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BUSINESS GUARDIAN guardian.co.tt JULY 20 • 2017
SVL expands into horse racing
Supreme Ventures Ltd(SVL) main-
tained its position in the Jamai-
can lottery and gaming business
during 2016. As 2017 evolves, it is
set to expand its operations into
the horse racing business. We will
now review SVL's results to December 31, 2016.
Total assets expanded by about 1 per cent
from J$5.39 billion to J$5.43 billion.
Property and equipment fell to J$732.4 mil-
lion from J$752 million. Computer equipment
increased to J$33.2 million from J$22.3 million.
However, the value of video lottery terminals
declined to J$93 million from J$114.8 million
while motor vehicles closed at J$32 million
from J$38 million.
Investment properties advanced to J$815.3
million from J$756.2 million. This increase
was entirely due to the reversal of a 2015 im-
pairment charge of J$102.7 million on freehold
building, but then reduced by the current pe-
riod's depreciation charge of J$43.7 million.
Goodwill and intangible assets increased
marginally to J$645.7 million from J$642.8
million. The largest advance was shown un-
der computer software, which rose to J$13.1
million from J$3.7 million.
In contrast, software usage rights declined to
J$32.2 million from J$40.3 million. The largest
component, trademarks and licences, edged
up to J$410.4 million from J$408.9 million.
Long-term receivables dropped to J$522
million from J$551 million. At the gross level,
sums due from both Radio Jamaica Ltd and
ICE Jamaica Ltd declined; the former closed
at J$18.8 million from J$32.2 million while the
latter fell to J$523.3 million from J$553.6 mil-
lion. Amounts due from Island Holdings Ltd
increased to J$32.5 million from J$30.6 million.
Current trade and other receivables in-
creased to J$864.1 million from J$752.2 mil-
lion. Net lottery agents' balances climbed to
J$421.4 million from J$330.7 million while the
current port of long-term receivables (above)
fell to J$52.6 million from J$71.4 million. The
other receivables and prepayments component
increased to J$385.3 million from J$345 mil-
lion; this item mainly reflects advances to key
management personnel and directors.
In 2016, SVL held cash of J$19.67 million as
security to fund wins for the PayDay game. In-
ventories, which mostly represented the value
of pin codes, advanced to J$192.6 million from
Cash and cash equivalents declined to J$1.5
billion from J$1.64 billion. The resale agree-
ments components increased to J$44 million
from J$34.5 million. Both the cash in hand and
at bank component and certificates of deposits
fell; the former closed at J$1.44 billion from
J$1.58 billion while the latter ended at J$19.6
million from J$26.2 million.
Despite the overall decline, the funds set
aside for dedicated purposes, such as taxes
and prizes, were equal to J$626 million and
that sum comfortably exceeds the reserve re-
quirement of J$210.2 million.
Total liabilities declined to J$1.63 billion
from J$1.8 billion.
The largest fall was shown under income tax
payable, which contracted to J$22.4 million
Prize liabilities also declined to J$242.8
million from J$268.5 million. The local lot-
tery games portion increased to J$193.0 mil-
lion from J$190.6 million; this was consistent
with an advertised jackpot of J$63 million. In
contrast, the multi-jurisdictional Super Lotto
liability, which is held in nine markets, was
reduced to J$49.8 million from J$75.8 million.
Trade and other payables advanced to J$1.34
billion from J$1.25 billion. The two largest com-
ponents were trade payables and service con-
tractor fees; the former rose to J$736.7 million
from J$698.9 million while the latter almost
doubled to J$166.3 million from J$83.3 million.
Other payables and accruals fell to J$251.4 mil-
lion from J$296.7 million.
Long-term payables closed at J$26.6 million
(2015: nil). This represented US$141,435.00
(J$18.1million) due to International Gaming
Technology (IGT) and PayDay prize liability
of J$19.7 million, then reduced by the current
portion of trade and other payables of J$11.1
The IGT loan is interest-free and repayable
over 24 months, ending on September 2018; it
was used to acquire VLT equipment. The new
game, PayDay, found a winner in October 2016.
Consequently, the prize liability represents the
present value of a monthly prize annuity of
J$150,000, which is payable for 20 years and
ends on October 25, 2036.
Total equity improved to J$3.8 billion from
Retained earnings climbed to J$1.77 billion
from J$1.56 billion. The opening figure was
enhanced by the current year's profit of J$1.18
billion, but then lowered by dividends to stock-
holders of J$975.8 million. A new component,
fair value reserve, closed at J$3.5 million from
zero; this represents the unrealised gain on
Both share capital and capital reserve balanc-
es were unchanged at J$1.97 billion and J$62.5
million respectively. The weighted average
number of shares outstanding was stable at
2,637,255,000; consequently, the book value of
each share improved to J$1.44 from December
Income and profit
Total revenue increased by 2.5 per cent to
J$44.92 billion from J$43.85 billion. The most
significant improvement was sales of pin
codes, which expanded to J$8.6 billion from
J$6.8 billion while PayDay pulled in a modest
J$109 million. In contrast, Lotto sales fell to
J$873 million from J$1.5 billion. The largest
component, Cash Pot, was marginally lower
at J$24.2 billion from J$24.6 billion.
On the other hand, direct expenses advanced
by 3.5 per cent to J$40.81 billion from J$39.43
Consistent with its higher sales, direct costs
for pin codes rose to J$7.9 billion from J$6.3
billion. However, lottery and sports betting
prizes slipped to J$24.5 billion from J$24.7
billion. These swings resulted in gross profit
declining by 7 per cent to J$4.11 billion from
Operating expenses fell by 8.8 per cent to
J$2.71 billion from J$2.97 billion. Contributing
to this decline was lower assets written off and
impairment, which slumped to J$6.2 million
from J$180.1 million.
Also, bad debts recognised fell to J$52.8
million from J$86.4 million while marketing
and business development expenses declined
to J$222.5 million from J$333.6 million. The
largest component, staff costs, closed at J$690
million from J$707 million.
These changes saw operating profit slip to
J$1.4 billion versus J$1.45 billion.
Interest income closed at J$66.6 million
(2015: J$74.5 million) while net foreign ex-
change gains expanded to J$12 million from
J$8.1 million and finance costs were negligible
Other gains climbed to J$185 million from
J$89 million. The current period was helped
by the reversal of impairment loss on invest-
ment properties of J$102.7 million. In addition,
reimbursements from IGT contributed J$82.2
million (2015: J$60.6 million).
Consequently, pre-tax profit closed at J$1.66
billion from 2015's J$1.61 billion.
The effective tax rate increased to 29.1 from
26.7 per cent; therefore, the tax expenses rose
to J$483.4million from J$431.1 million. In 2015,
the company benefitted from employment tax
credit of J$21million and non-taxable income
of J$13.3 million. In 2016, expenses disallowed
for tax purposes were J$56.7 million compared
with J$38.9 million in 2015.
These movements resulted in a net profit of
J$1.179 billion versus J$1.184 billion for 2015
and translated to EPS of J$0.447 compared
with the previous year's J$0.449.
At the lottery segment, both revenues and
gross profit were lower. Revenue declines were
most prominent under the Cash Pot and Lotto
components. Both the increased prize pay-out
for Cash Pot (71.61 versus 71.3 per cent) and
greater Lotto jackpot hit frequencies (6 versus
4) adversely impacted profit. At the end of No-
vember 2016, the PayDay game was suspended
due to its poor reception.
Pin codes registered 25.5 per cent higher rev-
enues but delivered a marginally lower pre-tax
profit; reduced commission on some products
contributed to the weaker profit.
Sports betting saw higher revenues and a
smaller loss. The reduced loss was attributed
to both cost management and the introduction
of QuickSports to the portfolio of options.
Gaming and hospitality revenues increased
while losses were cut by 80 per cent. Computer
upgrades and new machines on the gaming
floor helped drive this improvement.
Q1 2017 results
For the first quarter ended March 31, 2017,
SVL recorded a 19.7 per cent improvement in
revenues to J$13.39 billion accompanied by a
51 per cent jump in net profit to J$415.9 million
These strong results were driven by robust
advances under the lottery and gaming seg-
ments. Also, losses under its sports betting
segment contracted by 86 per cent to a modest
J$9.5 million. In addition, operating expenses
fell by almost 11 per cent to J$673.5 million.
EPS for the quarter swelled to J$0.1577 from
SVL's share price closed at J$4.64 on De-
cember 31, 2015. By January 26, 2016, its price
J$6.59, but then dropped to a low of J$4.27
on March 24. Thereafter, it traded within a
narrow range and closed 2016 at J$5.25.
Following the release of its strong Q1 results
on May 12, 2017, the price closed at J$7.51 on
May 16, 2017. It ended at J$7.99 on July 4 and
was recently quoted at J$7.96.
Excluding special dividends of J$0.23 paid
in calendar 2015, dividends for that year were
J$0.39. Total dividends paid in 2016 were
J$0.37. In 2017, dividends of J$0.09 and J$0.14
were paid on March 27 and May 31, respectively.
Relating the total 2016 dividend of J$0.37
to the recent price of J$7.96, the yield is 4.65
Linking that price to a trailing EPS of J$0.50
gives a trailing P/E multiple of 15.92 and price
to book value of 5.53.
Helping SVL's recent price appreciation is
its purchase on March 7, 2017 of the Caymanas
Park horse racing facility. The final purchase
price has not yet been settled, but the company
has started to operate the facility and made a
partial payment of J$305.94 million towards
the completion of this transaction. This new
income stream will help assure SVL's future
In next week's article, we will review Kingston
Wharves Ltd's 2016 results.
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