Setback for Sportech after a bad day at the races

The company behind the Littlewoods football pools suffered a mini setback yesterday when it warned that its bookmaking division had been hit by the cost of developing an interactive TV betting platform and a string of unfavourable horseracing results.

Sportech said trading results from its Bet Direct arm, home to its sports betting operations, would miss market expectations despite being better than the first half. Its shares slipped a ha'penny to 16p, knocked by City concerns over weaker betting margins.

Gary Speakman, the finance director, said: "Generally, 2003 has not been favourable for horseracing. Internet [betting] has been a bit more off the mark than our telephone platform." The launch of Bet Direct on AtTheRaces and Sky Active cost the division an extra £200,000.

David Pope, an analyst at Brewin Dolphin, trimmed his pre-tax profit expectations by 5 per cent to £13.3m, but said the news was far from all bad.

Sportech said it was making good progress with developing its interactive gaming arm.

It struck a deal with ITV last year to develop interactive software for the broadcaster and is set to launch an interactive service for This Morning, the channel's flagship daytime show, next week. The service will eventually allow the programme's 1 million viewers to play a new lottery game with a £6,000 daily prize pot.

Mr Speakman said: "This gives us UK penetration into the mass market, which is where we were originally [with our pools business]." He said the company had chosen to target this segment of the gaming market because it was less crowded than some of the more conventional areas. "There are only so many companies focused on TV-linked gaming because you need to be aligned with a broadcaster to work," he added.

Sportech already offers two games on the ITVi service, including a scratchcard-style game with instant win prizes of up to £100,000.

"They are trying to leverage the Littlewoods brand, which is the best known gaming brand among people in their homes," Mr Pope said. "That's why the ITV deal is so good. It's also very pleasing that the pools side is holding up profitability very well."

Mr Speakman said the group's "soft gaming" division, which accounts for the bulk of its profits and spans football pools, scratch cards, lotteries and online casino games, was trading in line with market expectations.