Shares in Sportech tumbled as the company said it had terminated sales talks and that trading in the first few weeks of the current financial year has been “fairly challenging” while full-year earnings are likely to be below expectations, as it announced the appointment of a new chief executive officer.
The pool betting firm announced a formal sale process last October as part of a wider strategic review. However, it said on Wednesday that while the board engaged in detailed discussions with interested parties, these talks were unlikely to result in an offer for all or a large chunk of the group that it would be able to recommend to shareholders.
“As a result, the board today confirms that it has closed the formal sale process and terminated all discussions with interested parties. Accordingly, the company is no longer in an 'offer period' as defined in the Takeover Code.”
Sportech said the strategic review found that the group has “significant” potential for long-term value creation through growing its core businesses and diversification and that it would benefit the possible liberalisation of sports betting in a number of states in the US.
The company also gave a brief update on its current trading, saying the first ten weeks of the current financial year have been fairly challenging, with some weather-related weakness in the Connecticut-based venues division. Still, this was offset by the racing and digital business, which has secured new long-term contracts, so Sportech said it sees no reason to change its expectations for this year.
Following the strategic review, a number of write-offs and restatements will need to be made to the group's financial statement for the year to the end of December 2017 and Sportech now expects adjusted earnings before interest, tax, depreciation and amortisation to fall short of expectations at around £6.5m. This includes a series of accounting corrections including write-downs of old stocks and doubtful debtors.
Sportech added that the departure of former board members and other senior management caused a non-cash accelerated option charge of £4.3m, while restructuring costs and associated provisions arising from the strategic review are expected to come in at £2.5m. In addition, the sale of the NYX shares for £2.3m in cash resulted in a book loss of £1.6m.
Also on Wednesday, the group announced that it has appointed Andrew Gaughan as chief executive with immediate effect. Based in Toronto, he joined Sportech in 2010 following the acquisition of Scientific Games Racing and was appointed to the board last January.
Gaughan is well known to the group's customers and staff and has more than 25 years' experience in the gaming, technology and horseracing industry.
The company is conducting a formal search process for a group chief financial officer, to be based in North America. In the interim, non-executive director Richard Cooper will continue to provide financial oversight.
At 0820 GMT, the shares were down 59% to 32p.