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Phumelela loses to rand
April 9, 2010
Gaming company Phumelela was hit by the strengthening of the rand in the six months to January, which turned what would have been a 12 percent increase in its income from overseas into a 3 percent drop to R55 million.
Despite this, and the recessionary conditions for most of the period under review, it lifted total revenue for the first half of its financial year by 9 percent to R447.4m.
It posted a 21 percent rise in operating profit to R72.4m and a 2 percent jump in attributable earnings to R38.6m, but headline earnings a share slipped by 6 percent to 47.1c.
Income from bookmaker's levies, unclaimed dividends, stable rentals and local and international broadcasting fees fell by 1 percent to R109.7m.
The company purchased a further 16.5 percent stake in fixed odds bookmaker Betting World at a cost of R12.9m, taking its total shareholding to a controlling 59 percent. This helped to increase its local revenue by 11 percent to R392.3m.
Without the contribution from Betting World, the directors say, this revenue would have dipped by 1 percent.
Phumelela originally concentrated on horseracing but about five years ago it started taking bets on soccer in this country and overseas. The directors say income from this has risen by 25 percent on the run-up to the World Cup.
Chief executive Riaan du Plessis said Phumelela itself was not yet taking bets on the World Cup, but Betting World was doing so, with Spain the current favourite to win the soccer tournament. He believed some bets were being made on Bafana Bafana.
The group's operations remained "strongly cash generative although the balance dipped from R78.4m to R59.1m", Du Plessis said. "Debt is insignificant and relates to an element of gearing within the Betting World business."
Describing the results as satisfactory, he said consumer spending had come under increasing pressure in a depressed economic climate.
Totalisator revenue generated by local and international horseracing fell by 5 percent. The weather had added to operational challenges, with some UK race meetings being cancelled because of the severe winter, with heavy snowfalls. Heavy rains in South Africa had also resulted in the cancellation of some meetings.
Discussing investment in horseracing, he said the group had spent R45m on completing its illumination project at Turffontein racecourse, ensuring "a quality night racing experience for our patrons".
In addition to this, R5.8m was spent on upgrading the training and racing facilities at Turffontein and the Vaal.
Du Plessis added that he expected both local and international trading conditions to remain challenging in the second half. Management would continue to focus on cost containment and revenue growth through the use of technology and the introduction of new types of betting.
It would also look at alternative international business opportunities.
The shares rose 2.31 percent to R9.31 on the JSE yesterday.
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