China LotSynergy Holdings Ltd, a provider of technology and services for mainland China’s lottery market, on Thursday posted a net loss of HKD148.1 million (US$19.1 million) for the first half of 2015, compared to a net profit of HKD54.9 million a year earlier. The firm said the loss was mainly due to an impairment of goodwill of approximately HKD95.3 million.
The lottery supplier recorded a turnover of about HKD522.5 million in the six months to June 30, up by 13.5 percent from the prior-year period.
Cost of sales and services in the period went up by 6 percent year-on-year to HKD136.6 million, the firm said in a filing to the Hong Kong Stock Exchange. General and administrative expenses rose 182 percent year-on-year to HKD282.6 million.
China LotSynergy is engaged in the provision of technology and services for lottery systems, terminal equipment, gaming products – and their operation – in mainland China’s lottery market. The principal businesses range from video lottery terminals (VLT), computer-generated ticket games and KENO-type lottery to new media lottery services.
During most of the reporting period the company was the exclusive terminal equipment provider for China welfare lottery’s VLT business. The firm noted in its filing that the VLT supply contract had expired on June 28 without any confirmation of renewal.
China LotSynergy said it had consulted with China Welfare Lottery Centre on the status of the procurement procedures for the new supply contract. But the firm added that as such procedures for the new supply contract were not yet finalised, its management “decided to make an impairment of goodwill from the VLT business in amount of approximately HKD95.3 million”.
For the six months ended June 30, the revenue and profit generated from the VLT business was approximately HKD444 million and HKD260 million respectively, according to Thursday’s filing.
China LotSynergy said it expects “a material impact on its financial position if the group is unable to obtain the new supply contract”.
In commentary accompanying the results, the firm said its business operations “thrived despite slowing growth in the overall China lottery market, with the VLT and computer-generated ticket games businesses achieving large year-on-year revenue growth”.
Mainland China’s lottery sales grew to approximately RMB187.68 billion (US$30.7 billion) in the first half of 2015, up 5.2 percent year-on-year, show data released by the country’s Ministry of Finance. Sales for July however – outside China LotSynergy’s current results reporting period – declined 27.3 percent year-on-year. As a consequence, the combined sales of China’s sports lottery and welfare lottery in the first seven months of 2015 fell by 0.4 percent year-on-year.
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