Sportech takes digital dive in 2015 but vows turnaround in 2016

sportech-penrose-digital-revenueUK race and pools betting operator Sportech took a digital dive in 2015 following the loss of two “significant customers” but believes new customer signings will stem the tide in 2016.

Sportech’s overall revenue fell 4% last year to £100.2m, while earnings were down a similar slice to £23.1m. Statutory pre-tax profit came to £9.7m, up from a £20m loss in 2014.

The year-on-year profit comparison is illusory, given that 2015’s numbers were goosed by the sale of Sportech’s New Jersey online gambling business – which added £8.1m to pre-tax profits – while the 2014 loss was largely due to a non-cash impairment of goodwill at Sportech’s Football Pools division.

The Sportech Racing & Digital division reported earnings up £500k to £8.6m thanks largely to supplying new hardware and software for Betfred’s Totepool operations, but online revenue fell 38% to £4m and online profits fell by half to just £600k. Sportech hopes to rebound in 2016 following its signing of new clients in Asia, an expanded relationship with Penn National Gaming and a new deal with the Hawthorne Racecourse in Chicago.

The Sportech Venues division reported earnings falling £400k to £2.8m, which the company blamed on severe winter weather in Connecticut, where the company operates 15 Winners-branded race betting venues. In January 2016, Sportech expanded into the California market via its first venue in San Diego.

Football Pools earnings came to £15.2m, which the company claimed was “in line with expectations.” Sportech says the Pools business has arrived at “the inflection point of expected stability” following several years of tinkering with technology platforms and processes.

Sportech was the subject of much acquisition talk last year, as a parade of looky-loos mulled a purchase of either the whole company or the Pools business but a sale remained elusive. More recently, former COO Ian Hogg was said to be marshaling his resources in preparation for a £100m bid for the Pools business.

Sportech CEO Ian Penrose (pictured) offered little in the way of updates on the acquisition front, saying only that the company would “continue to investigate any proposals that recognized the inherent potential” of the businesses.

Of more immediate concern is Sportech’s VAT refund case, which has a date with the UK Court of Appeal on April 7. Back in 2013, Sportech won a £93m judgment against Her Majesty’s Revenue and Customs for what Sportech claimed were overpayments on its Spot The Ball game revenue, but a higher court reversed that judgment three months later. Sportech has appealed this decision in a bid to avoid having to pay a bill that has now risen to £97m.