Supreme Ventures Limited expects the gaming sector to take a hit this year as tourism receipts and remittances slide, but is hedging its bets through diversification and a tighter rein on spending.

The company has also signalled that its gaming operations will likely be restructured and improved - a path it has trod before with some success - given the current results showing operating loss for that line of business in the year just ended.

Revenue for that segment rose by some $260 million to $1.22 billion at October 31, 2008, but the gaming/hospitality segment under which its video lottery terminals, lounges and restaurant operations fall still ended $181.6 million in the red, compared to $36 million of operating profit the year before.

Disposal income erosion

In a note to shareholders, Chairman Paul Hoo and President Brian George said the business was affected by the erosion of disposable income linked to declining economic conditions, inflation, the fallout from the failed alternative investment schemes and Tropical Storm Gustav which hit Jamaica last August.

Supreme Ventures, which is now valued by assets at $4.3 billion, is already positioned to launch into sports betting through a contract with INTRALOT and its acquisition of Big A Track Limited which will open for business by June, and is set re-enter the lottery market in Guatemala in March when SGL BVI Limited is expected back in play after more than a year of dormancy.

Making no assumptions

But the company, in its outlook for 2009, is making no assumptions about how it will perform in the year ahead, notwithstanding that it came through 2008 with strong profit growth of more than 59 per cent, and revenues which rose almost 12 per cent in the period.

At year end, the SVL group made net profit of $646 million off revenue of $21 billion, compared with $405 million profit and $19 billion of revenue in 2007.

Strong gains

SVL's operating expenses moved to $1.94 billion in the year, but though its spending bill was more than $600 million higher, it was insufficient to erase the strong gains made in the clampdown on the costs associated with selling its games. SVL shaved more than a billion off its direct expenses to report just under $3 billion of gross profit, compared with $1.96 billion in the 2007 period.

Cash Pot remained the premier income generator, accounting for $15 billion of the near $18.9 billion that lottery games contributed to total revenue. Pick 3 this year surpassed Lotto with earnings of $1.4 billion, up by almost $300 million in a year.

Drop in lotto sales

Lotto itself fell from $1.3 billion to $1.1 billion.

Overall, operating profit from lottery games more than doubled from $449 million to $1.1 billion. Total operating profit, however, was lower than the contribution of the games to earnings at $1.05 billion because of the loss recorded by the gaming lounges.

For the first time since its listing in 2005, the company also paid dividend to shareholders totalling $421 million.

Its balance sheet assets also strengthened by some $400 million, while shareholder equity increased by $500 million to $2.95 billion.