SVL Shareholder’s Jackpot Shrinks Due to Beryl

  • With revenues remaining largely flat, SVL reported earnings of $1.70Bn for the nine months ending September 2024, a 17.9% decline compared to the previous year. The results largely reflect a decline of 51.8% decline in earnings in the second quarter, which was due to a one-off lottery surplus that was recorded in the prior year.
  • The company estimates that it lost $1Bn in gross ticket sales due to damages sustained from Hurricane Beryl to its retail networks in Clarendon, Manchester, St. Elizabeth, and Westmoreland during the quarter. As a result, it increased by just 0.8% over the nine-month period.
  • That being said, overall costs were well contained, mitigating the impact of weaker revenues on the bottom line. Direct costs, which include payouts to horse racing and agents' commissions, rose by 1.4% during the period, totaling $30.03Bn. Selling and Administrative Expenses amounted to $6.07Bn, a 1.1% year-over-year increase.
  • SVL’s stock price has been on a steady downtrend since the start of the year and has fallen by 19.8% year to date. However, the sharpest declines appeared to have occurred after the release of the weaker Q2 earnings in July (see Figure 1). The stock closed Monday’s trading session at $21.74, with a P/E ratio of 28.2x, higher than the Junior Main Market Entertainment Sector average of 21.7x.
  • SVL's performance may face further challenges in the current quarter as the company’s distribution network is still not fully restored. This situation could impact lottery sales and, ultimately, its overall performance.
  • However, innovation continues to be a cornerstone of SVL’s growth strategy as the company actively seeks to engage the public with exciting new games, leveraging its digital channels. By continually introducing fresh and dynamic offerings, SVL aims to enhance the gaming experience, drive business growth, and capture the interest of a wider audience. This commitment to innovation is essential for staying competitive in a rapidly evolving market and should help to bolster its performance over the medium term.

(Source: JSE & NCBCM Research)