So, the company I have been assigned is Sportech PLC.  I had never heard of this company before and I initially thought it was going to be a manufacturer of sports goods, or something similar, until I saw ‘gambling’ in the company spreadsheet description.  I then thought it might be a little x-rated and more exciting than some of the others until I realised I know nothing about gambling, which may make it a little daunting.  My suspicions were confirmed when the front page of their annual report read ‘A leader in pools and tote betting.’  What are pools in the world of gambling? What is tote betting?!  Surely nothing to do with swimming or handbags, based on my previous experience with these words.

I decided I needed to take a step back before jumping into the deep end of their annual report, so explored their website a bit more.  I found myself coming across the same terms, along with others such as pari-mutuel, but found no real explanations.  I figured that people looking at their site and financials would already know the meanings, so I took to Google.  It seems that a sweep is another name for a betting pool, something that I have had experience with at work, with Melbourne Cup only a few weeks ago.  Here, people pay a fixed price into a pool, which is then evenly divided by the winners, and not influenced by odds.  On the contrary, however, true pool betting (par-mutuel) does involve odds and variable, not fixed, prices.

Tote betting appears to be the same thing.  It is an abbreviated name for the totalisator, a machine invented to assist in the large amount of calculations involved.  Different types of bets available are win, place and trifecta, to name a few.  Something that may have been handy to know a few weeks ago for my work sweeps…  Anyhow, as mentioned earlier, there is a quite complex calculation involved in the bets, which I can’t seem to grasp.  So, even though I’ve looked into what the terms mean, I’m still a little iffy on them.

Going back to the basics, Sportech is a well-established and old company (going back over 100 years – a real strength when it comes to trust and recognition).  Put simply, they facilitate the viewing of and betting on various sports and racing.  They are listed in the UK, with their headquarters being in London, but operate in 30 countries, with an excess of 1,000 employees worldwide.  There are three business divisions, being Sportech Racing and Digital, Sportech Venues, and Football Pools.  Below is a summary of each division:

Sportech Racing and Digital

·         Supplies betting technology, equipment, system and services, from agent-operated to self-service that players can use on their own devices            

·         Customers – race tracks, casinos, off-track betting venues, online operators (worldwide)

·         Divisional performance

o   Revenue - £34.5m

o   EBITDA - £8.1m

·         Contribution to group revenue – 33%

Sportech Venues

·         Operates venues (sports bars, betting facilities etc) that provide betting on racing physically and through telephone and internet

·         Customers – Connecticut, California, the Netherlands

·         Divisional performance

o   Revenue - £32.5m

o   EBITDA - £3.2m

·         Contribution to group revenue – 31%

Football Pools

·         Facilitates pool betting – mainly through subscriptions and online channels

·         Customers – mainly UK

·         Divisional performance

o   Revenue - £38.0m

o   EBITDA - £16.6m

·         Contribution to group revenue – 36%

Out of the three, Football Pools brings in the most revenue but all of the divisions are still fairly equal.  EBITDA seems to be a main concern but I’m not entirely sure why just yet, I mean, wouldn’t you be more concerned about earnings after tax and depreciation etc – income that is all yours to keep and do what you want with?  Although I know what EBITDA is, there are plenty of terms and words in the rest of the report that I have no idea on the meaning of, let alone the importance.  I’m sure this will come with the rest of the course, though, so moving on and not stressing about it.

Half of their EBITDA comes from the US, along with 66% of their overall revenues.  Sportech process over $13 billion horse racing bets annually, and are responsible for over 50% of all horse racing bets in the US.  From this, it seems that their presence in the US is critical to their success and something that they should focus on maintaining or even improving.  Looking at their annual report, this is exactly what they intend on doing.  Part of their strategy is to really drive the expansion into the US, securing licences and locations in new and existing areas.  They are also focused on keeping their technology as up to date as possible to ensure they stay at the forefront of their industry.  I think this is very important as technology is increasing more than ever and if they hadn’t been innovative and moved to platforms such as smart phones, they could have easily fell behind.  Due to all of these expansions and investments, Sportech decided not to pay a dividend this year – something I am familiar with happening.  It does make we wonder, would people be less likely to buy shares in a company if they were not going to receive any dividends, or more likely because growing the business would make their shares more valuable?

Technology is a strong part of their strategy because it is one of their main channels of earning income, so it is also a challenge they face.  Like I mentioned earlier, they invest heavily in upgrades but also subject their systems to audits and have plans in case of disasters.  This helps assure customers that their systems are trustworthy, and also lessens the blow if unexpected and unavoidable events occur.  Another challenge facing Sportech involves the regulations around their licences.  They operate under quite a few of them around the globe and, as such, consider them a major asset.  It’s a little bit scary to think that any loss of, or even accidental breach of, a licence could have a really adverse effect on them.  This could lose them a lot of money through penalties and loss of trade, but could also land some of their people in jail and damage their reputation.  They seem to be mitigating it fairly well, though, with a director appointed solely to make sure requirements are complied with and any risky territories avoided.  They are also covered by insurance where possible and ensure staff are trained and kept up to date with the various risks.

I did find it slightly difficult to find any outside information on Sportech, but no news is good news, right?  From the information I have found from Sportech themselves, they are doing well (based on my limited abilities to understand the words and numbers).  As the annual report in particular is a ‘marketing document’ I’m not sure that I can trust it not to be biased or looking through rose tinted glasses.  The fact that I couldn’t find much else tells me that maybe I can trust it though, because any big scandal or failure would surely have come up in my searches?

I have included links below to a few of the sources I did find, which reference new contracts and takeovers, in line with their view to expansion.   This is also consistent with their annual report which state that they have acquired other companies and established joint ventures with some others.

Article: http://www.thedeal.com/content/tmt/contagious-gaming-infected-by-enthusiasm-for-sportech-takeover.php

Video: https://www.youtube.com/watch?v=_cwZNGwXUe4

It definitely was a challenge to get to know Sportech and their annual report, and I hope I've made some sense here - any feedback would be very much appreciated!