Betting technology supplier Sportech's losses widened five-fold in the first half of 2020 as the impact of the novel coronavirus (Covid-19) led to a 38.7% drop in revenue to £20.2m (€22.2m/$26.3m).
Of Sportech’s £20.2m in revenue, £13.1m came from the racing and digital division, down 27.4% amid the cancellation of most horse racing worldwide.
Racing and digital's total icluded £12.3m from services provided to partners, with £440,000 from the sale of goods and £395,000 from the Bump 50:50 charitable raffle division.
Sportech said that while Bump 50:50’s revenue fell sharply, it “added clients at an unprecedented rate” during the period, including the National Football League’s Tennessee Titans and Major League Baseball’s Texas Rangers.
A further £7.2m was made through venues, down 52.5%. Services made up £6.4m of this revenue and food and beverage sales £807,000.
The Sportech board said the business was on track for a strong 2020 before the effects of Covid-19 were felt.
“The group made a good start to H1 2020,” it explained. “However, as previously announced, Covid-19 had a material impact on performance due to the group's reliance on sporting events to generate revenue.”
Costs of sales fell 41.4% to £5.7m, which left a gross profit of £14.4m, a 38.9% decline.
Of these costs, £2.1m were from the racing and digital division and £3.7m were from venues. This meant the racing and digital division made a gross profit of £10.9m, and venues £3.5m.
Marketing and distribution costs declined by 28.9% to £512,000, leaving the business with a profit of £13.9m after these expenses, down 37.1%.
Sportech’s operating costs, however, remained level at £24.2m. Operating costs from racing and digital came to £9.3m and from venues these costs came to £4.5m. Corporate operating costs totalled £1.2m, resulting in a loss in earnings before tax, interest, depreciation and amortisation (EBITDA) of £1.2m.
The business paid depreciation and amortisation expenses of £8.7m, plus share option costs of £112,000 and exceptional expenses of £220,000, for an operating loss of £10.3m, up 392.8% from 2019’s loss.
After an additional £479,000 in finance costs, up 1.5%, and £13,000 in finance income, down 61.8%, Sportech made a pre-tax loss of £10.7m, more than four times its loss in the first half of 2019.
The business paid a further £4,000 in tax, meaning Sportech’s overall loss remained at £10.7m, up 427.3% from the loss it made the year prior.
Sportech chief executive Richard McGuire said the challenges of 2020 to date had prompted the business to accelerate the development of new digital products and solutions.
“2019 marked a year of operational improvement and a serious motivation to strengthen digital capabilities,” McGuire said. “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.”
However the board added that there was still too much uncertainty to provide any future earnings guidance.
“As the group moves through the rest of the financial year, profitability and cash generation will continue to be our key metrics,” it said. “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.
“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.”
Last month, Sportech signed a deal with the Racecourse Media Group (RMG), which means the RMG will use Sportech’s software to facilitate tote commingling between racecourses in the UK and Ireland and RMG’s global partners.