Sportech rejects Standard General takeover approach
The 28.5 pence per share offer was one of “several” that Standard General said it made, and followed a 25.0 pence per share offer, Sportech said.
The business’ shares closed at 18.0 pence per share on 27 October when the offer was made, but following news of the offer, they have risen to 22.6 pence.
Sportech’s board said the 28.5 pence per share offer “fundamentally undervalues [its] businesses and prospects”.
Standard General said Sportech had declined to enter into discussions toward a deal for all of the prior offers, but that it still hoped to engage with the board.
After publicly announcing the approaches yesterday (5 November), Standard must now by 3 December either announce a firm intention to make an official takeover offer or announce that it will not do so.
With the rejection, Sportech also released certain financial information. It said it expects revenue of £45.9m for 2020, down 29.2% largely due to the impact of the novel coronavirus (Covid-19) pandemic.
Of this total, it expects £27.0m in service revenue, £1.0m from the sale of goods, £900,000 from its Bump 50:50 lottery product, £15.0m from services at its horse racing venues and £2.0m from food and beverages.
Sportech’s expected costs of sales are £12.3m, for a gross profit of £33.6m, down 28.3%. After marketing and distribution costs and ordinary operating costs, Sportech is projected to make an £11.2m operating loss in 2020, 45.4% more than 2019’s loss.
After tax and financial income, Sportech’s loss is projected to be £12.2m, up 8.9%.
In 2021, Sportech expects the business to rebound, with revenue growing to £58.4m in revenue, then declining to £54.8m in 2022, though both these figures are still below 2019 levels.
However, it projects a loss of just £500,000 in 2021 before returning to profit in 2022, with £1.4m.
The business expects earnings before interest, tax, depreciation and amortisation (EBITDA) in 2020 of £1.9m, down 74.9%, before a projected rebound to £8.0m in 2021.
In the first half of the year, Sportech’s losses widened five-fold as the impact of the novel coronavirus (Covid-19) led to a 38.7% drop in revenue to £20.2m.
In August, chief executive Richard McGuire said the business would focus on “rigorous cost management” in order to mitigate these losses.