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Cape Town - Tote operator Phumelela Gaming and Leisure [JSE:PHM] has registered a 26% rise in headline earnings per share (Heps) to 114.46 cents for the 12 months to July 31 2013 on strong international growth and bigger contributions by equity accounted investees.
"In South Africa it is our traditional business of horse racing and tote betting that is under pressure. It is a very labour intensive business, which is 22 times more labour intensive than a casino per R1m of gross gaming revenue," Rian du Plessis, CEO of Phumelela, told Fin24 on Tuesday.
"We are talking to government and book makers about this in order to find a more equitable funding model to level the playing fields a bit. We all bet on sport, but the funding burden is disproportionate."
Du Plessis said without healthy horse racing Phumelela will have nothing to "export".
"If we have bad quality horse racing in South Africa then our international business will decline. Luckily we have a very healthy one currently," he said.
"I am very excited about the results all in all."
Results
Profit in the domestic market continues to decline, however, according to the results released on Tuesday.
The group's income rose 8% to R1bn and profit before tax (PBT) on international operations was up 56% to R97m.
International operations now account for 87% of group profit, while PBT from local operations are down 59% to R14m. Operations on the Isle of Man run 24 hours a day, with only 26 seconds of downtime per day.
The start of trading with IOM by Phumelela’s Australian partner Tabcorp helped drive growth.
The board declared a final cash dividend from income reserves of 60c a share - in increase of 18%.
A B-BBEE AAA level 2 contributor status was accomplished.
The group's PBT is up 15% at R111m on the back of the surge in international profits, which includes a 72% rise in the profit share from equity accounted investees, primarily the group's stake in the Isle of Man (IOM) totalisator.
Income from the export of South African thoroughbred horseracing media rights was up 28%. Rand's weakness was beneficial on the translation of offshore earnings.
“Despite a pleasing 60% increase in net betting income from tote sports betting and a 197% increase in net betting income from fixed odds betting on lucky numbers, PBT from local operations declined by 59%,” said Du Plessis.
Local tote revenues on horseracing fell 5%. Without the contribution of the group’s Betting World fixed odds bookmaker, Phumelela’s local operations made a R7,7m loss.
Total operating expenses, including stakes, increased by 10% to R881m. Pressure on expenses was driven by higher costs relating to utilities, transport, training, wages, rentals and CSI expenditure.
“The group invested a further R104m in its capital infrastructure,” Du Plessis said.
“This included R40m invested in a synthetic track and a general upgrade of facilities at the Fairview racecourse in the Eastern Cape.”
The project was completed after year-end.
Investment in the continued expansion of Betting World’s retail footprint was maintained.
Local operations
Income from local operations rose 6% to R902m, driven by a 17% rise in fixed odds income to R125m.
Income from the tote, racing and other operations rose 5% to R777m.
The tote’s net betting income was underpinned by a 60% rise in sports pools betting income to R142m – largely soccer bets.
Net betting income on horseracing fell 5% to R461m, impacted by a fall in the number of race meetings and bad weather.
Net betting income from tote agencies at bookmakers fell by 17%. Some bookmakers ceased agent operations, preferring to offer the "open bet".
Fixed odds betting turnover rose 13%. Horseracing bets accounted for 61% of volume, with 22% on other sports and 17% on lucky numbers.
Despite tighter betting margins, net betting income increased by 12%, though horse racing’s contribution was down 15% to R55m.
Other sports were up 4% to R20m. Income on lucky numbers rose 197% to R30m.
Prospects
Losses incurred in the group’s traditional business of horseracing and tote betting remains a concern, said Du Plessis.
“Management has made representations to government and the gambling boards and entered into discussions with bookmaker associations with a view to reaching a more equitable funding mechanism for the sport and is hopeful of achieving tangible results during the 2014 financial year," he said.
“The group’s sports pools, fixed odds operations and international operations have started the new period well. Initial indications are that changes to the Pick 6 rules have had a markedly positive effect on pool sizes."
- Fin24
"In South Africa it is our traditional business of horse racing and tote betting that is under pressure. It is a very labour intensive business, which is 22 times more labour intensive than a casino per R1m of gross gaming revenue," Rian du Plessis, CEO of Phumelela, told Fin24 on Tuesday.
"We are talking to government and book makers about this in order to find a more equitable funding model to level the playing fields a bit. We all bet on sport, but the funding burden is disproportionate."
Du Plessis said without healthy horse racing Phumelela will have nothing to "export".
"If we have bad quality horse racing in South Africa then our international business will decline. Luckily we have a very healthy one currently," he said.
"I am very excited about the results all in all."
Results
Profit in the domestic market continues to decline, however, according to the results released on Tuesday.
The group's income rose 8% to R1bn and profit before tax (PBT) on international operations was up 56% to R97m.
International operations now account for 87% of group profit, while PBT from local operations are down 59% to R14m. Operations on the Isle of Man run 24 hours a day, with only 26 seconds of downtime per day.
The start of trading with IOM by Phumelela’s Australian partner Tabcorp helped drive growth.
The board declared a final cash dividend from income reserves of 60c a share - in increase of 18%.
A B-BBEE AAA level 2 contributor status was accomplished.
The group's PBT is up 15% at R111m on the back of the surge in international profits, which includes a 72% rise in the profit share from equity accounted investees, primarily the group's stake in the Isle of Man (IOM) totalisator.
Income from the export of South African thoroughbred horseracing media rights was up 28%. Rand's weakness was beneficial on the translation of offshore earnings.
“Despite a pleasing 60% increase in net betting income from tote sports betting and a 197% increase in net betting income from fixed odds betting on lucky numbers, PBT from local operations declined by 59%,” said Du Plessis.
Local tote revenues on horseracing fell 5%. Without the contribution of the group’s Betting World fixed odds bookmaker, Phumelela’s local operations made a R7,7m loss.
Total operating expenses, including stakes, increased by 10% to R881m. Pressure on expenses was driven by higher costs relating to utilities, transport, training, wages, rentals and CSI expenditure.
“The group invested a further R104m in its capital infrastructure,” Du Plessis said.
“This included R40m invested in a synthetic track and a general upgrade of facilities at the Fairview racecourse in the Eastern Cape.”
The project was completed after year-end.
Investment in the continued expansion of Betting World’s retail footprint was maintained.
Local operations
Income from local operations rose 6% to R902m, driven by a 17% rise in fixed odds income to R125m.
Income from the tote, racing and other operations rose 5% to R777m.
The tote’s net betting income was underpinned by a 60% rise in sports pools betting income to R142m – largely soccer bets.
Net betting income on horseracing fell 5% to R461m, impacted by a fall in the number of race meetings and bad weather.
Net betting income from tote agencies at bookmakers fell by 17%. Some bookmakers ceased agent operations, preferring to offer the "open bet".
Fixed odds betting turnover rose 13%. Horseracing bets accounted for 61% of volume, with 22% on other sports and 17% on lucky numbers.
Despite tighter betting margins, net betting income increased by 12%, though horse racing’s contribution was down 15% to R55m.
Other sports were up 4% to R20m. Income on lucky numbers rose 197% to R30m.
Prospects
Losses incurred in the group’s traditional business of horseracing and tote betting remains a concern, said Du Plessis.
“Management has made representations to government and the gambling boards and entered into discussions with bookmaker associations with a view to reaching a more equitable funding mechanism for the sport and is hopeful of achieving tangible results during the 2014 financial year," he said.
“The group’s sports pools, fixed odds operations and international operations have started the new period well. Initial indications are that changes to the Pick 6 rules have had a markedly positive effect on pool sizes."
- Fin24
