improve our offerings and services to them in the coming
months and years.
Giles Vardey
Chairman
31 March 2022
44
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021 Operating Review
2021 was another difficult year coloured by the long tail of the global pandemic
and challenging trading for businesses operating leisure premises.
At the end of 2020 and in early 2021, the Group had entered
into contracts for the sale of two significant divisions –
Sportech Racing & Digital (Global Tote) and Bump 50:50.
Those contracts were contingent upon licences being
granted by the many gambling regulatory bodies that the
businesses operated under and made for a protracted period
between signing and closing the deals in June 2021. Over
the period, the Group retained the people and infrastructure
to service those businesses but with the finalisation of the
disposals, was able to resize accordingly. The move from
the Main Market to AIM was made in July and the corporate
structure was resized with Richard McGuire and Tom Hearne
both stepping down from their respective leadership roles.
Sportech is very thankful for Richard and Tom’s significant
contributions in reshaping the business over their tenures and
leaving Sportech lean and fit for the continuing journey to
cash generation.
Following completion of the two deals, the transfers of
the businesses were executed in an orderly fashion with
transitional services being carried-on to support the remaining
business through to the end of the year whilst the core teams
in Sportech were reshaped. The Group is consequently now
“right-sized” for the operations going into 2022.
Additionally, in October the Group completed a return of
capital back to shareholders that delivered £35.5m of the
tangible value, created by the disposals in the year.
A focus on maintenance of cash remains a core metric but
the Venues business is, with sports included, in a period
of change with busier operations and a new and additional
crowd of patrons to service. Moreover, the United States as
a whole remains a land of new opportunity in the gambling
sector as sports betting continues to enter the pantheon
of entertainment State by State. Sportech, as a participant
with a significant USP in its Venues business, has the ability
both to seize the immediate opportunities in Connecticut and
demonstrate its skills in doing so to position itself for other
opportunities which may arise across the rest of the Country.
Accordingly, there will be extra focus on operational efficiency
and service to ensure that the value of this USP is maximised.
The Venues business traded below the results of 2019
through the pandemic hit years of 2020 and 2021 so the first
challenge for 2022 will be to recover that ground as the world
recovers. Albeit, five venues were permanently closed through
2020 and 2021, so the overall handle target will be lower
than the full 2019 figure with the correct comparator being
the like for like venues total. In 2019, for the remaining like for
like venues, pari-mutual handle was $96.1m and in 2021 was
$89.7m (2020: $56.1m). Food and beverage revenues were
$5.6m in 2019 and $2.9m in 2021 (2020: $1.9m). Sports
betting has no comparator but handle in December was
$6.5m and growing on a trajectory that could see it mature
to levels similar to those of pari-mutuel handle in the short to
medium term. The pari-mutuel and food and beverage sales
had begun to measure up to those of 2019 in the last two
months of 2021 and although 2022 did not start well with
the Omicron surge hitting America at that time, the business
remains positive for a full recovery in 2022.
Early in the year Venues also completed the sale of its ‘Sports
Haven’ property in Connecticut; a 40,000 sq. ft. concrete
building of 1960s build that requires redevelopment. This
delivered £4.2m of cash and was another element of the
October return of cash to shareholders. With the leaseback
of the property ending in Q4 2022, it is expected that the
business will move out of the property to a new venue in the
vicinity and in doing so will create the blueprint for a future
model for the Venues business.
The online elements of the business traded above the 2019
numbers in 2020 and continuing in 2021; this being aided
by the pandemic as the locked-down population went online
to resume their leisure. The Group continued to invest in the
digital opportunities to drive acquisition and stickiness and in
the coming year will look to improve its platform offer to further
capitalise on the gains made; this part of the overall strategy
assisted the profitability of the Group again during 2021,
delivering $22.8m handle, translating to $2.0m contribution.
The UK based digital technology team worked for the first
half of 2021 on the delivery of a digital pari-mutuel solution for
an Asian customer of the now sold Racing & Digital division
and moved on post-sale to create a digital lottery platform for
the Dominican Republic customer. The Dominican Republic
business was sold on the very last day of 2021 to Inspired
Entertainment Inc. (“Inspired”) and the team will continue to
work with Inspired, as a third-party supplier, to deliver a digital
solution to the customer; this will bring a royalty revenue
stream and a strengthened platform offer to the business
once launched.
The disposal of the business in the Dominican Republic also
secured £9.4m of free cash that increased the total cash in
hand at the end of the year to £21.9m (with an additional
£0.4m of working capital adjustment to be received in Q1
2022). Some of that cash is earmarked to clear down legacy
liabilities of the Group including a potential tax liability relating
to the Football Pools business and an onerous lease in
California. Free cash then, will be circa £11m and itis expected
that some of the value created by the disposal will be returned
to shareholders in the 2022.
During 2021, capital and net cash position were considered
more crucial metrics than EBITDA due to the uncertain trading
position. Capex was kept low at £1.6m for both the continuing
and discontinued business (including capitalised software
costs of internal staff of £1.3m) and one of the costlier venues
located in Bridgeport was closed, improving efficiency in CT.
The return of cash reduced the liquid reserves of the Group,
55
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Operating Review
continued
but to a comfortable level within the context of uncertain
trading, with the future of the pandemic far from clear. Any
further return will be made with a sufficient buffer in mind to
counter a resurgence of COVID-19 and continue to optimise
both divisions.
As the Group transitions through 2022, revenues and
profitability will return to the fore as key metrics. The tail of
legacy issues that affect the difference between cash held
and ‘free cash’ on the balance sheet will be addressed and
the liabilities settled to provide a clean company and reduce
needless distraction. Whilst being mindful of events unfolding
in Ukraine and our thoughts are with those affected, Sportech
itself is not directly affected by economic and legal actions
being taken in response to the crisis. However, the Group will
monitor the ripple effects on prices and supply chains which
will likely impact the businesses to some degree.
It is difficult to provide accurate guidance on the future
outlook given the uncertainty of speed of recovery and the
short history of sports betting in Connecticut so far. However,
management are confident that trade is recovering and that
a good rate of handle and growth is being experienced in the
new sports product and that the business will meet market
expectations.
DIVISIONAL SUMMARIES
SPORTECH VENUES
Sportech Venues offers legal betting across the State
of Connecticut; (a) pari-mutuel betting on horseracing,
greyhound racing and jai alai through both online and
venue-based operations under an exclusive and perpetual
licence and, (b) sports betting under a distributorship type
arrangement with the Connecticut Lottery Corporation.
The venues operations are of two distinct types; (a) Sports
Bar/Restaurants which offer a main-steam leisure-based
experience where betting is an exciting additional customer
attraction, and (b) Off-Track Betting (OTB) shops, which are
dedicated primarily to retail gambling operations albeit with
some light refreshments and other products.
£’000
Wagering revenue
Commission from sports betting
Food and beverage revenue
Total revenue
Contribution
Contribution margin
Constant
currency
2020
2021
19,515
14,796
280
2,115
21,910
10,769
49.2%
—
1,401
16,197
7,734
47.7%
Adjusted operating expenses
(9,149)
(8,682)
Adjusted EBITDA
Capex
1,620
27
(948)
27
66
Developments during the year
COVID-19 continued to affect the business for the entire
year with closures of venues abundant across the year and
facemasks being removed in all Connecticut counties only
during December 2021 (immediately prior to the Omicron
surge) impacting footfall generally for the full year.
Staffing and food and beverage stocks were carefully
managed to reduce the impact of wasted cost, but central
costs and rents were more difficult to keep in line with
trading, and therefore, the impact of COVID-19 on the overall
profitability of the Venues operation was high.
Internet traffic was increased as a result of COVID-19, albeit
not sufficiently to negate the entire impact on the terrestrial
business, however handle has remained trading at 35.3%
above 2019 levels through additional marketing and closer
management of individual customers.
During March 2021, the State of Connecticut approved
new laws on gaming for the state with the inclusion of
grants of sports betting licences; something Sportech had
been campaigning to be a part of for a number of years.
Unfortunately, Sportech was not included in the grants, which
were secured only by the two tribal nations in Connecticut (for
online betting across the state and terrestrial betting limited
to their tribal lands) and the Connecticut Lottery Corporation
(“CLC”), itself an emanation of the state (for online betting
and terrestrial betting across the state). This was obviously a
massive blow for the business and Sportech was considering
its response to its legitimate expectation to be considered
for a licence when the opportunity to participate in sports
betting was offered by CLC. The deal struck delivered
Sportech Venues the right to participate in the new sports
betting product that it had been waiting for as a commission-
based distributor for CLC, as well as a small share of CLC’s
online revenues to recognise the link between terrestrial and
online participation. Crucially, any need for lengthy, costly and
potentially risky litigation relating to the administrative decision
of the state was averted.
The team readied the venues for launch within a month of the
CLC deal, which was signed in August, and CLC’s licences
were granted at the end of October when Sportech took its
first sports bets in the Stamford venue. Roll out to all venues
continued into November and by the third week of the month
all venues (except Norwalk, which will not take sports bets
due to local restrictions) were trading sports.
$4.2m of sports betting handle was taken through November
2021, following which total sports handle increased by over
$2m per month through to the end of January 2022, which
marked the end of NFL season. Trading thereafter has levelled
off in line with expectations (as January was the anticipated
high watermark for the initial surge in sports betting). Venues’
footfall has increased considerably, particularly in the bar /
restaurants which are notably busier with a demographic shift
toward younger sports betting patrons.
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021 The handle to profit ratio from sports is poorer than those
obtained from pari-mutuel as Sportech are only entitled to a
share of CLC’s profits as the distributor, however, it provides
another strong vertical and attracts new patronage to the
venues that is not limited to the sports products and therefore
leverages both the existing products with new sales and
existing cost base with new revenues, and thus synergises the
entire operation.
Looking forward
Sport and capturing the revenues of its followers is clearly
the key mantra for the future of the Venues business and we
expect the shape of the business to change as this product
beds in.
The immediate signs of improvement in the venues are
strongest in the bar / restaurant formats where the sports
patron demographic is the primary target audience.
The management team will therefore be assessing the
development of this trend throughout the year and planning
for optimisation of the mix of formats and locations of venues
to better capture the sports market without detraction from
the mainstay earnings of pari-mutuel betting.
The freehold property in New Haven Connecticut (known as
“Sports Haven”) was sold during the year and a lease through
to the last quarter of 2022 has kept operations there. It is
expected that Sports Haven will close in the year and a new
bar/restaurant will be opened locally to replace it (along with
offices to house management and support staff). The result
will be the most up to date iteration of the bar / restaurant in
the estate and will capitalise on the learnings of the others and
potentially provide a blueprint for any future investment in the
business.
SPORTECH DIGITAL
Sportech Digital now encompasses the two digitally focused,
small, non-CT based businesses of (a) a US facing B2C
trading operation in the form of 123Bet.com, which was
previously a white-label customer of the discontinued Racing
and Digital business and was brought in-house in 2019, and
(b) a B2B operation based in Chester, UK, that faces markets
worldwide with an ultra-modern and proprietary platform for
lottery management that can also integrate and manage any
other gambling vertical.
123Bet.com continues to grow, operating with thin
management and marketing budgets derived from its own
profits. It has had success relative to its size and is ready for
the offer to be refreshed and the business taken to the next
stage of growth.
The Chester team is pursuing opportunities primarily in the
lottery space with private and national lotteries to develop the
business, 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
Constant
currency
2020
295
211
2021
1,032
408
Contribution margin
39.5%
71.5%
Adjusted operating expenses
Adjusted EBITDA
Capex
(987)
(579)
169
(984)
(773)
230
Developments during the year:
The Dominican Republic (LEIDSA) lottery supply contract was
sold during the year. The Chester team has worked in the
year to develop an online sales platform for the LEIDSA client
with local capabilities. It continues to do so, with Inspired
Entertainment (the buyer), and will licence the delivered
product to Inspired who will manage it post-delivery and pay a
royalty for doing so.
123Bet.com has maintained significant traction that it enjoyed
during the beginnings of the pandemic when it saw an influx of
players from Puerto Rico whilst the local cash betting venues
were closed.
Looking forward
The Board will continue to evaluate both businesses and seek
opportunities to build on their foundations and enhance the
products through innovation, collaboration and/or investment.
GROUP OUTLOOK
Tentatively, the pandemic that so tested our organisation (and
the world) may peter out in 2022 and provide everyone in
Sportech with new purpose in a reinvigorated business.
The Board’s core strategies are clear in taking the current
opportunities in Connecticut, looking at corporate and trading
opportunities to create value, reducing costs and returning
cash to shareholders.
The way forward is clear and simple, and the Board and
management remain fully engaged and focused on delivering
these objectives through 2022.
Andrew Lindley
Chief Executive Officer
31 March 2022
77
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Financial Review
INCOME STATEMENT – DETAILED VIEW
£’000
Service revenue
Sports betting commission
F&B revenue
Total revenues
Cost of sales
Gross profits
Marketing and distribution costs
Contribution
Contribution margin %
Adjusted operating expenses3
Impact of FX on reported earnings
Adjusted EBITDA
Separately disclosed items
Other income
Non-cash items:
Share option charges
Depreciation
Impairment of property, plant and equipment
Reversal of impairment of property, plant and equipment
Amortisation
Amortisation of acquired intangibles
Total – non-cash items
LBIT
Net finance income/(charges)
LBT
Taxation – continuing operations
Result after taxation – continuing operations
Result after taxation – discontinued operations
Profit/(loss) for the year
Adjusted loss before tax for the year from continuing operations1
2021
20,547
280
2,115
22,942
(11,489)
11,453
(276)
11,177
48.7%
Restated
Reported
20202
15,900
—
1,472
17,372
(8,717)
8,655
(311)
8,344
48.0%
Constant
Currency
2020
15,091
—
1,401
16,492
(8,276)
8,216
(281)
7,935
48.1%
(12,960)
(12,379)
(11,791)
(179)
(4,035)
—
(1,783)
(1,101)
4,101
(334)
(982)
—
335
(129)
(509)
(1,619)
(402)
156
(246)
(192)
(438)
35,001
34,563
(3,358)
—
(4,035)
(229)
—
(347)
(1,621)
(4,349)
—
(276)
(509)
(7,102)
(11,366)
(557)
(11,923)
1,055
(10,868)
(1,964)
(12,832)
(6,533)
1.
2.
Adjusted loss before tax for the year from continuing operations is the aggregate of adjusted EBITDA, share option charges, depreciation, amortisation (excluding amortisation of
acquired intangibles), and certain finance charges (see note 1 for reconciliation).
Prior year comparatives have been restated to exclude the results of the LEIDSA contract which have been included with the results of the Global Tote business and Bump 50:50
within profit/(loss) after taxation from discontinued operations.
3.
Adjusted operating expenses exclude depreciation, amortisation, impairments, share option charges, other income and separately disclosed items.
88
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
REVENUE – CONTINUING OPERATIONS
£’000
Wagering revenue
Sports betting commission
F&B revenue
Total Sportech Venues
Total Sportech Digital
Total revenues
2021
19,515
280
2,115
21,910
1,032
22,942
Restated
Reported
2020
15,596
—
1,472
17,068
304
17,372
Constant
Currency
2020
14,796
—
1,401
16,197
295
16,492
Revenue from continuing operations increased by 39% on a constant currency basis. In Venues, the land-based operation was
shuttered for over three months in the prior year and had venue capacity restrictions imposed from July 2020 through most
of 2021, as well as mask mandates and work from home orders in place in the State of Connecticut. However, despite the
restrictions, revenue recovered to near 2019 levels. The online revenue in Connecticut fell by 5% in 2021 from 2020 but was up
35% on 2019, having maintained customers who migrated from in person to online wagering during 2020.
ADJUSTED EBITDA – CONTINUING OPERATIONS
£’000
Sportech Venues
Sportech Digital
Central costs
Adjusted EBITDA before sports betting investment
Sports betting investment
Adjusted EBITDA
Restated
Reported
2020
Constant
currency1
2020
(1,085)
(762)
(1,927)
(3,774)
(261)
(4,035)
(948)
(773)
(1,890)
(3,611)
(245)
(3,856)
2021
1,620
(579)
(2,564)
(1,523)
(260)
(1,783)
Sportech Venues largely recovered in 2021 from the strict restrictions which were in place in 2020. Cost reductions implemented
in 2020 were maintained wherever possible which also contributed to the EBITDA recovery. Costs were reduced in the Digital
division as well as revenue growing from 123Bet.com, contributing to the reduced EBITDA loss. Central costs increased due to
a significant increase in Directors and Officers insurance which was experienced market wide.
Sports Betting investment represents the lobbying costs 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.
99
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Financial Review
continued
DISCONTINUED OPERATIONS
In addition to the Global Tote and Bump 50:50 businesses, whose disposals were agreed on 24 December 2020 and
31 January 2021, respectively and were held for sale as at 31 December 2020, the Group also agreed and completed the
disposal of its contract with LEIDSA (Dominican lottery) on 31 December 2021.
All three disposals were completed by 31 December 2021 and all consideration was received apart from the net working capital
settlement for LEIDSA (£0.4m, received in Q1 2022). The disposals signal a departure from major business lines in which the
Group previously operated. Accordingly, they have been treated as discontinued operations, in accordance with IFRS 5, in these
financial statements.
The table below shows the results of the discontinued operations.
£’000
Revenue
Costs
Adjusted EBITDA
Depreciation and amortisation
Profit on sale of assets
Other income
Separately disclosed items
Finance (costs)/income
Profit/(loss) before tax
Taxation
Profit/(loss) after tax
Global
Group
2021
12,245
(8,140)
4,105
—
68
1,057
(371)
(24)
4,835
(195)
4,640
Bump
50:50
2021
810
(487)
323
—
—
—
—
78
401
–
401
LEIDSA
2021
3,364
(913)
2,451
(372)
47
—
—
—
2,126
(791)
1,335
Total
2021
Global
Tote
2020
16,419
25,052
Bump
50:50
2020
703
LEIDSA
2020
Total
2020
2,594
28,349
(9,540)
(19,525)
(1,598)
(857)
(21,980)
5,527
(5,083)
—
—
(1,159)
(113)
(828)
(528)
6,879
(372)
115
1,057
(371)
54
7,362
(986)
6,376
(895)
(291)
—
—
(65)
45
—
1,737
(381)
6,369
(5,755)
—
—
—
—
(758)
598
—
—
(1,224)
(68)
(678)
(1,286)
(1,964)
(1,206)
1,356
(1,356)
(1,206)
The trading from the discontinued operations through to disposal date accrued to the Group which benefited the Group’s cash
position. The above disclosures for Global Tote and Bump 50:50 differ from those disclosed in the half year accounts following
additional information becoming available after the approval of the Interim Report, a reconciliation will be provided in the 2022
Interim Report.
In addition to the discontinued operations above, the disposal of our New Haven freehold property in Connecticut, USA for
consideration of circa £4.3m (US$6.0m) was completed on 28 April 2021. The sale and purchase agreement included 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 has a monthly rental of circa £36k (US$50k) per month. The profit on disposal of £2,575k has been recorded
within other income in the income statement.
1010
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021 SEPARATELY DISCLOSED ITEMS
£’000
Included in operating costs – continuing operations
Onerous contract provisions and other losses resulting from exit from Californian operations
Restructuring and redundancy costs
Corporate activity costs
Costs in relation to Spot the Ball VAT refund
Costs in relation to exiting the Group’s interests in India
Costs in relation to the Group’s move to AIM
UK defined pension scheme buy-out
Discontinued operations
Included in operating costs
Included in finance costs – continuing operations
Interest accrued on corporate tax potentially due and unpaid at the balance sheet date on
STB refund received in 2016
Interest paid on VAT settlement reached in 2020
2021
Reported
2020
91
625
21
10
13
341
—
1,101
—
—
118
44
65
—
2
229
371
1,224
150
—
150
150
83
233
1,622
1,686
The Group continues to focus on resolving legacy issues and reducing ongoing separately disclosed items. The Group’s
lease issues in California have been resolved in the year and in early 2022. The Group has been resized to reflect the reduced
operations following the disposals in the year and in response has moved its listing from the Main Market to AIM during the year.
OTHER INCOME
Other income includes the profit on disposal of Sports Haven (£2,575k), credits received against the US payroll through the
CARES Act as amended on 27 December 2020 (£1,426k in continuing operations and £1,057k in discontinued operations) and
a contract settlement (£100k). All have been excluded from Adjusted EBITDA due to the one-off nature of the credits and the
fact the amounts would distort comparability of the results of 2021 when analysing underlying performance.
TAXATION
The current tax expense for the year in continuing activities was £239k being mainly state taxes payable in the US. The deferred
tax credit for the year was £47k within continuing activities; relating to the recognition of timing differences in the US on the
Group’s former joint venture in California net of deferred tax liability release on acquired intangibles. The Group continues to not
recognise deferred tax assets on gross timing differences of £14,225k (2020: £35,745k), £12,016k being in the US and £2,209k
being in the UK. A significant amount of the timing differences were utilised in the year against profits on disposal in the US
meaning no tax was payable of those disposals.
Tax paid in the year of £105k in continuing operations is mainly taxes in the US both federal and state, a further £924k was paid
by discontinued operations, being mainly withholding taxes in the Dominican Republic. A tax refund of £1,442k was received in
February 2021 in relation of overpaid prior year UK taxes in relation to the disposal of the Football Pools.
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 balance is US taxes payable for 2021.
1111
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Financial Review
continued
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:
Net proceeds from disposal of Sports Haven
Net proceeds from disposal of Global Tote
Net proceeds from disposal of Bump 50:50
Net proceeds from disposal of LEIDSA contract
Less:
Other Acquisition, disposal, and JV items
Capitalised software
Property plant and equipment (net of proceeds from sales)
Separately disclosed items and other income (net)
Working capital and other
Tax received net of tax paid and net interest received
Share buy-back including expenses
FX impact
Net cash flows in year
Opening cash, excluding customer balances
Closing cash, excluding customer balances
2021
(1,783)
6,879
5,096
(1,512)
3,584
4,193
22,786
4,644
9,417
—
(1,012)
(582)
76
(2,418)
438
(35,880)
(171)
5,075
16,837
21,912
2020
(4,035)
6,369
2,334
(1,655)
679
—
6,180
—
—
(500)
(1,650)
(753)
(484)
1,552
(1,100)
—
(72)
3,852
12,985
16,837
Net cash inflow (excluding movement in customer balances) in the year was £5,075k. Total proceeds from disposals in the year
net of cash disposed of and disposal costs was £41,040k with £6,180k having been received late in 2020 on account, bringing
the total net cash in of £47,220k. Capex in the year was reduced following the disposal of Global Tote and Bump 50:50. Other
income includes inflows for CARES Act credits of £2,483k after the US Federal Government amended the legislation from mid-
2020 to make it more wide ranging and enabling the Group to claim credits for 2021 US payroll. Net tax received of £413k was
a tax refund of £1,442k net of tax paid of £1,029k, and net interest received was £25k.
Finally, a significant amount of the disposal proceeds received in the year were distributed to shareholders in a tender offer
which completed in October 2021, following a Court Approved reduction of capital process to create distributable reserves in
the Sportech PLC company, by cancelling its capital redemption reserve of £10.3m and reducing the nominal value of each
share from 20p to 1p.
Nicola Rowlands
Chief Financial Officer
31 March 2022
1212
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021 SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and of its
members as a whole 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 and other stakeholders in the long term. We
explain in this annual report, and below, how the Board engages with all stakeholders.
•
•
•
The Directors understand 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, the Directors consider all
decisions in the light of section 172 and review its application within each of the reports in the Annual Report. 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 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 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 faces staff and management via Board updates and actively encourages dialogue and feedback. The Chair
and Independent NED will both visit operations again in 2022, meeting customers as well as employees in field operations,
and human resources. This helps the Board open direct lines of communication. Such visits were curtailed in 2020 and
2021 as a response to COVID-19.
• 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.
•
Relations with key stakeholders such as employees, contractors, shareholders, regulators, customers, local communities
and suppliers are considered in more detail in the Corporate Responsibility Report on page 20.
The key Board decisions made in the year are set out below:
Significant events/
decisions
Key s172 matter(s)
affected
Actions and impact
De-listing from
LSE’s Main Market
and listing on AIM
Shareholders,
employees, regulators,
suppliers
• Shareholder consultation took place in accordance with regulatory
requirements.
• Employees were kept informed of the process once announced and briefed on
Employees, customers,
regulators, state
governor,
shareholders
Sports betting
contract with CLC
and decision not to
pursue litigation
in relation to a
full licence for
Sportech
advantages.
• Key suppliers and regulators were updated informally in response to questions
raised.
• A lower cost base and more appropriate market for share trading.
• The legislation proposed in March 2021 made it clear that Sportech would
not be included in the grant of sports betting licences in Connecticut, but
that the Connecticut Lottery Corporation would have the right to sub-licence
retail sports betting to Sportech; a deal that was concluded in August 2021.
Sportech concluded that this arrangement was acceptable to the Group as
opposed to protracted litigation with the State.
• Sportech Venues commenced operation of sports betting in its Venues in
October/November 2021 which has added valuable additional revenues and
efficiencies to its existing operations, supporting all stakeholders.
1313
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS SECTION 172 STATEMENT
continued
Significant events/
decisions
Key s172 matter(s)
affected
Actions and impact
Reduction of
capital
Shareholders
• The Company applied for a reduction in capital during the year to create
distributable reserves to support the return of capital.
• The reduction was approved by shareholders and subsequently by the Scottish
Court.
• Facilitation of the buy-back and appropriate capital maintenance.
Shareholders
• The Board approved a £35.5m return of capital to shareholders through a share
Return of capital to
shareholders
buy-back and subsequent cancellation of the repurchased shares.
• The Board ensured that the Company retained sufficient funds for ongoing
operations, investment plans and liabilities of the Group.
• Tangible value delivered to all shareholders and de-risked their investments in
the Group.
• Shareholder updates were announced in accordance with regulatory
requirements.
• Employees were briefed on strategy and impact and kept updated on
progress of the transaction and what was required for the transition of
ownership.
• The customer was engaged in the transaction process and gave its
permission to execute the business sale.
• Key suppliers were also engaged in the process to ensure the
continuity of the business during and following the disposal.
• Monetised the full contract duration and de-risked delivery which was
entirely reliant upon a third party.
Disposal of
Sportech’s “LEIDSA
lottery contract”
Shareholders,
employees,
customers, suppliers
1414
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021 Directors and Officers
ANDREW LINDLEY
Chief Executive Officer
Nationality and residence:
Date appointed to the board:
UK
August 2021
Andrew Lindley was named CEO in September 2021. He
began his career in gambling in 2005 as General Counsel
for the UK Tote, steering it through to eventual privatisation
in 2011 and having also moved into a business role as the
Group Commercial Director during his tenure. Andrew co-
founded successful lottery betting and technology businesses
including Lottoland.com and Lot.to, has served as non-
executive director on a number of film, media and PLC boards
(including Turf TV and SiS in the gambling sector) and remains
a UK registered solicitor.
GILES VARDEY
Non-executive Chairman of the Board, Chairman of the
Nomination Committee and Chairman of the
Audit Committee
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.
NICOLA ROWLANDS
Chief Financial Officer
Nationality and residence:
Date appointed to the board:
UK
August 2021
Nicola Rowlands was named CFO in September 2021. She
joined Sportech in November 2010 to head up Group Finance
and support the Executive team for the enlarged international
business following the acquisition of Sportech Racing. Nicola
qualified as a Chartered Accountant with PwC and after four
years of auditing businesses varying in size from small owner
managed businesses to complex international groups, she
made the move into industry to Parkwood Holdings plc,
where she held various roles including Finance Director of the
landscaping and arboriculture subsidiary and latterly Group
Financial Controller. Nicola is also a qualified tax advisor.
BEN WARN
Independent Non-Executive Director and Chairman of
the Remuneration Committee
Nationality and residence:
Date appointed to the board:
UK
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 (C), Nomination Committee
(C), Remuneration Committee
Committees: Audit Committee, Nomination Committee,
Remuneration Committee (C)
C – Chair
15
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT 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 feed back to the Board. The Board identified further risks within
the Product category during the year given the introduction of Sports Betting in Connecticut as explained in the table below. The
“Technology” risk has also been amended to “Third party technology” given the sale of the Group’s Global Tote division during
2021, and it’s now a third-party relationship with Global Tote as its technology provider.
In addition, the wider use and enhancement of digital technology across the Group increases the risks associated with
information and cyber security, with an increasing risk from legacy system vulnerabilities, social engineering and phishing.
We have implemented corporate cyber security systems, governance and processes which are supplemented by incident
management, disaster recovery and business continuity plans, all of which are regularly reviewed to be able to respond to
changes in the threat landscape and organisational requirements.
“Customer Concentration” risk has also been removed as a principal risk following the sale of the Group’s largest contract on
31 December 2021, to which this risk referred. Finally, the risk Failure to implement Sports Betting Strategy following the repeal
of the Professional and Amateur Sports Protection Act (“PASPA”) has been updated to “Political Marginalisation in Connecticut”,
given the changes in the legislative and political environment seen during 2021.
1616
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021 Although the Board does expect the Group to be impacted by rising pricing and potentially some supply chain disruption in food
and beverage, it does not consider that the potential impacts from the events unfolding in Ukraine to be an emerging significant
principal risk to the Group.
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
Regulatory
Product
The Group holds licences in the USA (principally
Connecticut) for pari-mutuel gambling and sale
of liquor. It also retails sports bets under a licence
held by The Connecticut Lottery Corporation. 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 personnel, the loss of the
CLC contract and impact the Group’s reputation.
Data protection
Sportech holds personal data of employees and
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 in the CT Venues has
been in decline (at a revenue level) for some
years, following a trend in the USA as a whole.
Horseracing as a product has struggled to
deliver growth and if interest in the product
leads interest in the wagering, then the decline
in revenues is likely to continue. Following the
commencement of Sports Betting in Connecticut
there is potentially a risk to existing customer
spending on horseracing and greyhounds
products transferring to sports (both in venues
and online). The quality of earnings from the
CLC deal on sports is 4-5x lower on sports than
the horseracing / dogs (pari-mutuel) products
with the attendant risk to profitability of the CT
business.
The Chief Executive Officer oversees
regulatory and legal compliance. 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 two-factor access controls in place to
reduce risk.
In terms of the ongoing effect of the
reduction of the horseracing market, the
strategies available to management are (a)
horseracing – to capture greater percentage
of market share versus competitors to
mitigate the revenue reduction impact on our
business. (b) diversify products. Strategy (a)
is credible online but unlikely to be achieved
in venues where each location is a de-facto
local monopoly. Strategy (b) is credible both
online and in venue, however there are
licensing and political challenges to adding
betting product in venues, so a focus on
other lines of business to leverage the venues
operations will be considered.
Management is monitoring the impact of
sports betting on pari-mutual revenues
closely and will introduce techniques to
upsell the pari- mutuel products where
cannibalisation is occurring.
There is potential that the footfall increase
from the introduction of sports betting in
venue could impact pari-mutual handle
favourably as filler product to bet on between
sporting events.
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GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT Risk Management
continued
Risk area
Description
Mitigation
Mitigated
rating
Third Party
Technology
The Group is dependent upon third parties
(i.e. Global Tote) for the effective delivery of its
consumer services, both in Venues and Online.
Group revenue is at risk if the technology
products are not competitive or experience
failures.
Growth through innovation is entirely dependent
upon third parties.
Foreign
Exchange
The bulk of the business is generated in
North America.
The Group’s results are reported in GBP.
Political
marginalisation
in Connecticut
We have seen through the sports betting process
that our core competitors in CT (casinos) have
the political weight to secure exclusive right to or
the exclusion of Sportech from enhancements to
the gambling market.
The largest risk to the CT business is the potential
for horseracing and greyhounds to be included in
‘sports’ for the purposes of sports betting. This
will no doubt enter the political agenda at some
point in this 10-year licence cycle for sports.
In the event that this happens, the migration
(cannibalisation) of our pari-mutuel handle to
sports will be exponential / potentially fatal.
1818
In venues, there has been little innovation in
product or means of delivery for some years.
The former being an industry led issue as the
totes themselves are track owned and the
latter being a supplier issue.
Online is a constantly changing platform
and we have seen slow rates of adoption
of new product / product enhancement or
additional verticals from our supplier and little
enhancement of the platform as a result.
In terms of mitigating steps, management will
look at the means of enhancing the customer
experience both online and in venue.
This requires a focus on the supplier in terms
of their service level agreements, road map
for delivery of enhancements and a focus on
collateral enhancements through customer
service and/or additional technology
solutions that are not linked to the existing
technology.
The Group is able to migrate its contract with
third parties to other suppliers at the end of
contract terms and has punitive clauses in
service level agreements to compensate for
any service failures.
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.
The aspirations of the business insofar as
growth in CT have been concentrated in
the gambling side of the business and the
promise of new product. Whilst we can
continue with an aspiration to secure new
gambling product, management must also
look to non-gambling opportunities given the
political backdrop.
In terms of horseracing for sports, we retain
the political lobbying resource in CT for the
time being, both as our ‘eyes’ on the political
scene for early warnings of this arising, but
also to start pre-emptive lobbying as soon
as it does.
6
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021 Risk area
Description
Mitigation
Mitigated
rating
Global
Pandemics
For our revenue, we rely on racetracks and
sports events to be operating and our Venues
locations to be open. Most horse racing was
suspended 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.
All of our venues in Connecticut were closed (our
online offering and telephone betting continued
to trade).
We began opening Venues locations in late July
and early August 2020, and sporting events
started to take place again (but generally without
audiences).
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 in Q2 2020, mostly
in field operations for Global Tote and at
our Venues locations. We suspended all
travel and closed all 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.
We saw the return of the impact of the Pandemic
through winter 2020/2021 and although we did
not have to close Venues again, restrictions (such
as required mask wearing) did continue to impact
operations.
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.
8
Our online, mobile and phone betting
platforms remained available throughout the
crisis and saw significant growth.
The Group delivered a significant reduction
in costs in 2020 to partially offset severe
revenue declines, and we sought support
from governments globally where available.
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 if required.
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Corporate Social
Responsibility Report
The Group endeavours to act responsibly for all its
stakeholders, including not only its shareholders, employees,
and its customers but the wider public, regulators and the
environment.
The Sportech Venues division holds licences for business-
to-consumer activity for pari-mutuel betting on horse and
greyhound racing in Connecticut, USA.
The Chief Executive 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.
Beginning in 2019 and continuing to date, the Company took
comprehensive measures 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 UK and the EU
and CCPA in California, and has 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 2021 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. In compliance with the SECR we are
disclosing all the Group’s greenhouse gas (‘GHG’) emission
sources.
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. 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. 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.
UK GHG EMISSIONS DATA
(continuing operations)
Scope 2 (tonnes CO2e)³
Electricity, heat, steam and
cooling purchased for own use
Intensity metric (tonnes of
CO2e per £m of sales)
2021
2020
2,402
2,839
104.7
172.1
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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 2019 (“the 2019 Regulations”)
to report on greenhouse gas (“GHG”) emissions. The Group
has calculated an intensity ratio for 2021 of 104.7 which is
2,402 tonnes of CO2 divided by the Group’s revenue from
continuing operations of £22.9m, compared to a prior year
ratio of 172.1, which is calculated as 2,839 CO2 tonnes
divided by revenue at constant currency from continuing
operations of £16.9m. The Group’s intensity ratio has
decreased by 39.2% due to closure of venues in 2020 which
still needed heating despite no revenue generation, as well
as the closure in 2021 of an inefficient old venue, although
revenue was transferred to nearby venues.
Of the emissions noted in the table, minimal were generated
in the UK as the Group only has one small, efficient office
in the UK. 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 supports good causes in the communities where
our customers and employees live and our businesses
operate, and remains committed to identifying further
opportunities to continue this support.
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 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.
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.
With the outbreak of the pandemic from March 2020,
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.
21
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Corporate Governance Report
Chairman’s Introduction
I am pleased to present the Corporate Governance Report
as Chairman of Sportech PLC being ultimately responsible
for corporate governance in the Group. Sportech is
committed to a high standard of corporate governance and,
through the period to the de-listing from the Main Market of
the London Stock Exchange to its Alternative Investment
Market (“AIM”), had complied with the provisions of the 2018
UK Corporate Governance Code (the ‘Code’), however the
Company has now adopted the Quoted Companies Alliance
Code (the “QCA Code”), which is considered more
appropriate for a Company of Sportech’s size. This report
describes how the Company implements and addresses the
ten principles of the QCA. More information can be found on
the Company’s website (https://www.sportechplc.com/
investors/corporate-governance). It is the policy of the Board
to manage the affairs of the Company in accordance with
the principles of the QCA Code so far as the Board is able
and believes it is practicable.
Board Composition
Giles Vardey
Non-executive Chairman (Considered
to be Independent)
Ben Warn
Andrew Lindley
Nicola Rowlands
Non-executive Director (Considered
to be Independent)
Chief Executive Officer (Not
independent)
Chief Financial Officer (Not
independent)
The Board believes that the size and complexity of the
Group does not require additional independent
non-executives and that the experience and knowledge of
the current non-executives is sufficient to ensure good
governance.
Role of the Board
The Board is collectively responsible for the long-term
success of the Group. It provides entrepreneurial leadership,
sets Group strategy, upholds the Group’s culture and values,
reviews management performance and ensures that the
Group’s obligations to shareholders are understood and met.
How the Board Operates
The Executive Directors are responsible for business
operations and for ensuring that the necessary financial and
human resources are in place to carry out the Group’s
strategic aims. The Non-executive Directors’ role is to
provide an independent view of the Group’s business and to
constructively challenge management and help develop
proposals on strategy. The Board as a whole reviews all
strategic issues and key strategic decisions on a regular
basis. Control over the performance of the Group is
maintained through evaluation of financial information; the
monitoring of performance against key budgetary targets;
and by monitoring the return on strategic investments.
The Chairman takes responsibility for ensuring that the
Directors receive accurate, timely and clear information.
Directors are aware of their right to have any concerns
recorded in the Board minutes.
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 Company Secretary
provides minutes of each meeting.
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The following table shows Directors’ attendance at scheduled Board and Committee meetings in the period under review:
Remuneration Audit Nomination
Main Board Committee Committee Committee
Number of meetings during 2021: 13 1 3 1
Executive Directors
Andrew Lindley Appointed 27 August 2021 4 (4) n/a n/a n/a
Nicola Rowlands Appointed 27 August 2021 4 (4) n/a n/a n/a
Richard McGuire Stepped down on 13 September 2021 9 (10) n/a n/a n/a
Thomas Hearne Stepped down on 13 September 2021 10 (10) n/a n/a n/a
Non-executive Directors
Giles Vardey Appointed to the Audit Committee
on 31 May 2021 13 1 2 (2) 1
Chris Rigg Stepped down on 31 May 2021 4 (4) 1 1 (1) n/a
Ben Warn 12 (13) 1 3 1
Note: number in brackets represents maximum number of meetings that could have been attended due to appointment or resignation dates.
Matters Reserved for the Board
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.
Division of Responsibilities
There is a clear division of responsibilities between the
Chairman and CEO. The Chairman leads the Board and is
responsible for its effectiveness and governance. He sets the
Board agenda and ensures that sufficient time is allocated to
important matters, in particular strategic issues. The CEO is
responsible for the day-to-day management of operations
and the recommendation of strategy to the Board. The CEO
is then responsible for implementing that strategy supported
by the wider management team.
The Non-executive Directors have responsibility for
determining the remuneration of Executive Directors and
have the primary role in appointing and, where necessary,
removing Executive Directors, and in succession planning.
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.
These are escalated as appropriate to the Chairman so that
they can be addressed respectfully and fairly. It is ensured
that the issues raised are understood fully to facilitate
meaningful dialogue so that relevant action, if needed, is
taken. On resignation, a Non-executive Director provides a
23
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Corporate Governance Report continued
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.
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. 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).
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, suppliers and significant customers.
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.
Board Committees
The Board has delegated specific responsibilities to the
Nomination, Audit and Remuneration Committees. Each
Committee has written terms of reference setting out its
duties, authority and reporting responsibilities, with copies
available on the Company’s website or upon request from
the Company Secretary. The terms of reference of each
Committee are kept under review to ensure they remain
appropriate. Each Committee comprises the Non-executive
Directors of the Company. The Company Secretary is the
secretary of the Committees.
written statement to the Chairman, for circulation to the
Board, if they have any such concerns.
Board Diversity
The Board does not have a formal Board diversity policy but
plans to continue to review the need for such a policy
annually, taking into account the size of the Board and skills
required.
Induction of New Directors
On joining the Board, new Directors undergo an induction
programme which is tailored to the existing knowledge and
experience of the Director concerned, including site visits;
meetings with key employees; and presentations from
management on topics such as strategy, finance and risk.
The Chairman is responsible for this process.
Time Commitments, Skills and Expertise
The Board is satisfied that each Director continues to show
the necessary commitment and 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.
Development
The Company Secretary ensures that all Directors are kept
abreast of changes in relevant legislation and regulations,
with the assistance of the Group’s advisers where
appropriate. Executive Directors are subject to the Group’s
performance development review process through which
their performance against objectives is reviewed and their
personal and professional development needs considered.
External Appointments
In the appropriate circumstances, the Board may authorise
Executive Directors to take non-executive positions in other
companies and organisations provided the time commitment
does not conflict with the Director’s duties to the Company.
The appointment to such positions is subject to Board
approval.
Board Performance Evaluation
The annual Board Evaluation process was supported by the
Company Secretary, and concluded in April 2021. The
performance of Non-executive Directors and the functioning
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
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NOMINATION COMMITTEE
Members of the Nomination Committee
The Nomination Committee consists of Giles Vardey (Chair),
and Ben Warn. Executive Directors attend by invitation.
Chris Rigg was a member of the committee through to
stepping down from the Board on 31 May 2021.
Duties
In carrying out its duties, the Nomination Committee is
primarily responsible for:
•
•
•
•
•
•
Identifying and nominating candidates to fill Board
vacancies;
evaluating the structure and composition of the Board
with regard to the balance of skills, diversity, knowledge
and experience and making recommendations
accordingly;
drafting the job descriptions of all Board members;
reviewing the time requirements of Non-executive
Directors;
giving full consideration to succession planning; and
reviewing the leadership of the Group.
The Committee is scheduled to meet once a year, but it will
meet more frequently if required. The Committee reports to
the Board on how it has discharged its responsibilities.
Activity During the Year
The primary activity of the Committee during the year
centered around the recruitment of successors to Richard
McGuire as Chief Executive Officer and Tom Hearne as Chief
Financial Officer. The outcome of the review conducted was
that internal candidates should be appointed into the roles;
being Andrew Lindley and Nicola Rowlands.
AUDIT COMMITTEE
Members of the Audit Committee
The Audit Committee consists of the Giles Vardey (Chair),
and Ben Warn. Executive Directors attend by invitation. Chris
Rigg chaired the committee through to stepping down from
the Board on 31 May 2021.
The Board is satisfied that Giles Vardey as Chairman of the
Committee, has recent and relevant financial experience. The
Chairman of the Committee reports formally to the Board, as
appropriate, on issues discussed by the Audit Committee
and presents the Committee’s recommendations.
Duties
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 main focus areas and items of business considered by
the Audit Committee are:
•
•
•
•
•
•
•
•
Review of the key areas of judgement and estimation
which have been used by management in preparing
the financial statements, in conjunction with input from
the external auditors;
consideration of the external audit report and the
external auditor’s management letter which includes
observations on the Group’s financial control
environment;
review of the risk management and internal control
systems, and of the Company’s risk register;
review of the need for an internal audit function;
review of taxation matters of the Group;
review any whistleblowing reports;
review of the implications of forthcoming updates or
changes to accounting standards; and
review the Consolidated Financial Statements and the
Annual Report and assess whether, taken as a whole,
the Report and Accounts are fair, balanced and
understandable and provide the information necessary
for stakeholders to assess the Company’s position and
performance, business model and strategy.
In relation to the integrity of the financial statements for the
year ended 31 December 2021, the Committee also
reviewed and considered the following specific areas:
•
•
risk of misstatement on revenue recognition;
disposal accounting and discontinued operations; and
25
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Corporate Governance Report continued
•
the assumptions underlying impairment testing of the
Company’s investment in subsidiaries.
Risk Management and Internal Controls
The Group has a framework of risk management and internal
control systems, policies and procedures. The Audit
Committee is responsible for reviewing the risk management
and internal control framework and ensuring that it operates
effectively. The Committee has reviewed the framework and
is satisfied that risk management is appropriate for the size
of business.
Role of the External Auditor
The Audit Committee monitors the Company’s relationship
with the external auditor, BDO LLP, to ensure that external
auditor independence and objectivity are maintained. As part
of its review the Committee monitors the provision of non-
audit services by the external auditor. The breakdown of fees
between audit and non-audit services is provided in Note 7
of the Group’s Consolidated Financial Statements. The
non-audit fees related to Reporting Accountants work on the
Company’s admission to AIM.
The Committee also assesses the external auditor’s
performance. Having reviewed the external auditor’s
independence and performance, the Audit Committee
recommends that BDO LLP be re-appointed as the
Company’s external auditor at the next AGM.
Audit Process
The external auditor prepares an audit plan that sets out the
scope of the audit, key areas of audit focus, audit materiality
and the timetable for audit work. This plan is reviewed and
agreed in advance by the Audit Committee. Following the
completion of its work, the external auditor presents its
findings to the Audit Committee for discussion.
Internal Audit
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
and nature of the Group there was no such requirement. The
Finance function continues to undertake certain work of an
internal audit nature and reports its findings to the Audit
Committee. The Committee will keep the need for an internal
audit function under review. 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 design and implementation
of general IT controls and other controls in place related to
significant risks of material misstatement.
FRC review of 2020 Annual Report and Accounts
In October 2020, the Company received a letter from the
Financial Reporting Council (FRC) which made enquiries
about the presentation of interest payable on lease liabilities
as a financing cash flow in the consolidated statement of
cash flows whereas bank interest had been presented as an
operating cash flow. The Company acknowledged that this
was inconsistent and undertook to align the treatment of
bank interest payments with interest paid on lease liabilities
in the consolidated statement of cash flows in future periods.
The Company did not adjust the comparative amount for
bank interest in the 2021 annual report and accounts as it
was immaterial.
The Company responded fully to the matter raised and the
enquiry has been closed without any change to reported
profit or net assets.
Scope and Limitations of the FRC’s Review
The Company recognises that the FRC’s review was based
on a review of its annual report and accounts for the year
ended 31 December 2020 and did not benefit from detailed
knowledge of the Company’s business or an understanding
of the underlying transactions entered into. The FRC’s review
provides no assurance that the Company’s annual report
and accounts are correct in all material respects; the FRC’s
role is not to verify the information provided but to consider
compliance with reporting requirements.
The FRC’s letters are written on the basis that it (and its
officers, employees and agents) accepts no liability for
reliance on them by the Company or any third party,
including but not limited to investors and shareholders.
Financial Reporting Council: Audit Quality
Inspections
During the year, the 31 December 2020 audit of Sportech
PLC by BDO was reviewed by the AQR team. The FRC
routinely monitors the quality of the audit work of certain UK
audit firms through inspections of sample audits and related
procedures at individual audit firms. The Committee received
a copy of the findings in January 2022. The Audit Committee
and BDO have discussed the review findings and the agreed
actions and are satisfied with changes made by BDO in the
31 December 2021 audit.
REMUNERATION COMMITTEE
A detailed report by the Remuneration Committee can be
found on pages 28 to 40.
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Whistleblowing
The Group has a whistleblowing policy in place which sets
out the formal process by which an employee of the Group
may, in confidence, raise concerns about possible
improprieties in financial reporting or other matters. The
whistleblowing facility is provided by an independent external
company. During the year ended 31 December 2021, there
were no incidents for consideration.
Going Concern
The Directors have prepared detailed financial forecasts with
a supporting business plan covering the medium-term
future. These forecasts capture both a base plan and
downside scenarios which although Sportech has no
connections with Russia or Ukraine through its operations
(no employees located there nor any customers or suppliers
in the region), include assumptions taking into account
macro-economic potential indirect impacts of the events
unfolding.
Both the base plan and downside scenario forecasts led the
Directors to have a reasonable expectation that the
Company and the Group have adequate resources to
continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern
basis in preparing the financial statements.
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
Giles Vardey
Chairman
31 March 2022
27
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration Committee Report
STATEMENT FROM THE CHAIR OF THE REMUNERATION COMMITTEE
Dear Shareholder
As Chair of Sportech’s Remuneration Committee, I am
pleased to present the Remuneration Committee Report for
the financial year ended 31 December 2021. During 2021,
Chris Rigg stepped down from the Board and the
Remuneration Committee and Giles Vardey re-joined the
Committee.
This year’s report will be my second as Chair of the
Remuneration Committee, during the year the Company de-
listed from the Main Market of the London Stock Exchange
in July and re-listed on the Alternative Investment Market
(“AIM”). In light of this change of listing, the Company did not
propose a binding vote on the Directors Remuneration Policy
at the 2021 AGM, as AIM listed companies are not required
to put their Policy to a vote. The Company had committed to
complying with the UK Corporate Governance Code when it
listed on AIM in July 2021, however the Company has now
adopted the Quoted Companies Alliance Code (the “QCA
Code”), which is considered more appropriate for a
Company of Sportech’s size. As such this year’s report is in
compliance with the QCA Code.
Following its de-listing from the Main Market, the Company
is also no longer required to comply with Schedule 8 of the
Large and Medium-sized Companies and Groups (Accounts
and Reports) (Amendment) regulations 2013 (the
“regulations”). The Remuneration Committee Report has
therefore been simplified in some areas but still has regard to
the key parts of the Regulations. The Company still adopts a
Remuneration Policy, which is disclosed on pages 30 to 34,
but the policy does not require shareholder approval.
This year’s Remuneration Committee Report comprises
three sections: the Remuneration Committee Chair’s
Statement; the Remuneration Policy Report, which sets out
the remuneration policy adopted by the Board, and the
Annual Report on Remuneration which describes how the
Directors’ remuneration policy was implemented for the year
ended 31 December 2021.
At the 2022 Annual General Meeting (“AGM”), the Company
will be asking shareholders to vote on an advisory resolution
to approve the Annual Report on Directors’ Remuneration
including this statement, which provides details of the
remuneration earned by Directors for performance in the
year ended 31 December 2021 and proposals for the
operation of the Policy in 2022.
Proposed Directors’ Remuneration Policy for
2022
The Committee has reviewed current arrangements in light
of the Company’s de-listing from the London Stock
Exchange’s Main Market and re-listing on AIM. One key
difference from previously approved policies is that no long-
28
term incentive scheme will be operated, simplifying the
remuneration structure. The Board will continue to monitor
this closely.
Remuneration for 2021
Salary
Richard McGuire had voluntarily reduced his salary to
£300,000 during 2020 and no rise was given in 2021
through to his retirement from the Board. There was also no
pay rise for any other Director in 2021. The base salary of
Andrew Lindley on his appointment to the Board was
£225,000 per annum and Nicola Rowlands’ base salary was
£125,000.
Annual bonus
Bonuses in 2021 were based on two incentive pools and
subject to each participant’s maximum bonus opportunity,
where required by the policy, and performance against other
goals.
Firstly, in order to incentivise the maximisation of the cash
generated from disposals and therefore the preservation of
value for shareholders, part of each senior manager’s bonus
was based on a share of a notional pool of 3.5% of
proceeds from any sale of any division or business
commenced during 2021. The successful disposal of Bump
50:50 to Canadian Bank Note on 2 June 2021 for c£4.9m
during the year resulted in awards to Richard McGuire and
Tom Hearne of £14,332 and c£40,580 (CAD$70,000) which
were paid during the year. Andrew Lindley received £8,173
and Nicola Rowlands received £3,150 for the same
transaction. A further bonus will be payable dependent on
the receipt of contingent consideration in early 2023.
Andrew Lindley and Nicola Rowlands received bonuses for
the disposal of the LEIDSA lottery contract of £197,889 and
£131,926 respectively being 3.5% of the disposal proceeds
of c£9.4m (excluding working capital settlement). The
transaction was managed solely by Andrew and Nicola.
Secondly, a shareholder value pool of 5% of total
shareholder returns from a base of 33p per share would be
shared amongst Executive Directors and senior
management. This resulted in bonuses of £133,407 being
paid to Richard McGuire, £53,363 being paid to Tom
Hearne, £133,407 being paid to Andrew Lindley and
£106,726 being paid to Nicola Rowlands.
The Committee considers that this level of outturn is
appropriate given the value realised for shareholders during
the year which the Executives were targeted to achieve. No
discretion was applied in determining the level of payout.
Bonuses were paid also to Tom Hearne and Richard
McGuire in relation to the disposal of Global Tote which were
disclosed in last year’s Remuneration Report, these amounts
were charged to the income statement in 2021.
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VCP
The VCP scheme introduced in 2017 expired on 31
December 2021 with no vesting. No further awards are
proposed under a VCP for 2022. In the absence of a long-
term incentive plan the Committee plans to make cash
awards to Executives for event based extraordinary
achievements.
Implementation of remuneration policy for 2022
The remuneration of our Executive Directors will continue to
be made up of base salary, plus pension contributions and
benefits and an annual bonus paid in cash which is subject
to stretching performance conditions and additional event-
based bonuses for extraordinary achievements. The Board
will not grant awards of long-term incentives to Executive
Directors in the year.
The Chief Executive Officer and Chief Financial Officer’s
salaries were reviewed at the beginning of the year and,
Andrew Lindley’s basic annual salary will remain at
£225,000. Nicola Rowlands’ basic annual salary will be
increased to £156,250 for 2022, reflecting her increased
contracted working hours to full time from 1 January 2022.
Details of the other elements of their remuneration are
disclosed in detail later in the Annual Report on
Remuneration.
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.
On behalf of the Committee, I thank shareholders for their
support last year and hope you will be able to continue to
support the resolution on our Directors’ Remuneration
Report at the 2022 AGM.
Ben Warn
Non-executive Director and Chair of the Remuneration
Committee
31 March 2022
29
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration Report
FOR THE YEAR ENDED 31 DECEMBER 2021
DIRECTORS’ REMUNERATION POLICY
This Remuneration Report has been prepared in accordance
with the Quoted Companies Alliance Code (the “QCA”) 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.
This Directors’ Remuneration Policy provides an overview of
the Company’s policy on Directors’ pay that is intended will
be applied in 2022.
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. 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 in the
coming year.
Remuneration for Executive Directors
The main component parts of the remuneration packages for
Executive Directors are detailed in the table on pages 31 to
32, which should be read in conjunction with the
recruitment/promotion policy on page 34, and the “Detailed
remuneration policy for 2022” section of the Annual Report
on Remuneration, which starts on page 35.
30
Executive Directors’ Remuneration Policy adopted by the Board
The following table summarises each element of our Remuneration Policy for the Executive Directors, explaining how each
element operates.
Remuneration element and
purpose
Operation
Opportunity
Performance metrics
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Base salary
To attract and retain key
individuals.
Reflects the relevant skills
and experience in role.
Pension
To provide cost-effective,
yet market competitive,
retirement benefits.
A broad-based assessment of
individual and Company
performance is considered as
part of any salary review.
– 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 35.
– 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 as well as
reflective of the overall
financial performance of the
Group.
– Increases above this level
may be awarded if, for
example, there are
significant changes in
responsibility or a change in
scope or where pay for new
joiners is initially set below
market levels.
– Contribution to a personal pension
– In line with general
Not applicable.
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arrangement or cash in lieu of pension
by way of a salary supplement.
Benefits
To provide cost-effective,
yet market competitive,
benefits.
Benefits typically include a combination of
the following:
– Car or car allowance.
– Family cover private health insurance.
– Life insurance cover.
– Reimbursement of reasonable business
expenses (including tax thereon).
Additional benefits may also be
introduced in future including:
– Relocation benefits or allowances.
– Participation in any all-employee share
schemes operated by the Company.
– Other benefits introduced for the
majority of the workforce.
– Other benefits tailored to the
executive’s location if they are recruited
overseas.
Not applicable
workforce, up to 8% of
salary, or such other
amount from time to time.
– Only basic annual salary is
pensionable.
– There is no maximum 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 HRMC.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration report continued
Remuneration element and
purpose
Operation
Opportunity
Performance metrics
The majority of the bonus will
normally be based on financial
and/or shareholder value
measures. 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
Committee has discretion 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.
Not applicable.
Annual bonus plan
To motivate Executive
Directors and incentivise
the achievement of key
financial and strategic
goals and targets over
the financial year.
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 and Non-executive
Directors are subject to
personal licensing
assessments and if
appropriate consents by
certain US authorities.
– The annual bonus is
capped at 100% of salary
for the Chief Executive and
75% of salary for other
Directors.
– The Committee can
disapply these caps in the
event of an exit or
significant disposal
transaction, any such
bonuses would be
determined by the
Committee based on
valuations achieved.
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.
– 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 and
based on the achievement of targets
set on a sliding scale where possible.
– 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.
– 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.
– 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.
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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 the delivery of targets relating to key
financial and shareholder value measures that support the
Company’s strategic objectives as well as 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 they 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 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.
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.
Executive Director reward scenarios for 2022
The remuneration package comprises both fixed elements (base salary, pension and benefits) and performance-based variable
pay (annual bonus). Total remuneration for each Executive Director for a minimum, target and maximum presented in the chart
below.
)
s
0
0
0
£
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£500
£450
£400
£350
£300
£250
£200
£150
£100
£50
£0
£463
49%
£351
32%
£238
£293
40%
£235
25%
£176
100%
68%
51%
100%
75%
60%
Minimum
Target
Maximum
Minimum
Target
Maximum
Chief Executive Officer
Chief Financial Officer
Fixed pay
Annual bonus
Long-term incentives
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Remuneration report continued
circumstances, in respect of any period worked following
receipt of notice of resignation that the individual remained in
employment, subject to the appropriate performance
measures being achieved. The vesting of any share
incentives would be subject to the rules of the relevant plan,
but in general where an individual is a good leaver awards
would vest on the original vesting date, unless the
Committee decides the award should end on the cessation
date, and remain subject to assessment of performance and
time pro rating (unless the Committee decides it is
inappropriate to apply time pro rating).
Policy on external appointments
Executive Directors are allowed to accept Non-executive
appointments and retain any fees earned, with the Board’s
prior permission, provided that these do not interfere with
their ability to perform their duties at Sportech and are not
likely to lead to conflicts of interest.
Policy on Executive Director
recruitments/promotions
New Executive Director remuneration arrangement will be
based on the limits of the prevailing approved Directors’
Remuneration Policy.
The fee structure and quantum for Non-executive Director
ppointments will be based on the prevailing Non-executive
Director fee policy.
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 normally consult with major investors
whenever material changes to the policy are proposed. 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, when reviewing the
policy.
The following assumptions have been made:
•
•
•
Minimum – fixed pay (salary (as at 1 January 2022),
benefits (as paid in 2021) 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.
Policy on contracts of service
Details of the service contracts and letters of appointment in
place as at 31 December 2021 for Directors are as follows.
Executive Director Date of Service Contract Notice Period*
Andrew Lindley 01.02.19 12 months
Nicola Rowlands 16.11.10 6 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.
Date of
Non-Executive Director Letter of Appointment Notice Period
Giles Vardey 04.12.17 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. This
may be phased and subject to mitigation. 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), assistance with
reasonable legal fees and outplacement services or other
reasonable costs connected with the termination may be
made as required. Executive Directors may be awarded a
bonus in respect of the period of the year worked prior to
notice being served and, in certain exceptional
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ANNUAL REPORT ON REMUNERATION
Application of the Remuneration Policy for 2022
Basic annual salary
The Committee has reviewed base salaries for 2022 taking into account market conditions and performance in role since
appointment. For reference, full-time salaries across the Group were increased by an average of 5.0%.
The base salaries for 2022 are as follows:
Director 2022 2021 % Change
Chief Executive Officer £225,000 £225,0001 –
Chief Financial Officer £156,750 £125,0002 25%3
1 Andrew Lindley was appointed Chief Executive Officer on 10 September 2021 and was paid £225,000 per annum from this date. Richard McGuire was
Chief Executive Officer to this date and was paid £300,000 per annum.
2 Nicola Rowlands was appointed Chief Financial Officer on 10 September 2021 and was paid £125,000 per annum from this date. Tom Hearne was Chief
Financial Officer to this date and was paid c£210,000 (CAD$357,000) per annum.
3 The increase for 2022 was planned on appointment and reflects an increase in working days per week from four to five.
Performance related bonus
Andrew Lindley’s and Nicola Rowlands’ performance related
bonuses will be based on Group financial performance and
delivering on Group strategic objectives, specifically relating to
the Company assets, which would include any significant
disposals during 2022. Details of the structure, metrics and
weightings of measures will be disclosed in full in the 2022
Annual Report. Any bonus achieved is typically payable in
cash.
Pension arrangements
For Andrew Lindley the Company pension contribution level is
5% of base salary; paid in cash into a SIPP. The Company
matches the first 5% of Nicola Rowlands’ contributions and if
personal contributions of 6% are made the Company makes
contributions of 8%. Company pension contributions for the
UK workforce are currently between 3% and 8% of salary.
Other benefits
Andrew Lindley and Nicola Rowlands are entitled to the
following other main benefits; private health insurance for
themselves, their spouse and children and life insurance for
themselves. Nicola Rowlands receives a car allowance of
£6,000 per annum paid in cash.
Long Term Incentive
No long-term incentive awards will be granted.
Non-executive Directors’ fees
The Non-executive Director fee for 2022 is £45,000 which had
been unchanged since May 2017 and reflects a 25%
reduction from the prior annual fee of £60,000. Reduction is
effective from 1 February 2022. The Chairman’s fee is also to
reduce by 25% to £90,000 per annum from 1 February 2022.
35
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration report continued
Single total remuneration figure for the Directors (audited)
Details of the remuneration for each Director in office during the financial year ended 31 December 2021 are given in the table
below.
Directors’ remuneration for 2021
Total Total
Pay in fixed variable
Fees/ Taxable lieu of remune- remune- 2021
Year of salary benefits Pension notice ration Bonuses ration Total
appointment £000 £000 £000 £000 £000 £000 £000 £000
Executive Directors
Andrew Lindley (appointed to
the Board 27 August 2021) 2021 75 – 4 – 79 113 113 192
Nicola Rowlands (appointed to
the Board 27 August 2021) 2021 42 2 3 – 47 81 81 128
Richard McGuire (Stepped down from
the Board on 10 September 2021) 2017 209 1 10 150 370 148 148 518
Tom Hearne (Stepped down from the
Board on 10 September 2021) 2018 143 2 – 205 350 94 94 444
Non-executive Directors
Giles Vardey 2017 120 – – – 120 – – 120
Chris Rigg (Stepped down from the
Board on 31 May 2021) 2019 25 – – 13 38 – – 38
Ben Warn 2020 60 – – – 60 – – 60
Aggregate emoluments 674 5 17 368 1,064 436 436 1,500
–Tom Hearne was paid a basic annual salary of CAD$357,000 during the year to 10 September 2021, an average exchange rate of 1.7311 has been used
to translate to Sterling in the above table.
–Remuneration for Andrew Lindley and Nicola Rowlands is pro-rated from annual totals for the period which they were Directors being 27 August 2021
through to 31 December 2021.
–Bonuses were paid to Tom Hearne and Richard McGuire in relation to the disposal of Global Tote which were disclosed in last year’s Remuneration
Report, these amounts were charged to the income statement in 2021 and included in the Directors’ Remuneration for 2020 table.
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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 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$357,000 during the year, an average exchange rate of 1.731 has been used to translate to Sterling in the
above table.
–No company pension contributions were made for Tom Hearne.
–As disclosed last year, bonuses for 2020 include amounts awarded for the successful disposal of the Global Tote business to Betmakers Technology
Group which were deferred until final completion of the deal on 17 June 2021.
–Tom Hearne’s bonus was based on a converted salary of £206,000.
–Giles Vardey voluntarily reduced his fees to £60,000 per annum from 1 April 2020 to 31 August 2020.
Performance related bonus
As set out in the Chair’s statement, bonuses in 2021 were
based on two incentive pools and subject to each
participant’s maximum bonus opportunity, where required by
the policy, and performance against other goals.
Firstly, in order to incentivise the maximisation of the cash
generated from disposals, and therefore the preservation of
value for shareholders, part of each senior manager’s bonus
was based on a share of a notional pool of 3.5% of proceeds
from any sale of any divisional or business disposals
commenced during 2021. The successful approval of the
disposal of Bump 50:50 to Canadian Bank Note on 2 June
2021 for c£4.9m during the year resulted in awards of
£14,332 for Richard McGuire and £40,580 (CAD$ 70,000) for
Tom Hearne which were paid during the year. Andrew Lindley
received £8,173 and Nicola Rowlands received £3,150 for the
same transaction. A further bonus will be payable dependent
on the receipt of contingent consideration in early 2023.
Andrew Lindley and Nicola Rowlands received bonuses for
the disposal of the LEIDSA lottery contract of £197,889 and
£131,926 respectively being 3.5% of the disposal proceeds of
c£9.4m (excluding working capital settlement). The
transaction was managed solely by Andrew and Nicola.
Secondly, Richard McGuire and Andrew Lindley were eligible
to receive 25%, Nicola Rowlands 20% and Tom Hearne 10%
of a notional pool of 5% of the increase in shareholder value
above a base threshold of £62,287,915 (being 33p per share
at 1 January 2021). The Pool being calculated as the average
mid-price per share from 1 December 2021 to 3l January
2022 multiplied by the shares in issue; plus any shareholder
returns, made during calendar year 2021 and through to end
January 2022; less any capital raised from shareholders
during calendar year 2021 and through to end January 2022.
In the event of an agreed takeover of the Company, before
settlement in Q1 2022, the Market Value within the definition
would become the agreed acquirer value of the PLC.
37
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration report continued
Richard Tom Andrew Nicola
McGuire Hearne Lindley1 Rowlands1
Financial £000 £000 £000 £000
Cash generation
Cash generation
Increase in shareholder
value
Successful disposal of
Bump 50:50
Successful disposal of
LEIDSA contract
Delivery of core new
business and extension of
key contracts
14,332 49,376 2,724 1,050
– – 65,963 43,975
133,407 53,363 44,469 35,575
Stepped
down 10
September
2021
Stepped
down 10
September
2021
Appointed
27 August
2021
Appointed
27 August
2021
1 Bonuses for Andrew Lindley and Nicola Rowlands are pro-rated from annual totals for the period which they were Directors, being 27 August 2021
through to 31 December 2021.
Long Term Incentive Plans (“LTIPs”)
No awards were granted to Executive Directors during 2021 under the existing LTIP, the Value Creation Plan (“VCP”). At the start
of the year, a total of 12,150 units were outstanding under the VCP for Executive Directors. The performance period ended on
31 December 2021, at which time all awards lapsed as the minimum performance hurdle had not been met.
Director interests
Details of the Directors’ interests in shares are disclosed in the Directors’ report at page 41.
Exit payments
Payments in lieu of notice were paid to Chris Rigg (£13,000), Richard McGuire (£150,000) and Tom Hearne (£205,000), in line
with contractual arrangements reflecting payment of salary in lieu of notice.
Payments to past Directors
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 2021.
External directorships
Andrew Lindley and Nicola Rowlands do not hold any external directorships.
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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 2021 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. A further comparator index, the FTSE All share
Index is also shown for information.
Total shareholder return
Source: Datastream
)
d
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31/12/2011
31/12/2012
31/12/2013
31/12/2014
31/12/2015
31/12/2016
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2021
Sportech plc
FTSE Small Cap
FTSE All Share
This graph shows the value, by 31 December 2021, of £100 invested in Sportech plc on 31 December 2011, compared with
the value of £100 invested in the FTSE Small Cap and the FTSE All Share on the same date.
The other points plotted are the values at intervening financial year-ends.
39
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Remuneration report continued
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:
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Remuneration before LTIPS
(£000) 542 575 515 517 1,2331 6093 2684 5225 5065 5606
LTIPS (£000) 233 836 158 – – 223 – – – –
Total remuneration (£000) 775 1,411 673 517 1,233 832 268 522 506 560
Annual bonus 25.0% 40.0% 21.25% 20.5% 39.2%2 40.0% – 20.0% 55.4% 44.5%7
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.
6 Relates to Richard McGuire to 31 August 2021 and Andrew Lindley thereafter.
7 Relates to Richard McGuire having held the position for eight months versus Andrew Lindley being in post for four months.
Shareholders’ vote on remuneration
At the last Annual General Meeting on 29 June 2021, votes on the Directors’ remuneration report were cast as follows:
In favour Against Withheld
To approve the Directors’ Remuneration Report for the year ended 119,297,821 2,000 515,871
31 December 2020 (100.00%) (0.00%)
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 terms of reference
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.
The Committee’s recommendations in 2021 and early 2022 were all accepted and implemented by the Board.
Remuneration Committee advisors
Wholly independent advice on executive remuneration is received from Alvarez and Marsal Taxand UK LLP (“A&M”). A&M are
members of the Remuneration Consultants Group and are signatories to its Code of Conduct. A&M has no connection with
Sportech. The terms of engagement with A&M are available from the Company Secretary on request. The fees of A&M during
the financial year were £34k (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.
Ben Warn
Non-executive Director and Chairman of the Remuneration Committee
31 March 2022
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Directors’ Report
The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2021.
General information of the Company can be found in the Accounting Policies on page 59.
The Strategic report and Corporate Governance report are set out on pages 2 to 27. 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 16 to 19 of the Strategic report.
DIRECTORS AND THEIR INTERESTS IN THE SHARES OF THE COMPANY
The Directors who held office at 31 December 2021 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
2022 2021 2020
Number Number Number
Andrew Lindley (appointed 27 August 2021) 187,555 187,555 –
Nicola Rowlands (appointed 27 August 2021) 22,708 22,708 –
Giles Vardey – – –
Ben Warn – – –
The Directors do not hold any options to acquire shares.
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 21.
41
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Directors’ Report continued
SUBSTANTIAL SHAREHOLDINGS
On 30 March 2022, interests representing 3% or more of the issued share capital of the Company had been notified to the
Company as shown below.
30 March 2022 31 December 2021
Ordinary shares % of issued Ordinary shares % of issued
of 1p share capital of 1p share capital
Mr Richard I Griffiths and entities 28,122,856 28.12 28,122,856 28.12
Lombard Odier Asset Management (Europe) Ltd 23,159,026 23.16 23,159,026 23.16
North Atlantic Smaller Companies Investment Trust PLC 17,120,316 17.12 17,120,316 17.12
Sand Grove Capital Management LLP 11,315,749 11.32 11,315,749 11.32
Spreadex Ltd 7,530,235 7.53 6,167,281 6.17
Cantor Fitzgerald Europe 5,903,562 5.90 n/a n/a
Total of substantial shareholdings 93,151,744 93.15 85,885,228 85.89
All other shareholdings 6,848,256 6.85 14,114,772 14.11
Total shares in issue 100,000,000 100.00 100,000,000 100.00
DIVIDEND
No dividend is proposed for 2021 (2020: £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 20. We continue to comply with the SECR required reporting and as such disclosure of the Group’s UK
energy use and carbon emissions can be found in the Strategic report on page 20.
CORPORATE GOVERNANCE
The Group’s statement on corporate governance is set out on pages 22 to 27 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 2021
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. 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 licences 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 pages
41 and 42. There are no restrictions on the transfer of
shares.
As part of the resolutions approved at the 2021 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 the Notice of AGM.
And in line with the Share Capital Management Guidelines
issued by the Investment Association:
Company in issue at the date of 2021 Notice of
Meeting.
GOING CONCERN
The Group’s forecasts and projections, which have been
prepared as described on page 59 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 2023. Accordingly, it is
deemed appropriate to prepare the financial statements on a
going concern basis for the financial year ended
31 December 2021.
FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks:
•
•
•
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.
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.
(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
approximately one-third of the share capital of the
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the group and company
financial statements in accordance with UK adopted
43
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Directors’ Report continued
ANNUAL GENERAL MEETING (“AGM”)
The Notice convening the AGM of the Company on 31 May
2022 will be sent to shareholders by 7 May 2022. In
accordance with good corporate governance practice, each
Director will voluntarily stand for re-election. The profiles of
the Directors appear on page 15. Resolutions will also be
proposed at the AGM to receive the Accounts and the
Directors’ and Independent Auditor’s Reports, to approve
the Remuneration Report set out on pages 35 to 40, 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 2022
international accounting standards. 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 of the group for that period.
In preparing these financial statements, the Directors are
required to:
•
•
•
•
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 UK adopted international accounting standards
subject to any material departures disclosed and
explained in the financial statements; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
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 requirements of the Companies Act 2006.
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.
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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 2021 and of the Group’s
profit for the year then ended;
the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
the Parent Company financial statements have been
properly prepared in accordance with UK adopted
international accounting standards 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.
We have audited the financial statements of Sportech PLC (the
‘Parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 December 2021 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 UK adopted international accounting
standards 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.
Independence
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
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
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:
•
•
•
•
•
Directors’ assessment of going concern: we obtained
an understanding of the process undertaken by the
Directors to prepare the going concern assessment,
including confirming the assessment and underlying
projections were prepared by appropriate individuals
with sufficient knowledge of the detailed figures as well
as an understanding of the Group’s markets, strategies
and risks.
Assessment of assumptions within the cashflow
forecasts: Understanding, challenging and
corroborating the key assumptions used in cash flow
forecasts against prior year, our knowledge of business
and industry and other areas of audit, taking into
consideration the funds available.
We tested the numerical accuracy of the model used to
prepare the forecasts.
Sensitivity analysis: evaluation of the Directors’
sensitivities over the Group’s cashflows to changes in
the significant inputs and assumptions used. Assessing
stress test scenarios for any key future events that may
have impact on cash flow forecasts of continuing
operations.
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 and the 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.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Independent auditor’s report
to the members of Sportech PLC
continued
OVERVIEW
Coverage 96% (2020: 90%) of Group revenue
99% (2020: 89%) of Group net assets
95% (2020: 80%) of Group EBITDA
Key audit matters
2021 2020
Appropriateness of
revenue recognition P P
Impairment of
investments: P P
Parent Company Only
Disposal accounting
and discontinued
operations P
Disposal accounting and discontinued
operations is considered to be a key audit
matter during the current year because of
significant disposal transactions completed
during the year.
Materiality Group financial statements as a whole
£195,000 based on 0.5% of total Group
revenue (2020: £204,000 based on 0.5% of
total group revenue)
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 24 separate components (including 12
disposed during the year) making up the Group, of which
seven were deemed significant components that required a
full scope audit given their contribution to the Group’s
revenue and net assets (Sportech Racing LLC, Sportech
Lotteries LLC, Sportech Venues Inc., Racing Technology
Ireland Limited, Sportech Plc, eBet Technologies Inc. and
Bump Worldwide Inc.). This work, combined with the work
performed over consolidation journals and specific Group
account balances accounted for 96% of group revenue
(2020: 90%), 95% of Group EBITDA (2020: 80%) and 99%
of Group net assets (2020: 89%).
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.
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Key audit matter
Appropriateness of revenue recognition
The details of the accounting policies applied during the year
are set out in Basis of accounting section of the financial
statements.
The Group recognises revenue from a number of revenue
streams.
There is a risk that wagering revenue and variable service fee
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.
Therefore, we considered this to be key audit matter.
How the scope of our audit addressed the key audit
matter
We completed the following audit procedures:
• Reviewed the Group’s revenue recognition policies,
having regard to the customer contracts inspected by
us, against the requirements of applicable accounting
standards, challenging and where necessary
corroborating to supporting documentation, the key
accounting policies adopted by Directors in relation to
the customer contracts including commission rates.
• Selected a sample of contracts and agreed key terms,
taking into account variations in contract terms, we
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 from wagering data captured
in the Group’s IT systems and reconciled this to the
amounts recorded in the nominal ledger.
• Reviewed the new contract entered during the year
related to sport betting and identified performance
obligations in the same. Ensured that revenue is
accounted in accordance with requirements of
accounting framework.
• Reviewed a sample of 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.
•
For wagering revenue stream we tested design and
implementation of controls in respect of the key
processes around revenue transactions recognised.
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.
47
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Independent auditor’s report
to the members of Sportech PLC
continued
Key audit matter
Impairment of investments: Parent Company only
The details of the accounting policies applied during the year
are set out in Basis of accounting section of the financial
statements.
In accordance with the requirements of relevant accounting
standards, considering the return of capital to shareholders,
Directors have performed an impairment review on
investments in the current year. This has resulted in
impairment charge of £37.8 million during the year.
The impairment review is based on the expected future
performance of the trading entities in the US and UK and
requires Directors 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 key audit matter.
How the scope of our audit addressed the key audit
matter
We completed the following audit procedures:
Challenged the key assumptions and cash flows used in the
impairment model which included the following:
• Checked that the cash flows used to assess the
recoverability of the parent company investments were
consistent with those used in the Impairment models at
the group level.
• Assessment of the discount rate used to calculate the
present value of future cash flows by involving our
internal valuation experts to determine the
appropriateness of the discount rates used across the
Cash Generating Units (CGU’s).
• 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 Director on the growth rates used in the
model for particular revenue streams such as Venues
and sought detailed explanations from Directors 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 CGU’s in
reasonable and worst case scenarios.
• Considered publicly available information and other
information obtained during our audit work to determine
whether there were any 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
Directors in their impairment review were inappropriate.
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Key audit matter
Disposal accounting and discontinued operations
The Group completed several disposal transactions during
the year as disclosed in note 11 of the financial statements.
The details of the accounting policies applied to these
transactions are set out in Basis of accounting section of the
financial statements.
Accounting of disposals require Directors to exercise
significant judgements in fair value of consideration including
contingent consideration, tax provisioning, finalisation of the
closing balance sheet and presentation of discontinued
activities in the financial statements.
Therefore, we considered this to be key audit matter.
How the scope of our audit addressed the key audit
matter
We completed the following audit procedures in relation to
disposal accounting:
• Performed a review of the sale and purchase
agreements and assessed whether the consideration
received and other terms in the sale and purchase
agreement were appropriately accounted for in the
disposal accounting entries and disclosures made by the
Group in the financial statements.
•
Involved our internal experts and reviewed their work to
determine the appropriateness of the tax provisioning for
discontinued operations as at the date of disposal.
• Agreed the closing balance sheet of disposed entities as
at the date of disposal to profit or loss on disposal
calculations and re-calculated the profit or loss on
disposal to ensure that it was correctly accounted and
disclosed.
• We challenged Directors and reviewed underlying
documents provided by Directors to assess whether any
contingent consideration due from the purchasers had
met the virtual certainty to be recognised at the year-end
as a receivable.
•
In relation to discontinued operations, based on group
scoping, we audited the financial information of
disposed entities up to the date of disposal for inclusion
in the consolidated financial statements and reviewed
the financial statement disclosure related to discontinued
operations for compliance with accounting standards.
Key observations
Nothing has come to our attention as a result of performing
the above procedures that the accounting of discontinued
operations is inappropriate.
49
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Independent auditor’s report
to the members of Sportech PLC
continued
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.
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.
Based on our professional judgement, we determined
materiality for the financial statements as a whole and
performance materiality as follows:
Group financial statements
Parent company financial statements
2021
Materiality
£195,000
2020
£204,000
2021
£40,000
2020
£40,000
Basis for determining
materiality
0.5% of Total Group
Revenue
0.5% of Total Group
Revenue
Rationale for the
benchmark applied
Revenue was used as a measure to reflect the
volatility in EBITDA results arising from the impact
of COVID-19 with a negative EBITDA arising in
2020 and significant disposals during the current
year.
Capped at £40,000
based on Group
materiality
Capped at £40,000
based on Group
materiality
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. This is capped
to £40,000 for Group audit purposes based on
group scoping.
Performance
materiality
Basis for determining
performance
materiality
£136,500
£142,800
£28,000
£28,000
70% (2020: 70%) based on our assessment of past misstatements and Director’s attitude towards
proposed adjustments.
Component materiality
We set materiality for each significant component of the
Group based on a percentage of between 20% and 65%
(2020: 20% and 55%) of Group materiality dependent on the
size and our assessment of the risk of material misstatement
of that component. Component materiality ranged from
£40,000 to £126,750 (2020: £40,000 to £ 110,000). In the
audit of each component, we further applied performance
materiality levels of 70% (2020: 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 £9,750
(2020: £10,200). 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 and accounts other than the financial
statements and our 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
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
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.
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.
Strategic report and
Directors’ report
Matters on which we are
required to report by
exception
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.
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 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.
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
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
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
51
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Independent auditor’s report
to the members of Sportech PLC
continued
could give rise to a material misstatement in the
financial statements, including, but not limited to, the
Companies Act 2006, AIM Rules, Gaming Regulation
and Licences and tax legislation.
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 2022
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
•
•
•
•
•
•
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 Directors’ remuneration incentives and how
they could influence Directors 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 Directors, the Audit Committee, review of
Board minutes, review of legal expenses.
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. Also refer to Key audit
matters section above for procedures performed to test
appropriateness of revenue recognition.
We tested and challenged the key estimates and
judgements made by Directors in preparing the
financial statements for indications of bias or
management override when presenting the results and
financial position of the group.
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.
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Consolidated Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2021
Restated
2021 2020
Note £000 £000
Revenue 2 22,942 17,372
Cost of sales 3 (11,489) (8,717)
Gross profit 11,453 8,655
Marketing and distribution costs 3 (276) (311)
Contribution 11,177 8,344
Operating costs 3 (15,680) (19,710)
Other income 10 4,101 –
Operating loss (402) (11,366)
Finance costs 8 (305) (568)
Finance income 8 461 11
Loss before tax from continuing operations (246) (11,923)
Tax – continuing operations 9 (192) 1,055
Loss for the year – continuing operations (438) (10,868)
Profit/(loss) after taxation from discontinued operations 11(g) 35,001 (1,964)
Profit/(loss) for the year 34,563 (12,832)
Attributable to:
Owners of the Company 34,563 (12,832)
Basic (loss)/earnings per share attributable to owners of the Company
From continuing operations 12(a) (0.3)p (5.8)p
From discontinued operations 12(a) 20.6p (1.0)p
Total 12(a) 20.3p (6.8)p
Diluted (loss)/earnings per share attributable to owners of the Company
From continuing operations 12(b) (0.3)p (5.8)p
From discontinued operations 12(b) 20.6p (1.0)p
Total 12(b) 20.3p (6.8)p
Adjusted loss per share attributable to owners of the Company
Basic 12(c) (1.7)p (2.8)p
Diluted 12(c) (1.7)p (2.8)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 restated to excluded the results of the LEIDSA contract which have been included with the
results of the Global Tote business and Bump 50:50 within profit/(loss) after taxation from discontinued operations.
53
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Consolidated Statement of
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
Note £000 £000
Profit/(loss) for the year 34,563 (12,832)
Other comprehensive (expense)/income:
Items that will not be reclassified to profit and loss
Actuarial gain/(loss) on retirement benefit liability – discontinued operations 186 (344)
Deferred tax on movement on retirement benefit liability – discontinued operations 19 – 88
186 (256)
Items that may be subsequently reclassified to profit and loss
Currency translation differences – continuing operations (617) 237
Currency translation differences – discontinued operations (550) (314)
Less: gain reclassified to profit and loss on disposal of foreign operations 11 (3,373) –
(4,540) (77)
Total other comprehensive expense for the year, net of tax (4,354) (333)
Total comprehensive income/(expense) for the year 30,209 (13,165)
Attributable to:
Owners of the Company 30,209 (13,165)
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Consolidated Balance Sheet
AS AT 31 DECEMBER 2021
2021 2020
Note £000 £000
ASSETS
Non-current assets
Goodwill 13 604 604
Intangible fixed assets 14 6,357 7,343
Property, plant and equipment 15 4,261 5,077
Right-of-use assets 16 4,657 1,133
Trade and other receivables 18 158 156
Deferred tax assets 19 – 4
Total non-current assets 16,037 14,317
Current assets
Trade and other receivables 18 1,750 1,517
Inventories 20 124 120
Current tax receivable 9 – 1,442
Cash and cash equivalents 21 22,367 11,821
24,241 14,900
Assets classified as held for sale 11i – 27,671
Total current assets 24,241 42,571
TOTAL ASSETS 40,278 56,888
LIABILITIES
Current liabilities
Trade and other payables 22 (7,945) (14,104)
Provisions 23 (736) (321)
Lease liabilities 24 (923) (823)
Deferred tax liabilities 19 – (94)
Current tax liabilities 9 (4,718) (4,700)
(14,322) (20,042)
Liabilities directly associated with assets classified as held for sale 11i – (7,507)
Total current liabilities (14,322) (27,549)
Net current assets 9,919 15,022
Non-current liabilities
Lease liabilities 24 (6,091) (3,059)
Deferred tax liabilities 19 (43) –
Provisions 23 – (1,121)
Total non-current liabilities (6,134) (4,180)
TOTAL LIABILITIES (20,456) (31,729)
NET ASSETS 19,822 25,159
EQUITY
Ordinary shares 29 1,000 37,750
Other reserves 3,527 16,539
Retained earnings 15,295 (29,130)
TOTAL EQUITY 19,822 25,159
The financial statements on pages 53 to 108 were approved and authorised for issue by the Board of Directors on 31 March 2022 and were signed on its behalf by:
Andrew Lindley Nicola Rowlands
Director Director
Company Registration Number: SC069140
55
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Consolidated Statement of
Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2021
Other reserves
Capital Foreign
Ordinary redemption Other exchange Retained
shares reserve reserve reserve earnings Total
£000 £000 £000 £000 £000 £000
At 1 January 2021 37,750 10,312 (638) 6,865 (29,130) 25,159
Comprehensive income
Profit for the year – – – – 34,563 34,563
Other comprehensive items
Actuarial gain on defined benefit pension liability* (note 26) – – 186 – – 186
Cumulative actuarial loss on defined benefit pension liability
disposed of, transferred to retained earnings – – 766 – (766) –
Currency translation differences arising in the year – – – (4,540) – (4,540)
Total other comprehensive items – – 952 (4,540) (766) (4,354)
Total comprehensive items – – 952 (4,540) 33,797 30,209
Transactions with owners
Share option charge (note 29) – – – – 334 334
Cancellation of capital redemption reserve – (10,312) – – 10,312 –
Capital reduction (note 29) (35,862) – – – 35,862 –
Fees in relation to capital reduction (note 29) – – – – (66) (66)
Fees in relation to share buy-back (note 29) – – – – (314) (314)
Share buy-back (note 29) (888) 888 – – (35,500) (35,500)
Total transactions with owners (36,750) (9,424) – – 10,628 (35,546)
Total changes in equity (36,750) (9,424) 952 (4,540) 44,425 (5,337)
At 31 December 2021 1,000 888 314 2,325 15,295 19,822
Other reserve includes the premium on shares issued of £314k in relation to the acquisition of Lot.to Systems Limited in 2019,
which is recorded as a merger reserve.
*Net of deferred tax.
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Consolidated Statement of
Changes in Equity continued
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* (note 26) – – (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 (note 29) – – – – 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
Other reserve includes the premium on shares issued of £314k in relation to the acquisition of Lot.to Systems Limited in 2019, which is
recorded as a merger reserve and cumulative actuarial movements on defined benefit pension schemes net of deferred tax.
*Net of deferred tax
57
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Consolidated Statement
of cash flows
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
Note £000 £000
Cash flows from operating activities
Cash generated from operations, before separately disclosed items 30 511 3,928
Interest received – 13
Interest paid – (84)
Tax refund received 9 1,442 –
Tax paid 9 (1,029) (1,029)
Net cash generated from operating activities before separately disclosed items 924 2,828
Cash inflows – other income 10 2,483 –
Cash outflows – separately disclosed items 4 (2,407) (484)
Cash generated from operations 1,000 2,344
Cash flows from investing activities
Disposal of Sports Haven (net of transaction costs) 11(a) 4,193 –
Disposal of Bump 50:50 (net of cash disposed of and transaction costs) 11(f) 4,644 –
Consideration paid for Lot.to Systems Limited, net of cash acquired 25 – (500)
Disposal of LEIDSA contract (net of cash disposed of and transaction costs) 11(f) 9,417 –
Disposal of Global Tote (net of cash disposed of and transaction costs) 11(f) 22,636 6,180
Proceeds from sale of intangible assets 14 150 –
Investment in intangible fixed assets 14,11 (1,012) (1,650)
Purchase of property, plant and equipment 15,11 (582) (753)
Net cash generated from investing activities 39,446 3,277
Cash flows used in financing activities
Principal paid on lease liabilities (1,333) (1,316)
Interest paid on lease liabilities (179) (339)
Share buy-back including transaction costs 29 (35,880) –
Interest received 27 –
Interest paid (2) –
Cash used in financing activities (37,367) (1,655)
Net increase in cash and cash equivalents 3,079 3,966
Effect of foreign exchange on cash and cash equivalents (171) (72)
Cash and cash equivalents at the beginning of the year 11,821 15,565
Opening cash included in asset held for sale and excluded from
cash and cash equivalents 7,638 –
Cash and cash equivalents at the end of the year 22,367 19,459
Less cash held by assets held for sale – (7,638)
Group cash and cash equivalents at the end of the year 21 22,367 11,821
Represented by:
Cash and cash equivalents 21 22,367 11,821
Less customer funds 21 (455) (465)
Adjusted net cash at the end of the year 21 21,912 11,356
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Notes to the financial
statements
FOR THE YEAR ENDED 31 DECEMBER 2021
GENERAL INFORMATION
Sportech PLC (the “Company”) is a company domiciled in the UK and listed on the London Stock Exchange’s Alternative
Investment Market (“AIM”). 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 period ended 31 December 2021 comprise
the Company, its subsidiaries, joint ventures and associates (together referred to as the “Group”). The principal activities of the
Group were the provision of pari-mutuel betting (B2C) and the supply of wagering technology solutions (B2B) up until the
disposal of the Group’s Global Tote business on 17 June 2021, the disposal of the Group’s 50:50 Lottery business (Bump
50:50) on 2 June 2021 and the disposal of the Group’s supply contract with LEIDSA in the Dominican Republic on
31 December 2021. Following the disposals the Group continues to provide pari-mutuel betting (B2C) and lottery technology
(B2B).
GOING CONCERN
As discussed in the Directors’ report on page 43, 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 the disposal of the LEIDSA Lottery
contract on 31 December 2021, the Group has realised significant cash, the Board will continue to engage with shareholders to
assess the optimal use of capital.
The forecasts used in the analysis of the Group’s ability to continue in operational existence for the foreseeable future include
both the base plan and downside scenarios which although Sportech has no connections with Russia or Ukraine through its
operations (no employees located there nor any customers or suppliers in the region), include assumptions taking into account
macro-economic potential indirect impacts of the events unfolding.
BASIS OF ACCOUNTING
These financial statements have been prepared in accordance with UK adopted international accounting standards. 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.
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Notes to the financial
statements continued
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)
(c)
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
is a subsidiary acquired exclusively with a view to resale.
The Board applied judgement and concluded that the Global Tote business and the Bump 50:50 operation were held for sale at
the prior year end and considered to be discontinued activities. The Group also agreed the disposal of its freehold property in
New Haven, Connecticut, USA known as “Sports Haven” and the Board considered this asset to be held for sale as at 31
December 2020. Finally, the Group agreed the disposal of its entire interest in its contract for the supply of lottery systems to
Loteria Electrónica Internacional Dominicana S.A. (LEIDSA) in December 2021.
As such the results of the Global Tote and Bump 50:50 have been presented separately in the income statement in the current
and prior year. Given the classification as a discontinued operation in 2021, the results of the LEIDSA supply contract 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 Global Tote division, Bump 50:50 as well as the net book value of the
Sports Haven property were presented separately as assets held for sale on the prior year balance sheet and as liabilities
directly associated with held for sale assets as appropriate. Given the disposal of the LIEDSA supply contract was completed in
the year the assets and liabilities have been removed from the balance sheet and a profit on disposal included within
discontinued operations.
Recognition of deferred contingent consideration for Bump 50:50
In addition to the consideration received during the year for the disposal of Bump 50:50, there is potential further consideration
due to the Group of CAD$2m if Bump 50:50 achieves revenues in the financial year ending 31 December 2022 of CAD$6.5m or
more. The Group has received information from the buyer they believe Bump is likely to achieve revenue in excess of CAD$6.5m
however not sufficient information was provided for the Directors to conclude that it is virtually certain the amount will be
received by the Group. It is therefore concluded that there is not sufficient evidence to recognise the asset, as such it is being
disclosed as a contingent asset rather than a receivable on the Group’s balance sheet.
The recoverability of the receivable is binary i.e. it is either paid in 2023 calendar year if 2022 revenue is CAD$6.5m or more, or it
is not paid. The probable recoverability is judgemental and the Directors will reassess the recoverability at each period end.
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;
sports betting commission likely to be earned at the venue; 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; and
discount rate, which appropriately reflect the risks associated with the CGU.
–
–
–
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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 assumptions 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 (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 £0.6m 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 c£90k (€106k) for income tax allegedly underpaid in relation to
subsistence claims of Irish field crew. During the year, the Group made a Voluntary Disclosure and paid an amount of c£180k
(€211k) to settle the matter, this has been expensed through separately disclosed items in discontinued operations (Global Tote
division). It is not certain that the Irish revenue will accept the voluntary disclosure and close the enquiry and therefore there may
be additional liabilities to pay in relation to this matter. However, the Board are confident that this will draw the matter to a close
and therefore have not made any additional accruals as at 31 December 2021.
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) 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.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
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
Source market 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.
Fees are a percentage of handle taken by out-of-state (outside
of Connecticut, USA) online operators who take bets on horse
and dog racing from Connecticut residents. Fees are only taken
from those operators granted permission from the State’s
Department of Consumer Protection (“DCP”) to take bets.
Revenue is recorded monthly based on handle disclosed by
those operators.
Parking lot rental for events e.g. carnival, rodeo
Revenue recorded as each event occurs.
Sports Betting revenue share
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Revenue is net commission receivable calculated as a share of
Net Gaming Revenue (“NGR") derived in retail venues net of
cost allowances to the sports book operator (Rush Street
International) and net of a cost allowance for “allowable costs”
of Sportech Venues and Connecticut Lottery Corporation.
Sportech Venues’ share of the “allowable costs” is subject to a
maximum of 20% of NGR is also recognised as revenue.
Revenue is calculated monthly and payable within 30 days and
therefore no significant financing element exists.
A percentage of Net GGR of CLC’s online gaming is also
recognised as Sportech Venues’ revenue monthly and is
payable on the same terms as retail revenue.
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Sports Betting – Principal versus Agent:
The Group evaluates the principal versus agent considerations, in determining whether it is appropriate to record the gross
amount of revenues and related costs, or the net amount earned as commissions. If the Group were the principal in a
transaction and controlled the specific good or service before it is transferred to the customer, revenue would be recorded
gross; however, in the arrangement with CLC, revenue is recorded on a net basis as this is not the case. For retail sports
services, the Group does not control the promised goods or services and, therefore, records the net amount of revenue earned
as a commission. Evidence for the agent conclusion comprises amongst other indicators;
i.
ii.
iii.
iv.
v.
vi.
The terminals used in the retail venues for sports betting are not the property or responsibility of Sportech and were not
purchased or rented by Sportech;
The risk on transactions is not Sportech’s and Sportech does not manage the sportsbook;
Sportech does not set the sportsbook prices;
Sportech is not responsible for credit risk (chargebacks);
The Connecticut Lottery Corporation is the licence holder and the customer contracts with CLC not Sportech; and
If a loss is made on the sportsbook, Sportech does not participate in that loss and instead receives zero commissions.
Sportech Digital:
123Bet.com Revenue
The Group owns the brand 123Bet.com and operates a pari-mutuel betting site taking bets on horse and dog racing from
customers mainly in the USA through its affiliate provider eBet Technologies Inc. Wagers net of customer winnings and loyalty
awards is recognised as revenue.
Lottery software supply
The Group’s subsidiary Lot.to Systems Limited provides online lottery software to customers globally. The service fees are either
fixed monthly fees, percentages of handle through the software or a combination of both and most contracts can have fixed
monthly “minimums”. Revenue is recognised as the obligations under the contract are met.
Discontinued operations:
Global Tote and LEIDSA
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
control of the goods is transferred to the customer, generally following the receipt of an acceptance form or confirmation of
delivery. 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
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
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 and recognised on completion of the raffle.
(c) 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.
(d) 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
–
–
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Sportech Digital: a pari-mutuel betting website and 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
–
Global Tote, Bump 50:50 and LEIDSA: provision of pari-mutuel wagering and lottery platform services and systems
worldwide principally to the horseracing industry and provision of 50:50 lottery software and services.
(e) 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
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.
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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. 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.
(f)
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.
(g) 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.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
(h) 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 and buildings
Leasehold Improvements
Plant and machinery
Fixtures and fittings
Not depreciated
Over the period of the lease or 25 years whichever is shorter
Between 3 and 12 years
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.
(i) 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 (taking into account the lease term being considered) 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.
(j)
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.
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.
(k)
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 (five to ten years).
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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:
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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.
(l)
Investments in subsidiaries
Investments in subsidiaries are carried at historic cost less any impairment. Annual impairment reviews are performed.
(m) 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.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss to the extent that it eliminates the impairment loss
which has been recognised for the asset in prior years. Any increase in excess of this amount is treated as a revaluation
increase.
(n) Pension obligation
The Group operates various pension schemes.
The schemes are generally funded through payments to insurance companies. The Group now only has 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.
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Notes to the financial
statements continued
In the past the Group did have defined benefit plans, until the disposal of Global Tote on 17 June 2021, the plans were
accounted for as follows; 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
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.
(o) 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.
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.
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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.
(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.
(p) 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
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
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.
(q) 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.
(r) 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.
(s) 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.
(t)
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
(u)
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.
(v) 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.
(w) 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.
(x) Separately disclosed 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.
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(y) Government grants
Grants for revenue expenditure are shown gross in the income statement in other income. Where retention of a government
grant is dependent on the Group satisfying certain criteria, it is initially recognised as deferred income. When the criteria for
retention have been satisfied, the deferred income balance is released to the income statement.
(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.
(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 2021 and
are therefore applicable for the 31 December 2021 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 2021.
New standards and amendments effective for periods beginning on or after 1 January 2021 and therefore relevant to these
financial statements:
Applicable for financial
Standard or interpretation year beginning on or after
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform – Phase 2 1 January 2021
All of the other pronouncements are relevant other than IFRS 7, but do not result in the accounting applied by the Group
changing.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
(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
Annual Improvements to IFRS Standards 2019–2021 1 January 2022
IFRS 4 and IFRS 17 and Interest Rate Benchmark Reform are not relevant to the Group.
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 that management believe should be added back (separately disclosed items) and other
income. 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 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
2021 2020
Note £000 £000
Continuing operations
Operating costs per income statement (15,680) (19,710)
Add back:
Sports betting investment 2 260 261
Depreciation 15,16 982 1,621
Amortisation, excluding acquired intangible assets 14 129 276
Amortisation of acquired intangible assets 14 509 509
Impairment of property, plant and equipment and right-of-use assets 15,16 – 4,349
Reversal of impairment of property, plant and equipment 15 (335) –
Share option charge 29 334 347
Separately disclosed items (net) 4 1,101 229
Adjusted operating costs, pre sports betting investment (12,700) (12,118)
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Adjusted EBITDA is calculated as below:
Restated
2021 2020
£000 £000
Continuing operations
Revenue 22,942 17,372
Cost of sales (11,489) (8,717)
Gross profit 11,453 8,655
Marketing and distribution costs (276) (311)
Contribution 11,177 8,344
Adjusted operating income and costs (pre sports betting investment) (12,700) (12,118)
Adjusted EBITDA pre sports betting investment (1,523) (3,774)
Sports betting investment (260) (261)
Adjusted EBITDA (1,783) (4,035)
Prior year comparatives have been adjusted for discontinued operations related to the LEIDSA contract (prior year comparatives
were adjusted in the 2020 financial statements to excluded results of the Global Tote and Bump 50:50 business).
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. In both the current and prior year, the costs were all wholly externally incurred and included no internal
allocations.
Adjusted profit/(loss) 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
2021 2020
£000 £000
From continuing operations:
Adjusted EBITDA (1,783) (4,035)
Share option charge (334) (347)
Depreciation (982) (1,621)
Amortisation (excluding amortisation of acquired intangibles) (129) (276)
Net finance costs (excluding certain finance costs – note 8) (130) (254)
Adjusted loss before tax (3,358) (6,533)
Tax at 16.4% (2020: 20.3%) 551 1,326
Adjusted loss after tax (2,807) (5,207)
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
Restated
2021 2020
Note £000 £000
From discontinued operations:
Adjusted EBITDA 11 6,879 6,369
Depreciation 11 (221) (2,170)
Amortisation 11 (151) (3,585)
Net finance costs 11 54 (68)
Adjusted profit before tax 6,561 546
Tax at 25.8% (2020: (60.9)%) (1,693) 333
Adjusted profit after tax 4,868 879
2. SEGMENTAL REPORTING
Sportech Sportech Corporate
Digital Venues costs Group
2021 £000 £000 £000 £000
Revenue from sports betting services – 280 – 280
Revenue from food and beverage sales – 2,115 – 2,115
Revenue from rendering of services 1,032 19,515 – 20,547
Total revenue 1,032 21,910 – 22,942
Cost of sales (548) (10,941) – (11,489)
Gross profit 484 10,969 – 11,453
Marketing and distribution costs (76) (200) – (276)
Contribution 408 10,769 – 11,177
Adjusted net operating costs (note 1) (987) (9,149) (2,564) (12,700)
Adjusted EBITDA (pre sports betting investment) (579) 1,620 (2,564) (1,523)
Sports betting investment – (260) – (260)
Adjusted EBITDA (579) 1,360 (2,564) (1,783)
Share option charge – – (334) (334)
Depreciation (10) (950) (22) (982)
Amortisation (excluding amortisation of acquired intangible assets) (97) – (32) (129)
Segment result before amortisation of acquired intangibles (686) 410 (2,952) (3,228)
Amortisation of acquired intangibles (509) – – (509)
Reversal of impairment of property, plant and equipment – 335 – 335
Separately disclosed items (165) (84) (852) (1,101)
Other income 100 4,001 – 4,101
Operating (loss)/profit (1,260) 4,662 (3,804) (402)
Net finance income 156
Loss before taxation from continuing operations (246)
Taxation – continuing operations (192)
Loss for the year from continuing operations (438)
Profit after tax from discontinued operations 35,001
Profit for the year 34,563
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Discontinued operations in relation to the LEIDSA contract were within the Sportech Digital division, formally known as Sportech
lotteries. Those in relation to Global Tote and Bump 50:50 were classified as discontinued in 2020 also.
Within Sportech Venues’ services revenue there is £545k, of which c£263k which related to 2020 handle taken from
Connecticut residents online by out of state operators, the balance is related to 2021 financial year (£282k). It was only in 2021
that those operators received approval from the regulator to take bets from Connecticut residents and as such that Sportech
could collect as “source market” fee from those operators.
Sportech Sportech Corporate
Digital Venues costs Group
£000 £000 £000 £000
Segment assets 1,252 20,288 18,738 40,278
Segment liabilities (208) (12,144) (8,104) (20,456)
Other segment items – capital expenditure
Intangible assets (continuing operations) 165 – – 165
Intangible assets (discontinued operations) 847 – – 847
Property, plant and equipment (continuing operations) 4 27 – 31
Property, plant and equipment (discontinued operations) 551 – – 551
Sportech Sportech Corporate
Digital Venues costs Group
2020 restated £000 £000 £000 £000
Revenue from food and beverage sales – 1,472 – 1,472
Revenue from rendering of services 304 15,596 – 15,900
Total revenue 304 17,068 – 17,372
Cost of sales (93) (8,624) – (8,717)
Gross profit 211 8,444 – 8,655
Marketing and distribution costs – (311) – (311)
Contribution 211 8,133 – 8,344
Adjusted net operating costs (note 1) (973) (9,218) (1,927) (12,118)
Adjusted EBITDA (pre sports betting investment) (762) (1,085) (1,927) (3,774)
Sports betting investment – (261) – (261)
Adjusted EBITDA (762) (1,346) (1,927) (4,035)
Share option charge – – (347) (347)
Depreciation (10) (1,595) (16) (1,621)
Amortisation (excluding amortisation of acquired intangible assets) (26) – (250) (276)
Segment result before amortisation of acquired intangibles (798) (2,941) (2,540) (6,279)
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 loss (1,307) (7,308) (2,751) (11,366)
Net finance costs (557)
Loss before taxation from continuing operations (11,923)
Taxation – continuing operations 1,055
Loss for the year from continuing operations (10,868)
Loss after tax from discontinued operations (1,964)
Loss for the year (12,832)
75
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
Sportech Sportech Corporate Assets held
Digital Venues costs for sale Group
£000 £000 £000 £000 £000
Segment assets 2,943 13,681 12,593 27,671 56,888
Segment liabilities (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) – 29 – – 29
Property, plant and equipment (discontinued operations) 121 – – 603 724
Information by geographical area
Revenues from Revenues from
external customers external customers
Continuing operations Discontinued operations Non-current assets
Restated Restated
2021 2020 2021 2020 2021 2020
£000 £000 £000 £000 £000 £000
United Kingdom 62 180 1,867 4,287 1,316 1,883
North and South America 22,880 17,192 12,534 18,368 14,721 12,434
Europe – – 1,724 4,871 – –
Other – – 294 823 – –
Total 22,942 17,372 16,419 28,349 16,037 14,317
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3. EXPENSES BY NATURE
Restated
2021 2020
Note £000 £000
Cost of sales
Tote and track fees 10,205 7,821
F&B consumables 818 528
Betting and gaming duties and licences 99 79
Repairs and maintenance cost of sales 34 48
Programs 266 196
Other cost of sales 67 45
Total cost of sales 11,489 8,717
Marketing and distribution costs
Marketing 253 295
Vehicle costs 23 16
Total marketing and distribution costs 276 311
Operating costs
Staff costs – gross, excluding share option charges 6,661 7,015
Less amounts capitalised (165) (230)
Staff costs – net 6,496 6,785
Property costs 2,581 2,723
IT & Communications 457 500
Professional fees and licences 2,323 1,521
Insurance 968 639
Travel and entertaining 26 66
Banking transaction costs and FX 109 121
Other costs – 24
Adjusted operating costs (including sports betting investment) 12,960 12,379
Share option charge 334 347
Depreciation 15,16 982 1,621
Amortisation, excluding amortisation on acquired intangibles 14 129 276
Amortisation of acquired intangibles 14 509 509
Impairment of property, plant and equipment and right-of-use assets 15,16 – 4,349
Reversal of impairment of property, plant and equipment 15 (335) –
Separately disclosed items 4 1,101 229
Total operating costs 15,680 19,710
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
4. SEPARATELY DISCLOSED ITEMS
2021 2020
Note £000 £000
Continuing operations
Included in operating costs:
Onerous contract provisions and other losses resulting from exit from Californian operations 91 –
Redundancy and restructuring costs 625 –
Corporate activity costs 4(a) 21 118
Costs in relation to the Spot the Ball VAT refund 4(b) 10 44
Costs in relation to exiting the Group’s interests in India 4(c) 13 65
Costs in relation to the Group’s move from Main Market to AIM 341 –
UK defined benefit pension scheme buy-out – 2
1,101 229
Discontinued operations
Included in operating costs 11 371 1,224
Total included in operating costs 1,472 1,453
Included in finance costs – continuing operations:
Interest accrued on corporate tax potentially due and unpaid at the balance sheet date
on STB refund received in 2016 150 150
Interest paid on VAT settlement reached in 2020 – 83
8 150 233
Net separately disclosed items 1,622 1,686
(a) Corporate activity costs
Costs incurred 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 is incurring costs in relation to dissolving the holding company of the joint venture in Mauritius, the issue is ongoing.
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Below is a summary of cash outflows from separately disclosed items:
2021 2020
£000 £000
Continuing operations – cash outflows from separately disclosed items:
Redundancy and restructuring costs (625) (18)
Expenses in relation to the UK defined benefit pension scheme “buy-out” – (2)
Costs in relation to the Spot the Ball VAT refund (37) –
Costs in relation to corporate activity (71) (127)
Costs in relation to legacy tax disputes – (17)
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 move to AIM (341) –
Costs in relation to the Group’s lease in Norco, California (785) –
Costs in relation to exiting the Group’s interests in India (13) (65)
(1,872) (469)
Cash outflows from separately disclosed items – discontinued operations (net) (535) (15)
(2,407) (484)
5. EMPLOYMENT COSTS
Average number of monthly employees (full-time equivalents) including Executive Directors comprised:
Continuing Discontinued Total Continuing Discontinued Total
2021 2021 2021 2020 2020 2020
Number Number Number Number Number Number
Continuing operations
Sales and marketing 4 13 17 4 12 16
Operations and distribution 134 195 329 121 203 324
Administration and management 12 24 36 26 13 39
Total employees 150 232 382 151 228 379
Their aggregate remuneration comprised:
Continuing Discontinued
2021 2020 2021 2020
£000 £000 £000 £000
Wages and Salaries 5,933 6,207 4,145 9,636
Social security costs 475 463 406 1,061
Pension costs – defined contribution scheme (note 26) 88 115 225 364
Pension costs – defined benefit scheme (note 26) – – – 221
Employee remuneration, excluding share option charges 6,496 6,785 4,776 11,282
Share option expense (note 29) 334 347 – –
Total remuneration 6,830 7,132 4,776 11,382
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
6. DIRECTORS AND KEY MANAGEMENT REMUNERATION
Directors Key management
2021 2020 2021 2020
£000 £000 £000 £000
Short-term employee benefits 1,115 757 1,236 796
Share-based payments 45 103 45 103
Pay in lieu of notice 369 – 391 –
Post-employment benefits 18 20 18 20
Total remuneration 1,547 880 1,690 919
Details of individual Directors’ remuneration and share-based incentives granted are given in the Remuneration report on pages
28 to 40. This information forms part of the financial statements. Retirement benefits are accruing under defined benefit pension
schemes for nil Directors (2020: nil). No Directors exercised share options in the year (2020: nil).
In the above table, the prior year includes approved bonuses for 2020 and excludes any bonus which was contingent on the
completion of the disposal of the held for sale assets at 31 December 2020 (£221k, excluding employer’s taxes). Those
bonuses which have now been paid in 2021 have been included in the 2021 amounts in the above table.
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:
2021 2020
£000 £000
Audit fees 264 354
Corporate finance services 55 110
Other assurance services 18 24
Total fees 337 488
8. NET FINANCE INCOME/(COSTS)
2021 2020
£000 £000
Continuing operations:
Finance costs:
Interest accrued and paid on tax liabilities (150) (233)
Interest on lease obligations (note 24) (155) (265)
Foreign exchange loss on financial assets and liabilities denominated in foreign currency – (70)
Total finance costs (305) (568)
Finance income:
Interest received on bank deposits 25 11
Foreign exchange gain on financial assets and liabilities denominated in foreign currency 436 –
Total finance income 461 11
Discontinued operations (note 11) 54 (68)
Net finance income/(costs) 210 (625)
Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in
note 1.
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Continuing operations: £000 £000
Foreign exchange gain/(loss) on financial assets and liabilities denominated in foreign currency 436 (70)
Interest accrued and paid on tax liabilities (150) (233)
286 (303)
9. TAXATION
The Group’s tax charge from continuing and discontinued operations comprises:
2021 2020
£000 £000
Current tax:
Current tax on profit for the year 1,219 1,176
Adjustments in respect of prior years 6 (1,895)
Total current tax 1,225 (719)
Deferred tax:
Origination and reversal of temporary differences (56) 169
Change in rates (4) (1)
Adjustments in respect of prior years 13 (204)
Derecognition of previously recognised deferred tax assets – 986
Total deferred tax (47) 950
Total tax charge 1,178 231
Restated
2021 2020
Note £000 £000
Total tax charge/(credit) in continuing operations 192 (1,055)
Total tax charge in discontinued operations 11 986 1,286
Total tax charge 1,178 231
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
The taxation on the Group’s profit/(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:
2021 2020
Note £000 £000
Profit/(loss) for the year 34,563 (12,832)
Total tax charge 9 1,178 231
Profit/(loss) before tax 35,741 (12,601)
Tax calculated at domestic tax rates applicable to (losses)/profits in the respective countries 8,065 (2,669)
Tax effects of:
– income not taxable net of expenses not deductible for tax purposes (5,282) 449
– foreign taxes paid not provided for 689 835
– adjustments in respect of prior years – current tax 6 (1,895)
– adjustments in respect of prior years – deferred tax 13 (204)
– effect of change in rates (4) (1)
– deferred tax not recognised during the year 319 2,730
– deferred tax not previously provided (2,628) –
– derecognition of previously recognised deferred tax assets – 986
Total tax charge 1,178 231
US deferred tax assets were revalued downwards in 2020 by £986k to £nil carrying value (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. The same analysis was carried out in 2021 and the review confirmed no recoverability and therefore no deferred tax
asset has been recognised in the US businesses as at 31 December 2021. There are no changes expected in the US federal
income tax rate from the current rate of 21%.
These financial statements account for the change in the UK Corporation Tax rate from 19% to 25% based on enacted
legislation. Deferred tax in the UK would be provided at 25%, however deferred tax in the UK is valued at £nil as losses carried
froward are not expected to be recovered.
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 in the
prior year 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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An analysis of the net current tax liabilities is as follows:
Restated
2021 2020
Note £000 £000
At 1 January 3,258 4,880
Charged to the income statement – continuing operations 239 (1,770)
Charged to the income statement – discontinued operations* 791 1,051
Paid during the year – continuing operations (105) 41
Received during the year – continuing operations 1,442 –
Paid during the year – discontinued operations* (904) (1,070)
Transferred to liabilities associated with assets held for sale – 117
Foreign exchange movements (3) 9
At 31 December 4,718 3,258
Included in:
Current assets – (1,442)
Current liabilities 4,718 4,700
4,718 3,258
* Relating to LEIDSA contract only. Tax paid in the other discontinued operations was £20k.
10. OTHER INCOME
Other income recognised in the income statement during the year is as follows:
2021
Note £000
Settlement for early termination of a contract 100
CARES Act credits received – continuing operations 1,426
Profit on disposal of Sports Haven 11(a) 2,575
Total – continuing operations 4,101
CARES Act credits received – discontinued operations 11(c) 1,057
Total 5,158
CARES Act credits were received given the impact on the Group’s operations of the COVID-19 restrictions imposed in the USA.
All amounts were received in cash during the year. Proceeds from the settlement for early termination of a contract are due to be
received in early Q2 of 2022.
83
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
11. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
11a) On 28 April 2021 the Group completed the disposal of its freehold property in New Haven, Connecticut, known as “Sports
Haven” for gross consideration of £4,346k ($6,000k). The asset was classified as held for sale as at 31 December 2020 and
was part of the Sportech Venues division. Costs related to the disposal amounted to £153k ($210k). The property is to be
leased back for 18 months to 31 October 2022 at a rental of c£36k per month ($50k). On disposal, a lease liability of £633k was
recognised as well as a right-of-use asset of £169k. The profit on disposal is analysed as follows:
2021
£000
Cash consideration received 4,346
Net book value disposed of (1,154)
Right-of-use asset recognised 169
Lease liability recognised (633)
Costs of disposal (153)
Profit after tax on disposal net of costs 2,575
11b) On 2 June 2021 the Group completed the disposal of its 100% interest in Bump (Worldwide) Inc. (“Bump”) for gross
consideration of £4,941k (CAD$8,462k), including a net working capital settlement of £277k. The division was classified as held
for sale as at 31 December 2020 and was part of the Sportech Racing division. Further deferred contingent consideration is
potentially due of £1,165k (CAD$2,000k). This has not been recognised given the uncertainty of the revenue hurdle required to
be achieved, see note 28.
The profit/(loss) for the period and cashflows from Bump are shown below:
Period ended
2 June
2021 2020
Bump (Worldwide) Inc.: Note £000 £000
Revenue 810 703
Cost of sales, marketing and distribution and adjusted operating expenses (487) (1,598)
Adjusted EBITDA 323 (895)
Depreciation and amortisation – (291)
Separately disclosed items – (65)
Finance income 78 45
Profit/(loss) before tax 401 (1,206)
Tax, excluding tax arising on disposal – –
Profit/(loss) after tax 401 (1,206)
Gain from selling discontinued operations after tax (net of disposal costs) 11e 3,805 –
Profit/(loss) for the period 4,206 (1,206)
Net cash flow from/(used in) operating activities 462 (801)
Net cash flow used in investing activities (37) (118)
Net cash inflow/(outflow) 425 (919)
Separately disclosed items within the above table in the prior year are disposal costs.
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11c) On 17 June 2021 the Group completed the disposal of its Global Tote division which also formed part of the Sportech
Racing division and was classified as held for sale as at 31 December 2020. Gross Consideration amounts to £33,906k
including a payment for cash transferred to the buyer with the business of £3,609k net of debt like items of £1,294k, received in
July 2021 plus a settlement of net working capital which was in excess of an agreed Target working capital (and other
adjustments) of £559k also delivered. In addition, the historical underlying tote software code was disposed of by Sportech PLC
to BetMakers Technology Group Limited within the same agreement, proceeds of £150k resulted in a profit on disposal of £68k.
The profit/(loss) for the period and cashflows from Global Tote are shown below:
Period ended
17 June
2021 2020
Global Tote Group: Note £000 £000
Revenue 12,245 25,052
Cost of sales, marketing and distribution and adjusted operating expenses (8,140) (19,525)
Adjusted EBITDA 4,105 5,527
Other income 1,057 –
Depreciation and amortisation – (5,083)
Profit on disposal of intangible assets 68 –
Separately disclosed items (371) (1,159)
Finance costs (24) (113)
Profit/(loss) before tax 4,835 (828)
Tax, excluding tax arising on disposal (195) (528)
Profit/(loss) after tax 4,640 (1,356)
Gain from selling discontinued operations after tax (net of disposal costs) 11e 17,051 –
Profit/(loss) for the period 21,691 (1,356)
Net cash flow from operating activities 1,944 6,099
Net cash flow used in investing activities (930) (1,905)
Net cash flow used in financing activities (160) (436)
Net cash inflow 854 3,758
Separately disclosed items incurred in the period were redundancy and restructuring costs in respect of a rationalisation of this
business (£192k) and a provision for an employment tax settlement in Ireland (£179k) (2020: 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).
11d) On 31 December 2021 the Group completed the disposal of its wholly owned subsidiary, Sportech Lotteries, LLC which
had the legal rights to the service contract with LEIDSA who operates the Dominican Republic national lottery. Gross
Consideration amounts to £9,854k including an estimate for settlement of net working capital which was in excess of an agreed
Target working capital of £431k. Of the consideration, £9,423k was received on 31 December 2021, the final working capital
settlement has been received in Q1 2022, there was no variance to estimate as at 31 December 2021.
In addition, the Group’s lottery software provider, Lot.to Systems Limited has signed a five-year contract with the buyer of
Sportech Lotteries, LLC to provide an online lottery platform for LEIDSA in return for commission revenue up to c£1.5m ($2.0m)
over the period.
85
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
The profit for the period and cashflows from Sportech Lotteries, LLC are shown below:
Period ended
31 December
2021 2020
Sportech Lotteries, LLC: Note £000 £000
Revenue 3,364 2,594
Cost of sales, marketing and distribution and adjusted operating expenses (913) (857)
Adjusted EBITDA 2,451 1,737
Depreciation and amortisation (372) (381)
Profit on disposal of property, plant and equipment 47 –
Profit before tax 2,126 1,356
Tax, excluding tax arising on disposal (791) (758)
Profit after tax 1,335 598
Gain from selling discontinued operations after tax (net of disposal costs) 11e 7,769 –
Profit for the period 9,104 598
Net cash flow from operating activities 1,068 568
Net cash flow used in investing activities (429) (121)
Net cash inflow 639 447
11e) A summary of the gain on disposal of each discontinued operation is as follows:
Global Bump Sportech
Tote (Worldwide) Lotteries
Group Inc. LLC Total
Note £000 £000 £000 £000
Cash consideration received and receivable 33,906 4,941 9,854 48,701
Cash disposed of (3,609) (116) – (3,725)
Cash consideration received and receivable net of cash
disposed of 11f 30,297 4,825 9,854 44,976
Add cumulative foreign exchange movements recycled to
the income statement 3,234 (101) 240 3,373
Costs of disposal (1,511) (118) (405) (2,034)
Less net assets disposed of:
Intangibles 6,582 274 209 7,065
Property, plant and equipment 5,001 210 180 5,391
Right-of-use assets 761 – – 761
Deferred tax assets 12 – – 12
Trade and other receivables 4,621 380 1,542 6,543
Inventories 2,479 – – 2,479
Income tax payable (44) – – (44)
Trade and other payables (2,660) (63) (11) (2,734)
Lease liabilities (786) – – (786)
Retirement benefit liability (997) – – (997)
14,969 801 1,920 17,690
Pre-tax gain on disposal of discontinued operations 17,051 3,805 7,769 28,625
Taxation – – – –
Gain on disposal of discontinued operations 17,051 3,805 7,769 28,625
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Costs of disposal include bonuses paid to Group employees of £1,173k for Global Tote, £85k for Bump and £375k for Sportech
Lotteries, LLC (including employer’s taxes payable).
11f) A summary of the cash consideration received and receivable net of cash disposed of is as follows:
Global Bump Sportech
Tote (Worldwide) Lotteries
Group Inc. LLC Total
Note £000 £000 £000 £000
Cash consideration received in 2021 net of cash disposed of 24,352 4,825 9,423 38,600
Disposal costs paid in 2021 (1,716) (181) (6) (1,903)
Cash consideration received net of cash disposed of and
disposal costs paid in the period 22,636 4,644 9,417 36,697
Add back cash disposal costs paid in the period 1,716 181 6 1,903
Cash consideration received net of cash disposed of before
disposal costs paid in the period 24,352 4,825 9,423 38,600
Cash consideration received in 2020 (including FX movement) 5,945 – – 5,945
Consideration to be received in 2022 – – 431 431
Cash consideration received and receivable net of cash
disposed of before disposal costs paid in the period 11e 30,297 4,825 9,854 44,976
Cash consideration received in 2020 related to an Initial Payment received from BetMakers Technology Group Ltd for the
disposal of Global Tote, the deposit was unconditional and non-returnable.
11g) Reconciliation to profit/(loss) for the period included in the income statement:
2021 2020
Note £000 £000
Global Tote 11c 21,691 (1,356)
Bump 11b 4,206 (1,206)
Sportech Lotteries, LLC 11d 9,104 598
35,001 (1,964)
11h) Summary of cash flows from discontinued operations
Global Bump Sportech
Tote (Worldwide) Lotteries
Group Inc. LLC Total
Note £000 £000 £000 £000
Net cash flow from operating activities 1,944 462 1,068 3,474
Net cash flow used in investing activities (930) (37) (429) (1,396)
Net cash flow used in financing activities (160) – – (160)
Net cash generated 854 425 639 1,918
87
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
11i) Assets held for sale as at 31 December 2020
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:
Global Bump Sports
Tote (Worldwide) Haven
Group Inc. property 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)
12. EARNINGS/(LOSS) PER SHARE
(a) Basic
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Parent Company by
the weighted average number of ordinary shares in issue during the year.
Restated
Dis- Dis-
Continuing continued Total Continuing continued Total
2021 2021 2021 2020 2020 2020
£000 £000 £000 £000 £000 £000
(Loss)/profit attributable to the owners of the Company (438) 35,001 34,563 (10,868) (1,964) (12,832)
Weighted average number of ordinary shares in issue (’000) 169,785 169,785 169,785 188,751 188,751 188,751
Basic (loss)/earnings per share (0.3)p 20.6p 20.3p (5.8)p (1.0)p (6.8)p
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(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.
Restated
Dis- Dis-
Continuing continued Total Continuing continued Total
2021 2021 2021 2020 2020 2020
£000 £000 £000 £000 £000 £000
Loss)/profit attributable to the owners of the Company (438) 35,001 34,563 (10,868) (1,964) (12,832)
Weighted average number of ordinary shares in issue (’000) 169,785 169,785 169,785 188,751 188,751 188,751
Dilutive potential ordinary shares N/A N/A N/A N/A N/A N/A
Total potential ordinary shares 169,785 169,785 169,785 188,751 188,751 188,751
Diluted (loss)/earnings per share (0.3)p 20.6p 20.3p (5.8)p (1.0)p (6.8)p
The number of potentially dilutive shares not taken into account in respect of the VCP in prior year was unlimited. The VCP
expired on 31 December 2021 and there are no longer any potentially dilutive shares.
(c) Adjusted
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.
2021 2020
Weighted Restated Weighted
Adjusted average Adjusted average Restated
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 (2,807) 169,785 (1.7)p (5,207) 188,751 (2.8)p
Diluted adjusted EPS (2,807) 169,785 (1.7)p (5,207) 188,751 (2.8)p
13. GOODWILL
Goodwill cost brought forward arose on the acquisition of Lot.to Systems Limited (which is now subsumed into Sportech Digital)
in February 2019. The goodwill is attributable to the knowledge and expertise of the workforce.
Movements in the Group's goodwill are shown below:
2021 2020
Sportech Sportech
Digital Total eBet Digital Total
£000 £000 £000 £000 £000
Cost
At 1 January 604 604 5,548 604 6,152
Transferred to held for sale – – (5,548) – (5,548)
At 31 December 604 604 – 604 604
Accumulated impairment charges
At 1 January – – (5,548) – (5,548)
Transferred to held for sale – – 5,548 – 5,548
At 31 December – – – – –
Closing net book value 604 604 – 604 604
As required by IAS 36, an impairment test has been carried out as at 31 December 2021. In testing for impairment, other assets
used solely to generate cash flows in the Sportech Digital CGU are also included, totalling £1,037k.
89
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
The recoverable amount of the CGU has been determined based on a value-in-use calculation. The key base case assumptions
made in calculating the value-in-use were:
–
–
–
–
–
–
–
The base year cash flow is represented by the 2022 budget EBITDA as per the Board approved plan;
The online Lottery for LEIDSA is expected to go live in H2 2022, revenues are forecasted to start at a low base but then to
grow quickly;
One new lottery customer is assumed in January 2023 and a further new customer in June 2023;
No increase in the cost base of the development support team;
Capital expenditure remains at 2021 levels into perpetuity;
Growth in 123Bet revenues following moderate increases in marketing spend. 20% growth is assumed in 2023 and 2024,
15% in 2025 and 10% in 2026, and nil growth into perpetuity, 40% EBITDA margin; and
a post-tax discount rate of 13.5% was used representing a market-based weighted average cost of capital appropriate for
the Sportech Digital CGU.
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 £2,726k and accordingly no
impairment was identified.
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 £1,640k.
–
–
no further increases in revenue beyond 2023 levels in either Lot.to or 123Bet;
EBITDA therefore remains flat at £432k per annum into perpetuity.
14. INTANGIBLE FIXED ASSETS
Software Licences Total
2021 £000 £000 £000
Cost
At 1 January 2021 5,353 5,696 11,049
Additions – continuing operations 165 – 165
Additions – discontinued operations 23 – 23
Disposal (965) – (965)
At 31 December 2021 4,576 5,696 10,272
Accumulated amortisation
At 1 January 2021 3,594 879 4,473
Charge for year – continuing operations 603 35 638
Charge for year – discontinued operations 151 – 151
Disposal (756) – (756)
At 31 December 2021 3,592 914 4,506
Exchange differences at 1 January 2021 – 767 767
Movement in the year – 71 71
Disposal (247) – (247)
Exchange differences at 31 December 2021 (247) 838 591
Net book amount at 31 December 2021 737 5,620 6,357
90
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P
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I
I
F
N
A
N
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A
L
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A
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E
N
T
S
Of the amounts capitalised in the year in continuing operations, £165k arose from capitalising staff costs for development
expenditure (2020: £230k). Of the amounts capitalised in the year in discontinued operations, £nil arose from capitalising staff
costs for development expenditure (2020: £1,420k). Amortisation has been included within operating costs.
Assets relating to in-house developed proprietary pari-mutuel software serving racing customers worldwide was sold during the
year to Betmakers Technology Group for proceeds of £150k resulting in a profit on disposal of £68k.
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 GBP at the reporting date, prior to any impairment that may be considered necessary, of
£5,616k ($7,569k, 2020: £5,545k, $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 2021. In testing for impairment, other assets
used solely to generate cash flows in the Venues CGU are also included, totalling (together with the licence carrying value)
£12,680k, $17,088k (2020: £9,876k, $13,479k).
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 8% in 2022 and 1% per annum
thereafter and 2% decline into perpetuity;
3% increase in online handle in 2022, 5% in 2023, 2% in 2024 and 2025 and into perpetuity;
7% increase in handle at the Stamford venue in 2022 and handle is assumed to decline by 5% thereafter through 2025,
and 2% decline into perpetuity;
a 44% increase in core F&B revenues, which excludes the Stamford venue, in 2022 reflecting further recovery from COVID-
19 restrictions, a 1% increase in 2023, 2024 and 2025 and thereafter stable revenues into perpetuity;
F&B revenues at the Stamford venue are forecasted to increase by 70% in 2022, again reflecting recovery from COVID-19
restrictions, to increase a further 10% in 2023, 5% in 2024 and 3% in 2025, and remain flat thereafter into perpetuity;
Sports betting revenues are forecasted to increase by 8% from 2022 budget levels in 2023 and by 6% in 2024 and 2025
and to then remain flat into perpetuity (is it assumed the 10-year contract with CLC will be renewed in perpetuity);
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 13.5% (2020: 10.5%) was used representing a market-based weighted average cost of capital
appropriate for the Sportech Venues CGU. The pre-tax discount rate was 18.9% (2020: 14.7%).
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 £16,792k ($22,630k) and
accordingly no impairment was identified (2020: 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 £12,946k, being headroom to the carrying value of £266k.
–
–
–
–
–
–
2% decline for 2023 through 2025 rather than 1% for core wagering handle;
3%, 1% and 1% growth for online handle in 2023 through 2025 rather than 5%, 2% and 2%;
Stamford’s handle remains at 2022 forecast levels;
All other costs remain constant;
Core F&B delivers same EBITDA as 2022 budget - $65k throughout the period; and
Stamford F&B delivers same EBITDA as 2022 budget - loss of $219k throughout the period.
91
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
For information, if a 0.5% increase in the post-tax discount rate to 14.0% was used in the Base Case model this would lead to a
value in use of £14,697k.
Customer
contracts and
Restated 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 – 735 50 – 785
Charge for year – discontinued operations – 3,585 – – 3,585
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
An impairment test was carried out as at 31 December 2020 on the Group’s licence in perpetuity to offer pari-mutuel off-track
betting in the State of Connecticut in the US.
The recoverable amount of the asset was 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%).
–
–
–
–
–
–
–
92
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A
T
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G
C
R
E
P
O
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G
O
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E
R
N
A
N
C
E
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
The above assumptions were 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.
15. PROPERTY, PLANT AND EQUIPMENT
Leasehold
improvements Assets
and owned in the
land and Plant and Fixtures course of
buildings machinery and fittings construction Total
2021 £000 £000 £000 £000 £000
Cost
At 1 January 2021
Additions – continuing operations
Additions – discontinued operations
Disposals
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Charge for year – continuing operations
Charge for year – discontinued operations
Reversal of impairment
Disposals
At 31 December 2021
Exchange differences at 1 January 2021
Movement in the year
Disposals
Exchange differences at 31 December
Net book amount at 31 December 2021
8,393
–
–
–
8,393
4,780
195
–
(335)
–
4,640
122
(68)
–
54
3,807
3,022
16
343
(2,879)
502
1,513
19
221
–
(1,752)
1
(672)
1
199
(472)
29
3,553
45
–
–
3,598
3,274
234
–
–
–
3,508
195
138
–
333
423
31
(30)
64
(64)
1
–
–
–
–
–
–
–
1
–
1
2
14,999
31
407
(2,943)
12,494
9,567
448
221
(335)
(1,752)
8,149
(355)
72
199
(84)
4,261
Depreciation charges have been included in operating costs.
Reversal of impairment
The assets at the Stamford sports bar venue in Connecticut, USA were fully impaired in prior periods. Given the new
arrangement for sports betting in the venue which came into force in late October 2021, management have considered
whether any of the previous impairment of assets should be reversed based on the venue’s trading performance. Modelling
was undertaken to calculate the value-in-use of the assets at the venue. The following key assumptions were made in the
value-in-use calculation:
–
–
–
–
The break clause in May 2025 will not be activated to end the lease in June 2026 and the trade at the venue will continue
into perpetuity (this a reversal of the assumption taken in June 2020 that the break would be taken). This has been
reflected in the year with the lease liability remeasured resulting in an increase in the lease liability of £2,835K and a
corresponding increase in the right-of-use asset was made (see note 16 and 24);
Pari-mutuel handle was assumed to increase by 7% from 2021 to 2022 but then decrease by 5% per annum until 2025
and by 2% thereafter into perpetuity;
F&B revenues are forecasted to increase by 69% in 2022 (recovering from the depressed 2020 and 2021 levels due to
COVID-19 restrictions), by 10% in 2023 and by 5% in 2024 and 3% in 2025, and to then remain flat into perpetuity;
Sports betting revenues are forecasted to increase by 8% from 2022 budget levels in 2023 and by 6% in 2024 and 2025
and to then remain flat into perpetuity (is it assumed the 10-year contract with CLC will be renewed in perpetuity);
93
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
–
–
Capital expenditure will average at $100k per annum into perpetuity; and
a post-tax discount rate of 13.5% (2020: 9.5%) was used representing a market-based weighted average cost of capital
appropriate for the Sportech Venues CGU.
As part of the discounted cashflow exercise with the above assumptions the recoverable amount of those assets was deemed
to be £3,119k. Accordingly a reversal of impairment of £335k was identified and has been credited to the income statement
within operating costs.
No indicators of impairment of other property, plant and equipment arose in the second half of the year.
Leasehold
improvement Assets
and owned in the
land and Plant and Fixtures course of
Restated buildings machinery and fittings construction Total
2020 £000 £000 £000 £000 £000
Cost
At 1 January 2020
Additions – continuing operations
Additions – discontinued operations
Transferred to held for sale
At 31 December 2020
Accumulated depreciation and
impairment charges
At 1 January 2020
Charge for year – continuing operations
Charge for year – discontinued operations
Transferred to held for sale
Impairment
At 31 December 2020
Exchange differences at 1 January 2020
Movement in the year
Transferred to held for sale
Exchange differences at 31 December
Net book amount at 31 December 2020
16,573
–
–
(8,180)
8,393
11,320
401
40
(8,869)
1,888
4,780
2,003
(27)
(1,854)
122
3,735
11,785
–
710
(9,473)
3,022
4,260
31
1,742
(4,520)
–
1,513
1,198
(24)
(1,846)
(672)
837
5,423
–
–
(1,870)
3,553
4,225
382
8
(1,974)
633
3,274
425
(126)
(104)
195
474
74
29
14
(86)
31
–
–
–
–
–
–
–
(2)
2
–
31
33,855
29
724
(19,609)
14,999
19,805
814
1,790
(15,363)
2,521
9,567
3,626
(179)
(3,802)
(355)
5,077
The table has been restated to show additions which are in continuing activities and those which are classed as discontinued.
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 May 2025 and the trade at the venue would terminate;
Handle was assumed to remain flat through the period at 2019 levels to June 2025;
F&B revenues were forecasted to remain flat through to June 2025 at management’s expected “post-pandemic” levels;
There would 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.
–
–
–
–
–
94
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N
A
N
C
E
I
I
F
N
A
N
C
A
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S
T
A
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E
M
E
N
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S
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 charged to the income statement within operating costs.
No further indicators of impairment of property, plant and equipment arose in the second half of 2020.
16. RIGHT-OF-USE ASSETS
Land and Fixtures
buildings Vehicles and fittings Total
2021 £000 £000 £000 £000
Cost
At 1 January 2021
Additions
Reassessment of lease term
Transferred from held for sale
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Charge for year
Reassessment of lease term
Transferred from held for sale
At 31 December 2021
Exchange differences at 1 January 2021
Movement in the year
Exchange differences at 31 December 2021
Net book amount at 31 December 2021
Depreciation charges have been included in operating costs.
6,941
1,240
604
96
8,881
5,878
519
(2,231)
51
4,217
20
(62)
(42)
4,622
29
–
–
–
29
2
5
–
–
7
(1)
–
(1)
21
53
–
–
–
53
27
10
–
–
37
(2)
–
(2)
14
7,023
1,240
604
96
8,963
5,907
534
(2,231)
51
4,261
17
(62)
(45)
4,657
Reassessment of lease assumption – break clause
During the year ended 31 December 2020, management had judged that the break clause in the lease of the Stamford sports
bar venue in Connecticut, USA, would be exercised and that the venue would be exited in May 2025. Following the new
arrangement which came into force in late October 2021 and allowed sports betting to commence in the venue, management
now consider that the break will not be taken and the Group will continue to operate the venue until at least the end of the
lease in May 2035. As a result, during the year ended 31 December 2021, the lease liability was remeasured resulting in an
increase of £2,835k (see note 24) and a corresponding increase in the right-of-use asset.
This £2,835k increase to the right-of-use asset should wholly be recognised as an increase in cost but £2,231k has been
taken against accumulated depreciation with only £604k recognised as an increase in cost. This is to ensure that the correct
closing cost and accumulated depreciation figures are reported as, during the year ended 31 December 2020, the
reassessment of the lease term which led to a decrease in the right of use asset of £2,231k was shown as an increase in
accumulated depreciation when it should have been recognised as a reduction in cost. This had no impact on the net book
amount of the right-of-use asset reported nor on profit for the year. Rather than restate the cost and accumulated depreciation
figures for the year ended 31 December 2020 with no overall impact, management have reversed the £2,231k adjustment to
accumulated depreciation during the year ended 31 December 2021 and correctly recognised the excess of £604k as an
increase in cost.
Value in use
Management considered that indicators of impairment of the right-of-use assets of the Stamford sports bar lease in
Connecticut, USA, following the reassessment of the break clause assumption. The carrying value was considered to be
supported by the discounted future cashflows and as a result no further impairment was identified. See note 15 for details of
assumptions used in the forecasting.
No indicators of impairment arose in relation to any other right-of-use asset during the period.
Further lease disclosures are given in note 24.
95
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
Land and Plant & Fixtures
buildings Vehicles machinery and fittings Total
2020 £000 £000 £000 £000 £000
Cost
At 1 January 2020
Additions – continuing operations
Additions – discontinued operations
Transferred to held for sale
At 31 December 2020
Accumulated depreciation
At 1 January 2020
Charge for year – continuing operations
Charge for year – discontinued operations
Reassessment of lease term
Impairment
Transferred to held for sale
At 31 December 2020
Exchange differences at 1 January 2020
Movement in the year
Transferred to held or sale
Exchange differences at 31 December 2020
Net book amount at 31 December 2020
7,698
304
73
(1,134)
6,941
1,282
791
225
2,231
1,828
(479)
5,878
(263)
250
33
20
1,083
237
29
30
(267)
29
97
2
97
–
–
(194)
2
(6)
(1)
6
(1)
26
–
–
205
(205)
–
–
–
58
–
–
(58)
–
–
(3)
3
–
–
40
13
–
–
53
13
14
–
–
–
–
27
(2)
–
–
(2)
24
7,975
346
308
(1,606)
7,023
1,392
807
380
2,231
1,828
(731)
5,907
(271)
246
42
17
1,133
The table has been restated to show additions and depreciation which are in continuing activities and those which are classed
as discontinued.
17. NET INVESTMENT IN JOINT VENTURE
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. The Group’s obligations in relation to the joint venture have been settled
and the legal process to dissolve the joint venture company will be completed in 2022.
18. TRADE AND OTHER RECEIVABLES
Non-current
Other receivables
Non-current trade and other receivables
Current
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Other receivables
Accrued income
Prepayments
Current trade and other receivables
Total trade and other receivables
96
2021
£000
2020
£000
158
158
781
–
781
480
279
210
1,750
1,908
156
156
778
(111)
667
62
292
496
1,517
1,673
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
The fair value of trade and other receivables is not considered to be different from the carrying value recorded above. Other
receivables includes £423k due from Inspired Entertainment Inc. for final working capital settlement on disposal of LEIDSA.
Movements in the provision for impairment of receivables in the year is shown below:
At 1 January
Charged to the income statement – discontinued operations
Utilisation of provision
Transferred to held for sale
Foreign exchange movements
At 31 December
The carrying amounts of trade and other receivables are denominated in the following currencies:
Sterling
US Dollar
Total
2021
£000
111
–
(111)
–
–
–
2021
£000
233
1,675
1,908
2020
£000
875
362
–
(1,167)
41
111
2020
£000
69
1,604
1,673
Trade receivables that are not more than three months past due are not considered impaired. As at 31 December 2021, £102k
(2020: £177k) 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:
Net deferred tax asset at 1 January
Income statement (charge)/credit – continuing operations
Income statement charge – discontinued operations
Tax credited directly to other comprehensive income
Deferred tax transferred to assets held for sale
Exchange differences
Net deferred tax asset at 31 December
Note
9
Included in:
Non-current assets
Current liabilities
Non-current liabilities
Asset
2021
£000
Liability
2021
£000
Net
2021
£000
4
(4)
–
–
–
–
–
–
–
–
–
(94)
51
–
–
–
–
(43)
–
–
(43)
(43)
(90)
47
–
–
–
–
(43)
–
–
(43)
(43)
2020
£000
808
(715)
(235)
88
(27)
(9)
(90)
4
(94)
–
(90)
97
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
Deferred tax assets
At 1 January 2020
Income statement charge – continuing operations
Income statement charge – discontinued operations
Tax credited directly to other comprehensive income
Transferred to assets held for sale
Currency translation differences
At 31 December 2020
Income statement charge – continuing operations
At 31 December 2021
Pension
£000
Capital
allowances
£000
Other
temporary
differences
£000
–
–
(88)
88
–
–
–
–
–
33
4
(5)
–
(27)
(1)
4
(4)
–
957
(807)
(142)
–
–
(8)
–
–
–
Total
£000
990
(803)
(235)
88
(27)
(9)
4
(4)
–
The Group has not recognised further deferred tax assets on gross timing differences in continuing operations of: £6,804k in
the US (2020: £21,637k) arising from unutilised trading losses and carried forward foreign tax credits; £nil (2020: £6,123k) from
capital tax allowances versus accounting charges; and £5,212k (2020: £7,985k) from other short term timing differences. In the
UK, £2,177k gross timing differences exist arising from trading losses and £32k on depreciation charged in excess of capital
allowances claimed, which have not been provided for.
The Directors reviewed the recoverability of the deferred tax assets in the US and the UK 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 the respective business units. A significant proportion of the tax losses unprovided for last year end in
the US were utilised against profits on disposal of the discontinued operations in the US (as was expected at 31 December
2020, however accounting prevented 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.
Deferred tax liabilities
At 1 January 2020
Income statement credit – continuing operations
At 1 January 2021
Income statement credit– continuing operations
At 31 December 2021
Other
temporary
differences
£000
(182)
88
(94)
51
(43)
Total
£000
(182)
88
(94)
51
(43)
Of the deferred tax liability, £5k is the remaining balance from that which was recognised on the acquisition of Lot.to Systems
Limited, in relation to intangible assets identified. The balance is in relation to the S&S Venues partnership. All of the deferred
tax liability is recorded in non-current liabilities (2020: current liabilities).
20. INVENTORIES
Finished goods
2021
£000
124
2020
£000
120
The cost of inventories (food and beverage inventory) recognised as an expense and included in cost of sales amounted to
£818k (2020: £528k). Food and beverage inventory is included in finished goods. There was no provision for obsolescence
held against inventories at 31 December 2021 (2020: £nil).
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21. CASH AND CASH EQUIVALENTS
Cash and short-term deposits
Customer funds
Note
22
2021
£000
21,912
455
22,367
2020
£000
11,356
465
11,821
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 £455k (2020: £465k) 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
Trade payables
Other taxes and social security costs
Accruals
Deferred income
Player liability
Note
21
2021
£000
3,545
178
3,767
–
455
7,945
2020
£000
3,581
141
3,737
6,180
465
14,104
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 acquisition of certain parts of the Racing and Digital division.
23. PROVISIONS
At 1 January 2020
Utilised during the year
Transferred to liabilities associated with assets held for sale
Currency differences
At 1 January 2021
Utilised during the year
Charged to the income statement
Currency differences
At 31 December 2021
Of which:
Current provisions
Onerous
contracts
£000
Other
Provisions
£000
1,597
(105)
–
(50)
1,442
(785)
91
(12)
736
736
8
–
(7)
(1)
–
–
–
–
–
–
Total
£000
1,605
(105)
(7)
(51)
1,442
(785)
91
(12)
736
736
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 had committed financial obligations arising from leases it entered into in California. The amounts provided for in
prior year represented management’s best estimate based on scenario analysis of what the Group was expecting to pay to
settle the liabilities. During the period one lease dispute was settled resulting in a cash outflow of £785k (including legal fees).
The second lease dispute was settled subsequent to the period end but prior to approving these financial statements, for
£736k (including estimated legal fees to completion of the legal process). The estimated legal fees amount to £45k and could
differ from management’s expectations. The liability was settled in March 2022.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
24. LEASE LIABILITIES
2021 2020
Maturity analysis – contractual undiscounted cash flows £000 £000
Less than one year 1,211 1,085
Between 2 and 5 years 2,615 3,241
More than 5 years 4,824 –
Total 8,650 4,326
The weighted average incremental borrowing rate applied to the lease liabilities was 4.16%, lowest rate being 4.00% and
highest rate of 5.75%.
2021 2020
Lease liabilities included in the balance sheet £000 £000
Current 923 823
Non-current 6,091 3,059
Total 7,014 3,882
2021 2020
Movement in lease liability during the year Note £000 £000
At 1 January 3,882 7,724
New leases entered into 1,698 654
Reassessment of lease term 16 2,835 (2,231)
Interest charged to the income statement – continuing operations 8 155 265
Interest charged to the income statement – discontinued operations – 74
Lease rentals paid – continuing operations (1,354) (1,219)
Lease rentals paid – discontinued operations – (436)
Disposed of on settlement of lease dispute (169) –
Transferred to held for sale – (998)
Movement as a result of foreign exchange (33) 49
At 31 December 7,014 3,882
25. FINANCIAL LIABILITIES
Movements in the year are as below:
2021 2020
£000 £000
At 1 January – 500
Instalment payments made – (500)
At 31 December – –
26. PENSION SCHEMES
The Group operates defined contribution schemes in the UK. Datatote and Lot.to employees contribute to a separate defined
contribution scheme to that of Sportech PLC employees. The Group operated a further funded defined benefit scheme in the
US, two defined contribution schemes in the US and a defined contribution scheme in Ireland within its discontinued operations.
Summary of pension contributions paid:
2021 2020
£000 £000
Defined contribution scheme contributions – continuing operations 88 115
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Defined contribution schemes
Continuing and discontinued operations
In the UK, employer contributions for Sportech are set at a maximum of 8% of pensionable salaries.
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.
seven respectively), all pensions cover is provided through employer and employee social security contributions.
For employees in France and Turkey (of which there are one and
Summary of pension contributions paid:
2021 2020
£000 £000
Defined contribution scheme contributions – discontinued operations 225 364
Defined benefit schemes – discontinued operations
The Group had 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 amounts recognised in the balance sheet within liabilities associated with assets held for sale in the prior year are as follows:
2020
£000
Fair value of plan assets 3,674
Present value of the scheme’s liabilities (4,903)
Deficit in the scheme (1,229)
The figures below have been determined by qualified actuaries at the balance sheet date using the following assumptions:
US
2020
Discount rate 2.5%
Rate of increase in salaries N/A
Rate of inflation N/A
Mortality table Pri-2012 Total Dataset (Employee/Retiree)
with Scale MP-2021
The qualified actuaries who valued the scheme are The Prudential Insurance Company.
The scheme was transferred on disposal to Betmakers Technology Group Limited on 17 June 2021. Contributions in the period
were £219k, service cost was £120k, actuarial movement was £186k credit to reserves and the foreign exchange movement
was £53k debit, leaving a closing net lability disposed of of £997k (opening net liability £1,229k).
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
The movement in the net defined benefit obligation over the prior year was 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
Pension risks
The Group is no longer subject to risks associated with defined benefit pension schemes having transferred the US scheme with
the disposal entities to Betmakers Technology Group Limited.
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 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 2021 (2020: £nil) was determined other than specific provisions for bad debts in trade
receivables.
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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 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 2021, there were no outstanding
commitments on foreign exchange forward contracts (2020: none). The Group did not enter into any forward contracts during
the year (2020: the Group did not enter into any forward contracts).
The functional currencies of the individual entities in the Group is kept under review.
The average rate for the US Dollar and Euro in both the current and previous reporting period are as outlined below.
2021 2020
Average Closing Average Closing
US Dollars 1.37 1.35 1.29 1.36
Euro 1.16 1.19 1.13 1.11
If the exchange rates in 2021 were comparable to those in 2020, profit after tax would have been £25,627k and the net assets
would have been £19,595k at 31 December 2021.
If exchange rates had be 1% higher/lower in 2021 than the prevailing rates during the year, profit for the year would have been
£115k higher/lower and net assets as at 31 December 2021 would have been £19,646k (£176k lower/higher).
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:
2021 2020
£000 £000
Financial assets measured at amortised cost 24,065 12,998
Financial liabilities measured at amortised cost (14,781) (11,665)
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, being leases with asset value of less than £4,000
($5,000). Leases that qualify for these exemptions are included within the disclosures below.
The expenditure charged to the income statement was £114k (2020: £67k).
103
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
The future aggregate minimum lease payments under non-cancellable leases not accounted for elsewhere under IFRS 16, are
as follows:
2021 2020
£000 £000
No later than one year 26 50
Later than one year and no later than five years 1 10
Total 27 60
Contingent items
Bump contingent consideration receivable
On 2 June 2021 the Group completed the disposal its 50:50 lottery division, Bump 50:50. In addition to the consideration
received during the year, there is potential further consideration due to the Group of CAD$2m if Bump 50:50 achieves revenues
in the financial year ending 31 December 2022 of CAD$6.5m or more. The Group has received information from the buyer
indicating that they believe Bump is likely to achieve revenue in excess of CAD$6.5m, however insufficient information was
provided for the Directors to conclude that it is virtually certain that the amount will be received. It is therefore concluded there is
not sufficient evidence of virtual certainty to recognise the asset, as such it is being disclosed as a contingent asset.
The recoverability of the receivable is binary i.e. it is either paid in 2023 if 2022 revenue is CAD$6.5m or more, or it is not
payable if this level of revenue is not reached. The Directors will reassess the recoverability at each period end.
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
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.
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 tax warranties under the terms of the Sale and Purchase Agreements. The possibility of material claims being
made under the seller tax warranties in either deal is considered by management to be remote. In addition, the 2021 sales of the
Bump 50:50, the Global Tote business and Sportech Lotteries, LLC 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 £0.1m (2020: £0.5m). Management is of the view that the risk of those outflows
arising is not probable and accordingly they are considered contingent items.
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29. ORDINARY SHARES
Authorised, issued and fully paid ordinary shares of 1p 2021 2020
(2020: 20p) each ‘000 £000 ‘000 £000
At 1 January 188,751 37,750 188,751 37,750
Cancellation of 19p nominal value – (35,862) – –
Buy-back and cancellation (88,751) (888) – –
At 31 December 100,000 1,000 188,751 37,750
On 28 September 2021. The Scottish Court approved the reduction of the Company’s nominal share value from 20p to 1p per
share and also the cancellation in full of the Capital redemption reserve (£10,312k). Costs associated with the process were
expensed to retained earnings (£66k).
On 21 October 2021 the Company completed a tender offer to buy back of 88,751,257 shares for consideration of £35,500k
(40p per share). The shares repurchased were cancelled reducing the number of shares in issue to 100 million. Fees associated
with the buy-back were £314k and were expensed to retained earnings.
Potential issue of ordinary shares
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.
All awards lapsed on 31 December 2021 as the hurdle was not achieved.
Awards were 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
105
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
30. CASH GENERATED FROM OPERATIONS
Reconciliation of profit/(loss) before taxation to cash generated from operations, before separately disclosed items:
2021 2020
Note £000 £000
Loss before tax – continuing operations (246) (11,923)
Profit/(loss) before tax – discontinued operations 11 35,987 (678)
Total profit/(loss) before tax 35,741 (12,601)
Adjustments for:
Separately disclosed items (included in operating costs) 4 1,472 1,453
Other income (excluding profit on disposal of Sports Haven) 10 (2,583)
Depreciation and amortisation 14,15,16 1,992 8,161
Profit on disposal of discontinued operations 11e (28,625) –
Profit on disposal of Sports Haven 11a (2,575) –
Profit on sale of property, plant and equipment 11d (47) –
Profit on sale of intangible assets 11c (68) –
(Reversal of impairment)/impairment of assets 15,16 (335) 4,349
Net finance costs 8 (210) 625
Share option expense 334 347
Changes in working capital:
(Increase)/decrease in trade and other receivables (2,162) 2,791
Decrease/(increase) in inventories 192 (179)
Decrease in trade and other payables (448) (1,060)
(Decrease)/increase in customer funds (2,167) 42
Cash generated from operating activities, before separately disclosed items 511 3,928
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:
Key management compensation is disclosed in note 6.
No cash was invested in and there were no trading transactions between the Group and any of its joint ventures during the
year or prior year, and no amounts outstanding at the reporting date (202: £nil).
a.
b.
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32. RELATED UNDERTAKINGS
Country of Registered Class of
Subsidiaries, excluding dormant companies incorporation address shares held Shareholding
Sportech Group Holdings Limited England & Wales 16 Ordinary 100%
Sportech Gaming Limited England & Wales 16 Ordinary 100%
Sportech Pools Limited England & Wales 16 Ordinary 100%
Sportech Pools Games Limited England & Wales 16 Ordinary 100%
Sportech Holdco 1 Limited3 England & Wales 1 Ordinary 100%
Sportech Holdco 2 Limited England & Wales 16 Ordinary 100%
Datatote (England) Limited3 England & Wales 1 Ordinary 100%
Lot.to Systems Limited England & Wales 16 Ordinary 100%
Playlot.to Limited1 England & Wales 16 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.3 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 Racing, LLC3 United States 4 Ordinary 100%
Sportech Lotteries, LLC4 United States 3 Ordinary 100%
Sportech Retail, LLC United States 3 Ordinary 100%
Bump Worldwide, Inc.2 Canada 5 Ordinary 100%
Sportech Racing Canada, Inc.3 Canada 5 Ordinary 100%
Sportech Racing Limited British Virgin Islands 7 Ordinary 100%
Racing Technology Ireland Limited3 Ireland 8 Ordinary 100%
Autotote Europe GmbH3 Germany 9 Ordinary 100%
Sportech Racing GmbH3 Germany 10 Ordinary 100%
Sportech Racing Turkey3 Turkey 11 Ordinary 100%
Sportech Racing SAS3 France 12 Ordinary 100%
1 Playlot.to Limited was dissolved on 19 January 2021.
2 Bump Worldwide Inc was disposed of on 2 June 2021.
3 Global Tote subsidiaries were disposed of on 17 June 2021.
4 Sportech Lotteries, LLC was disposed of on 31 December 2021.
107
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the financial
statements continued
During the year, the Group held investments in related undertakings as follows:
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%
Country of Registered Class of
Dormant companies incorporation address shares held Shareholding
Thepools.com Limited England & Wales 16 Ordinary 100%
C&P Promotions Limited England & Wales 16 Ordinary 100%
Pools Promotions Limited England & Wales 16 Ordinary 100%
Sportech Pools Competitions Company Limited England & Wales 16 Ordinary 100%
Bet 247 Limited England & Wales 16 Ordinary 100%
Pools Company Limited England & Wales 16 Ordinary 100%
Sportech Management Limited1 Scotland 15 Ordinary 100%
Sportech Pools Trustee Company Limited1 Scotland 15 Ordinary 100%
1 Sportech Pools Management Limited and Sportech Pools Trustee Company Limited were dissolved on 1 March 2022.
Registered addresses (whilst under Sportech ownership for those entities disposed of during the year)
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
16 England & Wales 3a Cestrian Court, Lightfoot Street, Chester, Cheshire, CH2 3AD
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Company Balance Sheet
AT 31 DECEMBER 2021
2021 2020
Note £000 £000
ASSETS
Non-current assets
Intangible fixed assets C5 276 503
Investment in subsidiaries C7 26,257 64,071
Trade and other receivables C8 2,679 6,621
Deferred tax assets – 7
29,212 71,202
Current assets
Trade and other receivables C8 197 191
Income tax receivable – 151
Cash and cash equivalents 6,769 10,597
6,966 10,939
TOTAL ASSETS 36,178 82,141
LIABILITIES
Current liabilities
Trade and other payables C9 (8,770) (30,635)
Income tax payable (110) –
(8,880) (30,635)
Net current liabilities (1,914) (19,696)
NET ASSETS 27,298 51,506
EQUITY
Ordinary shares 29 1,000 37,750
Other reserves 29 1,202 10,626
Retained earnings carried forward 25,096 3,130
TOTAL EQUITY 27,298 51,506
The profit after tax for the Company for the year was £11,338k (2020: loss of £2,168k).
The Company financial statements on pages 109 to 116 were approved and authorised for issue by the Board of Directors on
31 March 2022 and were signed on its behalf by:
Andrew Lindley Nicola Rowlands
Director Director
Company Registration Number: SC069140
109
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Company Statement of
Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2021
Capital
Ordinary redemption Other Retained
shares reserve reserve earnings Total
£000 £000 £000 £000 £000
Other reserves
At 1 January 2020 37,750 10,312 314 4,951 53,327
Comprehensive income
Loss of the year – – – (2,168) (2,168)
Transactions with owners
Share option charge – – – 347 347
At 31 December 2020 37,750 10,312 314 3,130 51,506
Comprehensive expense
Profit for the year – – – 11,338 11,338
Transaction with owners
Share option charge – – – 334 334
Cancellation of capital redemption reserve – (10,312) – 10,312 –
Capital reduction (35,862) – – 35,862 –
Fees in relation to the capital reduction – – – (66) (66)
Fees in relation to the buy-back – – – (314) (314)
Share buy-back (888) 888 – (35,500) (35,500)
At 31 December 2021 1,000 888 314 25,096 27,298
The premium on the shares issued of £314k is recorded as a merger reserve in Other reserves.
See note 29 for explanation of cancellation of capital redemption reserve, capital reduction and share buy-back.
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Company Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
Note £000 £000
Cash flows from operating activities
Cash generated from operations, before separately disclosed items C11 32,987 5,002
Interest paid – (118)
Interest received – 12
Tax refunds received 162 23
Net cash generated from operating activities before separately disclosed items 33,149 4,919
Cash outflows from separately disclosed items (1,170) (232)
Net cash generated from operating activities 31,979 4,687
Cash flows from investing activities
Dividends received – 211
Proceeds from disposal of intangible fixed assets C5 150 –
Net cash from investing activities 150 211
Cash flows (used in)/from financing activities
Share buy-back (35,500) –
Fees in relation to the buy-back (314) –
Interest paid (79) –
Interest received 2 –
Fees in relation to cancellation of capital (66) –
Net cash used in financing activities (35,957) –
Net (decrease)/increase in cash and cash equivalents (3,828) 4,898
Net cash and cash equivalents at the beginning of the year 10,597 5,699
Net cash and cash equivalents at the end of the year 6,769 10,597
111
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the Company Financial
Statements
C1. ACCOUNTING POLICIES
The accounting policies applied by the Company are consistent to those disclosed on pages 61 to 72 where applicable.
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100, and as such, these financial
statements were prepared in accordance with FRS 101 “Reduced Disclosures Framework” as issued by the Financial Reporting
Council.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in
relation to financial instruments, business combinations, standards not yet effective and related party transactions. Where
require equivalent disclosures are given in the consolidated financial statements.
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 2022.
C3. AUDITOR REMUNERATION
Fees payable to the Company auditors for the audit of these financial statements are £64k (2020: £64k). 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
2021 2020 2021 2020
£000 £000 £000 £000
Short-term employee benefits 1,115 757 1,236 796
Share-based payments 45 103 45 103
Pay in lieu of notice 369 – 391 –
Post-employment benefits 18 20 18 20
Total remuneration 1,547 880 1,690 919
The Company had four employees at 31 December 2021 (2020: five).
Details of individual Directors’ remuneration and share-based incentives granted are given in the Remuneration report on
pages 28 to 40. This information forms part of the financial statements. Retirement benefits are accruing under defined benefit
pension schemes for nil Directors (2020: nil). Nil Directors exercised share options in the year (2020: nil).
Key management is considered to be the Directors of the Company.
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C5. INTANGIBLE FIXED ASSETS
Software Total
2021 £000 £000
Cost
At 1 January 2021 18,103 18,103
Disposals (17,386) (17,386)
At 31 December 2021 717 717
Accumulated amortisation
At 1 January 2021 17,600 17,600
Charged during the year 145 145
Disposals (17,304) (17,304)
At 31 December 2021 441 441
Net book amount at 31 December 2021 276 276
Software Total
2020 £000 £000
Cost
At 1 January and 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 owned by the Company relating to in-house developed proprietary pari-mutuel software serving racing customers
worldwide was sold during the year to Betmakers Technology Group for proceeds of £150k resulting in a profit on disposal of
£68k. The remaining software is in relation to the implementation and customisation of the Group ERP system.
C6. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery Total
2021 £000 £000
Cost
At 1 January 183 183
Disposal (183) (183)
At 31 December 2021 – –
Accumulated depreciation
At 1 January 183 183
Disposal (183) (183)
At 31 December 2021 – –
Net book amount at 1 January and 31 December 2021 – –
113
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the Company Financial
Statements continued
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 – –
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 2021, 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
Sportech Management Limited was dissolved on 1 March 2022.
Movement in the book value of the Company's investments is shown below:
2021 2020
£000 £000
At 1 January 64,071 64,071
Impairment (37,814) –
At 31 December 26,257 64,071
The Directors considered the carrying value of the investments for impairment during the year following the disposal of two
divisions. It was concluded that as at 31 December 2021 the enterprise value of the subsidiaries of SGHL amounted to
£25,068k and the enterprise value of the Company’s Lot.to Systems Limited subsidiary was £1,189k. As a result, an impairment
of £37,814k was charged to operating costs in the income statement. This impairment reflects the cash paid to shareholders in
the share buyback from disposals of subsidiaries and cash paid up to Sportech PLC from the disposing entities. Following the
impairment, the Directors consider the carrying value of £26,257k to be supported by the underlying net assets and cashflows
of the Group including those forecasts outlined in note 14 of the consolidated financial statements. 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.
When applying the downside assumptions detailed in note 14 to the cashflows in the forecasts used to determine the carrying
value of investments which the Company holds, the carrying value reduces from £26,257k to £22,189k. The Directors consider
the downside assumptions occurring in unison to be a possible but remote scenario. There exists potential upsides to the
forecasts which have not been modelled which would increase the carrying value of the Company’s investments such as
improvement on each assumption outlined in note 14, in particular in sports betting revenues achieved and the enforcement by
the State of Connecticut of the Company’s exclusive rights to operate online wagering and Sportech Venues’ ability to drive
value from its exclusivity in the State from operators taking bets from Connecticut residents.
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C8. TRADE AND OTHER RECEIVABLES
2021 2020
£000 £000
Non-current
Amounts owed by Group companies 2,679 6,621
Current
Amounts owed by Group companies 6 78
Other receivables 73 70
Prepayments 118 43
Current trade and other receivables 197 191
2,876 6,812
Amounts due in more than one year are from:
2021 2020
£000 £000
Datatote (England) Limited – 833
Sportech Inc. 259 2,996
Lot.to Systems Limited 2,375 1,337
Bump (Worldwide) Inc. – 175
Ontario Inc. 45 –
Sportech Racing GmbH – 1,280
2,679 6,621
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
2021 2020
£000 £000
Trade payables 82 656
Amounts owed to Group companies 7,643 28,611
Social security and other taxes 29 29
Accruals 1,016 1,339
8,770 30,635
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 during 2022.
Given the expected settlement no interest has been charged on these payables during the year. The payables to the Football
Pools companies amount to £4,600k (2020: £15,882k).
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.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Notes to the Company Financial
Statements continued
C11. CASH GENERATED FROM OPERATIONS
Reconciliation of profit before taxation to cash generated from operations, before separately disclosed items:
2021 2020
Note £000 £000
Profit/(loss) before taxation 11,444 (2,007)
Adjustments for:
Investment income (14,168) (211)
Separately disclosed items 944 1,413
Amortisation of intangible assets C5 145 272
Profit on disposal of intangible assets C5 (68) –
Impairment of investments C7 37,814 –
Finance costs 229 268
Finance income (2) (12)
Other finance (income)/expense (148) 54
Share option charge 334 347
Changes in working capital:
Movement in trade and other receivables 3,936 (2,489)
Movement in trade and other payables (7,473) 7,367
Cash generated from operating activities, before separately disclosed items 32,987 5,002
C12. RELATED PARTY TRANSACTIONS
The Company had the following transactions with subsidiaries during the year:
2021 2020
£000 £000
Management charges received 1,223 624
Management charges paid (50) (209)
Royalty income received – 1,463
Investment income 14,168 211
Loan receivable from Sportech Racing GmbH waived (1,004) –
Loan payable to Datatote (England) Limited waived 4,190 –
Loan payable to Sportech Pools Limited waived 10,581 –
Loan payable to Sportech Holdco 2 Limited waived 23,822 –
Interest paid on inter-company loan balances (155) (153)
Interest received on inter-company loan balances 76 119
The amount outstanding in relation to management charges at the balance sheet date was £6k (2020: £178k). All
inter-company transactions are on an arm’s-length basis.
Investment income is a dividend received from the Company’s 100% owned subsidiary Sportech Group Holdings Limited
(2020: dividend income from Sportech Group Holdings Limited).
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175823 Sportech Annual Report 2021 C Financial Statements.qxp_175823 Sportech Annual Report 2021 C Financial Statements 05/04/2022 10:52 Page 117
Advisors and Corporate Information
Stockbroker and NOMAD
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
Tobin, Carberry, O'Malley, Riley & Selinger, P.C.
43 Broad Street
P.O. Box 58
New London, CT 06320-0058
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: enquiries@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
North American head office
Sportech, Inc.
600 Long Wharf Drive
New Haven, Connecticut 06511
Company registration number
SC069140
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.
Designed and printed by Sterling
www.sterlingfp.com
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