Caymanas profitability hinges on more race days, says SVL
Gaming company Supreme Ventures Limited says it is already allocated $250 million towards upgrading Jamaica's horse racing track, Caymanas Park.
The investments in the track have began even as SVL's interim CEO, James 'Danny' Morrison, weighs strategies on attracting more racehorse owners and growing the number of race days at the St Catherine-based track.
The funds come from a pool of $650 million borrowed by SVL to redevelop the newly acquired asset.
"We have borrowed $650 million to improve the plant and we intend to utilise it as soon as we can," Morrison told the Financial Gleaner after the company's annual general meeting on Wednesday.
He earlier reported to shareholders that work had already began, including re-sanding the one-mile round track to minimise injuries to the horses, the overhaul of sanitary facilities, and repainting of the sprawling facility that SVL acquired and took control of nearly three months ago.
The turnstiles which were considered restrictive have been removed, allowing free access to some areas at the racetrack.
"What we have seen since taking over in March is that whole families are coming back to the track," Morrison remarked.
He says the divestment agreement brokered with the Government commits subsidiary Supreme Ventures Racing and Entertainment Limited (SVREL) to a time-bound improvement programme.
"We have a five-year timeline under the privatisation agreement. These things will involve going to tender for construction, and so on. Certainly, in the first six months you will see a definite improvement in the infrastructure. We feel it is important to improve the product, while we do the other adjustments over time," he said.
"We intend to move as fast as we can because the sooner we do it, the better for us," Morrison said about the frenetic pace of the improvements at the track.
He noted that SVREL had taken over a facility that had been ailing for some time and was badly in need of a turnaround. The company was mindful, he said, that those improvements had to be executed without too much disruption of the operations.
"Turnaround is important, but we need to do it in such a way that it is sustainable. The regulatory requirements are such that it forces us to do the improvements, but we have to do it in such a way that it benefits us and, by extension, our shareholders," Morrison said. "We have to balance the need to improve and get the product looking good and the amount of profits we can extract from it."
Key to the strategy of profit extraction is upping the number of race days at the track. Morrison says that will involve the engagement of racehorse owners and attracting new owners so that there will be more horses available for added race days - noting that the present arrangements is barely enough to keep the company afloat.
There are currently 74 race days per year.
"We need a pool of horses that will allow us to accommodate additional race days. Indeed, profitability is also hinged to a large extent on how many race days you can get into this activity. Seventy-four race days would be just a break-even point. It would take another 10 or 15 race days and more horses per race," Morrison said.
Supreme Ventures says that since taking over Caymanas Park, it has seen encouraging signs of increased attendance and betting. Morrison is predicting a big increase in revenues for SVL as a result.
For the 2015 and 2016 periods, the racetrack generated $4.3 billion of revenue, according to the SVL CEO, who said bookmakers took in an additional $2.9 billion, quoting from Betting, Gaming & Lotteries Commission statistics.
As sole promoters of horse racing, SVREL is entitled to a four per cent licence fee from the bookmakers, he said.
Supreme Ventures currently earns $45 billion in revenue annually from its lottery and gaming operations.
Last year, the company reported flat annual profit of $1.18 billion. But its first-quarter earnings for March were a robust $416 million, compared to the $275 million at March 2016, while its quarterly revenue spiked from $11.2 billion to $13.4 billion.