Hi Andrew, Sportech’s H1 2021 interim results show a significant increase in wagering handle since pre-pandemic. What is the main strategy for the business moving forward?
Andrew Lindley: The main strategy of the business leading up to now has been to tidy up the whole Sportech model with a view to reducing the size of the business. This also includes reducing the cost base and getting it to a set of manageable businesses with good potential for growth, rather than necessarily nursing some of the older businesses which require significant investment. The Football Pools were sold some years ago, more recently we have divested ourselves of two other businesses, and that leaves us with two or three core competencies. One of which is the venues business in Connecticut, the other is our lottery technical supply, and the other is online retail, again centre din America, which is pari-mutuel only. The venues business has always had the opportunity of being licensed for sports betting, and we have kept hold of that business in anticipation of receiving a licence and powering Connecticut with sports betting as the new and hot product.
What are the biggest challenges Sportech has faced (aside from the pandemic)?
AL: We obviously had a disappointment in the middle of the year when we were told we wouldn’t be getting a sports betting licence of our own, but we have worked very hard with the third licensee in the state and the three licensees are the two enormous tribal casinos in Connecticut. We’ve managed to partner with the equally sizeable Connecticut Lottery Corporation (which is a very, very pleasing result for us) to offer their sports betting product in our venues, which will give our venues the opportunity for growth and sustainability for the long term. So one of our key operational focuses is getting that right and making that an operational beacon across America.
What are the achievements and attributes that are making Sportech successful?
AL: The lottery business is a UK-based technical business, in Chester. We have a young team of dedicated engineers there who have a very modern cloud-based platform for omni-channel gambling. Our own proprietary lottery vertical stands as the core tenet of that platform, albeit the platform has capability to run any vertical in the gambling space, and we expect to take that product forward into the market – and grow the business with that.
Then we have the online retail in America, MyWinners, which is Connecticut-based and is the online retail element of the venues business; and largely serves the Connecticut market. We also have another brand called 123bet which serves the rest of the American market to the extent that it’s available, which is quite a lot of the States but not all of them.
We have seen some good growth in particular in the online piece in the last year or so with Covid. One of the core opportunities is to continue that growth going forward. And that, in terms of operations and strategy, is the helicopter view of the interim presentation.
Nicola, could you please run through the headline numbers?
Nicola Rowlands: Sportech revenue stands at £13.4m (£18.54m) which is 70% up on last year, but obviously last year was Covid-stricken so that explains the increase. We are getting back toward 2019 levels; we are not quite there yet but the recovery is definitely almost there. Bottom line profit and loss saw a £24mprofit, mostly due to the profit on disposals, so the consideration and the proceeds from those disposals are what the value of those businesses were on the balance sheet.
This has driven quite a positive impact to the valuation of the balance sheet, with the cash being held on there from disposals at the moment, ready and waiting to be returned to shareholders we announced during August; the £35.5m buyback (or up to), leaving us with sufficient cash to drive these remaining businesses forward.
Nicola, what are your plans and strategies to execute innovation within your new CFO position?
NR: From a finance point of view, it’s very much working closely with RSI (Rush Street Interactive) – who are the technology behind the lottery that we’ve partnered with. It’s about making sure our systems work with their systems in driving the revenue forward, and we work very much together as a team; bringing the financials through with our numbers effectively and working closely with them on that. We definitely have a much smaller condensed team from a finance perspective and that’s kind of leveraging the investment we’ve made in the systems over the recent years, to drive efficiency and automation.
In terms of your last role as COO, Andrew, what are the most successful attributes that you’ll bring to your new position as CEO?
AL: That’s a good question. It dovetails very nicely because obviously as a COO, one is very close to the operational delivery of the business on the ground. So I’ve now had two years of getting my head around all of the Sportech businesses and indeed the landscapes in which Sportech operates, and whilst Richard [Sportech’s former CEO] has probably been more focused on some of the corporate exercises I outlined at the beginning – I’ve always been in touch as well and helped with those.
As we move into a period of greater operational focus, I will ensure the full weight ofthe company now (with my position of CEO) is brought to bear on operations.
Alongside this, we will deliver the kind of excellence that is required in the Connecticut venues to become a beacon product across America, and project Sportech forwards as a new and disruptive force in this very fast-growing sports betting market. Moreover, in a slightly different format than is perhaps making headlines currently – which is of course the online market – we will very much be about the domestic retail, sports bars and capturing people on the ground.
Given Richard McGuire and Tom Hearne have stepped down and you both are stepping into the new roles, what kind of support do you expect the team would need in their absence?
AL: The simple answer to that is Richard and Tom have extensive experience in the corporate world and Nicola and I are new to these roles, therefore we will be relying on them to pick up the phone and discuss with us points of order that are perhaps new to us. This ensures we have got great mentors to help us along and make sure we don’t learn by making mistakes, because we will be able to learn from them with a bit of luck!
Do you have an M&A strategy moving forward?
AL: We don’t have an M&A strategy currently; we have three very opportune businesses that we need to focus on operationally, giving them the full force of the team. I have quite an extensive background in M&A myself; I was a lawyer highly involved in a number of those strategies, so we have the right expertise involved if the opportunities arise. But as it stands, we don’t have a formal strategy for M&A at the moment.
Is there anything you would like to say about your new role as CEO?
AL: The core message is a move into a period of operational focus that is the mantra for the business now.