Intangible assets declined marginally to J$644.9 million from J$650.8 million previously. The largest component, trademarks and licences, declined from J$400.7 million to J$396.8 million. Goodwill was unchanged at J$190 million. Software usage rights fell to J$48.3 million from the previous level of J$56.4 million.
Total liabilities rose to J$1.86 billion from the 2013 figure of J$1.68 billion. The major component, trade and other payables, increased marginally to J$1.14 billion from J$1.13 billion. Within this category, the main elements were trade payables and service contractor fees. The former advanced to J$617.2 million from J$555.6 million while the latter increased from J$130.7 million to J$162.5 million as at December 2014.
Another significant component, prize liabilities, rose to J$599.1 million from J$320.6 million as at the end of 2013. The 2014 figure saw local lotto games balances jump from J$130.8 million to J$339.5 million; this figure includes an amount accrued for an advertised jackpot of J$175 million.
In addition, the multi-jurisdictional lottery game increased to J$255.3 million from J$188 million as at December 2013. This game is played in several countries outside Jamaica, including the Dominican Republic, Paraguay and Barbados. (Subsequently, on March 6, 2015, the jackpot of J$179.5 million (BDS$3.11 million) was won by a Barbados national.)
Equity improvements
Stockholders' equity advanced to J$4.05 billion from the previous level of J$3.64 billion.
Retained earnings improved by a net of J$402.5 million to close 2014 at J$2.02 billion. The current year's profit of J$929.9 million boosted this figure while dividends to shareholders of J$527.5 million lowered the net result.
With 2,637,254,926 shares outstanding, each share has a book value of J$1.53 (2013: J$1.38).
Income and profits
Total revenues advanced by 21 per cent to reach J$41.3 billion from 2013's J$34.1 billion.
The largest component, Cash Pot, generated revenues of J$26.3 billion versus J$23 billion previously. Two new games also made significant contributions. Money Time, which started in October 2014, garnered J$1.18 billion in revenues to the year-end. In addition, Top Draw, which started in June 2014, brought in revenues of J$759 million.
However, total direct expenses clawed back J$37.59 billion in 2014; this was 22 per cent greater than the J$30.81 billion incurred for 2013. Among the more significant direct expenses were lottery and sports betting prizes (2014: J$24.8 billion; 2013: J$20.7 billion), pin codes (2014: J$4.72 billion; 2013: J$3.34 billion) and lottery and gaming taxes (2014: J$2.21 billion; 2013: J$1.82 billion).
These changes allowed SVL to report a 2014 gross profit of J$3.72 billion; this was 11.8 per cent greater than the J$3.33 billion earned for 2013.
Operating expenses declined to J$2.65 billion from 2013's J$2.77 billion. Core expenses, such as staff cost and rental and utilities, did increase; the former rose to J$668.9 million from J$627 million while the latter moved to J$292.7 million from J$286 million.
On the other hand, many expenses did decline. These included professional fees, irrecoverable general consumption tax (GCT), local and foreign travel, complimentary tokens, security and bank charges. The wide range of expenses that fell suggests that a general mood of cost consciousness must have infused the organisation during the past year!
These changes allowed SVL to register a profit from operations of J$1.07 billion; this result is J$510.7 million or 90.7 per cent greater than the 2013 result of J$563.3 million.
In line with higher cash balances, interest income rose to J$75.7 million from 2013's J$46.4 million. The slower rate of devaluation of the Jamaican dollar during 2014 contributed to a decline in net foreign exchange gains, which registered at a modest J$6 million, down from J$30.7 million in 2013.
Finance costs also moved down to J$16.3 million from the previous level of J$28.5 million. Meanwhile, other gains, mainly GTECH reimbursements and bad debt recoveries, came in at J$76.5 million, down from J$99.2 million in 2013.
These movements saw the pre-tax profit for 2014 register at J$1.22 billion; this result was 71 per cent greater than the J$711 million recorded for 2013.
Helped by a lower primary tax rate of 25 per cent and an employment tax credit of almost J$50 million, the effective tax rate dropped to 23.5 per cent (2013: 32.1 per cent); this resulted in SVL recording an after-tax 2014 profit of J$929.9 million. This was 92.7 per cent greater than the J$482.6 million recorded for 2013.
These results translated into 2014 EPS of J$0.3526 versus J$0.1830 for 2013.
Segment performance
Using only about half of SVL's total assets, the largest segment, lottery, generated substantially all of the company's pre-tax profit.
Pin codes generated a strong improvement in revenues accompanied by a useful contribution to profits.
Both gaming and hospitality and sports betting appear to be "treading water" and have not yet begun to make a contribution to the bottom line.
Dividends and share price
During calendar 2013, SVL paid dividends totalling J$0.21. In calendar 2014, dividends disbursed were J$0.23. In March 2015, the Board of SVL agreed to pay a regular dividend of J$0.08 and a special dividend of J$0.23; these payments reflect the strong results generated during 2014.
Almost exactly one year ago, on May 6, 2014, SVL's share price was J$2.10. This price closed at J$3.50 on April 29, 2015, reflecting a capital appreciation of almost 67 per cent.
Over the one-year period, investors have enjoyed a total return of J$1.63, comprising the dividends paid in 2014 of J$0.23 together with a capital gain of J$1.40. This represents a percentage gain of 77.6 per cent. If we were to include the dividends paid or announced in early 2015, the total returns would be much higher.
Dividends paid with respect to the 2014 fiscal period totalled J$0.48; when we relate those payments to the recent price of J$3.50, investors derive a yield of 13.71 per cent. This high yield strongly suggests that the share price is (or, was) significantly under-valued.
Last Thursday, April 30, SVL's Board also met to evaluate its first quarter's performance and to determine the payment of its first interim dividend for 2015.
Future prospects
On April 18, 2011, SVL signed a new contract with G-Tech which extends their relationship to 2026. This creates a high level of predictability for the gaming industry in Jamaica.
One of the societal contributions from this industry is that it funds a CHASE fund in Jamaica, which provides financing for projects in the areas of culture, health, arts, sports and early childhood education.
These connections with the wider society help mitigate any harmful side effects with which the gaming (alcohol and tobacco) industries are sometimes associated.