Mar 2009 Financial News

Supreme Ventures bets on US$ 'super lotto' - To launch game in Jamaica, Caribbean Starting jackpot US$2m

Mar 27, 2009

In a bid to bolster flat revenues and sagging profits, listed gaming company Supreme Ventures Limited (SVL) has unveiled plans to launch in four months a US dollar lottery game across six Caribbean countries.

If the Jamaican gaming watchdog, the Betting Gaming and Lotteries Commission gives the nod, the Super Lotto, with a starting jackpot of US$2 million, will hand SVL the breakthrough into the overseas market it has sought for some time, and send another US$100 million in annual revenue to the company's bottom line, shareholders were told this week.

The game, with expected average individual winnings of some US$8 million, will also see wagers in Jamaica, the Dominican Republic, Barbados, the Turks and Caicos Islands, Anguilla and Antigua also pocketing secondary cash prizes.

Targetted rollout date is July, SVL president and chief executive officer, Brian George announced at the company's annual general meeting (AGM) at the Hilton hotel in Kingston on Wednesday.

A J$250, or around US$3 ticket price is being considered for the game, with, according to George, 72 per cent of sales going to the jackpot. The odds of a win or payout is one in 72, according to the lottery company.

SVL is looking to pull in US$40 million in annual sales from Jamaica alone for Super Lotto.

Lottery gaming contributes 88 per cent to the company's income stream, which also includes slot machines/gaming lounges, phone cards sales and remittance services.

Despite having more than doubled the starting jackpot on its flagship Lotto game to $15 million last year, increased the Lotto ticket price by 67 per cent to $50, and stepped up marketing, the twice weekly game recorded a 16.7 per cent drop in sales and an 18 per cent fall-off in profits from $1.3 billion in 2007 to $1.1 billion in 2008.

For the year, SVL saw a 59 per cent hike in net profit to $646 million, and a near 12 per cent rise in revenue to $21.2 billion on the ever increasing popularity of its most lucrative lottery game, Cash Pot, sales from which rose $1.5 billion to $15.2 billion.

$342.84 million jackpot for shareholders

The company has announced a 13 cent per share dividend - a $342.84 million jackpot for shareholders - payable in May.

But SVL profits were depressed for the 2009 first quarter, tumbling close to 20 per cent in the period to the end of January compared to the same period the year before - dragged down by anaemic revenue growth and burgeoning Cash Pot payouts.

For the period net profit totalled $172.9 million, down from $214.9 million for the same period last year.

Total revenue grew a mere eight per cent to roughly $6 billion for the quarter, while expenses grew marginally faster at nine per per cent to $5.14 billion.

The principals of SVL are upbeat about the prospects of the pan-Caribbean lottery game catapulting the business, listed on both the Jamaican and Trinidad and Tobago stock markets, into other potentially lucrative markets in Central and South America, even as it continues to eye mainland North America. According to its CEO, previous attempts to participate in US-based games have so far been unsuccessful.

With its latest quarterly financials showing ballooning expenses, SVL is banking on its partnership with US-based international gaming technology firm, GTECH Corporation, to keep the lid on the cost to SVL for the new venture.

Online gaming technology support

SVL has a deal with the company to 2016 for the provision of online gaming technology support.

"The Super Lotto is almost zero per cent expenditure as we are working with GTECH under an existing agreement," George told shareholders.

"One of the few areas in which we may see an outlay is in the draws which must be televised," George told shareholders.

The SVL stockholders meeting, at which directors also announced a dividend of 13 cents per share payable on May 6, George fended off criticisms over the fall in the price of shares, which currently trade at $2.30 on the Jamaican exchange.

Noting that the share price was beyond the control of the company, the SVL boss said the management would remain focused on core objectives of improving revenue and returning value to its investors.

He explained much of the dynamics accounting for the company's recent quarterly performance, which, according to the CEO, was affected by $96 million in new expenses related to the recent restructuring of its Coral Cliff operation in Montego Bay and foreign exchange losses of $6 million.

Meanwhile, SVL expects earnings this year to be affected by the recessionary economy, marked by higher interest rates on loans, relatively high inflation, mounting job losses, revenue downturn in key sectors and a significant drop in remittances.

But the gaming company says it is taking some solace from research, which it says, show that gaming products do well in hard times. Although gaming lounges have seen a 30 per cent fall-off in business, George said SVL would continue to implement marketing and other strategies to maintain its client base.

This year, he said, the company will be increasing its effort to reach males aged 25 to 45, who, according to SVL, do not currently have a significant presence in the gaming industry.

To pull in more business from this cohort, Supreme Ventures is looking to set up sports bars at its Acropolis facility in Kingston and at Montego Bay's Coral Cliff to offer fixed odds sports betting on football, cricket, track and field and the American NBA basketball league.


Source:
avia.ustanny@gleanerjm.com
Friday March 27, 2009
Jamaica Gleaner

http://www.jamaica-gleaner.com/gleaner/20090327/business/business1.html