Sportech CEO Richard McGuire has spoken with SBC Americas to add color, detail and context to the firm’s interim financials which were published last week against a backdrop of industry-wide decline in the US sports betting and gaming sectors.

By way of a recap, 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.

When asked how the firm had addressed the onset and sustained impact of the COVID pandemic, he explained that mitigating action 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. In fact the exceptional costs in the business are ones that we are drilling out. Payroll in our 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.” 

McGuire added that the online business – which he described as small – was up 48% in the first half, predominantly in the second quarter. “The first quarter was up a little bit but it really kicked in during the second quarter,” he said.

Turning to Sportech’s international Tote business, which forms a big part of the group, McGuire revealed that performance was ahead 23% in the first half “…despite quite frankly virtually every racetrack globally closing for a couple of months”.

He continued: “In addition, we’ve added during the period a significant number of solid contracts, both in our racing business and in the Bump 50:50 business. So from our perspective we learned a lot going through this period. Our cash drop from the end of February to the end of June was a lot better than we originally forecast. We only dropped £1.4m ($1.8m) during the period from the end of February to the end of June.”

Having navigated the pandemic thus far with some aggressive cost cutting, while maintaining a strong platform, the big question remains as to how well Sportech is positioned to trade through what many will hope to be a period of recovery.

McGuire’s view is that the company is well placed. “As a group now, we’re certainly better positioned – we’re a more agile business and a less capital intensive business,” he claimed. “We’ve really accelerated our focus on digital opportunities and on delivering growth in our higher margin businesses. 

“We kept going with our core businesses, we kept developing and working with our clients across the globe which resulted in significant increased contracts. I think we’re much better positioned to go forward than we were probably six or seven months ago.”

Sportech’s key stomping ground in the US is Connecticut, where it operates 14 Winners venues, an online wagering platform @, and two Bobby V’s Restaurant & Sports Bar locations. The state is also currently engaged in a four-way tug of war over who should run sports betting, with the tribes, state lottery, Sportech itself and state legislature all involved.

The challenge of operating those Connecticut venues during the pandemic has been considerable, as McGuire explained. “Anyone who has a physical retail outlet in any sector – not only the gaming sector – is clearly considering what they do with their physical outlets,” he said. “We own two of our properties in Connecticut and lease the remainder. 

“We had discussions with all of our landlords back in late March early April and managed to get some rent reductions going forward and defer a little bit of the costs. We worked deals with all of them. But having a physical retail outlet in the gaming space is not ideal. We’re managing that estate very effectively and monitoring that.” 

The CEO admitted, though, that the huge option value for Sportech in Connecticut is securing a sports betting licence. He finished the interview, leaving more than just a subtle hint that the dispute looks set to run for some considerable time.

“There has been some progress there but it still remains a dispute between the state, the tribes and ourselves and the lottery as to who should run sports betting,” he said. “I think it will come but it’s going to need some further negotiations from all parties.”