Sportech shares crash 50pc on profit warning and failure to find a buyer

Betting company Sportech has shocked the market by announcing a failure to find a buyer, a profit warning and a new chief executive in the same day.
The former owner of the Football Pools said in October it was seeking offers for the group after deciding its future looked too bleak to go it alone.
But in spite of talks with some potential suitors, Sportech has now revealed none of the bidders were prepared to buy the whole business or even a substantial part of it.
The reaction by investors was stark, with the shares plunging by more than half to 35.5p.
Sportech shares
The fall was exacerbated by the revelation its adjusted earnings before interest, tax, depreciation and amortisation would drop to roughly ?6.5m due to a series of “accounting corrections including write-downs”. This is almost half the ?12.3m consensus expectation by analysts.
An estimated ?8m of one-off costs, including the ?4.3m payment of share options to former senior staff, will also weigh on earnings.
The firm claimed it still had “significant potential” by putting more focus on the US, where it derives most of its profits via horse race betting and lotteries in 38 states.
Sportech is pinning its hopes on greater liberalisation of the sports betting market in the US. The Supreme Court is mulling over whether to relax laws that constrain sports betting and is expected to deliver a ruling by the summer.
Sportech also announced that Andrew Gaughan has been promoted to chief executive. He joined the company in 2010 and is based in Toronto. Sportech said he had 25 years’ experience in the gaming, technology and horseracing industries via senior positions at other international gaming companies.
Sportech shares crash 50pc on profit warning and failure to find a buyer

The Spot The Ball Competition was subject to an eight-year ?93m VAT battle, which Sportech eventually won

Phil Noble/Phil Noble
The failure to secure a sale comes after some recent good news for the company. At the end of 2016 Sportech won its eight-year wrangle with HM Revenue & Customs over a ?97m VAT claim linked to its Spot The Ball competition, which has been running for roughly 50 years.
Sportech had claimed the game, which involves looking at a picture of a football match and guessing the position of the ball, was one of chance and not a game of skill, meaning it should be exempt from VAT.
In June last year, it completed the ?83m sale of the Football Pools business to FP Acquisitions, a new company controlled by funds advised by private equity firm OpCapita. At the same time, it pledged to return ?20m to shareholders.
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