Sportech H1 digital profits tumble 66%

Loss of key customers sees digital revenues fall 40% to $1.9m and EBITDA to just $0.3m in the first half of the year

Sportech saw digital profits within its Racing and Digital business tumble 66% to £0.2m off the back of a 40% slump in revenues in the first half of the year, the company announced this morning. [private]

And when including its large land-based venues, B2B tote business and B2C online wagering site in Connecticut, Sportech’s total revenues were down 6% year-on-year to $80m while EBITDA fell 10% to $17m.

At constant currency comparisons, digital revenues for the six month period ended 30 June – which saw the firm sell off its New Jersey-facing online casino interests – dropped from $3.1m in H1 2014 to $1.9m this year. EBITDA meanwhile fell from $0.9m to $0.3m over the same period.

Sportech attributed the decline in digital revenues and profits, now mainly derived through mobile wagering at racetracks and venues in the US, to the loss of two significant customers, a high value affiliate player and Colonial Downs, which ceased trading entirely in April.

It said cost actions had been taken to mitigate the decline, including a management restructure, and was confident of driving growth by signing up new customers in the second half of the year.

Earlier this week Sportech confirmed it had received an offer from Contagious Gaming to acquire the operator in its entirety.

Revenues from Sportech’s land-based venues in the US, which includes its flagship Winners venue in Connecticut, remained flat at $26.5mm, but EBITDA tumbled 30% to $2.2m due to bad weather-induced race abandonments in the North East and the temporary closure of the Jai Ali venue in Florida for refurbishment.

But the firm also noted that revenues from its B2C Connecticut-facing horse race wagering site MyWinners.com were up 59% to $6.4m during the period.

Revenues from tote services and equipment sales increased marginally (3%) to $25m, with Sportech attributing growth to current contracts performing well and revenues from Danske Spil, which launched on its platform last year.

The operator said tote equipment sales were $3.4m in the first half of the year and include contributions from its ongoing $15.6m contract to overhaul Betfred’s Totepool platform, with the first part of the upgrade introduced in time for Royal Ascot.

Revenues from the Football Pools, for which Sportech declined a £75m ($144m) takeover offer during the period, fell by $3.3m to $26.9m, but the firm said its plan was to “stabilize then grow revenues”.

It’s been a busy six months for Sportech, which sold its 50% stake in its New Jersey-facing SNG Interactive joint venture back to NYX Gaming for $18.7m.

“We have built a portfolio of highly regulated businesses in the US and UK, and have continued to invest in each to bring through innovation and technological improvements,” Sportech CEO Ian Penrose said.

“Our industry is currently experiencing a period of considerable consolidation, and we continue to explore all options to deliver strategic value for our shareholders. We remain confident in the underlying strength of the business,” he added.

Sportech’s share price was up 0.97% to 66.80p at the time of writing.