An International
Betting Technology Business
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Annual Report and Accounts 2022
STRATEGIC REPORT
HIGHLIGHTS
REVENUE1
£26.0m
2021: £22.9m
ADJUSTED3 EBITDA1
£1.6m
2021: £(1.8)m
ADJUSTED2 CASH AT 31 DECEMBER
£7.4m
2021: £21.9m
GROSS PROFIT1
£14.2m
2021: £11.5m
LOSS BEFORE TAX1
£(0.9)m
2021: £(0.2)m
1.
2.
3.
4.
From continuing operations.
Excludes customer balances.
Adjusted EBITDA excludes expenditure that management believe should be added back (separately disclosed items and share option charges) and other income. See note 1
of the financial statements for a full reconciliation of adjusted EBITDA and other adjusted performance measures.
2021 comparisons are actual reported.
FINANCIAL OVERVIEW
Continuing operations:
• Strong Operational Performance.
Group:
• Year end 2022 £7.4 million.
• Stable Revenue growth +2% to
• £7 million dividend paid (7p per share).
£26.0 million.
• Gross Profit +11% £14.2 million.
• Adjusted EBITDA returned to positive
territory of £1.6 million (2021: (£1.8) million
loss). driven by the introduction of the
sports betting services in Connecticut
and further easing of Covid regulations.
(See note 1 of the financial statements for
reconciliation of adjusted EBITDA).
• Settled Californian legacy litigation claims.
• Exited royalty arrangement expense.
• Further reduced corporate costs .
Post Year End:
• Successful receipt of CN $ 2 million,
(£1 million) earnout related to a 2021
disposal.
• Following the sale of certain lottery
agreements to Inspired Entertainment in
2021, the remaining operating assets were
sold to Inspired Entertainment in February
2023 for £0.5 million, (with a further
£0.5m being an unrecognised, deferred
performance earnout).
• Adjusted cash at 31 March 2023, was
£8.5 million.
• 2023 Q1 Sports Betting Hold +39%, vs
Q1 2022.
GROUP DEVELOPMENTS
• Disposals: 2022 marked a year of consolidation following significant business
sales in 2021. Post the 2022 year end the Group sold certain non-core assets for
£500,000, plus a potential performance earnout.
• Corporate: During 2022 the Company continued to return capital to investors,
via a £7 million (7p per share) dividend. Post year end, the Group received
£1 million, net of associated incentives from Canadian Bank Note, relating to a
2021 asset disposal.
• Venues: The Group’s core business line delivered a strong performance, with
traditional Pari-Mutuel handle declining only -4.7% on a like-for-like basis despite
the introduction of additional competing betting products such as iLottery,
iCasino, and Sports Betting. Throughout the year, the Group focused on investing
in building a solid foundation to expand opportunities for delivering Sports Betting
to retail customers.
• Sports Betting: In August 2021, Sportech agreed to become a distributor for the
Connecticut Lottery Corporation’s (CLC) sports betting product at the majority of
venues across the state. Through Sportech Venues, the gross retail sports betting
handle during the year was an impressive $98.7 million, from which Sportech
received a percentage of the net hold.
• Digital: In recent years the Company has advanced two online pool betting
sites in the US, both of which delivered revenue growth in the year. Additional
opportunities for these sites are under review
• Plc Board: The Board was reshaped following various departures during the year
to better align with the Company’s evolved strategy.
Sportech are an operator and
technology supplier within the
gaming market
Sportech operates in the gaming market and has two main
businesses:
Firstly, it runs Sports Bars and other betting venues in Connecticut,
USA, where it has an exclusive licence to offer pari-mutuel wagering
in the State, it also has a distribution agreement with the Connecticut
Lottery Corporation to provide retail sports betting.
Secondly, Sportech provides online gaming through two separate
lines of business. Mywinners.com operates under an exclusive licence
to offer pari-mutuel betting online in Connecticut, while 123bet.com
offers pari-mutuel betting online across the wider USA.
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
12
14
15
19
Corporate Social
Responsibility Report
Corporate Governance Report 21
Report of the
Remuneration Committee
Directors’ Report
Report of the Auditors
26
37
41
Consolidated Financial
Statements
Company Financial
Statements
Advisors and Corporate
Information
50
98
107
1
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Overview
Sportech at a
glance
Over the past decade, the global gaming
industry has rapidly evolved, with competing
product lines emerging alongside the
Group’s historic core reliance on Pool betting
business lines.
These developments provided leading indicators of
the Group’s evolving strategy to drive profitability and
reduce shareholder risk by exploring new options.
In the last six years, the Company has taken steps to
successfully eliminate debt, sell non-core assets, and
return significant amounts to shareholders.
As a result, the business has become smaller and
more agile, with effective management and a Board
focused on executing the optimal strategy for the
benefit of all stakeholders.
Despite challenges within the gambling industry
and new competition in our core retail location,
Connecticut (CT), US, Group performance in 2022
exceeded initial expectations. Sportech demonstrated
improved performance across all key performance
metrics.
The Venues retail business, operating across nine retail
locations in CT, processed a total of US$178.6 million
in wagers during 2022, an average of $19.8 million per
outlet. In addition, the Group’s online and Telebetting
units handled $27.3 million throughout the year.
The Group made progress with its new sports betting
partnership with the Connecticut Lottery Corporation
(CLC), generating an impressive sports betting handle
of approximately $98.7 million from its retail outlets.
(included in retail handle above).
The management team is continuously exploring
opportunities for growth in the gaming sector that
capitalise on their skills and drive returns.
In 2022, the Board underwent significant changes, with
the Company expressing its gratitude to those who
had previously served and welcoming the new skills
and expertise of Clive Whiley and Paul Humphreys to
the Plc Board.
The entire Sportech business is energised by the
changes, operational focus, and growth prospects,
and is working tirelessly to make Sportech a
successful and valuable business. We extend our
thanks and congratulations to the entire team.
Richard McGuire
Executive Chairman
18 April 2023
22
Sportech Venues
Sportech Venues offers online, mobile, call centre and
retail betting from venues located across the State. During
2022, the Division progressed a distribution agreement with
the Connecticut Lottery Corporation (CLC) to offer retail
sports betting. Key locations within the network offer food
and beverage services in premium sports bar/restaurant
environments. With 9 venues in operation currently, the
Division has a licensing capacity for 24 pari-mutuel locations
and CLC has capacity for a total of to extend to 15 retail
sports betting locations.
Revenue
(£m)
Adjusted1 EBITDA
(£m)
2022
2021
24.5
24.5
4.0
1.6
In the table above, prior year figures are at constant currency.
1 See note 1 of the financial statements for reconciliation of adjusted EBITDA and note 2
for the breakdown of adjusted EBITDA by segment.
Sportech Digital
Sportech Digital, included a development team who develop,
service and operate the division’s digital omni channel
platform for gaming verticals. Certain assets were sold post
the year end.
Revenue
(£m)
Adjusted1 EBITDA
(£m)
Capital Expenditure
(£m)
2022
1.5
2021
1.1
(0.3)
(0.6)
0.2
0.2
In the table above, prior year figures are at constant currency.
1 See note 1 of the financial statements for reconciliation of adjusted EBITDA and note 2
for the breakdown of adjusted EBITDA by segment.
Discontinued Operations
During 2022 no business units were sold. Post year end the
Group transferred/sold certain assets within its Digital division
for £500,000, plus a potential contingent sum of £500,000,
the recovery of which is deemed sufficiently uncertain
that it has not been recognised in the Group’s accounts.
Management anticipated this will improve the Digital division
net contribution to the Group in 2023.
In addition post year end the Group received, net of
associated fees and incentives, £1.01 million being a
contingent earnout relating to the 2021 sale of Bump 50:50.
We wish continued success to our ex-colleagues and to the
acquirers involved in all business units sold in recent years.
Revenue
(£m)
Adjusted EBITDA
(£m)
Capital Expenditure
(£m)
2022
2021
–
1.2
–
16.4
6.9
1.4
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Business Model and Strategy
THE GROUP’S STRATEGIC AIMS FOR 2023 INCLUDE:
1. Execute further corporate opportunities
2. Materially reduce corporate cost base
3. Maximise further growth opportunities and partnerships across gaming sector
4. Deliver further shareholder capital returns
DIGITAL
ONLINE
Sportech Venues operates MyWinners.com1 online across
the State of Connecticut as a complementary business to the
retail Venues locations, offering online pari-mutuel betting. The
focus for the coming year is creating innovative new products
and services to differentiate our product from competitors and
meet the evolving needs of customers.
Additionally, Sportech operates 123Bet.com as a pan-USA
pari-mutuel online retail platform (where State local laws
allow). Following management improvements to the model,
revenue has grown significantly from c$2.7m handle in 2019
to $11.2m handle in 2022. It will receive the same focus as
MyWinners.com to deliver further net return growth.
LOTTERY
The disposal of a significant lottery provision contract in late
2021 marked the end of the last of its direct client lottery
contracts. During 2022 the team, located in Chester, England,
supplied under agreement a digital lottery platform to the
buyer of the LEIDSA contract (ultimately for that former client).
Post the year end the Group sold and transferred certain
assets to the same buyer for £0.5 million, (a further £0.5m
being a contingent potential earnout which has not been
recognised in the accounts at this time) which included the
personnel. The team had delivered exceptional support to
the Global Tote business (sold June 2021) in prior years and
were an integral component in successfully securing core Tote
contracts, domestically and overseas.
1. MyWinners.com revenues are included in the divisional breakdowns for Sportech
Venues.
Sportech is an international betting business that
owns and operates restaurant/bars and retail
gaming venues in the State of Connecticut, USA,
and online globally.
The Group seeks to achieve long-term shareholder value by
leveraging Sportech’s gaming licences, technologies and
expertise as well as its brand heritage and 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,
in doing so, the business as a whole and its shareholders’
positions were de-risked leaving a streamlined and efficient
base for growth.
During 2022, following the 2021 disposals, a renewed focus
on the remaining businesses was vital whilst remaining alive to
opportunities in line with stated strategy. Sportech navigated
the global challenges of the COVID-19 pandemic and
maintained strong capital reserves. The environment during
2022 was 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 progressed a Group restructuring, the Group now
has a clear 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.
This provides 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 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.
33
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2021
Chairman’s Statement
Dear Shareholder,
2022 was year of consolidation and progress
I am pleased to address you as your Chairman after another year of progress
for your company.
Following the disposal of major business lines in 2021 the
Group stabilised operations and improved core metrics,
specifically Revenue, EBITDA and operational cash
generation.
Group Adjusted EBITDA1 for 2022 improved markedly
during the period to a positive £1.67 million (2021: loss of
£1.8 million). This was driven by: the commencement of
Sports Betting in Connecticut in late 2021, (where the Group
has a commercial retail sports betting arrangement with the
State via the Connecticut Lottery Corporation); stronger food
and beverage revenues, digital business growth and lower
corporate costs all supported the improvement.
Positive progress, enabled the Group to return a further
£7 million to shareholders by means of a 7p per share
dividend, announced on 27 April 2022, taking shareholder
repayments to £117.5 million since 2017. Your company
continues to operate with no material financial debt and a
positive net cash position.
The 2021 business disposals had a major impact on the
size of the Company’s business activities and subsequently
management has focused on reducing central costs in
line with the reduced size of the businesses. This work will
continue in 2023.
Post year end, the Group agreed the sale of certain assets
within the Digital division for £0.5 million, (a further £0.5m in
performance related earnouts has not been recognised). We
also successfully agreed and received a performance earnout
in relation to the 2021 sale of Bump 50:50, realising a further
£1.01 million net of costs.
I wish to formally thank our business partners in these
transactions, Inspired Entertainment and Canadian Bank
Note, who executed with the highest degree of professional
integrity throughout. On behalf of the Sportech Plc Group we
wish them and our ex-colleagues continued success.
During the year the Board underwent significant change.
Senior executives, Andrew Lindley, Chief Executive, and
Non-Executive Directors Giles Vardey and Ben Warn, stepped
down during H1. Nicola Rowlands, Chief Financial Officer,
stepped down at the end of September. They take our good
wishes with them for success in the future.
We were fortunate to have Clive Whiley join the Group as
the Senior Independent Non-Executive Director in April and
Mr. Paul Humphreys join as an Independent Non-Executive
Director and chair of the Audit committee in September
2022. Both professionals bring a wealth of experience and
expertise to the Group, and a clear focus to drive commercial
performance and empower management to execute strategic
goals, benefitting all shareholders.
As we enter 2023, the Company’s focus remains on executing
core strategies, creating further value from our Venues
business in the US and to evaluate and execute further
opportunities in the electronic wagering and US Sports
Betting sphere.
We note early encouraging performance in Q1 2023 and
remain optimistic regarding the outlook for 2023, with
legacy issues mostly concluded, the company has a simpler
business with a clear strategy aligned to stakeholders’
interests.
I would like to thank all of our employees and Board
colleagues for their continued hard work through a period of
change within the Company, and to our shareholders and
stakeholders who continue to support the Group’s objectives.
Finally, 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.
Richard McGuire
Executive Chairman
18 April 2023
1.
Excludes expenditure that management believe should be added back (separately disclosed items and share option charges) and other income.
44
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Operating Review
2022 was year of consolidation and progressing strategic objectives.
After selling several business lines and moving to the
Alternative Investment Market (AIM), the Group achieved
operational stability and growth in 2022.
The introduction of the Sports Betting product suite in late
2021 required significant capital investment. The Venues
business, now including sports betting, is experiencing a
period of positive change with busier operations and a new
crowd of patrons to service. Despite the Omicron surge
affecting early 2022, the food and beverage revenues
performed well, and the retail division’s focus on delivering
sports betting was the major difference in the company’s
operations.
The company’s business relationship with the Connecticut
Lottery Corporation (CLC) continues to strengthen, with a
more robust agreement progressed to build on the early
success of sports betting across the State. One non-
performing location was closed, and certain leases were
extended to meet demand and secure the profitable estate.
The UK-based digital technology team executed and delivered
a contracted digital solution to a major client, and post year-
end, the team was transferred to Inspired Entertainment with
additional Lot.to Systems assets.
A focus on efficient use of cash and accurately measuring
returns on capital deployed remain core metrics. The
introduction of the Sports Betting product suite in late
2021, required obvious capital investment to secure our
position with the master wagering licensee, the Connecticut
Lottery Corporation (CLC). 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 US.
Accordingly, there will be extra focus on operational efficiency
and service to ensure that the value of this USP is maximised.
The introduction of Sports Betting to the Connecticut
Venues business and the successful rollout across locations
demanded a significant amount of management focus and
planning and given the opportunity will continue to be a core
part of business planning in 2023 and beyond. Adding this
additional betting product to our existing pari-mutuel product
range has clearly increased consumer traffic driving a higher
F&B revenue and proportionally reduced the Pari-Mutuel cost
base, as costs are now allocated proportionally between F&B,
pari-mutuel and sports betting.
Food and beverage revenues in 2022 performed well despite
the Omicron surge negatively affecting the early months:
+46% at £3.44m (2021: £2.37m). Sports betting handle
comparison to the Q4 2021 introduction are not a useful
measure, however worth noting early progress in 2023 with
Q1 handle +18% and Q1 Hold +39% vs. Q1 2022.
Delivering Sports Betting across our retail division was the
major difference to the operational focus during the year.
Retail Sports Betting handle was an impressive $98.7million in
this initial year, across our eight approved locations. The core
‘hold’ metric was a solid 9.4% during the year, significantly
better than forecast (hold being the gross profit from wager),
primarily driven by 40% of gross handle being accumulator
wagers with respective higher risk and therefore higher
potential margin.
Major League Baseball topped the handle charts, however
the importance of American Football, both NFL and NCAAF
remains evident for both sports betting and F&B demand.
Soccer, is not a major sport yet in the US however, we noted
increasing volume in major European leagues. Our retail
clients beat our book in the World Cup as they supported
an Argentina victory and France to be top European
team resulting in modest loss for the book. That said, the
attendance when USA played, across our sports bars was
very strong, delivering impressive F&B surges.
Our business relationship with the CLC, continues to
strengthen and we have progressed a new agreement with
CLC, providing further commitment to build on the early
success of Sports Betting across the State.
During 2022, one non-performing location was closed and
certain leases extended to meet demand and secure the
profitable estate. Whilst the significant New Haven, lease was
extended to February 2024, it is expected that the business
will move out of this property to a new venue in the vicinity, to
maintain betting handle growth. Additionally two new locations
are being evaluated that would provide pari-mutuel and sports
betting product suite to more Connecticut retail consumers
and in doing so will create the blueprint for a future Venue
model for the business.
The UK based digital technology team executed and delivered
a contracted digital solution to the customer as part of
the lottery contract concluded in late 2021. Post year end
the team were transferred to Inspired Entertainment with
additional assets, for £500,000. This transfer will reduce costs
and ultimately enhance Group cashflow during 2023.
During the year the Group concluded and exited various
legacy litigation claims in California and have now successfully
exited that historic endeavour. The tax position in relation to
the treatment of the £4.6m gain included in the 2016 financial
statements for the Spot the Ball VAT refund remains uncertain.
The Company has made payment of the amount at issue,
in order to freeze the accumulation of interest, although the
directors continue to dispute that this amount is ultimately
payable. The directors await HMRC’s final assessments
whereupon they will consider if any further actions are
appropriate.
The 2022 dividend reduced the cash position of the Group to
a comfortable level to enable the business to explore further
organic investment opportunities in broader initiatives within
the gaming sector.
55
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Operating Review
continued
As the Group transitions through 2023, revenues and
profitability will return to the fore as key metrics. The tail of
legacy issues that affected the business are concluded and
we have a simpler business with clear strategy aligned to
stakeholders interests.
For the first time in many years, we can provide with some
accuracy a future outlook for 2023, having emerged from
the depths of COVID, and having experience of a full year of
Sports Betting in Connecticut.
Management are confident that trade is recovering, Q1 2023
has delivered early encouraging performance and a good rate
of handle and growth is being experienced in the new sports
product.
DIVISIONAL SUMMARIES
SPORTECH VENUES
Sportech Venues, (‘Venues’) operates across the State of
Connecticut offering legal betting through two distinct types of
operations.
Firstly, Venues offer pari-mutuel betting on horseracing,
greyhound racing and jai alai through both online and venue-
based operations under an exclusive and perpetual licence.
Secondly, they offer sports betting under a distributorship type
arrangement with the Connecticut Lottery Corporation.
The Venues operations are of two types: Sports Bar/
Restaurants and Off-Track Betting (OTB) shops. The Sports
Bar/Restaurants offer a main-stream leisure-based experience
where betting is an exciting additional customer attraction.
The Off-Track Betting (OTB) shops are dedicated primarily to
retail gambling operations, although they do offer some light
refreshments and other products.
£’000
Wagering revenue
Commission from sports betting
Food and beverage revenue
Total revenue
Contribution
Contribution margin
Constant
currency
2021
2022
19,116
21,835
1,974
3,443
24,533
13,240
54.0%
313
2,366
24,514
12,048
49.1%
Adjusted operating expenses
(9,194)
(10,453)
Adjusted EBITDA
Capex
4,046
142
1,595
27
66
Developments during the year
Connecticut has three licensed sports books in operation:
Mohegan casino engaged Fan Duel, the Mashantucket
Pequot casino engaged Draft Kings, and CLC engaged Rush
Street Interactive (RSI) to provide their Play Sugarhouse sports
book, which is delivered across most of the retail outlets. In
March 2023, RSI announced they would cease being the
sportsbook provider, likely in H2, 2023.
CLC is the only licensee authorised to provide retail sports
betting across the state. The two casinos are limited to within
casino property. All three are authorised to provide online
sports betting (1 online skin each), and the casinos are also
authorised and provide iCasino.
Sports betting was the major feature and focus of 2022,
and the division increased staffing to manage the additional
regulatory, planning, and execution requirements. This was the
first full year of sports betting in Connecticut and a learning
curve for all state participants.
Sportech Venues provides a sports betting product range
across eight Venues under a commercial agreement with the
CLC, and the Venues business also receive a modest share of
online sports betting net hold.
Sports betting handle grew during the year and was $98.7
million from the Group’s eight sports betting locations, with
an equally impressive 9.42% hold. US Sports dominate the
‘action’ with Baseball, American Football, and Basketball
leading the turnover. Post-year-end, the Company continues
to note significant increases in sports betting handle with
January and February 2023 +33% and +18% respectively vs
2022.
Pari-mutuel handle remained stable in the face of increased
competition for discretionary gambling dollars, dropping
only -4.7% on a like-for-like basis. The non-retail component
(online and tele-betting) represented 25.4% of the total handle
in 2022, which is higher than the pre-Covid level of 18.9% in
FY 2019.
Sports betting provides a strong vertical that attracts new
patronage to the venues. Therefore, it leverages both pre-
existing products with new sales and existing cost base with
new revenues, enhancing the entire operation.
Looking forward
Plans for 2023 include the delivery of an improved pari-
mutuel website, providing additional opportunities and closer
management of online clientele. In addition, the Group is
working with Sports Betting partners to progress a retail client
relationship management rewards initiative.
Sport and capturing the wagering revenues of its followers
is clearly the opportunity for the Venues business and we
continue to reshape the business accordingly.
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022 Management have developed a retail brand and experience
format, optimising the mix of formats to further enhance and
better capture the sports betting market.
SPORTECH DIGITAL
Sportech Digital is comprised of two small, digitally focused
businesses.
The first is a US-facing B2C trading operation called 123Bet.
com, which was previously a white-label customer of the
now-discontinued Racing and Digital business. In 2019, it
was brought in-house, and since then, it has operated by
experienced management and with a tight marketing budget
derived from its own profits. Despite its small size, 123Bet.
com has achieved success and continues to grow. We believe
that it is ready for a refreshed offer and the next stage of
growth.
The second business in 2022, was a B2B operation based in
Chester, UK, that served markets with a proprietary platform
for lottery management.
£’000
Services revenue
Contribution
Contribution margin
Adjusted operating expenses
Adjusted1 EBITDA
Capex
Constant
currency
2021
1,094
409
37.4%
(1,021)
(612)
169
2022
1,471
531
36.1%
(838)
(307)
201
1. See note 1 of the financial statements for reconciliation of adjusted EBITDA and note 2
for the breakdown of adjusted EBITDA by segment.
The team at Lot.to Systems, based in Chester, provided
invaluable research and development support to several
Sportech businesses, including the Global Tote and the
Lotteries division. Their contributions enhanced the capabilities
and profile of these business lines, resulting in improved client
deliverables, numerous contract extensions, and ultimately,
sales of certain business lines in 2021.
In 2022, the team delivered the online lottery product
as contracted within the late 2021 sale of the LEIDSA
lottery contract. Their successful delivery of this product
demonstrates their expertise and commitment to providing
high-quality solutions that meet client needs.
Developments during the year end:
After selling significant operational businesses in 2021 and
successfully delivering the online platform, Sportech decided
to sell certain assets of Lot.to Systems Ltd and transfer the
team to Inspired Entertainment. The sale concluded for £0.5
million (a further £0.5m being an unrecognised, contingent
performance earnout). This decision was made early in 2023.
Sportech remains optimistic about the future of 123Bet.com.
We believe that this business line has a strong future and
going forward we will be reporting the results within our retail
Venues business.
GROUP OUTLOOK
There is little doubt that the pandemic tested our organisation
in recent years, however Sportech employees are
professionals who work with incredible passion and purpose
and the Board continues to be inspired by their dedication to
improve in every area.
2022 marked a year of consolidation and redefining growth
opportunities within the Group. Within the Venues business,
the attraction of Sports Betting boosted F&B revenue while
the team catered to a new clientele eager to find that live
game experience.
The emphasis on accountability and an ownership culture
that commenced in 2020 thrives as the entire team promote
an entrepreneurial attitude to client service and growth
opportunities.
The Board and management remain fully engaged and
focused on enhancing shareholder value and effectively
managing opportunities.
Richard McGuire
Executive Chairman
18 April 2023
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 expenses2
Impact of FX on reported earnings
Adjusted EBITDA
Separately disclosed items
Other income
Non-cash items:
Share option charges
Depreciation
Amortisation of software
Amortisation of acquired intangibles
Reversal of impairment of Property, Plant & Equipment
Impairment of goodwill
Total – non-cash items
LBIT
Net finance (charges)/income
LBT
Taxation – continuing operations
Result after taxation – continuing operations
Result after taxation – discontinued operations
Profit for the year
Adjusted loss before tax for the year from continuing operations1
2022
20,587
1,974
3,443
26,004
(11,847)
14,157
(386)
13,771
53.0%
Reported
20211
20,547
280
2,115
22,942
(11,489)
11,453
(276)
11,177
48.7%
Constant
Currency
2021
22,928
313
2,366
25,608
(12,835)
12,773
(315)
12,457
48.6%
(12,172)
(12,960)
(14,240)
142
(1,641)
—
1,599
(657)
120
—
(1,366)
(252)
(29)
190
(517)
(1,974)
(912)
(22)
(934)
(79)
(1,013)
1,183
170
(99)
—
(1,783)
(1,101)
4,101
(334)
(982)
(129)
(509)
335
—
(1,619)
(402)
156
(246)
(192)
(438)
35,001
34,563
(3,358)
1.
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).
2.
Adjusted operating expenses exclude depreciation, amortisation, impairments, share option charges, other income and separately disclosed items.
88
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
REVENUE – CONTINUING OPERATIONS
£’000
Wagering revenue
Sports betting commission
F&B revenue
Total Sportech Venues
Total Sportech Digital
Total revenues
2022
19,116
1,974
3,443
24,533
1,471
26,004
Reported
2021
19,515
280
2,115
21,910
1,032
22,942
Constant
Currency
2021
21,835
313
2,366
24,514
1,094
25,608
Revenue from continuing operations increased by 2% on a constant currency basis. The growth in F&B and Sports betting
helping to offset the wagering revenue decline. A further location was closed during 2022, resulting in the Venues business
operating nine current locations. The Digital revenue was principally supported by improved performance from the online
pari-mutuel operations.
ADJUSTED EBITDA – CONTINUING OPERATIONS
£’000
Sportech Venues
Sportech Digital
Central costs
Adjusted EBITDA
2022
4,046
(307)
(2,140)
1,599
Reported
2021
1,620
(579)
(2,824)
(1,783)
Constant
Currency
2021
1,595
(612)
(2,624)
(1,641)
The significant Adjusted EBITDA improvement from a loss of £(1,783)k, which included a £260,000 sports betting investment,
representing lobbying costs, in 2021. Returning to a profit of £1,599k from continuing operations, was delivered through
improvements across all divisions. The Venues business more than offset the decline in pari-mutuel revenue through its
strong results in its first full year of sports betting commission in addition to the recovery of the F&B product after COVID. The
digital division reduced its losses, with growth through CRM in the 123.bet online business. Central costs were also reduced
significantly in the year.
DISCONTINUED OPERATIONS
Further consideration was received from the Bump 50:50 businesses of £1,229k, (£1,013k net of fees) as well as retrospective
receipt of other income of £170k in respect of the CARES Act in relation to the Global Tote business.
99
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Financial Review
continued
SEPARATELY DISCLOSED ITEMS
Continuing operations
Included in operating costs:
Onerous contract provisions and other losses resulting from exit from Californian
operations
Redundancy and restructuring costs1
Corporate activity costs
Costs in relation to the Spot the Ball VAT refund
Settlement of a contract2
Costs in relation to exiting the Group’s interests in India
Costs in relation to the Group’s move from Main Market to AIM
Discontinued operations
Included in operating costs
Total included in operating costs
Included in finance costs – continuing operations
Interest accrued on corporate tax related to the STB refund received in 2016
Net separately disclosed items
Note
2022
£’000
2021
£’000
(120)
414
57
—
304
2
—
657
—
657
24
24
681
91
625
21
10
—
13
341
1,101
371
1,472
150
150
1,622
11
8
The Group’s lease issues in California were finally resolved during the year, avoiding further litigation and bringing those matters
to a close, below the previous provisions.
The redundancy and restructuring costs relate to settlements made to former Directors in lieu of notice.
Settlement of a contract relates to the Group exiting a royalty arrangement in the period relating to branding at its Connecticut venues. This required a termination fee to be paid.
1.
2.
1010
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022 CASH FLOW
The Group’s cash flow for the year is as follows (including discontinued operations):
£’000
Adjusted EBITDA – continuing operations
Adjusted EBITDA – discontinued operations
Total Adjusted EBITDA
Payment of lease liabilities including interest
EBITDA after lease payments
Add:
Less:
Net proceeds from disposals
Capitalised software
Property plant and equipment (net of proceeds from sales)
Separately disclosed items and other income (net)
Working capital
Tax and interest (paid)/received
Dividends paid
Share buy-back including expenses
FX impact
Net cash flows in year
Opening cash, excluding customer balances
Closing cash, excluding customer balances
2022
1,599
1,183
2,782
(1,357)
1,425
—
(196)
(147)
(657)
(3,398)
(5,083)
(7,000)
—
565
(14,491)
21,912
*7,420
2021
(1,783)
6,879
5,096
(1,512)
3,584
41,040
(1,012)
(582)
76
(2,418)
438
—
(35,880)
(171)
5,075
16,837
21,912
*
There is a modest rounding adjustment of £1,000, within the aggregate table above to match Closing cash.
Net cash outflow (excluding movement in customer balances) in the year was £14,491k.
The significant outflow items related to distributions to shareholders with a £7,000k dividend paid during the year and the
agreement to place in Escrow an amount related to a potential tax liability, in order to stop interest accruing with no settlement
yet reached with HMRC.
The business generated EBITDA on its continuing operations, improving on this measure year-on year.
Following the disposals of major businesses in 2021, the capitalized software and PPE investment were reduced for the
continuing 2022 business. The Venues business introduced a significant new product line late 2021 and expanded upon that
during 2022, requiring additional working capital during the period.
1111
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS
SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and 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 Executive Chairman
of the Board regularly meets with staff and actively encourages dialogue and feedback. The Chair and Senior Independent
Non-Executive Director has and will continue to visit operations during 2023, meeting business partners, customers and
employees in field operations, and human resources. This helps the Board open direct lines of communication.
• 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 19.
The key Board decisions made in the year are set out below:
Significant events/
decisions
Key s172 matter(s)
affected
Actions and impact
Employees, customers,
regulators, state
governor,
shareholders
Sports betting
contract with
CLC and deferring
decision not to
pursue litigation
in relation to a
full licence for
Sportech
• 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 provided efficiencies to its existing
operations, supporting all stakeholders.
Disposal of Lot.to
Systems Limited
Employees, customers
and shareholders
•
In determining a sale partner as well as the “good-standing” of the purchasers
and therefore their likelihood of assuming licences. Continuity of service to
customers was also a key consideration and shareholders in determining a sale
partner as well as the “good-standing” of the purchasers and therefore their
likelihood of assuming licences.
• Key suppliers were notified of the prospective change in ownership following
announcement of the disposal.
1212
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022 Significant events/
decisions
Key s172 matter(s)
affected
Actions and impact
Expansion of the
product suite
Customers,
employees
• Customer consultation in relation to the Company’s roadmap has
increased to ensure that products developed match customer needs,
with a focus on expanding sports betting product range to support
existing pari-mutuel offerings.
• The development teams have been consulted and trained to work with
an expanded product management department.
1313
GOVERNANCESTRATEGIC REPORT FINANCIAL STATEMENTS Directors and Officers
RICHARD MCGUIRE
Executive Chairman
Nationality and residence:
Date appointed to the board:
CLIVE WHILEY
Non-Executive Director, Senior Independent Director
UK
April 2022
Nationality and residence:
Date appointed to the board:
UK
April 2022
Richard first joined the Board of Sportech as a Non- executive
Director in November 2016 and was appointed Executive
Chairman in May 2017 and then in July 2019 was appointed
Chief Executive. Richard stepped down between September
2021 and April 2022.
Richard spent much of his career within capital markets being
Managing Director of Citigroup from 1996 through 2009 and
previously with HSBC. Since then he has held a number of
non-executive directorships within the leisure and gaming
industries. Prior to joining Sportech, Richard was Chairman at
Timeweave PLC, the joint owner of TurfTV. He also held the
position of Non-Executive Director at Mitchells and Butlers
PLC, one of the largest operators of restaurants and bars in
the UK. He is currently also Chairman of GYG Limited and
Director of Grey Wolf Investments Ltd.
Committees: Chairman of Remuneration Committee,
member of Audit and Nomination Committees.
Clive has forty years’ experience in regulated strategic
management positions since becoming a Member of the
London Stock Exchange. He has extensive main board
director experience across a broad range of financial services,
engineering, manufacturing, distribution, leisure, retail & mining
businesses encompassing the UK, Europe, North America,
Australasia, Middle East, and the People’s Republic of China.
Mr. Whiley is Chairman of Mothercare plc, China Venture
Capital Management Limited, First China Venture Capital
Limited & Y-LEE Limited and Senior Independent Director of
Griffin Mining Limited. Formerly Chairman of Dignity plc and a
Non-Executive Director of Grand Harbour Marina plc. Clive is
the Senior Independent Director.
PAUL HUMPHREYS
Independent Non-executive Director
Nationality and residence:
Date appointed to the board:
UK
September 2022
Committees: Chairman of the Audit Committee, member of
Remuneration and Nomination Committees.
Having qualified as a Chartered Accountant in 1980, Paul has
had a broad and varied executive career spanning more than
30 years at Board level, almost all of which as either Group
Finance Director or CFO. Paul was Group FD of McLeod
Russel Holdings, a listed engineering group, for ten years and
Group FD of Care UK, a large health and social care provider,
for more than 12 years, eight of which whilst the company
was listed. Latterly Paul spent more than five years as CFO of
JLA, a private equity backed provider of critical asset services.
Paul now holds a small number of advisory roles at unlisted
companies, as well as having served as an Independent Non-
executive Director and Audit Committee Chair at Dignity Plc.
14
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022 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 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
regularly attend team meetings and 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.
In addition, the wider use and enhancement of digital technology across the Group increases the risks associated with
information and cybersecurity, with an increasing risk from legacy system vulnerabilities, social engineering and phishing.
We have implemented corporate cybersecurity 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.
The Board has budgeted anticipated inflation increases in utilities, food and beverage supplies and are managing higher input
costs accordingly.
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.
15
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT Risk Management
continued
Risk area
Description
Mitigation
Mitigated
rating
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. 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. However, the burden and
cost of operating physical retail locations has
increased in recent years. The addition of sports
betting product to the mix has effectively shared
the cost burden allocation to three distinct
revenue lines, pari-mutuel, F&B and sports
betting.
The Executive Chairman 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 are being considered.
Management is monitoring the impact of
sports betting on pari-mutual revenues
closely and have introduced cross selling
opportunities.
Consumer footfall has increased from the
introduction of sports betting in venue could
impact pari-mutual handle favorably as filler
product to bet on between sporting events.
4
8
Regulatory
Product
16
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022 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.
Economic
Indicators
Global Inflation has increased and interest rates
have increased recently.
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.
Management are reviewing 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 SOC1 reports from
major third party technology providers
to demonstrate third party suppliers are
operating in line with best practice.
The Group manages the non GBP cash and
repatriates to £, when possible, in addition
considers hedging instruments to mitigate
significant fluctuations during corporate
transactions. The Group shareholders are
predominantly GBP based.
The Group, has surplus cash in reserves and
has no meaningful debt, higher interest rates
therefore have marginal positive impact.
Inflationary pressures have been included
within Group 2023 Budget planning, with
electricity supplies hedged through March
2024.
6
6
6
17
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT Risk Management
continued
Risk area
Description
Mitigation
Political
marginalisation
in Connecticut
We have noted through the sports betting
process that our core competitors in CT (Tribal
Casinos) have the political weight to secure
exclusive rights 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.
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 product provisions
opportunities given the political backdrop.
The Group retains and has regular dialogue
with external expertise via political lobbying
resources in CT.
Mitigated
rating
9
18
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022 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 Board ensures the Group meets its policy of maintaining
the highest standards of compliance and integrity. The
Group also employs security and compliance support 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 certain 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 2022 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)
2022
2021
1,107
2,402
42.6
104.7
19
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT
Corporate Social
Responsibility Report
continued
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.
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 2022 of 42.6 which is
1,107 tonnes of CO2 divided by the Group’s revenue from
continuing operations of £26.0m, compared to a prior year
ratio of 104.7, which is calculated as 2,402 CO2 tonnes
divided by revenue at constant currency from continuing
operations of £22.9m. The Group’s intensity ratio has
decreased by 59% due to closure of venues and increased
revenue.
Of the emissions noted in the table, minimal were generated
in the UK as the Group only had 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.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022 I
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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”) in 2021, 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 code. 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
Richard McGuire
Executive Chairman
º(Not Independent)
Clive Whiley
Paul Humphreys
Non-executive Director
(Independent)
Non-executive Director
(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 Director is 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. The Company Secretary provides minutes of
each meeting.
21
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance Report continued
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 2022 9 2 3 2
Executive Directors
Richard McGuire Appointed 01 April 2022 7/7 1/1 1/1 1/1
Andrew Lindley Stepped down 31 May 2022 3/3 – – –
Nicola Rowlands Stepped down 30 September 2022 6/6 – – –
Non-executive Directors
Clive Whiley Appointed 01 April 2022 7/7 1/1 2/2 1/1
Paul Humphreys Appointed 01 September 2022 2/3 – 1/1 1/1
Giles Vardey Stepped down 14 April 2022 3/3 1/1 1/1 1/1
Ben Warn Stepped down 31 May 2022 3/3 1/1 1/1 1/1
Note: The table represents the 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
The Company is a small entrepreneurial entity and the role of
Executive Chairman, leads the Board and is responsible for its
effectiveness and governance. They set the Board agenda
and ensures that sufficient time is allocated to important
matters, in particular strategic issues. In addition they are
responsible for the day-to-day management of operations and
the recommendation of strategy to the Board. They are also
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. The non-
executive Directors provide significant experience and
expertise of public and private companies and have additional
communications with leading shareholders directly. Clive
Whiley is Senior Independent Director.
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.
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These are escalated as appropriate to the Chairman or
Senior Independent Director 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 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
reviews the need for such a policy annually, taking into
account the size of the Company, the size of the Board and
skills available and 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 Executive 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
A 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 and to have an open
discussion on the overall functioning of the Board. The
Board composition was entirely restructured in 2022 and the
next Board Performance Evaluation is anticipated during
2023.
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.
23
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Corporate Governance Report continued
NOMINATION COMMITTEE
Members of the Nomination Committee
The Nomination Committee consists of Clive Whiley (Chair),
Paul Humphreys and Richard McGuire.
Duties
In carrying out its duties, the Nomination Committee is
primarily responsible for:
•
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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 Andrew
Lindley as Chief Executive Officer and Nicola Rowlands as
Chief Financial Officer.
The outcome of the review conducted was that, given the
reduced scale of the Company, Richard McGuire would
adopt the role of Executive Chairman and an external
consultant be appointed under contract to provide support
as Group Financial Controller, until such times as the long
term strategy of the Group is decided.
AUDIT COMMITTEE
Members of the Audit Committee
The Audit Committee consists of the Paul Humphreys
(Chair), and Clive Whiley. Executive Directors and senior
management attend by invitation.
Duties
The Committee is scheduled to meet at least three times a
year. The Committees 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:
•
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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 auditor;
consideration of the external audit reports 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 2022, the Committee also
reviewed and considered the following specific areas:
The Board is satisfied that Paul Humphreys 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 Committees
recommendations.
•
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risk of misstatement on revenue recognition;
disposal accounting and discontinued operations;
the assumptions underlying impairment testing of the
Company’s investment in subsidiaries;
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the evaluation of impairment on tangible and intangible
fixed assets; and
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.
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.
REMUNERATION COMMITTEE
A detailed report by the Remuneration Committee can be
found on pages 26 to 36.
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 2022, there
was one incident of a non-financial reporting nature raised
for consideration to the Senior Independent Director and
resolved.
Going Concern
The Directors have concluded that it is reasonable to adopt a
going concern basis in preparing the financial statements. This
is based on a reasonable expectation that the Group has
adequate resources to continue in operational existence for at
least twelve months from the date of signing of these
accounts. At the 31st December 2022 the Group had
unrestricted cash of £7.4 million, with no debt in the business.
The Directors have prepared forecasts covering the period to
December 2024, built from the detailed Board-approved
budget for 2023.
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. The
downside case makes far more pessimistic commercial
assumptions, for instance that online handle remains flat
rather than continue on growth trajectory, and a significant
reduction in the contribution from sports betting. It also
considers the impact of a weakening dollar.
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
Richard McGuire
Executive Chairman
18 April 2023
25
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
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 2022.
There were numerous changes to the Board as noted on
page 4
Notably regarding the Remuneration Committee, Ben Warn
and Giles Vardey stepped down from the Board and the
Remuneration Committee and I stepped in to Chair the
Remuneration Committee, being joined by Paul Humphreys
upon his Board appointment in September 2022.
As noted in last year’s report, 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.
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 26 to 36,
the policy does not require shareholder approval, however
the Company maintains regular communication with key
shareholders.
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 2022.
At the 2023 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 2022 and proposals for the
operation of the Policy in 2023.
Proposed Directors’ Remuneration Policy for
2023
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, alongside the
wholesale replacement of all previous Directors.
The key difference from previously approved policies is that
no long- term incentive scheme will be operated, simplifying
the remuneration structure, the Board will continue to
monitor this to ensure shareholders’ interests are aligned
with strategic objectives. In the interim, in the absence of a
26
long term incentive plan the Committee may provide cash
bonus awards to Executives for event based achievements.
Remuneration for 2022
Executive Salary
The base salaries of Executive directors who left in 2022,
were Andrew Lindley, CEO, £225,000 pa. and Nicola
Rowlands CFO, £156,250. These and further benefits are
noted in the table on page 34. Richard McGuire rejoined the
Board in April 2022 and given his previous tenure with the
Company in an executive capacity was not deemed to be
independent. Following Andrew Lindley stepping down in
May 2022, Richard McGuire stepped into the role of
Executive Chairman on 1 April 2022. The Committee
subsequently decided to compensate him £62,500 for the
12 months to 31 May 2023 and will review the position
ahead of that time.
Annual bonus
2022 Bonuses noted are related were provided in relation to
the successful receipt of CN$ 2m earnout in relation to from
the 2021 sale of Bump 50:50, which was recognised in the
2022 financial results. The receipt, and associated bonuses,
were received and paid respectively in 2023.
Within the 2021 report, Andrew Lindley and Nicola Rowlands
received bonuses for noted execution of specific tasks. In
that report the amounts were detailed within the
commentary, yet allocated pro-rata for the four months of
the calendar year they were directors. Following shareholder
consultation, the committee elected to provide the 2021
table in this report illustrating the FY 2021 compensation,
which includes the period they were senior executives of the
Company, before appointment to Directors, to better reflect
the annual total compensation to senior executives and
consistent with other senior management.
Implementation of remuneration policy for 2023
The remuneration of our Executive Directors is under review
and historically comprised 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 does not anticipate granting long-
term incentives to Executive Directors during 2023.
The Executive Chairman’s, being the only current executive
director, compensation was reviewed at the beginning of the
year and, as noted the Committee elected to provide
compensation for the 12 months to the end of May 2023,
totalling £62,500. This amount includes Company health
cover benefit and a £10,000 pension contribution. There is a
potential discretionary bonus award based on performance
(nil in 2022). The position will be reviewed by the Committee
in May 2023.
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The Remuneration policies in 2022 were simplified entirely
where incentives meet contribution and effort and results are
wholly aligned with shareholder interests.
The Committee is satisfied that the policy recognises the
Company size and current structure and 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 consulted with key
shareholders who voted against last year’s report prior to my
appointment and I am satisfied that this report addresses
their concerns accordingly. Finally, I thank shareholders for
their support during 2022 and hope you will be able to
support the resolution on our Directors’ Remuneration
Report at the 2023 AGM.
Clive Whiley
Non-executive Director and Chair of the Remuneration
Committee
18 April 2023
27
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Remuneration Report
FOR THE YEAR ENDED 31 DECEMBER 2022
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 may be applied
in 2023.
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 potential remuneration
packages for Executive Directors are detailed in the table on
pages 29 to 34, which should be read in conjunction with
the recruitment/promotion policy on page 20, and the
“Detailed remuneration policy for 2023” section of the Annual
Report on Remuneration, which starts on page 26.
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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. It should be noted that this did apply to executive directors who subsequently stepped down during 2022.
Remuneration element and
purpose
Operation
Opportunity
Performance metrics
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.
Benefits
To provide cost-effective,
yet market competitive,
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 34.
– 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.
– 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.
workforce, up to 5% 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.
Not applicable.
arrangement or cash in lieu of pension
by way of a salary supplement.
Benefits may extend to include a
combination of the following:
– Car or car allowance.
– Family cover private health insurance.
– Life insurance cover.
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 tailored to the
executive’s location if they are recruited
overseas.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
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 licenced
entity and Non-executive
Directors are subject to
personal licensing
assessments and if
appropriate consents by
certain US authorities.
– The annual bonus is
typically 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.
As noted the Board have elected to review the strategic
position of the Company in May 2023. The executive
Director will receive compensation to the end of May 2023
and potentially a 2023 discretionary bonus, based on
performance of core identified objectives.
Policy on contracts of service
Details of the service contracts and letters of appointment in
place as at 31 December 2022 for Directors are as follows.
Executive Director Date of Service Contract Notice Period*
Richard McGuire 01.04.22 0 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
Clive Whiley 01.04.22 3 months
Paul Humphreys 01.09.22 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
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 may be permitted, under certain
circumstances, 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 arrangements will be
based on the limits of the prevailing approved Directors’
Remuneration Policy.
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Remuneration report continued
The fee structure and quantum for Non-executive Director
appointments 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 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.
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ANNUAL REPORT ON REMUNERATION
Application of the Remuneration Policy for 2023
Basic annual salary
The Committee has reviewed base salaries for 2023 taking into account market conditions and performance in role since
appointment. For reference, some staff received increased salary in line with performance or inflation, however full-time salaries
across the Group were not increased for 2023.
The base salaries for 2023 are as follows:
Director 2023 2022 % Change
Executive Chairman £62,500 £62,5001 –
1 The amount noted relates to an agreement for the twelve month period to end May 2023, includes a pension contribution and is annualised for
illustration.
Performance related bonus
The 2022 bonus awards relate to the successful receipt of
CN $ 2 million earnout related to the sale of Bump 50:50 in
2021.
Pension arrangements
During 2022, for Andrew Lindley the Company pension
contribution level was 5% of base salary; paid in cash into a
SIPP. The Company matched 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. Richard McGuire did not benefit from any
pension contribution in 2022.
Other benefits
Andrew Lindley and Nicola Rowlands were entitled to the
following other main benefits; private health insurance for
themselves, their spouse and children and life insurance for
themselves. Nicola Rowlands received a car allowance of
£6,000 per annum paid in cash. Richard McGuire received
personal, private health coverage during the year.
Long Term Incentive
No long-term incentive awards were granted in 2022 and
none are anticipated in 2023.
Non-executive Directors’ fees
The Non-executive Director fee for 2023 is £45,000, the result
of a reduction of 25% in 2022.
During 2022, the Chairman fee applied to Giles Vardey was
1 month at £120,000 pa, then February 2022 to his departure
at £90,000 pa., matching the 25% reduction.
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Remuneration report continued
Single total remuneration figure for the Directors
Details of the remuneration for each Director in office during the financial year ended 31 December 2022 are given in the table
below.
Directors’ remuneration for 2022
Taxable Pay in lieu 2022
Fees Benefits Pension of notice Total Bonus Total
Notes £000 £000 £000 £000 £000 £000 £000
Executive Directors
Andrew Lindley Note 1 94 – 6 232 332 – 332
Nicola Rowlands Note 2 114 5 15 – 134 – 134
Richard McGuire Note 3 36 – – – 36 11 47
Non-executive Directors
Giles Vardey Note 4 33 – – 23 55 – 55
Ben Warn Note 5 20 – – 11 31 – 31
Clive Whiley Note 6 18 – – – 18 – 18
Paul Humphreys Note 7 15 – – – 15 – 15
Directors’ remuneration for 2021
Taxable Pay in lieu 2021
Fees Benefits Pension of notice Total Bonus Total
Notes £000 £000 £000 £000 £000 £000 £000
Executive Directors
Andrew Lindley Note 8 175 – 12 – 187 339 526
Nicola Rowlands Note 8 108 6 7 – 121 242 363
Richard McGuire Note 9 209 1 10 150 370 148 518
Tom Hearne Note 9 143 2 – 205 350 94 444
Non-executive Directors
Giles Vardey 120 – – – 120 – 120
Ben Warn 60 – – – 60 – 60
Chris Rigg Note 10 25 – – 13 38 – 38
(1) Andrew Lindley stepped down from the Board 31 May 2022, his contract dictated 12 months’ notice period.
(2) Nicola Rowlands stepped down from the Board 30 September 2022.
(3) 2022 Bonus relates to existing contractual agreement, relating to the successful receipt of CN $2m contingent earnout related to the 2021 disposal of
Bump 50:50. This amount was paid in 2023 as part of his 2021 exit arrangement and paid in 2023. He also notes an interest as Director of Company
engaged to recover the CN$2m. The gross fee to that Company was £50,000. Post year end the Remco elected to compensate and provide remuneration
of £58,500 for 12 months to end May 2023.
(4) Giles Vardey stepped down from Board 14 April 2022.
(5) Ben Warn stepped down from Board 31 May 2022.
(6) Clive Whiley was appointed to the Board 01 April 2022 and the Company has also engaged with a business Mr Whiley is a director of to provide
strategic support services. The gross annual fee to that separate entity would not exceed £36,000 in any given year.
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(7) Paul Humphreys was appointed to the Board on 01 September 2022.
(8) Andrew Lindley and Nicola Rowlands 2021 amounts include payments made in FY 21, prior to being appointed Directors on 27 Aug 2021. The Bonus
amounts reflect the bonuses paid when they were Directors and reflects more accurately FY 2021 compensation.
(9) Richard McGuire & Tom Hearne 2021 payment includes, notice and bonuses related to Tote sale, stepped down from the Board 10 September 2021.
(10) Chris Rigg stepped down from Board 31 May 2021 –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 table above.
Performance related bonus
The only performance related bonus payout related to the FY 2022 period was, as set out in the Chair’s statement, related to
the successful receipt of CN $2 million, related to a previous disposal.
Long Term Incentive Plans (“LTIPs”)
No awards were granted to Executive Directors during 2022 under the existing LTIP.
Director interests
Details of the Directors’ interests in shares are disclosed in the Directors’ report at page 37.
Exit payments
Payments in lieu of notice was paid to Andrew Lindley (£225,000), Giles Vardey (£22,500) and Ben Warn (£11,250), in line with
contractual arrangements reflecting payment of salary in lieu of notice.
Payments to third parties
No payments were made to third parties for making available the services of any of the Directors during 2021.
Executives External directorships
Richard McGuire, is a director of GYG Limited and Grey Wolf Investments Ltd.
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:
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Remuneration before LTIPS
(£000) 575 515 517 1,2331 6093 2684 5225 5065 5606 1308
LTIPS (£000) 836 158 – – 223 – – – – –
Total remuneration (£000) 1,411 673 517 1,233 832 268 522 506 5606 1308
Annual bonus 40.0% 21.25% 20.5% 39.2%2 40.0% – 20.0% 55.4% 44.5%7 –
LTIP vesting 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.
8 Andrew Lindley, 2022 prior to stepping down May 2022 being £94,000 plus Richard McGuire as Executive Chairman, £36,000 thereafter.
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Remuneration report continued
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 21,181,343 47,105,734 0
31 December 2021 (31.02%) (68.98%)
As Chair of Remuneration Committee, Clive Whiley subsequently met with leading shareholders to understand the significant
votes against and subsequently set in place improved communication between the Company and major Shareholders.
The Board and Remuneration Committee continue to welcome and value shareholder engagement and appreciate 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
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.
Clive Whiley
Chairman of the Remuneration Committee
18 April 2023
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Directors’ Report
The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2022.
General information of the Company can be found in the Accounting Policies on page 6.
The Strategic report and Corporate Governance report are set out on pages 2 to 25. 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 15 to 18 of the Strategic report.
DIRECTORS AND THEIR INTERESTS IN THE SHARES OF THE COMPANY
The Directors who held office at 31 December 2022 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
2023 2022
Number Number
Richard McGuire (appointed 01 April 2022) 1,250,000 1,250,000
Clive Whiley (appointed 01 April 2022) 150,000 150,000
Paul Humphreys (appointed 01 September 2022) – –
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 20.
37
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Directors’ Report continued
SUBSTANTIAL SHAREHOLDINGS
On 31 March 2023, interests representing 3% or more of the issued share capital of the Company had been notified to the
Company as shown below.
31 March 2023 31 December 2022
Ordinary shares % of issued Ordinary shares % of issued
of 1p share capital of 1p share capital
Mr. Richard Griffiths and entities 28,597,856 28.60 28,597,856 28.60
Lombard Odier Asset Management (Europe) Ltd 22,064,961 22.06 21,940,000 21.94
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
Cantor Fitzgerald Europe 5,903,562 5.90 5,903,562 5.90
Total of substantial shareholdings 85,002,444 85.00 84,402,483 84.40
All other shareholdings 14,997,556 15.00 15,597,517 15.60
Total shares in issue 100,000,000 100.00 100,000,000 100.00
DIVIDEND
The Company is reviewing dividend policy and will update the market ahead of the 2023 AGM, 2022 was £7 million, being 7p
per share.
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 19. 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 19.
CORPORATE GOVERNANCE
The Group’s statement on corporate governance is set out on pages 21 to 25 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. It endeavours to ensure that there is no infringement on human rights, complicity in the human rights
abuses of others, and compliance 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. It is
committed to acting professionally, fairly, and with integrity in all business dealings and relationships.
Sportech will constantly uphold all laws relating to anti-bribery and corruption in all the jurisdictions in which it operates. It is
bound by the laws of the UK, including the Bribery Act 2010 with respect to its 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 the company is
discovered to have taken part in corrupt activities, it may be subjected to an unlimited fine, be excluded from tendering for
public contracts, and face serious damage to it’s reputation. It is with this in mind that it commits to preventing bribery and
corruption and takes its legal responsibilities seriously.
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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 and contracts retain the right to
preapprove the acquirer in order for a change of control to
be permitted without any change of terms.
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
37 and 38. There are no restrictions on the transfer of
shares.
As part of the resolutions approved at the 2022 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 £333,333. 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:
(ii)
allot shares in the Company and grant Rights up to a
further aggregate nominal value of £50,000 in
connection with a rights issue. This amount represents
approximately one-third of the share capital of the
Company in issue at the date of 2022 Notice of
Meeting.
GOING CONCERN
The Group’s forecasts and projections, which have been
prepared as described on page 56 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 December 2024. Accordingly,
it is deemed appropriate to prepare the financial statements
on a going concern basis for the financial year ended 31
December 2022.
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 26 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.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the group and company
financial statements in accordance with UK adopted
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
39
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Directors’ Report continued
ANNUAL GENERAL MEETING (“AGM”)
The Notice convening the AGM of the Company on 30 May
2023 will be sent to shareholders by 5 May 2023. In
accordance with good corporate governance practice, each
Director will voluntarily stand for re-election. The profiles of
the Directors appear on page 14. 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 28 to 36, 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
18 April 2023
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 2022 and of the Group’s
loss 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 United Kingdom
Generally Accepted Accounting Practice; 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 2022 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 of the Group financial statements is
applicable law and UK adopted international accounting
standards. The financial reporting framework that has been
applied in the preparation of the Parent Company financial
statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting
Standard 101 Reduced Disclosure Framework (United
Kingdom Generally Accepted Accounting Practice).
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, including accuracy of historical
forecasting by agreeing to actual results.
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 against the requirements of the
accounting standards and consistency of the
disclosures against the forecasts and going concern
assessment.
41
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Independent auditor’s report
to the members of Sportech Plc
continued
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.
OVERVIEW
Coverage 96% (2021: 96%) of Group profit before tax
100% (2021: 99%) of Group revenue
99% (2021: 95%) of Group total assets
Key audit matters
2022 2021
Revenue recognition:
Group P P
Impairment of
investments: P P
Parent Company Only
Impairment of
intangibles: Group P P
Disposal accounting and
discontinued operations:
Group P
Disposal accounting and discontinued
operations is not considered to be a key
audit matter in the current year because
there has been no significant disposal
during the year and therefore, we
considered this to be a low focus for our
audit.
Materiality Group financial statements as a whole
£195,000 based on 0.75% of total Group
revenue (2021: £195,000 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 12 separate components making up the
Group, of which two were deemed significant components
that required a full scope audit given their contribution to the
Group’s revenue and net assets (Sportech Venues CT and
Sportech Plc). Our work on the remaining components
comprised analytical procedures and certain specified audit
procedures. All audit work was performed by the Group
audit team.
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
Revenue recognition
The details of the accounting
policies applied during the
year are set out in the Basis
of accounting section of the
financial statements.
(Summary of significant
accounting policies, (b)).
How the scope of our audit addressed the key audit
matter
We completed the following audit procedures:
• We developed an understanding of the key revenue
processes from inception to disclosure in the financial
statements and assessed the design and implementation
of the controls over the revenue cycle on betting revenue
in Venues.
•
•
•
•
For the betting revenues, using data analytic techniques
we recalculated the expected income earned from betting
data captured in the Group’s IT systems for venues and
reconciled this to the amounts recorded in the nominal
ledger.
For the betting revenue stream, we tested revenue to
cash reconciliations for bets placed during the year.
For the betting revenue stream, we reviewed the Systems
and Organisation Controls (SOC) report of the underlying
IT system operated by a third party since June 2021 and
ensured that controls within underlying IT systems were
noted therein as operating effectively. We also enquired
with management regarding the modification rights
available with personnel within the Group to ensure that
data agrees to underlying IT systems was not
manipulated.
For the betting revenue stream we verified a sample of
underlying agreements with racetracks to ensure that
rates used in the underlying IT systems in calculating
revenue were correct.
• Reviewed manual journal entries to revenue nominal
ledger codes related to betting revenue in Venues which
met a defined risk criteria, to identify any unusual journal
entries which may indicate fraud or error in revenue
recognition.
Key observations
Based on above procedures performed, nothing has come
to our attention that causes us to believe that revenue
recognition on betting revenue in Venues is inappropriate.
The Group recognises
revenue from the following
revenue streams:
a. Revenue from rendering
of services (includes
betting revenue in
venues, 123Bet online
services and racebook
commissions).
b. Revenue from sale of
food and beverage.
c. Revenue from betting
services commissions.
Betting revenue in venues
was considered a KAM due
to the complexity of the IT
systems and the level of
audit focus required.
Betting revenue in venues is
derived from handle (betting
stakes) net of return to
bettors for wagering and
customer incentives and is
recognised when the event
takes place. There is a risk
that amounts recorded are
calculated incorrectly due to
manipulation of the
underlying source data, an
error in the IT system or the
incorrect contractual rate
being applied.
Also, there is a risk that
management has the
opportunity to manipulate
and overstate revenue by
overriding controls and
posting manual journals.
Therefore, manual journals to
revenue has been
considered as a key focus
area for audit.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
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.
(Summary of significant
accounting policies, (l) and
(m)).
In accordance with the
requirements of relevant
accounting standards, the
Directors have performed an
impairment review on
investments in the current
year. This has resulted in an
impairment charge of
£8.2 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 a 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.
• Challenged management on the growth rates used in the
model for specific revenue streams, reviewed underlying
documents 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
Based on the procedures performed, the judgements made
by management in determining the impairment of
investments are considered to be appropriate.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Key audit matter
Impairment of intangible
fixed assets
The details of the accounting
policies applied during the
year are set out in Basis of
accounting section of the
financial statements.
(Summary of significant
accounting policies, (j) and
(m)).
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:
• 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).
• Challenged Management on the growth rates used in the
model for specific revenue streams and sought detailed
explanations from them 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.
• We considered publicly available information and other
information obtained during our work in order to assess
whether there were any other potential indicators of
impairment not identified by Management.
Key observations
Based on the procedures performed the judgements made
by management in determining the impairment of intangible
fixed assets are considered to be appropriate.
The Group’s total intangible
fixed assets as at
31 December 2022 were
£6.9m which are material to
the Group’s balance sheet.
This mainly relates to the
Group’s Connecticut license.
During the year, the Group
recognised an impairment
loss on intangible fixed
assets amounting to £517k.
IAS 36 “Impairment of
Assets” requires
management to review the
carrying value of intangibles
and test it annually for
indicators of impairment.
Management exercise
significant judgement in
determining the underlying
assumptions used in the
impairment review. The
assumptions are not limited
to, but can include the
discount rate used, the
allocation of assets to cash
generating units (CGUs),
growth rates and the future
cash flows attributed to each.
45
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
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
2022
Materiality
£195,000
2021
£195,000
2022
£40,000
Basis for determining
materiality
0.75% of Total Group
Revenue
0.5% of Total Group
Revenue
20% of Group
materiality
Rationale for the
benchmark applied
Revenue was
considered to be most
appropriate benchmark
due to volatility of profit
measures.
20% of Group
materiality
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 2021.
2021
£40,000
20% of Group
materiality
20% of Group
materiality
Performance
materiality
£136,500
£136,500
£28,000
£28,000
Basis for determining
performance
materiality
70% (2021: 70%) of materiality, based on our overall risk assessment, including the expected total
value of known and likely misstatements (based on past experience and other factors) and
management’s attitude towards proposed adjustments.
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Component materiality
For the purposes of our Group audit opinion, we set
materiality for each significant component of the Group
based on a percentage of between 30% and 75% (2021:
20% and 65%) 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 £146,250 (2021: £40,000 to £126,750). In the
audit of each component, we further applied performance
materiality levels of 70% (2021: 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
(2021: £9,750). 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 2022 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 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 in respect of the financial statements, 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.
47
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Independent auditor’s report
to the members of Sportech Plc
continued
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:
Non-compliance with laws and regulations
Based on:
•
•
•
Our understanding of the Group and Parent Company
and the industry in which it operates;
Discussion with management and those charged with
governance, including Audit Committee; and
Obtaining and understanding of the Group’s and Parent
Company’s policies and procedures regarding
compliance with laws and regulations,
we considered the significant laws and regulations to be the
applicable accounting framework, Companies Act 2006, AIM
Listing Rules, Gaming Regulations and Licences and tax
legislation.
48
Our procedures in respect of the above included:
•
•
•
•
•
Enquiries of management and those responsible for
legal and compliance procedures to understand how
the Group is complying with those legal and regulatory
frameworks. We corroborated our enquiries through
our review of minutes of meeting of those charged with
governance, reviewing summary of claims, litigations
and regulatory inquiries that we have obtained from
those charged with governance;
Review of minutes of meeting of those charged with
governance and correspondence with local tax and
regulatory authorities, including review of legal
expenses, to identify potential litigation and claims and
non-compliance with laws and regulations;
Review of financial statement disclosures and agreeing
to supporting documentation;
Involvement of internal taxation specialists to review the
adequacy and appropriateness of tax provisioning; and
Review of legal expenditure accounts to understand
the nature of expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to
material misstatement, including fraud. Our risk assessment
procedures included:
•
•
•
•
Enquiry with management and those charged with
governance, including Audit Committee, regarding any
known or suspected instances of fraud, potential
litigation and claims, and non-compliance with laws
and regulations;
Obtaining an understanding of the Group’s and Parent
Company’s policies and procedures relating to:
o
o
Detecting and responding to the risks of fraud;
and
Internal controls established to mitigate risks
related to fraud.
Discussion amongst all the engagement team
members as to how and where fraud might occur in
the financial statements; and
Considering remuneration incentive schemes and
performance targets and the related financial statement
areas impacted by these.
Based on our risk assessment, we identified fraud risks in
relation to management override of controls and
overstatement of revenue during the year specifically through
manual journal entries where incentive might exist to
accelerate earnings.
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Our procedures in respect of the above included:
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
14 April 2023
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
•
•
Testing manual and automated journal entries
throughout the year, particularly on revenue and
consolidation journals, which met a defined risk criteria,
by agreeing to supporting documentation where we
considered there to be a higher risk of potential fraud
and other adjustment;
Assessing whether the judgements made in making
accounting estimates, individually and in aggregate, are
indicative of a potential bias, and evaluating the
business rationale of any significant transactions that
are unusual or outside the normal course of business.
This included those set out in the key audit matters
section of our report.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement team
members who were all deemed to have appropriate
competence and capabilities and remained alert to any
indications of fraud or non-compliance with laws and
regulations throughout the audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from
the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Consolidated Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £000 £000
Revenue 2 26,004 22,942
Cost of sales 3 (11,847) (11,489)
Gross profit 14,157 11,453
Marketing and distribution costs 3 (386) (276)
Contribution 13,771 11,177
Operating costs 3 (14,803) (15,680)
Other income 10 120 4,101
Operating loss (912) (402)
Finance costs 8 (254) (305)
Finance income 8 232 461
Loss before tax from continuing operations (934) (246)
Tax – continuing operations 9 (79) (192)
Loss for the year – continuing operations (1,013) (438)
Profit after taxation from discontinued operations 11(g) 1,183 35,001
Profit for the year 170 34,563
Attributable to:
Owners of the Company 170 34,563
Basic (loss)/earnings per share attributable to owners of the Company
From continuing operations 12(a) (1.0)p (0.3)p
From discontinued operations 12(a) 1.2p 20.6p
Total 12(a) 0.2p 20.3p
Diluted (loss)/earnings per share attributable to owners of the Company
From continuing operations 12(b) (1.0)p (0.3)p
From discontinued operations 12(b) 1.2p 20.6p
Total 12(b) 0.2p 20.3p
Adjusted loss per share attributable to owners of the Company
Basic 12(c) (0.1)p (1.7)p
Diluted 12(c) (0.1)p (1.7)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.
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Consolidated Statement of
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £000 £000
Profit for the year 170 34,563
Other comprehensive income:
Items that will not be reclassified to profit and loss
Actuarial gain/(loss) on retirement benefit liability – discontinued operations – 186
170 186
Items that may be subsequently reclassified to profit and loss
Currency translation differences – continuing operations 1,047 (617)
Currency translation differences – discontinued operations – (550)
Less: gain reclassified to profit and loss on disposal of foreign operations 11 – (3,373)
1,047 (4,540)
Total other comprehensive income/(expense) for the year, net of tax 1,217 (4,354)
Total comprehensive income for the year 1,217 30,209
Attributable to:
Owners of the Company 1,217 30,209
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Consolidated Balance Sheet
AS AT 31 DECEMBER 2022
2022 2021
Note £000 £000
ASSETS
Non-current assets
Goodwill 13 87 604
Intangible fixed assets 14 6,939 6,357
Property, plant and equipment 15 4,522 4,261
Right-of-use assets 16 5,042 4,657
Trade and other receivables 18 177 158
Deferred tax assets 19 15 –
Total non-current assets 16,782 16,037
Current assets
Trade and other receivables 18 1,978 1,750
Inventories 20 146 124
Current tax receivable 9 228 –
Contingent consideration (gross receivable) 11(e) 1,229 –
Cash and cash equivalents 21 7,811 22,367
Total current assets 11,392 24,241
TOTAL ASSETS 28,174 40,278
LIABILITIES
Current liabilities
Trade and other payables 22 (6,564) (7,945)
Provisions 23 – (736)
Contingent consideration (bonuses payable) 11(e) (216) –
Lease liabilities 24 (1,155) (923)
Current tax liabilities 9 – (4,718)
Total current liabilities (7,935) (14,322)
Net current assets 3,457 9,919
Non-current liabilities
Lease liabilities 24 (6,200) (6,091)
Deferred tax liabilities 19 – (43)
Total non-current liabilities (6,200) (6,134)
TOTAL LIABILITIES (14,135) (20,456)
NET ASSETS 14,039 19,822
EQUITY
Ordinary shares 28 1,000 1,000
Other reserves 4,574 3,527
Retained earnings 8,465 15,295
TOTAL EQUITY 14,039 19,822
The financial statements on pages 50 to 97 were approved and authorised for issue by the Board of Directors on 18 April 2023
and were signed on its behalf by:
Richard McGuire
Director
Company Registration Number: SC069140
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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 2022 1,000 888 314 2,325 15,295 19,822
Comprehensive income –
Profit for the year – – – – 170 170
Other comprehensive items –
Currency translation differences arising in the year – – – 1,047 – 1,047
Total other comprehensive items – – – 1,047 – 1,047
Total comprehensive items – – – 1,047 170 1,217
Transactions with owners –
Dividend paid – – – – (7,000) (7,000)
Total transactions with owners – – – – (7,000) (7,000)
Total changes in equity – – – 1,047 (6,830) (5,783)
At 31 December 2022 1,000 888 314 3,372 8,465 14,039
53
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Consolidated Statement of
Changes in Equity continued
FOR THE YEAR ENDED 31 DECEMBER 2022
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 – – 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 – – – – 334 334
Cancellation of capital redemption reserve – (10,312) – – 10,312 –
Capital reduction (35,862) – – – 35,862 –
Fees in relation to capital reduction – – – – (66) (66)
Fees in relation to share buy-back – – – – (314) (314)
Share buy-back (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
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Consolidated Statement
of cash flows
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £000 £000
Cash flows from operating activities
Cash (used in)/generated from operations, before separately disclosed items 29 119 511
Tax refund received 9 – 1,442
Tax paid 9 (5,083) (1,029)
Net cash (used in)/generated from operating activities before separately disclosed items (4,964) 924
Cash inflows – other income 10 – 2,483
Cash outflows – separately disclosed items 4 (1,457) (2,407)
Cash generated from operations (6,421) 1,000
Cash flows from investing activities
Disposal of Sports Haven (net of transaction costs) – 4,193
Disposal of Bump 50:50 (net of cash disposed of and transaction costs) – 4,644
Disposal of LEIDSA contract (net of cash disposed of and transaction costs) – 9,417
Disposal of Global Tote (net of cash disposed of and transaction costs) – 22,636
Proceeds from sale of intangible assets 14 – 150
Investment in intangible fixed assets 14 (196) (1,012)
Purchase of property, plant and equipment 15 (147) (582)
Net cash (used in)/generated from investing activities (343) 39,446
Cash flows used in financing activities
Principal paid on lease liabilities (1,127) (1,333)
Interest paid on lease liabilities (230) (179)
Share buy-back including transaction costs 28 – (35,880)
Dividend paid (7,000) –
Interest received – 27
Interest paid – (2)
Cash used in financing activities (8,357) (37,367)
Net (decrease)/increase in cash and cash equivalents (15,121) 3,079
Effect of foreign exchange on cash and cash equivalents 565 (171)
Cash and cash equivalents at the beginning of the year 22,367 11,821
Opening cash included in asset held for sale and excluded from cash and cash equivalents – 7,638
Group cash and cash equivalents at the end of the year 21 7,811 22,367
Represented by:
Cash and cash equivalents 21 7,811 22,367
Less customer funds 21 (391) (455)
Adjusted net cash at the end of the year 21 7,420 21,912
55
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements
FOR THE YEAR ENDED 31 DECEMBER 2022
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 2022 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 2022. Following the disposals the Group continues to provide pari-mutuel betting (B2C) and lottery technology
(B2B).
GOING CONCERN
The Directors have concluded that it is reasonable to adopt a going concern basis in preparing the financial statements. This is
based on a reasonable expectation that the Group has adequate resources to continue in operational existence for at least
twelve months from the date of signing of these accounts. At the 31st December 2022 the Group had unrestricted cash of £7.4
million, with no debt in the business.
The Directors have prepared forecasts covering the period to December 2024, built from the detailed Board-approved budget
for 2023.
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. The downside case makes far more pessimistic commercial assumptions, for
instance that online handle remains flat rather than continue on growth trajectory, and a significant reduction in the contribution
from sports betting. It also considers the impact of a weakening dollar.
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.
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;
•
•
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an active programme to locate a buyer is initiated;
the sale is highly probable, within 12 months of classification as held for sale (subject to limited exceptions);
the asset is being actively marketed for sale at a sales price reasonable in relation to its fair value; and
actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn.
In addition, a discontinued operation is a component of the Group that either has been disposed of, or is classified as held for
sale, and
(a)
(b)
(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.
Recognition of contingent consideration for Bump 50:50
On 2 June 2021 the Group completed the disposal its 50:50 lottery division, Bump 50:50.
In addition to the consideration received during 2021, further consideration was received by the group in March 2023 following
Bump 50:50 achieving the revenue trigger in the financial year ending 31 December 2022. The gross amount received of
£1,229k has been recognised within discontinued operations in the Income Statement with a net gain of £1,013k.
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.
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.
57
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
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 27).
The tax position in relation to the treatment of the £4.6m gain included in the 2016 financial statements for the Spot the Ball VAT
refund remains uncertain. The directors continue to consider that this amount is not payable and await the HMRC final
determination of assessments whereupon they will consider if any further actions are appropriate.
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.
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.
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
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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
Sports Betting revenue share Revenue is net commission
receivable calculated as a share of Net Gaming Revenue
(“NGR”) derived in retail venues net of cost allowances to the
CLC sports book operator (Rush Street International, during
2022) 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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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
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 through its affiliate provider eBet Technologies Inc. Wagers net of customer winnings and loyalty awards is
recognised as revenue with associated costs included in cost of sales.
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 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 were structured based on the supply of a turn-key service where both hardware and services are
provided throughout the period of the contract. Revenue was 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 was a sale of
hardware or software upfront, which was rare and generally not material to the contract as a whole, then this was 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 were either fixed monthly fees, percentages of handle through the tote software or a combination of
both and most contracts have fixed monthly “minimums”. Revenue was recognised as the obligations under the contract were
met.
Europe and rest of world
In Europe and the rest of the world the sales model is different in that most sales were for an upfront system and hardware and
revenue was recognised when performance obligations were satisfied. Sales which involved significant customisation were
recognised on a percentage of completion basis. Where contracts were long-term development projects for bespoke software
delivery to a customer, revenue was recognised over time using the inputs method (labour hours expended) for progress
towards complete satisfaction calculations.
Following initial delivery of hardware and software, the business then generated 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 was
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generally based on either a percentage of amounts wagered or on a predetermined fixed amount depending on contract terms.
Revenue was recognised as the obligations under the contract are met.
Under multiple performance condition arrangements, revenue was allocated to the various elements based on the standalone
selling prices determined by the price charged when the same element was sold separately, and revenue 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 was recognised over the contract term in line with the
supply of services, revenue was 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
–
–
–
Sportech Digital: including pari-mutuel betting website and provision of software and services;
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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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
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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(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 Not depreciated
Leasehold Improvements Over the period of the lease or 25 years whichever is shorter
Plant and machinery Between 3 and 12 years
Fixtures and fittings Between 3 and 12 years
Assets in the course of construction are not depreciated until they are ready for use.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
(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. There is potential contingent consideration receivable of up to a further £500k, the receipts are
contingent on certain activities being transacted through digital channels within a time period. The Directors have currently fair
valued these receipts at £nil, given uncertainty surrounding receipts deliverability and performance conditions beyond the Group
control. This is in line with a more conservative policy adopted in recent years.
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.
An impairment loss of £517k was recorded at the year-end following the transaction to sell the trade and assets of Lot.to
Systems Limited which completed on 4 February 2023. The impairment of goodwill ensures that the combination of the
remaining goodwill and the carrying value of the intangible asset in Lot.to Systems Limited’s own books totals £500k, which
represents the value of the initial purchase consideration settled in cash on 4 February 2023.
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Notes to the financial
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(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).
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets when the following criteria are met:
–
–
–
–
–
it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are
available; and
the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs
and an appropriate proportion of relevant overhead. Other development expenditure that does not meet these criteria are
recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset
in a subsequent period.
Software development costs are amortised over their estimated useful lives, which do not exceed 12 years.
Licences
Licences acquired in a business combination are recognised at fair value at the acquisition date. Licences that have a finite
useful life are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate
cost of licences over their estimated useful lives of 15 to 20 years. Licences with an infinite life (licences granted in perpetuity)
are held at cost or fair value at acquisition date and tested annually for impairment.
(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.
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(n) Pension obligation
The Group operates various pension schemes, the Group has no defined benefit (DB) scheme liabilities.
The Group now only has defined contribution plans. A defined contribution plan is a pension plan under which the Group pays
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.
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.
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
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
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 (fair value through profit or loss). 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
There were no share-based payments in 2022.
Previously, the fair value of employee options awarded under the Value Creation Plan were calculated using the standard Black-
Scholes model. The fair value of employee PSP (performance share plan) awards were 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
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price, and excluding the impact of any service and non-market performance vesting conditions, being profitability and the
individual remaining an employee over a specified time period. At each balance sheet date, the Company revises its estimates of
the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the
income statement, with a corresponding adjustment to equity.
The charge in relation to employees who provide services to subsidiary companies is recharged to those subsidiaries. Where the
charge is not required to be settled in cash, the Company’s investment in that subsidiary is increased by the value of the charge
and a corresponding increase in equity is recognised in the subsidiary.
(q) Cash and cash equivalents
Cash and cash equivalents shown on the balance sheet represent cash in hand, cash held in bank 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; 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 2022 and
are therefore applicable for the 31 December 2022 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 2022.
New standards and amendments effective for periods beginning on or after 1 January 2022 and therefore relevant to these
financial statements:
Applicable for financial
Standard or interpretation year beginning on or after
Annual Improvements to IFRS: 2018-2020 Cycle 1 January 2022
Conceptual Framework for Financial Reporting (Amendments to IFRS 3) 1 January 2022
IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendment – Onerous Contracts
– Cost of Fulfilling a Contract) 1 January 2022
IAS 16 Property, Plant and Equipment (Amendment – Proceeds before Intended Use) 1 January 2022
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(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
IAS 8 Accounting policies, Changes in Accounting Estimates and Errors (Amendment – Definition of
Accounting Estimates) 1 January 2023
IAS 12 Income Taxes (Amendment – Deferred Tax related to Assets and Liabilities arising from a Single Transaction) 1 January 2023
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:
2022 2021
Note £000 £000
Continuing operations
Operating costs per income statement (14,803) (15,680)
Add back:
Depreciation 15,16 1,216 982
Amortisation, excluding acquired intangible assets 14 252 129
Amortisation of acquired intangible assets 14 29 509
Impairment of goodwill 13 517 –
Reversal of impairment of property, plant and equipment 15 (190) (335)
Loss on sale of property, plant and equipment 15,16 150 –
Share option charge 2 – 334
Separately disclosed items (net) 4 657 1,101
Adjusted operating costs (12,172) (12,960)
Adjusted EBITDA is calculated as below:
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
2022 2021
£000 £000
Continuing operations
Revenue 26,004 22,942
Cost of sales (11,847) (11,489)
Gross profit 14,157 11,453
Marketing and distribution costs (386) (276)
Contribution 13,771 11,177
Adjusted operating income and costs (12,172) (12,700)
Adjusted EBITDA 1,599 (1,523)
The 2021 Adjusted EBITDA reported in 2021, included an amount of £260,000 Sports betting investment and therefore a total
2021 Adjusted EBITDA of £(1,783). This has been adjusted to provide clarity and consistency and ‘like for like’ reporting.
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.
2022 2021
£000 £000
From continuing operations:
Adjusted EBITDA 1,599 (1,783)
Share option charge – (334)
Depreciation (1,216) (982)
Amortisation (excluding amortisation of acquired intangibles) (252) (129)
Net finance costs (note 8) (230) (130)
Adjusted profit/(loss) before tax (99) (3,358)
Tax (79) 551
Adjusted profit/(loss) after tax (178) (2,807)
2022 2021
Note £000 £000
From discontinued operations:
Adjusted EBITDA 11 1,183 6,879
Depreciation 11 – (221)
Amortisation 11 – (151)
Net finance costs 11 – 54
Adjusted profit before tax 1,183 6,561
Tax – (1,693)
Adjusted profit after tax 1,183 4,868
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2. SEGMENTAL REPORTING
Sportech Sportech Corporate
Digital Venues costs Group
2022 £000 £000 £000 £000
Revenue from sports betting services – 1,974 – 1,974
Revenue from food and beverage sales – 3,443 – 3,443
Revenue from rendering of services 1,471 19,116 – 20,587
Total revenue 1,471 24,533 – 26,004
Cost of sales (944) (10,903) – (11,847)
Gross profit 527 13,630 – 14,157
Marketing and distribution costs 4 (390) – (386)
Contribution 531 13,240 – 13,771
Adjusted net operating costs (note 1) (838) (9,194) (2,140) (12,172)
Adjusted EBITDA (307) 4,046 (2,140) 1,599
Depreciation (10) (1,192) (14) (1,216)
Amortisation (excluding amortisation of acquired intangible assets) (162) – (90) (252)
Amortisation of acquired intangibles (29) – – (29)
Loss on sale of property, plant and equipment – (133) (17) (150)
Impairment of goodwill (517) – – (517)
Reversal of impairment – 190 – 190
Other income – 120 – 120
Separately disclosed items – (307) (350) (657)
Operating (loss)/profit (1,025) 2,724 (2,611) (912)
Net finance income (22)
Loss before taxation from continuing operations (934)
Taxation – continuing operations (79)
Loss for the year from continuing operations (1,013)
Net profit from discontinued operations 1,183
Loss for the year 170
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
Sportech Sportech Corporate
Digital Venues costs Group
£000 £000 £000 £000
Segment assets 951 27,055 168 28,174
Segment liabilities (50) (12,831) (1,254) (14,135)
Other segment items – capital expenditure
Intangible assets (continuing operations) 196 – – 196
Property, plant and equipment (continuing operations) 5 142 – 147
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 (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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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
2b Information by geographical area
Revenues from Revenues from
external customers external customers
Continuing operations Discontinued operations Non-current assets
2022 2021 2022 2021 2022 2021
£000 £000 £000 £000 £000 £000
United Kingdom 93 62 – 1,867 702 1,316
North and South America 25,911 22,880 – 12,534 16,080 14,721
Europe – – – 1,724 – –
Other – – – 294 – –
Total 26,004 22,942 – 16,419 16,782 16,037
73
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
3. EXPENSES BY NATURE
2022 2021
Note £000 £000
Cost of sales
Tote and track fees 10,208 10,205
F&B consumables 1,144 818
Betting and gaming duties and licences 125 99
Repairs and maintenance cost of sales 28 34
Programs 256 266
Other cost of sales 86 67
Total cost of sales 11,847 11,489
Marketing and distribution costs
Marketing 368 253
Vehicle costs 18 23
Total marketing and distribution costs 386 276
Operating costs
Staff costs – gross, excluding share option charges 6,323 6,661
Less amounts capitalised (171) (165)
Staff costs – net 6,152 6,496
Property costs 2,688 2,581
IT & Communications 628 457
Professional fees and licences 1,524 2,323
Insurance 913 968
Travel and entertaining 94 26
Banking transaction costs and FX 107 109
Other costs 66 –
Adjusted operating costs 12,172 12,960
Share option charge 334
Depreciation 15,16 1,216 982
Loss on sale of property, plant and equipment 150 –
Amortisation, excluding amortisation on acquired intangibles 14 252 129
Amortisation of acquired intangibles 14 29 509
Impairment of goodwill 13 517 –
Impairment reversal of property, plant and equipment and right-of-use assets 15,16 (190) (335)
Separately disclosed items 15 657 1,101
Total operating costs 14,803 15,680
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4. SEPARATELY DISCLOSED ITEMS
2022 2021
Note £000 £000
Continuing operations
Included in operating costs:
Onerous contract provisions and other losses resulting from exit from Californian operations (120) 91
Redundancy and restructuring costs1 414 625
Corporate activity costs 57 21
Costs in relation to the Spot the Ball VAT refund – 10
Settlement of a contract2 304 –
Costs in relation to exiting the Group’s interests in India 2 13
Costs in relation to the Group’s move from Main Market to AIM – 341
657 1,101
Discontinued operations
Included in operating costs 11 – 371
Total included in operating costs 657 1,472
Included in finance costs – continuing operations:
Interest accrued on corporate tax relating to the balance sheet date
on STB refund received in 2016 24 150
8 24 150
Net separately disclosed items 681 1,622
1 Redundancy and restructuring costs relate to settlements made to former Directors in lieu of notice.
2 Settlement of a contract relates to the Group exiting a royalty arrangement in the period relating to branding at its Connecticut venues. This required a
termination fee to be paid.
Below is a summary of cash outflows from separately disclosed items:
2022 2021
£000 £000
Continuing operations – cash outflows from separately disclosed items:
Onerous contract provisions and other losses resulting from exit from Californian operations (688) –
Settlement of a contract (304) –
Redundancy and restructuring costs (414) (625)
Costs in relation to the Spot the Ball VAT refund – (37)
Costs in relation to corporate activity (49) (71)
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 (2) (13)
Cash outflows from separately disclosed items – continuing operations (net) (1,457) (1,872)
Cash outflows from separately disclosed items – discontinued operations (net) – (535)
Cash outflows from separately disclosed items – total (1,457) (2,407)
75
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
5. EMPLOYMENT COSTS
Average number of monthly employees (full-time equivalents) including Executive Directors comprised:
Continuing Discontinued Total Continuing Discontinued Total
2022 2022 2022 2021 2021 2021
Number Number Number Number Number Number
Continuing operations
Sales and marketing 5 – 5 4 13 17
Operations and distribution 140 – 140 134 195 329
Administration and management 12 – 12 12 24 36
Total employees 157 – 157 150 232 382
Their aggregate remuneration comprised:
Continuing Discontinued
2022 2021 2022 2021
£000 £000 £000 £000
Wages and Salaries 5,545 5,933 – 4,145
Social security costs 530 475 – 406
Pension costs – defined contribution scheme (note 25) 75 88 – 225
Employee remuneration, excluding share option charges 6,150 6,496 – 4,776
Share option expense – 334 – –
Total remuneration 6,150 6,830 – 4,776
6. DIRECTORS AND KEY MANAGEMENT REMUNERATION
Directors & Key
Management
2022 2021
£000 £000
Short-term employee benefits 365 1,701
Share-based payments – –
Pay in lieu of notice 266 368
Post-employment benefits – –
Total remuneration 631 2,069
Details of individual Directors’ remuneration and share-based incentives granted are given in the Remuneration report on pages
26 to 36. This information forms part of the financial statements.
In the above table, the prior year includes approved bonuses for 2021 and excludes any bonus which was contingent on the
completion of the disposal of the held for sale assets at 31 December 2021. Those bonuses which have now been paid in 2021
have been included in the 2021 amounts in the above table.
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7. AUDITOR REMUNERATION
Fees paid to the Auditors of the consolidated financial statements during the period comprise:
2022 2021
£000 £000
Audit fees 258 264
Corporate finance services – 55
Other assurance services 15 18
Total fees 273 337
8. NET FINANCE INCOME/(COSTS)
2022 2021
£000 £000
Continuing operations:
Finance costs:
Interest accrued and paid on tax liabilities (24) (150)
Interest on lease obligations (note 24) (230) (155)
Foreign exchange loss on financial assets and liabilities denominated in foreign currency – –
Total finance costs (254) (305)
Finance income:
Interest received on bank deposits – 25
Foreign exchange gain on financial assets and liabilities denominated in foreign currency 232 436
Total finance income 232 461
Discontinued operations (note 11) – 54
Net finance (costs)/income (22) 210
Of the above amounts the following have been excluded for the purposes of deriving the alternative performance measures in
note 1.
2022 2021
£000 £000
Continuing operations:
Foreign exchange gain on financial assets and liabilities denominated in foreign currency 232 436
Interest accrued and paid on tax liabilities (24) (150)
208 286
77
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
9. TAXATION
The Group’s tax charge from continuing and discontinued operations comprises:
2022 2021
£000 £000
Current tax:
Current tax on profit for the year 287 1,219
Adjustments in respect of prior years (150) 6
Total current tax 137 1,225
Deferred tax:
Origination and reversal of temporary differences (43) (56)
Change in rates – (4)
Adjustments in respect of prior years (15) 13
Derecognition of previously recognised deferred tax assets – –
Total deferred tax (58) (47)
Total tax charge 79 1,178
2022 2021
Note £000 £000
Total tax charge in continuing operations 79 192
Total tax charge in discontinued operations 11 – 986
Total tax charge 79 1,178
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:
2022 2021
£000 £000
Profit for the year 169 34,563
Total tax charge 79 1,178
Profit before tax 248 35,741
Tax calculated at domestic tax rates applicable to (losses)/profits in the respective countries 44 8,065
Tax effects of:
– income not taxable net of expenses not deductible for tax purposes 201 (5,282)
– foreign taxes paid not provided for – 689
– adjustments in respect of prior years – current tax (150) 6
– adjustments in respect of prior years – deferred tax (15) 13
– effect of change in rates – (4)
– deferred tax not recognised during the year – 319
– deferred tax not previously provided – (2,628)
– derecognition of previously recognised deferred tax assets – –
Total tax charge 79 1,178
No deferred tax asset has been recognised in the US businesses as at 31 December 2022 or 2021 as there is not sufficient
certainty over the recoverability of these against suitable future profits. 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.
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The tax position in relation to the treatment of the £4.6m gain included in the 2016 financial statements for the Spot the Ball VAT
refund remains uncertain. The directors continue to consider that this amount is in dispute and await the HMRC final
determination of assessments whereupon they will consider if any further actions are appropriate. No contingent asset is
provided in this respect.
An analysis of the net current tax liabilities is as follows:
2022 2021
£000 £000
At 1 January 4,718 3,258
Charged to the income statement – continuing operations 153 239
Charged to the income statement – discontinued operations* – 791
Paid during the year – continuing operations (5,083) (105)
Received during the year – continuing operations – 1,442
Paid during the year – discontinued operations* – (904)
Transferred to liabilities associated with assets held for sale – –
Foreign exchange movements (16) (3)
At 31 December (228) 4,718
Included in:
Current assets (228) –
Current liabilities – 4,718
(228) 4,718
* Relating to LEIDSA contract. 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:
2022 2021
Note £000 £000
Settlement for early termination of a contract – 100
CARES Act credits received – continuing operations 120 1,426
Profit on disposal of Sports Haven – 2,575
Total – continuing operations 120 4,101
CARES Act credits received – discontinued operations 11c 170 1,057
Total 290 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 either during the year or in February 2023.
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 was leased
back for an initial 18 months to 31 October 2022, then extended to February 2024 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.
11b) On 2 June 2021 the Group completed the disposal its 50:50 lottery division, Bump 50:50. In addition to the consideration
received during 2021, further consideration was received by the group in March 2023 following Bump 50:50 achieving the
revenue trigger in the financial year ending 31 December 2022. The gross amount received of £1,229k has been recognised
within discontinued operations in the Income Statement with a net gain of £1,013k.
79
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
The profit for the period and cashflows from Bump are shown below:
Period ended
2 June
2022 2021
Bump (Worldwide) Inc.: Note £000 £000
Revenue 1,229 810
Cost of sales, marketing and distribution and adjusted operating expenses (216) (487)
Adjusted EBITDA 1,013 323
Depreciation and amortisation – –
Separately disclosed items – –
Finance income – 78
Profit before tax 1,013 401
Tax, excluding tax arising on disposal – –
Profit after tax – 401
Gain from selling discontinued operations after tax (net of disposal costs) 11e 1,013 3,805
Profit for the period 1,013 4,206
Net cash flow from operating activities – 462
Net cash flow (used in) investing activities – (37)
Net cash inflow/(outflow) – 425
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 Group has recognised £170k relating to Cares Act claims for the period prior to disposal which were received by the Group
in 2023.
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The profit for the period and cashflows from Global Tote are shown below:
Period ended
17 June
2022 2021
Global Tote Group: Note £000 £000
Revenue – 12,245
Cost of sales, marketing and distribution and adjusted operating expenses – (8,140)
Adjusted EBITDA – 4,105
Other income 170 1,057
Depreciation and amortisation – –
Profit on disposal of intangible assets – 68
Separately disclosed items – (371)
Finance costs – (24)
Profit before tax 170 4,835
Tax, excluding tax arising on disposal – (195)
Profit after tax – 4,640
Gain from selling discontinued operations after tax (net of disposal costs) 11e 170 17,051
Profit for the period 170 21,691
Net cash flow from operating activities – 1,944
Net cash flow (used in) investing activities – (930)
Net cash flow (used in) financing activities – (160)
Net cash inflow – 854
11d) The profit for the period and cashflows from Sportech Lotteries, LLC are shown below:
2022 2021
Sportech Lotteries, LLC: Note £000 £000
Revenue – 3,364
Cost of sales, marketing and distribution and adjusted operating expenses – (913)
Adjusted EBITDA – 2,451
Depreciation and amortisation – (372)
Profit on disposal of property, plant and equipment – 47
Profit before tax – 2,126
Tax, excluding tax arising on disposal – (791)
Profit after tax – 1,335
Gain from selling discontinued operations after tax (net of disposal costs) 11e – 7,769
Profit for the period – 9,104
Net cash flow from operating activities – 1,068
Net cash flow (used in) investing activities – (429)
Net cash inflow – 639
81
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
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 170 1,229 – 1,399
Cash consideration received and receivable net of
cash disposed of 170 1,229 – 1,399
Costs of disposal – (216) – (216)
Pre-tax gain on disposal of discontinued operations 170 1,013 – 1,183
Taxation
Gain on disposal of discontinued operations 170 1,013 – 1,183
Costs of disposal include bonuses paid to Group employees and former employees of £216k for Bump.
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 and receivable net of cash
disposed of before disposal costs paid in the period 170 1,229 – 1,399
11g) Reconciliation to profit/(loss) for the period included in the income statement:
2022 2021
Note £000 £000
Global Tote 11c 170 21,691
Bump 11b 1,013 4,206
Sportech Lotteries, LLC 11d – 9,104
1,183 35,001
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.
Dis- Dis-
Continuing continued Total Continuing continued Total
2022 2022 2022 2021 2021 2021
£000 £000 £000 £000 £000 £000
(Loss)/profit attributable to the owners of the Company (1,014) 1,183 169 (438) 35,001 34,563
Weighted average number of ordinary shares in issue (‘000) 100,000 100,000 100,000 169,785 169,785 169,785
Basic (loss)/earnings per share (1.0)p 1.2p 0.2p (0.3)p 20.6p 20.3p
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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.
Dis- Dis-
Continuing continued Total Continuing continued Total
2022 2022 2022 2021 2021 2021
£000 £000 £000 £000 £000 £000
Profit attributable to the owners of the Company (1,014) 1,183 169 (438) 35,001 34,563
Weighted average number of ordinary shares in issue (‘000) 100,000 100,000 100,000 169,785 169,785 169,785
Dilutive potential ordinary shares (1.0)p 1.2p 0.2p N/A N/A N/A
Total potential ordinary shares 100,000 100,000 100,000 169,785 169,785 169,785
Diluted earnings per share (1.0)p 1.2p 0.2p (0.3)p 20.6p 20.3p
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 2022 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.
2022 2021
Weighted Weighted
Adjusted average Adjusted average
loss number of Per share loss number of Per share
after tax shares amount after tax shares amount
Continuing operations £000 £000 Pence £000 £000 Pence
Basic adjusted EPS (143) 100,000 (0.1)p (2,807) 169,785 (1.7)p
Diluted adjusted EPS (143) 100,000 (0.1)p (2,807) 169,785 (1.7)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:
2022 2021
£000 £000
Cost
At 1 January 604 604
At 31 December 604 604
Accumulated impairment charges
At 1 January –
Impairment charge 517 –
At 31 December 517 –
Closing net book value 87 604
As required by IAS 36, an impairment test has been carried out as at 31 December 2022.
83
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
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:
On 3 February 2023, Lot.to Systems Limited received £500k cash in initial consideration for the disposal of its trade and assets
to Inspired Gaming Ltd. The purchase consideration represented value for the transfer under TUPE of the development team
and the intangible assets, being the software they had internally developed with the costs of their time having been capitalised in
previous periods.
The carrying value of the acquired goodwill in the Group in respect of Lotto is £604k which along with the intangible assets of
£412k comes to £1,016k. This means an impairment loss of £517k is required to write down the fixed assets to the value of the
purchase consideration.
14. INTANGIBLE FIXED ASSETS
Software Licences Total
2022 £000 £000 £000
Cost
At 1 January 2022 4,576 5,696 10,272
Additions – continuing operations 196 – 196
Disposals – continuing operations (2) – (2)
At 31 December 2022 4,770 5,696 10,466
Accumulated amortisation
At 1 January 2022 3,592 914 4,506
Charge for year – continuing operations 277 4 281
Disposal – continuing operations 2 – 2
At 31 December 2022 3,871 918 4,789
Exchange differences at 1 January 2022 (247) 838 591
Movement in the year 0 671 671
Exchange differences at 31 December 2022 (247) 1,509 1,262
Net book amount at 31 December 2022 652 6,287 6,939
Of the amounts capitalised in the year in continuing operations, £196k arose from capitalising staff costs for development
expenditure (2021: £165k). Amortisation has been included within operating costs.
Impairment – Licences
The Group holds a licence in perpetuity to offer pari-mutuel off-track betting in the State of Connecticut in the US for its Venues
division. This asset has a book value in GBP at the reporting date, prior to any impairment that may be considered necessary, of
£6,287k ($7,569k), (2021: £5,616k, $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 2022. 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)
£15,814k, $19,039k (2021: £12,680k, $17,088k).
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 2.8% in the next 5 years and a
2% decline into perpetuity;
a significant increase in F&B revenues in 2023 reflecting a full recovery from the overhang of COVID-19 restrictions,
thereafter the revenue is held flat into perpetuity;
Online and Sports betting revenues are forecasted to increase by 2% into perpetuity (is it assumed the 10-year contract
with CLC will be renewed in perpetuity);
–
–
–
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–
–
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 13.9% (2021: 13.5%) was used representing a market-based weighted average cost of capital
appropriate for the Sportech Venues 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 £17,726k ($21,340k) and
accordingly no impairment was identified (2021: 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.
–
–
–
–
4% decline for 2023 through 2025 rather than 2% for core wagering handle;
No growth in the F&B revenue;
On line and sports betting revenues growth rate halved to 1%; and
All other costs remain constant.
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
Disposals (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
85
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
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
2022 £000 £000 £000 £000 £000
Cost
At 1 January 2022
Additions – continuing operations
Disposals
8,393
–
(193)
3,598
109
(374)
12,494
147
(567)
502
3
–
1
35
–
At 31 December 2022
8,200
505
3,333
36
12,074
Accumulated depreciation
At 1 January 2022
Charge for year – continuing operations
Reversal of impairment
Disposals
At 31 December 2022
Exchange differences at 1 January 2022
Movement in the year
Disposals
Exchange differences at 31 December 2022
Net book amount at 31 December 2022
4,640
231
(190)
(119)
4,562
54
441
–
495
4,133
1
21
–
–
22
(472)
3
–
(469)
14
3,508
182
–
(315)
3,375
333
47
–
380
338
–
–
–
–
–
1
–
–
1
8,149
434
(190)
(434)
7,959
(84)
491
–
407
37
4,522
Depreciation charges and the loss on disposal of PPE 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);
All operating assumptions driving revenues and costs were considered in the same way as the overall venues business
Capital expenditure will average at $60k per annum until 2025 and then $40k per annum into perpetuity; and
a post-tax discount rate of 13.9% (2021: 13.5%) 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 £4,071k Accordingly a reversal of impairment of £190k 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.
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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
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
16. RIGHT-OF-USE ASSETS
Land and Fixtures
buildings Vehicles and fittings Total
2022 £000 £000 £000 £000
Cost
At 1 January 2022
Additions
Disposals
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Charge for year
Disposals
At 31 December 2022
Exchange differences at 1 January 2022
Movement in the year
Exchange differences at 31 December 2022
Net book amount at 31 December 2022
8,881
652
(102)
9,431
4,217
765
(85)
4,897
(42)
520
478
5,012
29
–
–
29
7
5
–
12
(1)
4
3
20
53
–
–
53
37
12
–
49
(2)
8
6
10
The addition in year relates to the extension of the existing lease of the Sports Haven venue.
8,963
652
(102)
9,513
4,261
782
(85)
4,958
(45)
532
487
5,042
87
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
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 2022
Accumulated depreciation
At 1 January 2021
Charge for year
Reassessment of lease term
Transferred from held for sale
At 31 December 2022
Exchange differences at 1 January 2021
Movement in the year
Exchange differences at 31 December 2022
Net book amount at 31 December 2022
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 was 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.
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 was completed in 2022.
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N
A
N
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I
I
F
N
A
N
C
A
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S
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A
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M
E
N
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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
2022
£000
177
177
1,112
–
1,112
491
231
144
1,978
2,155
The fair value of trade and other receivables is not considered to be different from the carrying value recorded above.
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
2022
£000
–
–
–
–
–
–
2022
£000
104
1,835
1,939
2021
£000
158
158
781
–
781
480
279
210
1,750
1,908
2021
£000
111
–
(111)
–
–
–
2021
£000
233
1,675
1,908
Trade receivables that are not more than three months past due are not considered impaired. As at 31 December 2022, £48k
(2021: £102k) of trade receivables were more than three months past due and not impaired. Management also considers that
these receivables are recoverable in full.
89
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
19. DEFERRED TAX
The movement on the net deferred tax balance is as follows:
Net deferred tax asset at 1 January
Income statement credit – continuing operations
Net deferred tax asset at 31 December
Note
9
Included in:
Non-current assets
Current liabilities
Non-current liabilities
Deferred tax liabilities
Asset
2022
£000
Liability
2022
£000
–
–
–
–
–
–
–
(43)
58
15
15
–
–
15
At 1 January 2021
Income statement credit – continuing operations
At 1 January 2022
Income statement credit– continuing operations
At 31 December 2022
20. INVENTORIES
Finished goods
Net
2022
£000
(43)
58
15
15
–
–
15
Other
temporary
differences
£000
(90)
47
(43)
58
15
2022
£000
146
146
Net
2021
£000
(90)
47
(43)
–
–
(43)
(43)
Total
£000
(90)
47
(43)
58
15
2021
£000
124
124
The cost of inventories (food and beverage inventory) recognised as an expense and included in cost of sales amounted to
£1,147k (2021: £818k). Food and beverage inventory is included in finished goods. There was no provision for obsolescence
held against inventories at 31 December 2022 (2021: £nil).
21. CASH AND CASH EQUIVALENTS
Note
Cash and short-term deposits
Customer funds
22
2022
£000
7,420
391
7,811
2021
£000
21,912
455
22,367
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 £391k (2021: £455k) 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).
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I
F
N
A
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M
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22. TRADE AND OTHER PAYABLES
Note
Trade payables
Other taxes and social security costs
Accruals
Player liability
21
2022
£000
4,588
148
1,437
391
6,564
2021
£000
3,545
178
3,767
455
7,945
There is no difference between book values and fair values of trade and other payables. All amounts are due within one year.
23. PROVISIONS
At 1 January 2021
Utilised during the year
Transferred to liabilities associated with assets held for sale
Currency differences
At 1 January 2022
Utilised during the year
Released to the income statement
Currency differences
At 31 December 2022
Of which:
Current provisions
Total
£000
1,442
(785)
91
(12)
736
(677)
(69)
10
–
–
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 onerous leases it had entered into in California. The final liability was
settled in March 2022.
24. LEASE LIABILITIES
2022 2021
Maturity analysis – contractual undiscounted cash flows £000 £000
Less than one year 1,435 1,211
Between 2 and 5 years 2,955 2,615
More than 5 years 4,783 4,824
Total 9,173 8,650
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%.
2022 2021
Lease liabilities included in the balance sheet £000 £000
Current 1,155 923
Non-current 6,200 6,091
Total 7,355 7,014
91
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
2022 2021
Movement in lease liability during the year Note £000 £000
At 1 January 7,014 3,882
New leases entered into 652 1,698
Reassessment of lease term 16 – 2,835
Interest charged to the income statement – continuing operations 8 230 155
Lease rentals paid – continuing operations (1,357) (1,354)
Disposed of on settlement of lease dispute – (169)
Movement as a result of foreign exchange 816 (33)
At 31 December 7,355 7,014
25. PENSION SCHEMES
The Group has no Defined Benefit Plans in place and provides defined contribution schemes only. Prior to their transfer in
February 2023, Lot.to employees contributed to a separate defined contribution scheme to that of Sportech PLC employees. In
previous years, the Group operated a funded defined benefit scheme and two defined contribution schemes in the US.
Summary of pension contributions paid:
2022 2021
£000 £000
Defined contribution scheme contributions – continuing operations 75 88
Defined contribution schemes
Continuing and discontinued operations
In the UK, employer contributions for Sportech are set at a maximum of 8% of pensionable salaries.
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.
26. 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 regular basis in the operating entities and is aggregated by Group finance. This
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 within 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 and business partners 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
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A
N
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I
F
N
A
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A
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M
E
N
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S
allowance as at 31 December 2022 (2021: £nil) was determined other than specific provisions for bad debts in trade
receivables.
The Group does not hold significant amounts of deposits with banks and financial institutions and the cash which is deposited is
spread over a few of financial institutions with Moody’s ratings of A or above (defined as upper-medium grade and subject to
low credit risk). Amounts held in cash for the Sportech Venues division are held in 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 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 2022, there were no outstanding commitments on
foreign exchange forward contracts (2021: none). The Group did not enter into any forward contracts during the year (2021: 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.
2022 2021
Average Closing Average Closing
US Dollars 1.23 1.20 1.37 1.35
Euro 1.17 1.13 1.16 1.19
If the exchange rates in 2022 were comparable to those in 2021, profit after tax would have been £98,473 and the net assets
would have been £12,67 million at 31 December 2022.
If exchange rates had be 1% higher/lower in 2021 than the prevailing rates during the year, profit for the year would have been
£1k higher/lower and net assets as at 31 December 2022 would have been £154k higher/lower.
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:
2022 2021
£000 £000
Financial assets measured at amortised cost 9,755 24,065
Financial liabilities measured at amortised cost 13,309 (14,781)
Maturity of financial liabilities
Except for lease obligations (see note 24) all non-derivative financial liabilities are all payable within twelve months.
93
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
27. 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 £158k (2021: £114k).
The future aggregate minimum lease payments under non-cancellable leases not accounted for elsewhere under IFRS 16, are
as follows:
2022 2021
£000 £000
No later than one year 13 26
Later than one year and no later than five years – 1
Total 13 27
Contingent items
Bump contingent consideration receivable
In addition to the consideration received during 2021, further consideration was received by the group in March 2023 following
Bump 50:50 achieving the revenue trigger in the calendar year ending 31 December 2022. The gross amount received of
£1,229k has been recognised within discontinued operations in the Income Statement with a net gain of £1,013k.
Tax
The Group’s only remaining open case is in relation to the treatment of the £4.6m gain included in the 2016 financial statements
for the Spot the Ball VAT refund. The directors continue to consider that this amount is not payable and await the HMRC final
determination of assessments whereupon they will consider if any further actions are appropriate.
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.
28. ORDINARY SHARES
2022 2021
Authorised, issued and fully paid ordinary shares of 1p ‘000 £000 ‘000 £000
At 1 January 100,000 1,000 188,751 37,750
Cancellation of 19p nominal value – – – (35,862)
Buy-back and cancellation – – (88,751) (888)
At 31 December 100,000 1,000 100,000 1,000
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A
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I
F
N
A
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29. CASH GENERATED FROM OPERATIONS
Reconciliation of profit before taxation to cash generated from operations, before separately disclosed items:
2022 2021
Note £000 £000
Loss before tax – continuing operations 2 (934) (246)
Profit before tax – discontinued operations 11(e) 1,183 35,987
Total profit before tax 249 35,741
Adjustments for:
Separately disclosed items (included in operating costs) 4 657 1,472
Other income (excluding profit on disposal of Sports Haven) 10 (120) (2,583)
Depreciation and amortisation 14,15,16 1,497 1,992
(Profit) on disposal of discontinued operations – (28,625)
(Profit) on disposal of Sports Haven – (2,575)
Loss/(Profit) on sale of property, plant and equipment 15,16 150 (47)
(Profit) on sale of intangible assets – (68)
Impairment of goodwill 13 517 –
Impairment of assets(reversal of impairment) 15 (190) (335)
Net finance income/(costs) 8 22 (210)
Share option expense – 334
Changes in working capital:
Decrease in trade and other receivables (1,476) (2,162)
(Increase)/Decrease in inventories (22) 192
Decrease in trade and other payables (1,101) (448)
Decrease in customer funds (64) (2,167)
Cash generated from operating activities, before separately disclosed items 119 511
30. 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.
Country of Registered Class of
Subsidiaries, excluding dormant companies incorporation address shares held Shareholding
Sportech Group Holdings Limited England & Wales 1 Ordinary 85%
Sportech Gaming Limited England & Wales 1 Ordinary 100%
Sportech Pools Limited England & Wales 1 Ordinary 100%
Sportech Pools Games Limited England & Wales 1 Ordinary 100%
Sportech Holdco 2 Limited England & Wales 1 Ordinary 100%
Lot.to Systems Limited England & Wales 1 Ordinary 100%
Sportech Mauritius Limited Mauritius 2 Ordinary 100%
Sportech, Inc. United States 3 Ordinary 100%
Sportech Venues, Inc. United States 3 Ordinary 100%
Sportech Venues California, LLC2 United States 3 Ordinary 100%
Sportech Venues CA Holdco, LLC2 United States 3 Ordinary 100%
Sportech Games Holdco, LLC United States 3 Ordinary 100%
1891323 Ontario, Inc.1 Canada 4 Ordinary 100%
Sportech Racing Limited British Virgin Islands 5 Ordinary 100%
95
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the financial
statements continued
1 1891323 Ontario Inc. was dissolved on 6 July 2022.
2 Sportech Venues California, LLC. And Sportech Venues CA Holdco, LLC were dissolved on 28 February 2022.
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 (2021: £nil).
31. RELATED UNDERTAKINGS
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 India 6 Ordinary 50%
S&S Venues California, LLC1 United States 3 Ordinary 50%
DraftDay Gaming Group, Inc United States 7 Ordinary 30%
1 S&S Venues California, LLC was dissolved on 28 February 2022.
Country of Registered Class of
Dormant companies incorporation address shares held Shareholding
Thepools.com Limited England & Wales 1 Ordinary 100%
C&P Promotions Limited England & Wales 1 Ordinary 100%
Pools Promotions Limited England & Wales 1 Ordinary 100%
Sportech Pools Competitions Company Limited England & Wales 1 Ordinary 100%
Bet 247 Limited England & Wales 1 Ordinary 100%
Pools Company Limited England & Wales 1 Ordinary 100%
Sportech Management Limited Scotland 8 Ordinary 100%
Sportech Pools Trustee Company Limited Scotland 8 Ordinary 100%
1 Thepools.com Limited, C&P Promotions Limited and Pools Company Limited were dissolved on 8 March 2022.
2 Sportech Management Limited and Sportech Pools Trustee Company Limited were dissolved on 1 March 2022.
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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, Ottawa, 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
32. POST BALANCE SHEET EVENTS
On 4 February 2023, the Company disposed of the trade and certain assets of its subsidiary, Lot.to Systems Limited (“Lot.to”),
to an unrelated third party. The disposal was completed after the balance sheet date and therefore represents a post-balance
sheet event.
The disposal was in accordance with the Company’s strategic plan to divest non-core assets and focus on its core business
operations. As a result of the disposal, the Company recognised an impairment in the carrying value of goodwill to reduce the
combined value of goodwill and intangible assets in relation to Lot.to to £500k which mirrors the consideration received post
year-end. The net cash inflow from the disposal will be used for general corporate purposes.
The disposal did not have a material impact on the Company’s financial position, cash flows or operations. However, the
Company will continue to monitor the impact of the disposal on its business and financial results going forward.
97
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Company Balance Sheet
AT 31 DECEMBER 2022
2022 2021
Note £000 £000
ASSETS
Non-current assets
Intangible fixed assets C5 189 276
Investment in subsidiaries C7 17,999 26,257
Trade and other receivables C8 – 2,679
18,188 29,212
Current assets
Trade and other receivables C8 161 197
Cash and cash equivalents 4,307 6,769
4,468 6,966
TOTAL ASSETS 22,656 36,178
LIABILITIES
Current liabilities
Trade and other payables C9 (1,406) (8,770)
Current tax payable – (110)
(1,406) (8,880)
Net current assets/(liabilities) 3,062 (1,914)
NET ASSETS 21,250 27,298
EQUITY
Ordinary shares 28 1,000 1,000
Other reserves 1,202 1,202
Retained earnings carried forward 19,048 25,096
TOTAL EQUITY 21,250 27,298
The profit after tax for the Company for the year was £941k (2021: £11,338k).
The Company financial statements on pages 50 to 97 were approved and authorised for issue by the Board of Directors on
18 April 2023 and were signed on its behalf by:
Richard McGuire
Director
Sportech Plc
Company Registration Number: SC069140
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Company Statement of
Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2022
Capital
Ordinary redemption Other Retained
shares reserve reserve earnings Total
£000 £000 £000 £000 £000
At 31 December 2020 37,750 10,312 314 3,130 51,506
Other reserves
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
Comprehensive expense
Profit for the year – – – 952 952
Transaction with owners
Dividend – – – (7,000) (7,000)
At 31 December 2022 1,000 888 314 19,048 21,250
99
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Company Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £000 £000
Cash flows from operating activities
Cash generated from operations, before separately disclosed items C11 5,056 32,987
Interest paid 22 –
Interest received – –
Tax payments/(refunds received) (99) 162
Net cash generated from operating activities before separately disclosed items 4,979 33,149
Cash outflows from separately disclosed items (441) (1,170)
Net cash generated from operating activities 4,538 31,979
Cash flows from investing activities
Proceeds from disposal of intangible fixed assets C5 – 150
Net cash from investing activities – 150
Cash flows from financing activities
Shareholder distribution (7,000) (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 (7,000) (35,957)
Net (decrease) in cash and cash equivalents (2,462) (3,828)
Net cash and cash equivalents at the beginning of the year 6,769 10,597
Net cash and cash equivalents at the end of the year 4,307 6,769
100
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Notes to the Company Financial
Statements
C1. ACCOUNTING POLICIES
The accounting policies applied by the Company are consistent to those disclosed on pages 56 to 97 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 18 April 2023.
C3. AUDITOR REMUNERATION
Fees payable to the Company auditors for the audit of these financial statements are £121k (2021: £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
2022 2021 2022 2021
£000 £000 £000 £000
Short-term employee benefits 291 1,115 332 1,236
Share-based payments – 45 – 45
Pay in lieu of notice 248 369 284 391
Post-employment benefits 13 18 13 18
Total remuneration 552 1,547 629 1,690
The Company had four employees at 31 December 2022 (2021: four).
Details of individual Directors’ remuneration and share-based incentives granted are given in the Remuneration report on pages
33 to 34. This information forms part of the financial statements. There are no retirement benefits accruing under defined benefit
pension schemes for any Director (2021: nil). No Directors exercised share options in the year (2021: nil).
Key management is considered to be the Directors of the Company.
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SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the Company Financial
Statements continued
C5. INTANGIBLE FIXED ASSETS
Software Total
2022 £000 £000
Cost
At 1 January 2021 717 717
Disposals
At 31 December 2022 717 717
Accumulated amortisation
At 1 January 2021 441 441
Charged during the year 87 87
Disposals
At 31 December 2022 528 528
Net book amount at 31 December 2022 189 189
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 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.
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C6. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery Total
2022 £000 £000
Cost
At 1 January – –
Disposal – –
At 31 December 2022 – –
Accumulated depreciation
At 1 January – –
Disposal – –
At 31 December 2022 – –
Net book amount at 1 January and 31 December 2022 – –
Plant and
machinery Total
2021 £000 £000
Cost
At 1 January 183 183
Disposal (183) (183)
At 31 December 2022 – –
Accumulated depreciation
At 1 January 183 183
Disposal (183) (183)
At 31 December 2022 – –
Net book amount at 1 January and 31 December 2022 – –
C7. INVESTMENTS IN SUBSIDIARIES
A full list of the Company’s subsidiaries and other related undertakings is included in note 31 of the Group Consolidated
Financial Statements.
At 31 December 2022, 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.
103
SPORTECH PLC ANNUAL REPORT AND ACCOUNTS 2022
Notes to the Company Financial
Statements continued
Movement in the book value of the Company’s investments is shown below:
2022 2021
£000 £000
At 1 January 26,257 64,071
Impairment (8,258) (37,814)
At 31 December 17,999 26,257
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 2022 the enterprise value of the subsidiaries of SGHL amounted to
£17,374k and the enterprise value of the Company’s Lot.to Systems Limited subsidiary was £625k. As a result, an impairment
of £8,258k was charged to operating costs in the income statement. Following the impairment, the Directors consider the
carrying value of £17,999k 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.
C8. TRADE AND OTHER RECEIVABLES
2022 2021
£000 £000
Non-current
Amounts owed by Group companies – 2,679
Current
Amounts owed by Group companies – 6
Other receivables 70 73
Prepayments 91 118
Current trade and other receivables 161 197
Total 161 2,876
Amounts due in more than one year are from:
2022 2021
£000 £000
Datatote (England) Limited – –
Sportech Inc. – 259
Lot.to Systems Limited – 2,375
Bump (Worldwide) Inc. – –
Ontario Inc. – 45
Sportech Racing GmbH – –
– 2,679
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.
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C9. TRADE AND OTHER PAYABLES
2022 2021
£000 £000
Trade payables 60 82
Amounts owed to Group companies 387 7,643
Social security and other taxes 29 29
Accruals 930 1,016
Total 1,406 8,770
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. The
remaining loans with the Football Pools companies which are all now dormant, were 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 £nil (2021: £4,600k).
C10. CONTINGENCIES AND COMMITMENTS
Contingent items
The Company is exposed to certain contingent items for corporation tax, M&A activity and legal claims. Further details of those
are disclosed in note 28 of the Group Consolidated Financial Statements.
C11. CASH GENERATED FROM OPERATIONS
Reconciliation of profit before taxation to cash generated from operations, before separately disclosed items:
2022 2021
Note £000 £000
Profit before taxation 947 11,444
Adjustments for:
Investment income (14,168)
Separately disclosed items 449 944
Amortisation of intangible assets C5 90 145
Profit on disposal of intangible assets C5 – (68)
Impairment of investments C7 8,258 37,814
Finance costs (22) 229
Finance income – (2)
Other finance income (209) (148)
Share option charge – 334
Changes in working capital:
Movement in trade and other receivables 3,059 3,936
Movement in trade and other payables (7,516) (7,473)
Cash generated from operating activities, before separately disclosed items 5,056 32,987
105
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
Barclays
Leicester, UK
LE87 2BB
Wells Fargo
420 Montgomery Street
San Francisco, California 94104
Solicitors as to UK law
Dickson Minto W.S.
16 Charlotte Square
Edinburgh
EH2 4DF
US Lawyers
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: shareholderenquiries@linkgroup.co.uk
North American head office
Sportech, Inc.
600 Long Wharf Drive
New Haven, CT 06511
Company registration number
SC069140
Company Secretary
SGH Company Secretaries Ltd
6th Floor
60 Gracechurch Street
London EC3V 0HR
Registered office
Sportech PLC
Collins House
Rutland Square
Midlothian
Edinburgh EH1 2AA
Group Website
The Group website can be found at www.sportechplc.com. This site is regularly updated providing information about the
Group. All press releases and announcements are on the site.
Designed and printed by Sterling
www.sterlingfp.com
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