Introduction
Sportech remains a company in transition. The new Board
and management team are committed to creating a growth business that will deliver returns for shareholders in the medium
to long term. To achieve this and to realise the potential of the business, fundamental change was required to the
previous Board’s strategy.
The Board’s strategic review is in its closing stages and the Company has already implemented a number of major changes. The Company
is now a far more focused and cash generative business with its principal operations now profitable and growth orientated
and the difficult challenges which the Board faces are being addressed with vigour.
Implementing strategy by transforming activities
We have achieved a number of key strategic objectives during 2006 and the business is seeing the benefit of these changes.
We have changed our Board and management team, creating a team with the necessary experience and skill sets required
for Sportech’s future. The business and its organisation have been transformed with the consolidation of three operational sites into one.
We have terminated our loss making contract to provide betting services to ITV and consequently closed our interactive television
operations. In June 2006 we sold our loss making betting division, Bet Direct, for £12.5m in cash achieving a profit on disposal
of £10.6m. These two activities alone incurred operating losses for Sportech of £8.9m in 2005.
The Board is pleased to have eliminated these loss-making activities, to have eliminated further cash outflows and to have achieved good value for Bet Direct. As a result
bank debt has been reduced significantly from £108.1m at 31 December 2005 to £89.9m at 31 December 2006. Debt reduction remains one
of the primary objectives of the Company.
We are determined to transform the culture of Sportech from a “small company with a big
company structure” to a “big company with a small company entrepreneurial culture.”
Financials
The changing nature of the
Company’s business activities
are reflected in the results for the
year. Operating profit amounted
to £15.5m, an increase of £8.6m
from that of 2005. Interest
payable reduced to £6.4m from £7.5m last year as a consequence
of focusing on reducing the
overall level of debt. The profit
after tax from continuing operations
is £7.6m (2005: loss of £1.7m).
The Company made a profit after
tax from discontinued operations
of £6.5m (2005: loss of £4.1m)
which when added to the profit
from continuing operations
delivers an overall profit for
the year of £14.1m (2005:
loss of £5.8m).
Net debt has been reduced
by £18.2m (17%) to £89.9m
(2005: £108.1m). No dividend
is proposed as your Board looks
to invest in growth opportunities
as well as further reducing debt.
Board and employees
One of the key objectives
set by our strategic review
was to appoint a Board and
management team with the
experience, energy and drive
to transform the business.
We now have that team in
place following the appointment
to the Board of Steve Cunliffe as
Finance Director on 3 July 2006
and the appointments to the Executive Team in early Summer
of Ted Taylor as Managing Director
of Littlewoods Football Pools
and Jon Sheehy as Marketing
Director. 2006 has been a very
challenging year as the Company
changed its Board, Management
team, commercial focus,
office locations and corporate
aspirations. This has put many
pressures on the employees
at Sportech and I should like to
express my thanks to those who
have remained steadfast in their
commitment to the business.
Acquisition opportunity
On 7 March 2007 the Company
was pleased to announce that
it had entered into exclusive
negotiations with Ladbrokes Plc
regarding the potential acquisition
of the Vernons Pools business.
The Company has now
commenced due diligence
and will make a further
announcement in due course.
Outlook
There remains much to do
but the Board is committed
to growth and implementing
the necessary changes to the
business. The significant changes
already made in eliminating loss
making activities, reducing
debt and focusing on our core
profitable businesses have
created a foundation upon which
the Company can continue its
growth and improve returns
to its shareholders.
Sportech is now in a position
to capitalise on the significant
opportunities ahead and I
look forward to the future
with confidence.
Piers Pottinger
Chairman
28 March 2007 |
