EXPECTED TIMETABLE OF PROPOSED DE-LISTING

Background to and reasons for the Cancellation and Re-registration

As Shareholders will be aware, the Company undertook a share consolidation and subdivision and capital distribution in July 2023 (the "Share Capital Reorganisation"). Following the Share Capital Reorganisation becoming effective, the Board undertook a thorough review of the corporate costs being borne by the Company as a result of its status as a publicly traded company.

Following that review, the Board has concluded that the Company's continued status as a publicly traded company is not appropriate given the scale of its business and, accordingly, the Cancellation and Re-registration are in the best interests of the Company and its Shareholders as a whole for reasons including those set out below.

§   Costs and regulatory burden: The considerable cost and management time and the legal and regulatory burden associated with maintaining the Company's admission to trading on AIM is, in the Board's opinion, disproportionate to the benefits of the Company's continued admission to trading on AIM.  These costs: (a) amounted to approximately £450,000 in the year ended 31 December 2022; (b) contributed to the Group's pre-tax loss of £934,000 in that period to a material extent; and (c) represented approximately 28 per cent. of the Group's adjusted EBITDA of £1.6 million in that period.  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 Group's business.

§   Lack of liquidity: Notwithstanding the Share Capital Reorganisation, there continues to be limited liquidity in the Ordinary Shares.  As a result, the Board believes that Shareholders are not provided with the opportunities to trade in meaningful volumes or with frequency in an active market in Ordinary Shares.

§   Market volatility:  As a result of the limited liquidity in Ordinary Shares described above, small trades in Ordinary Shares can have a significant impact on price and, therefore, market valuation, which, the Board believes, in turn has a materially adverse impact on: (a) the Company's status within its industry; (b) the perception of the Company amongst its customers, suppliers and other partners; (c) staff morale; and (d) the Company's ability to seek appropriate financing or realise an appropriate value for any material future disposal(s).

§   Challenges related to the Company's position as a micro-cap stock: Growing the Company, a UK micro-cap stock, comes with a range of challenges, which, in the Board's view, stem from the Company's small market valuation, limited resources, and the dynamic nature of the market. These challenges include, but are not limited to: (a) access to capital; (b) a lack of visibility among analysts, media and potential investors; (c) increased volatility in Company valuation unrelated to company performance leading to higher risk perception; and (d) an aversion from potential investors, seeking stability and a valuation that aligns with Company performance. 

§   Strategic flexibility: The Board believes that 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.

Therefore, following careful consideration, the Board believes that it is in the best interests of the Company and Shareholders to seek the proposed Cancellation, Re-registration and associated adoption of the New Articles.

Under the AIM Rules, the Company is required to give at least 20 Business Days' notice of the Cancellation. Additionally, the Cancellation will not take effect until at least five Business Days have passed following the passing of the Cancellation Resolution. If the Cancellation Resolution is passed at the General Meeting, it is proposed that the last day of trading in Ordinary Shares on AIM will be 16 October 2023 and that the Cancellation will take effect at 7.00 a.m. on 17 October 2023.

The Directors are aware that certain Shareholders may be unable or unwilling to hold Ordinary Shares in the event that the Cancellation is approved and becomes effective. Such Shareholders should consider selling their interests in the market prior to the Cancellation becoming effective.

The principal effects of the Cancellation will include the following:

§   there will cease to be a formal market mechanism enabling Shareholders to trade Ordinary Shares (other than any limited off-market mechanism provided by the Matched Bargain Facility);

§   it is possible that, following the publication of the Circular, the liquidity and marketability of the Ordinary Shares is reduced and their value adversely affected (however, as set out above, the Directors believe that the existing liquidity in the Ordinary Shares is, in any event, limited);

§   the Ordinary Shares may be more difficult to sell compared to shares of companies traded on AIM (or any other recognised market or trading exchange);

§   in the absence of a formal market and quoted price, it may be difficult for Shareholders to determine the market value of their investment in the Company at any given time;

§   the regulatory and financial reporting regime applicable to companies whose shares are admitted to trading on AIM will no longer apply;

§   Shareholders will no longer be afforded the protections given by the AIM Rules, such as the requirement to be notified of price sensitive information or certain events and the requirement that the Company seek shareholder approval for certain corporate actions, where applicable, including substantial transactions, reverse takeovers, related party transactions and fundamental changes in the Company's business, including certain acquisitions and disposals;

§   the levels of disclosure and corporate governance within the Company may not be as stringent as for a company quoted on AIM;

§   the Company will no longer be subject to UK MAR regulating inside information and other matters;

§   the Company will no longer be required to disclose publicly any change in its major shareholdings under the Disclosure Guidance and Transparency Rules;

§   Peel Hunt LLP will cease to be nominated adviser and broker to the Company;

§   whilst the Company's CREST facility will remain in place immediately following the Cancellation, the Company's CREST facility may be cancelled in the future and, although the Ordinary Shares will remain transferable, they may cease to be transferable through CREST (in which case, Shareholders who hold Ordinary Shares in CREST will receive share certificates);

§   stamp duty will be due on transfers of shares and agreements to transfer shares unless a relevant exemption or relief applies to a particular transfer; and

§   the Cancellation and Re-registration may have taxation consequences for Shareholders. Shareholders who are in any doubt about their tax position should consult their own professional independent tax adviser.

The above considerations are not exhaustive, and Shareholders should seek their own independent advice when assessing the likely impact of the Cancellation on them.

For the avoidance of doubt, the Company will remain registered with the Registrar of Companies in Scotland in accordance with, and subject to, the Companies Act, notwithstanding the Cancellation and Re-registration.

The Resolutions to be proposed at the General Meeting include the adoption of the New Articles, which reflect the change in the Company's status to a private limited company with effect from the Re-registration. A summary of the principal differences between the Current Articles and the proposed New Articles is included in Part 2 of the Circular. A copy of the New Articles can be viewed at https://www.sportechplc.com.

Board composition and provision of information, SERVICES AND FACILITATES following the Cancellation

Board composition

There will be no change to the composition of the Board immediately following the Cancellation and Re-registration although the Board intends to keep its composition under review following the Cancellation and Re-registration.  In particular, the Company is mindful of the need for its Board to be representative of its operating divisions and geographic operating areas and for the Company to take advantage of the flexibility which its status as a private limited company will allow.

As described in the Circular (and, in particular, paragraph 8 of Part 1 of the Circular and Part 3 of the Circular), the Takeover Code will continue to apply to the Company for a period of at least 10 years from the date of Cancellation if the Company is considered by the Panel to have its place of central management and control in the United Kingdom, the Channel Islands or the Isle of Man. This is known as the "residency test". In determining whether the residency test is satisfied, the Panel has regard primarily to whether a majority of a company's directors are resident in these jurisdictions.  If, following any changes to the Board's composition, the residency test is no longer considered by the Company to be met, the Company will seek a determination from the Panel on the continued applicability of the Takeover Code to the Company. In the event that the Panel advises the Company that the "residency test" is no longer met, the Company will seek to inform Shareholders of this outcome.

Provision of information, services and facilities following the Cancellation

The Company currently intends to continue to provide certain information, services and facilities to Shareholders following the Cancellation. The Company will:

§   continue to communicate information about the Company (including annual accounts) to its Shareholders, as required by the Companies Act;

§   continue, for at least 12 months following the Cancellation, to maintain its website, https://www.sportechplc.com (albeit the domain name may be altered as a result of changes to the Company's name in connection with the Cancellation and Re-registration) and to post updates on the website from time to time, although Shareholders should be aware that there will be no obligation on the Company to include all of the information required under the Disclosure Guidance and Transparency Rules, AIM Rule 26 or to update the website as required by the AIM Rules; and

§   make available to Shareholders, through JP Jenkins, the Matched Bargain Facility (as further described in paragraph 5.2 of Part 1 of the Circular) which will allow Shareholders to buy and sell Ordinary Shares on a matched bargain basis following the Cancellation.

Transactions in the Ordinary Shares prior to and FOLLOWING the Cancellation

Transactions prior to the Cancellation

Shareholders should note that they are able to continue trading in the Ordinary Shares on AIM prior to the Cancellation.

If Shareholders wish to buy or sell Ordinary Shares on AIM they must do so prior to the Cancellation becoming effective. As noted above, in the event that Shareholders approve the Cancellation, it is anticipated that the last day of dealings in the Ordinary Shares on AIM will be 16 October 2023 and that the effective date of the Cancellation will be on 17 October 2023.

Transactions following the Cancellation

The Directors are aware that Shareholders may wish to acquire or dispose of Ordinary Shares in the Company following the Cancellation. Should the Cancellation be approved by Shareholders at the General Meeting, the Company will implement a matched bargain facility with JP Jenkins which will allow Shareholders to buy and sell Ordinary Shares on a matched bargain basis following the Cancellation (the "Matched Bargain Facility").

Under the Matched Bargain Facility, Shareholders (or persons wishing to acquire Ordinary Shares) will be able to provide an indication to JP Jenkins, through their stockbroker (JP Jenkins is unable to deal directly with individuals), of the number of Ordinary Shares that they are willing to buy or sell and the price at which they are willing to do so. In the event that JP Jenkins is able to match that buy or sell order with an opposite sell or buy instruction, JP Jenkins would contact both parties and carry out the trade.

Should the Cancellation become effective, details of the Matched Bargain Facility will be made available on the Company's website.

The Matched Bargain Facility is expected to operate for a minimum period of twelve months from the Cancellation. The Directors' current intention is that it will continue beyond that time but Shareholders should note that it could be withdrawn and, therefore, inhibit the ability to trade the Ordinary Shares. Further details will be communicated to Shareholders via the Company's website at the relevant time.

Current Trading

On 11 September 2023, the Company released a trading update for the six months ended 30 June 2023 which contained the following information.

"The Group has continued to deliver solid operational performance, marked by stable revenue growth and a renewed emphasis on margin enhancement. This strategic approach has led to a 7.2% increase in gross profit and a notably improved Adjusted EBITDA performance, in comparison to the same period of the previous year.

The Group's Adjusted EBITDA demonstrated positive momentum, reaching £0.9 million (£0.4 million in H1 2022). This improvement was fuelled by several key factors, most notably growth in contributions from US gaming and a sustained focus on optimizing operational and corporate costs."

Re-registration

As set out above, following the Cancellation, the Directors believe that the requirements and associated costs of the Company maintaining its public company status will be difficult to justify and that the Company will benefit from the more flexible requirements and lower costs associated with private limited company status. It is, therefore, proposed to re-register the Company as a private limited company. In connection with the Re-registration, it is proposed that the New Articles be adopted to reflect the change in the Company's status to a private limited company. The principal effects of the Re-registration and the adoption of the New Articles on the rights and obligations of Shareholders and the Company are summarised in Part 2 of the Circular.

An application will be made to the Registrar of Companies for the Company to be re-registered as a private limited company. Re-registration will take effect when the Registrar of Companies issues a Certificate of Incorporation on Re-registration. The Registrar of Companies will issue the Certificate of Incorporation on Re-registration when it is satisfied that no valid application can be made to cancel the resolution to re-register as a private limited company or that any such application to cancel the resolution to re-register as a private limited company has been determined and confirmed by a court of competent jurisdiction.

Takeover Code

Notwithstanding the Cancellation and Re-registration, the Company will continue to be subject to the terms of the Takeover Code for a period of at least 10 years following the Cancellation (subject to the Re-registration occurring). However, the Takeover Code may cease to apply earlier, if a majority of the directors of the Company cease to be resident in the United Kingdom, the Channel Islands or the Isle of Man.

The Takeover Code applies to all offers for companies which have their registered offices in the United Kingdom, the Channel Islands or the Isle of Man if any of their equity share capital or other transferable securities carrying voting rights are admitted to trading on a regulated market or a multilateral trading facility in the United Kingdom or on any stock exchange in the Channel Islands or the Isle of Man. 

The Takeover Code also applies to all offers for companies (both public and private) which have their registered offices in the United Kingdom, the Channel Islands or the Isle of Man and which are considered by the Panel to have their place of central management and control in the United Kingdom, the Channel Islands or the Isle of Man, but in relation to private companies only if one of a number of conditions are met, including that any of the company's equity share capital or other transferable securities carrying voting rights have been admitted to trading on a regulated market or a multilateral trading facility in the United Kingdom or on any stock exchange in the Channel Islands or the Isle of Man at any time in the preceding 10 years.

If the Cancellation and Re-registration are approved by Shareholders at the General Meeting, the Company will be re-registered as a private company and its securities will no longer be admitted to trading on a regulated market or a multilateral trading facility in the United Kingdom. In these circumstances, the Takeover Code will only apply to the Company if it is considered by the Panel to have its place of central management and control in the United Kingdom, the Channel Islands or the Isle of Man. This is known as the "residency test". In determining whether the residency test is satisfied, the Panel has regard primarily to whether a majority of a company's directors are resident in these jurisdictions.

On the basis of the current residency of the Directors, the Company will have its place of central management and control in the United Kingdom following the Cancellation. In light of the Re-registration, and provided that the Company's place of central management and control continues to be considered by the Panel to be in the United Kingdom, the Takeover Code will continue to apply to the Company for the period of 10 years following the Cancellation, including the requirement for a mandatory cash offer to be made if either:

§   a person acquires an interest in shares which, when taken together with the shares in which persons acting in concert with it are interested, increases the percentage of shares carrying voting rights in which it is interested to 30 per cent. or more; or

§   a person, together with persons acting in concert with it, is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any person acting in concert with it, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which it is interested.

In particular, under Rule 9 of the Takeover Code, when any person or group of persons acting in concert, individually or collectively, are interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company but do not hold shares carrying more than 50 per cent. of the voting rights of a company and such person or any person acting in concert with him acquires an interest in any other shares, which increases the percentage of the shares carrying voting rights in which he is interested, then that person or group of persons is normally required by the Panel to make a general offer in cash to all shareholders of that company at the highest price paid by them for any interest in shares in that company during the previous 12 months. Rule 9 of the Takeover Code further provides that where any person, together with persons acting in concert with him, holds over 50 per cent. of the voting rights of a company to which the Takeover Code applies and acquires additional shares which carry voting rights, then that person will not generally be required to make a general offer to the other shareholders to acquire the balance of the shares not held by that person or his concert parties.

Following the expiry of the 10 year period from the date of the Cancellation (subject to the Re-registration occurring), or such other date on which the Takeover Code ceases to apply to the Company, the Company will no longer be subject to the provisions of the Takeover Code.

Brief details of the Panel, and of the protections afforded to Shareholders by the Takeover Code are set out in Part 3 of the Circular.

Process for Cancellation

Under the AIM Rules, it is a requirement that the Cancellation must be approved by Shareholders holding not less than 75 per cent. of votes cast by Shareholders at the General Meeting. Accordingly, the Notice of General Meeting set out in Part 4 of the Circular contains a special resolution to approve the Cancellation.

Furthermore, Rule 41 of the AIM Rules requires any AIM company that wishes the London Stock Exchange to cancel the admission of its shares to trading on AIM to notify shareholders and to separately inform the London Stock Exchange of its preferred cancellation date at least 20 Business Days prior to such date. In accordance with AIM Rule 41, the Directors have notified the London Stock Exchange of the Company's intention, subject to the Cancellation Resolution being passed at the General Meeting, to cancel the Company's admission of the Ordinary Shares to trading on AIM on 17 October 2023. Accordingly, if the Cancellation Resolution is passed, the Cancellation will become effective at 7.00 a.m. on 17 October 2023. If the Cancellation becomes effective, Peel Hunt LLP will cease to be nominated adviser and broker to the Company and the Company will no longer be required to comply with the AIM Rules.

ACTION TO BE TAKEN IN RELATION TO THE GENERAL MEETING

In line with the Company's approach at annual general meetings, hard copy proxy forms are not being sent to Shareholders in connection with the General Meeting. The Company would like to encourage shareholders to vote electronically or appoint a proxy electronically, which can be done via www.signalshares.com, via the LinkVote+ app or, where Ordinary Shares are held in CREST, via CREST. Certain shareholders may also be able to appoint a proxy electronically via the Proximity platform. Shareholders may also request a hard copy form of proxy directly from the Company's registrar, Link Group, by calling 0371 664 0300 or by emailing shareholderenquiries@linkgroup.co.uk. Notwithstanding the method of appointment, proxy appointments must be received by Link Group by 9.00 a.m. on 3 October 2023, being 48 hours before the time fixed for the General Meeting. Further details of the proxy appointment methods are set out in the Notice of General Meeting in Part 4 of the Circular.

Shareholders are encouraged to appoint the chair of the General Meeting as their proxy with directions as to how to cast their vote on the Resolutions proposed. For further details on how to submit a proxy vote, see the notes to the Notice of General Meeting at Part 4 of the Circular.

The appointment of a proxy will not preclude Shareholders from attending and voting at the General Meeting in person should they so wish. All Shareholders planning to attend the General Meeting in person are, however, requested to confirm their attendance by emailing ir@sportechplc.com (marked for the attention of the Company Secretary) by no later than 9.00 a.m. on 3 October  2023.

RECOMMENDATION

The Directors consider that each of the Cancellation Resolution and the Re-registration Resolution is in the best interests of the Company and its shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the resolutions at the General Meeting as Richard McGuire and Clive Whiley (being the only Directors who are interested in Ordinary Shares) intend to do in respect of their own beneficial holdings, insofar as they are able to control or direct the exercise of the voting rights attaching to the relevant Ordinary Shares.