Shares in Sportech have fallen by almost 50% after the company proposed delisting from the Alternative Investment Market (AIM) of the London Stock Exchange.
Edinburgh-based Sportech operates sports bars and other betting venues in the US state of Connecticut, where it has an exclusive licence to offer pari-mutuel wagering and an agreement with the Connecticut Lottery Corporation to provide retail sports betting.
The business aso offers online pari-mutuel betting in Connecticut via Mywinners.com, and nationwide across the US via 123bet.com.
H1 2023 results
Sportech announced the proposal today (11 September) alongside the publication of its financial results for the first half of 2023.
Revenue for the half-year totalled £13.5m, consisting of £12.7m from its retail business and £894,000 from online.
That represented an overall year-on-year increase of 1.4% on a constant currency basis, as growth of 1.7% in the retail segment was partially offset by a 2% decline in online revenue.
Adjusted EBITDA for the period totalled £869,000, up substantially from £311,000 in H1 2022.
Overall, the business declared a loss for the period of £344,000, down from an £831,000 loss in the prior year.
Following a review evaluating the benefits and drawbacks of operating as a publicly listed company, Sportech is now set to ask shareholders to vote on a proposition to cancel its shares on AIM and re-register as a private limited company.
The review acknowledged “signifcant burdens”, both financial and non-financial, associated with maintaining the company’s public status.
The financial cost, alongside the legal and regulatory burdens of remaining public, are considered “disproportionate to the benefits of the company’s continued admission to trading on AIM,” according to Sportech’s board.
In 2022, the cost of maintaining its public listing was approximately £450,000, Sportech added, contributing to its full-year pre-tax loss of £934,000 during the period.
That figure also represented some 28% of the company’s total adjusted EBITDA for the year.
“Given the lower costs associated with private limited company status, it is estimated that the cancellation and re-registration will materially reduce the company’s recurring administrative and adviser costs by approximately £450,000 per annum, which the board believes can be better spent supporting and investing in the Sportech group’s business,” the firm added.
Other reasons cited for the proposed delisting included a lack of liquidity for trading in Sportech’s ordinary shares, which contributes to increased volatility in its share price.
The board added that it believes “a private limited company can take and implement strategic decisions more quickly than a company which is publicly traded as a result of the more flexible regulatory regime that is applicable to a private company.”
Sportech’s board therefore believes that a cancellaction and re-registration of the company’s shares is in the best interests of both the company and its shareholders.
A circular is now expected to be sent to shareholders, detailing the background to, and reasons for, the proposed delisting, during the second half of September.
The circular will also contain a notice convening a general meeting at which shareholders will be asked to vote on the proposal.
The proposal requires at least 75% of votes cast by shareholders to be in favour of the resolution.
“Despite delivering improving operational results announced today, the substantial financial cost associated with maintaining a public listing, given our current scale, and the increasing volatility in the market valuation is adversely impacting net returns and future prospects,” said Sportech executive chairman Richard McGuire.
“Regrettably, in light of these circumstances, we find it necessary to take the difficult but pragmatic step of proposing delisting from the AIM market today.”