International betting technology firm Sportech has published its interim results for the six months ended 30 June 2020, citing a material impact on performance due to the COVID pandemic and the company’s reliance on sporting events to generate revenue.
But despite a fall of 38% in H1 revenue to $26.2m, a focus on operational efficiency and cash generation, and online growth across all business units during the period, saw the group’s net cash position reduced by a relatively modest $1.8m from the end of February 2020. The firm ended the period with a net cash position of $12.5m.
While group EBITDA showed a loss of $1.6m versus a profit of $4.4m year-on-year, Sportech said that EBITDA forecasts will remain unchanged and it would retain its full year forecast of $2.6m.
Updating investors, the group emphasized that profitability and cash generation will continue to form its key metrics through the rest of the financial year. “It is difficult to provide meaningful guidance on the future outlook given uncertainty around the timing of when sporting events will return in full and the potential impact of further lockdowns,” it noted.
“However, we remain confident in the quality of the group’s products, our services, our strategy, and in the strength of our balance sheet to help us deliver on these in the medium term.”
Sportech Racing and Digital revenues in the half reduced by 27% as most sporting events ceased during the majority of the period. A few international racetracks continued to provide some content, resulting in an opportune shift to online wagering and creating further margin growth opportunities as the division navigated through the current challenging environment.
During the period the group also extended and expanded its contracts with a number of key partners including UK Tote Group, Penn National Gaming, Emerald Downs, Macau Jockey Club and Monmouth Park in New Jersey.
Sportech’s Bump 50:50 raffle business experienced a sharp fall in H2 revenue due to COVID-19, but successfully added clients at an unprecedented rate. An additional 35 new clients have signed to-date in 2020, an increase of 35% this year, including the NFL’s Tennessee Titans and Florida Panthers, and MLB’s Texas Rangers.
With regard to Connecticut retail operations, the firm said these were severely challenged during the period. All retail outlets closed in March 2020 due to COVID-19. Gross handle declined 50% during the period year-on-year, however H1 2019 included all major Triple Crown races and the important Kentucky Derby and Preakness events have been postponed to September and October 2020, respectively.
The group continues to develop its online pari-mutuel betting presence with a rebranded MyWinners.com to support new customer acquisition campaigns in Connecticut, delivering growth opportunities. Online handle from the group’s retail platforms increased 48% during H1 2020, versus 2019.
In the H1 report CEO Richard McGuire said: “2019 marked a year of operational improvement and a serious motivation to strengthen digital capabilities. 2020 began well, however as a business primarily dependent on sporting events taking place, the impact of COVID-19 clearly affected performance.
“The group enhanced and diversified its client base further through record new and extended client agreements during the period, providing a realistic prospect for incremental growth in 2021. The Board’s focus remains absolute in creating tangible long-term value for shareholders.”
Speaking to SBC Americas, McGuire explained that action to address the pandemic had been taken a little quicker in the US than across Europe. “Financially we had to manage our costs very aggressively,” he said. “We cut our CapEx, we smashed our exceptional costs, we reduced them significantly obviously. Payroll in the group was one of our most significant costs – around £27m ($35m) a year – so we took very aggressive action on managing our payroll.
“We did maintain everyone in our technology department and kept progressing there. So cutting costs will help keep the wolf from the door for a period of time but we’ve got to build a stronger platform going forward. As a group now, we’re certainly better positioned – we’re a more agile business and a less capital intensive business. We’ve really accelerated our focus on digital opportunities and on building growth in our higher margin businesses.”