Supreme Ventures Limited posted net profit after tax for the first quarter of $301 million, a 64 percent increase over $184 million for the comparative period in 2012. The improvement was directly attributable to low lottery game payments for the quarter and a huge change to taxation charge on profit. While pretax profit climbed by $38 million, the tax on profit fell from $162 million in 2012 to just $82 million in 2013. The reduction in taxation is not sustainable. The rate used in the quarter was 25 percent, going forward it will be 30 percent. In all likelihood the charge for the first quarter may also have to be adjusted upwards to 30 percent as well.
“We continue to remind our investors that volatilities in game liabilities can adversely impact profitability in any financial quarter. The overall profitability of the company was also positively impacted by a $791.3 million reduction in direct expenses, reorganization of the company’s operating structure and interest income”, a management statement said.
Challenges | The second quarter onwards is poised to be a very challenging, as new tax measures for the sector took effect in April 2013. The tax package aims to collect a further $1.5 billion from the gaming industry.
The measures increase the tax rate for each lottery game from 17 percent to 20 percent and 23 percent to 25 percent respectively. The Company has taken the decision to absorb the fees for 2013, in light of what they see as uncertainty with the implementation process for this new licensing regime. They also speak of the elimination of the unclaimed prize allocation previously retained by the company. This allocation now has to be paid over to the Betting Gaming and Lotteries Commission. The effect of these new tax measures will no doubt affect the Company’s ability to achieve the levels of profitability projected over 2012.
Revenues | Revenue for the quarter was down 9 percent to $7.4 billion compared to $8.15 billion for the corresponding quarter in 2012. The gaming company management indicated that the decline was mainly due to decreases in lottery and VLT revenues of 11 percent and 39 percent respectively when compared to the same period in 2012. The significant decline in VLT revenues was directly attributable to closure of the Coral Cliff gaming lounge in Montego Bay for refurbishing which was rebranded and reopened as Acropolis Montego Bay on 7th March. Acropolis Portmore was also temporarily closed in January for refurbishing and new layout of the gaming floor. It is yet to be reopened. The Odyssey Gaming Lounge opened on 7th February and is enjoying early market support.
The Earnings per Share was $0.11, compared to $0.07 for the corresponding period in 2012.
The company has equity of $4 billion and borrowed debt of only $324 million. Cash was $1.45 billion at the end of March, more than enough to cover short term liabilities.
A dividend of $0.10 per share amounting to $263.725 million was paid in March. The company says it continues to execute an aggressive dividend payment policy, of quarterly payments based on the company’s performance.
During the quarter, the company commenced a scheme of amalgamating the betting, gaming and lottery operations of its subsidiaries into a single operating entity called Prime Sports (Jamaica) Limited.
The Betting Gaming and Lotteries Commission renewed the lottery license which has been issued to Prime Sports (Jamaica) Limited and will expire in January 2033. The company’s Bookmaker’s Permit was also renewed and issued to Prime Sports (Jamaica) Limited with the next renewal date being 31st March 2015.
Stock outlook | The stock traded on Monday, 2oth May at $3, up from $2.80 before the release of the results and is up from $2.60 at the start of May. Investing in the stock with the hope of short-term gains seem to be a bit of a gamble at this time.
[…] with 17,800 shares changing hands, Seprod rose 2 cents to $15.95 with 24,855 shares trading and Supreme Ventures ended at $4.75 after losing 5 cents with 65,893 shares changing […]