Sportech announces £5.8m profit for half-year
Sportech/Scientific Games Racing deal taking longer than expected, CEO tells eGR on the morning of its half-year results; company signs Ladbrokes B2B deal.
Football pools owner Sportech is “close” to completing its US$83 acquisition of Scientific Games Racing (SGR) but the regulatory process has “taken longer than expected” and has been both “extensive and expensive”, its CEO told EGRMagazine.com this morning as the company announced a first half £5.8m pre-tax profit.
The deal had been expected to be completed by the end of September, but Ian Penrose refused to confirm this would be the case, and instead said it would be finalised “in the near future”. The transaction would significantly strengthen Sportech’s pari-mutuel betting, and allow the British company access to SGR’s client base in North America, central and South America, as well as Denmark, Germany, Finland, Ireland, The Netherlands and Turkey.
“Scientific Games Racing is the largest tote operator and supplier with US£13bn of bets a year in 30 countries and the first half of the year has been dominated by the proposed acquisition,” Penrose said. “The deal will go through in the near future but we have had to wait for regulatory clearance in Holland and in three US states “ New Jersey, Connecticut and Maine. It has taken longer than expected and the regulatory process has been extensive and expensive but we have made good progress recently and we look forward to getting clearance as soon as possible.” Penrose did not mention a figure.
“Given how demanding and how strict they [US regulators] are it will be a real asset when we do get the licensing in place. It’s a very tough regime,” he said.
Penrose said that Sportech had bought SGR at a “low point in the cycle” and that the deal would represent good value. He added that once the deal went through it would strengthen the board with Lorne Weil, chairman of Scientific Games Corporation, becoming a Sportech non-executive director.
“Scientific Games will then have a 19.9% stake in Sportech, while our egaming partners Playtech will see its share drop from 12.5% to 9.9%.” In January Playtech bought a £10m stake in Sportech. The deal formed part of £29.2m capital raised by Sportech to fund its acquisition of Scientific Games Racing.
Earlier in January Playtech signed a joint venture with Scientific Games to target international state lottery operators, or business-to-government (B2G) deals, as well as signing a new tie for games machines. The 50/50 lottery joint venture is called Sciplay.
Sportech’s adjusted profit before tax for the six months ended June this year was £5.8m, a loss of £1.1m compared to £6.9m for the same period in 2009. Penrose added that the SGR deal would enable Sportech to develop into an “international sport and gaming business with significant opportunities for profitable growth”.
In further developments in the first half of this year Penrose said that its Footballpools.com and football products had shown “signs of resilience” generating £9.4m in revenue compared to £9.5m for the same period last year. “We have spent time and energy on our suite of products from short to long odds and along with our technology this is now being delivered.
He also announced that Ladbrokes.com had signed an agreement with Sportech to distribute its pool products online to Ladbrokes’ database and that there would be “further distribution deals to come in due course”. “We are looking to increase our liquidity and there are two ways we can do that, either with a B2C strategy or selling on our white labelled football products for a set commission and a share of revenues.” Penrose refused to state how much this would be but added it would be worth “several hundreds of thousands of pounds a year” to the business. “We want at least another two deals of this kind in the next 12 months,” he said.
Penrose said the business generates around £1m a year in casino, bingo and poker calling them “small complimentary businesses that operate as part of the unified business”. “Pari-mutuel in football and horse-racing will be our core, both operationally and in product supply, while we can then cross-sell egaming and sports.
In January this year Sportech also launched in India, via a joint venture with Indian gaming brand Playwin to create a multi-platform sports gaming business.
Playwin is owned by Pan India Network, a subsidiary of Indian conglomerate the Essel Group, and runs the online lottery franchises for the Indian states of Karnataka, Maharashtra and Sikkim, as well as offering games online and through its network of 12,000 gaming terminals. Penrose said both companies had invested £2m each over two years and that operations, which began in May, had so far attracted “above target” visitor numbers of 225,000 in the last two months with 45,000 people registering online.