Sportech, parent company of Betdirect and Littlewoods Gaming, has terminated its interactive gaming contract with UK television network ITV.
The contract was signed in March 2002 in the expectation of capitalising on the projected growth of interactive TV betting and gaming, with Sportech supplying the content and technology for ITV’s interactive gaming and betting products. However, it has been loss-making for the gaming operator since the start, and is expected to generate a £4m loss for 2005.
Sportech’s 2005 results will likely be hit by an exceptional charge of around £14m, as a write-off of payments already made to ITV, related assets and redundancies. The termination of the contract will also eliminate further operating losses in 2006 and potential payments of £22.2m over the remaining three years of the deal.
At the time of Sportech's interim results, in September 2005, the deal with ITV was seen as one of its key strengths in terms of generating future growth and profits. It also coincided with the appointment of Ian Penrose as chief executive, who instigated a wholesale review of the company’s assets and operations, resulting in the termination of the ITV contract.
Penrose said: “I have been looking at the whole group for the past three months and we decided the ITV contract was not commercially viable. There were operating costs and minimum guaranteed payments that had been to be made to ITV so we needed to take action to clear those issues out. We are delighted to have done that and avoided some £30m cash outflow for the next three years in the process.”
Charles Hall, analyst at stockbroker Panmure Gordon, applauded the decision: “This is a sensible move in consideration of the further cash payments Sportech would have to make. Interactive gambling needs enthusiasm on both sides and ITV is making slow progress with the business behind the red button.”
Penrose explained that Sportech was not withdrawing from the interactive TV space, with the company continuing to have a presence on the Sky platform and on the At the races TV channel.
sorce: egr magazine
