The betting technology group said the proposals are the result of a review evaluating the benefits and drawbacks of its listing on the London Alternative Investment Market (AIM).
Sportech said the review acknowledged the significant financial and non-financial burdens associated with its status given the scale of the group’s business. The group’s revenue was just £26.0m in 2022 following a downsizing programme that included the sale of Global Tote.
It added: “For this reason, the board has concluded that cancellation and re-registration are in the best interests of the company and its shareholders as a whole.”
Shareholders will now vote on a plan that would see Sportech delist and re-register as a private limited company. To be passed, the resolution will require the approval of at least 75% of the votes cast by shareholders.
At time of publication, Sportech’s share price was at 52.00p – a drop of more than 45% compared to Friday.
Adversely impacting Sportech’s net returns
Executive chairman Richard McGuire explained the decision in the group’s trading update for H1 2023. During the quarter, Sportech saw a 7.2% increase in gross profit and a notably improved adjusted EBITDA performance.
McGuire said: “Despite delivering improving operational results announced today, the substantial financial cost associated with maintaining a public listing, given our current scale, and the increasing volatility in the market valuation is adversely impacting net returns and future prospects. We find it necessary to take the difficult but pragmatic step of proposing delisting from the AIM market today.”
Revenue in the six months to 30 June 2023 was at £13.5m, which was flat compared to H1 2022 on a constant currency basis. On an actual reported basis, it was up 8.9%.
Positive momentum and earnings growth
Sportech said its strategic approach has led to a 7.2% increase in gross profit and an improved adjusted EBITDA performance. It said its adjusted EBITDA demonstrated positive momentum, reaching £900,000, compared to £400,000 in H1 2022.
“This improvement was fuelled by several key factors, most notably growth in contributions from US gaming and a sustained focus on optimising operational and corporate costs,” Sportech said.
The group posted a loss before tax from continuing operations of £300,000. This compared to an actual reported loss of £800,000 a year ago.
In a nod to shareholders, it noted a share capital restructuring which provided 3,600 smaller shareholders with a cost-effective exit. Additionally, the company announced a return of capital to shareholders totalling £3.5m, paid in August 2023. This brought cumulative shareholder repayments to around £46m over the past two years.
Group cash at the end of H1 2023 was £7.8m and at the end of August 2023 was £3.6m.