Cash Pot eats into Supreme Ventures profit
Lottery operator Supreme Ventures Limited (SVL) has recorded strong year-end results, posting a 43.9 per cent increase in net profit to J$606 million, but it fell short of its prediction to double last year's earnings of J$421 million due to larger than expected payouts.
Disbursements from the company's popular cash pot game totalled approximately J$200 million during the year to the end of December 2011 and that impacted profitability, Brian George, SVLs chief executive officer told Wednesday Business."The reality is that cash pot games exceeded our expectations, and the high payout creates a tremendous challenge at the expense of the profitability of the business," he said.
Another contributing factor to SVLs profit falling below expectations was the companys inability to achieve the level of distribution channels for its sports betting."We currently have 100 terminals for sports betting, said the chief executive officer. We had hoped to get to 200 by the end of the financial year, but the approval process has been challenging," he explained.
"We are, however, still going through the process," he said.
At the company's annual general meeting last year, George had projected that the company would double net profits at the end of the year to a record J$840 million with tight expense control.
Most of the company's expenses are related to gaming liability associated with lottery and sports betting prizes, which at the end of financial year totalled J$17 million, up 13 per cent from J$15 million in 2010.
Overall direct expenses also increased to J$24.7 billion from J$22.5 billion the prior year.
Operating expenses were also up, at J$2.4 billion from J$2 billion in 2010, Similarly finance costs grew to J$46 million from J$41.6 million.
For the financial year, SVL earned J$27.9 billion in revenues, a marginal improvement on the J$25.3 billion it recorded at the end of 2010.
During the reporting period the company, in an effort to streamline its operations, disposed of its financial services business.
SVL reported a loss of J$13.9 million from the discontinuation of that business line.
During the year the company also rationalised its gaming lounge operations while introducing new games.
In August SVL downsized its Acropolis slots gaming and restaurant operations at Bargain Village Plaza, May Pen, Clarendon due to continued operating losses brought about by what it said was the challenging economic situation.
However, as the company continued to diversify its product range, a new pick 4 game was introduced to the market, bringing total games in the companys portfolio to 10.
Going forward, George said the company would focus on its core gaming and lottery, while seeking out opportunities for expansion outside of Jamaica.
"As it relates to gaming lounges we will continue to find ways to streamlines the business to make it more profitable, he said. He said there was a lot of potential in sports betting although it was still a struggle to get approval for new terminal locations.
SVL, which last traded at J$2.50 on the Jamaica Stock Exchange, has an asset base of approximately J$5 billion.