Wrap Text
Audited preliminary results for the year ended 31 July 2015 and dividend declaration
Phumelela Gaming and Leisure Limited
(Incorporated in the Republic of South Africa)
Registration number: 1997/016610/06
Share code: PHM ISIN: ZAE000039269
Audited preliminary results for the year ended 31 July 2015 and dividend declaration
Key features of the trading year
Phumelela ranked eighth most empowered company listed on the JSE in 2015 by Empowerdex
Total tax contribution up 10% to R218 million
Good growth in tote betting on soccer and other sports
Operating profit from fixed odds continuing operations increases by 153% to R21 million
High costs to combat abuse of intellectual property by certain bookmakers and related matters
Improved second half result from PGI
Earnings per share reduced by 27% to 105,98 cents
Impairment of Betting World Nigeria and a mark-to-market adjustment of ASL Mauritius
Adjusted headline earnings per share increased by 7% to 141,48 cents
Headline earnings per share reduced by 11% to 117,06 cents
A maintained final gross dividend of 60 cents declared
Mr B McLoughlin CA(SA) Chief Financial Officer was responsible for supervising the preparation of the annual
financial statements and preparing the summarised financial statements. The financial statements have been
audited in terms of section 30 of the Companies Act of South Africa.
Summarised consolidated statement of comprehensive income
% Audited Audited
change 12 months 12 months
31 July 31 July
2015 2014
R’000 R’000
Income
- Local operations 10 1 067 444 967 406
- International operations (12) 198 761 224 703
6 1 266 205 1 192 109
Gross betting income
- Local operations 13 1 044 329 927 253
Net betting income
- Local operations 13 840 506 746 591
Other operating income
- Local operations 18 230 269 195 421
- International operations (12) 205 416 234 466
Investment income
- Local operations 38 1 692 1 228
- International operations 382 1 587
Net income 8 1 278 265 1 179 293
Operating expenses and overheads
- Stakes 2 (189 772) (186 299)
- Local operations 12 (819 763) (729 641)
- International operations (14) (139 604) (162 147)
Profit before finance costs, income tax, depreciation and amortisation 28 129 126 101 206
Depreciation and amortisation 27 (49 825) (39 373)
Profit from operations 28 79 301 61 833
Finance costs
- Local operations 393 (5 828) (1 183)
Profit before share of profit of equity-accounted investees and fair
value adjustment to investment 21 73 473 60 650
Profit on conversion of equity-accounted investee to investment 11 135
Equity-accounted investee impaired (8 545)
Share of profit of equity-accounted investees (19) 47 060 57 983
Profit before fair value adjustment (14) 111 988 129 768
Fair value adjustment to investment (12 753)
Profit before income tax expense (24) 99 235 129 768
Income tax expense 2 (19 713) (19 373)
Profit for the year (28) 79 522 110 395
Other comprehensive income for the year
Items that may subsequently be reclassified to profit or loss
- Exchange differences on translating foreign operations (124) 780 (3 313)
Items that will never be reclassified to profit or loss
- Remeasurement of defined benefit obligation 1 223
- Tax effect (342)
Total comprehensive income for the year (26) 80 302 107 963
Profit attributable to:
Ordinary equity holders of the parent (28) 79 516 110 409
Non-controlling interest 6 (14)
Profit for the year (28) 79 522 110 395
Total comprehensive income attributable to:
Ordinary equity holders of the parent (26) 80 296 107 977
Non-controlling interest 6 (14)
Total comprehensive income for the year (26) 80 302 107 963
Earnings per ordinary share (cents)
- Basic (27) 105,98 146,07
- Diluted (27) 101,14 139,13
Supplementary statement of comprehensive income information
% Audited Audited
change 12 months 12 months
31 July 31 July
2015 2014
R’000 R’000
Reconciliation of headline earnings
Earnings attributable to equity holders of parent (28) 79 516 110 409
Adjusted for:
Profit on conversion of equity-accounted investee to investment (11 135)
Equity-accounted investee impaired 8 545
Net (profit)/loss on disposal of property, plant and equipment (315) 804
Tax effect 88 (225)
Headline earnings (12) 87 834 99 853
Headline earnings per share (cents) (11) 117,06 132,10
Diluted headline earnings per share (cents) (11) 111,72 125,83
Net asset value per share (cents) (5) 600,79 633,04
Reconciliation of headline earnings to adjusted headline earnings
Headline earnings 87 834 99 853
Fair value adjustment to investment 12 753 (1 478)
Tax effect (2 380) 276
Legal and consulting fees associated with combating abuse of
intellectual property and related legal matters 11 045 1 242
Tax effect (3 093) (348)
Adjusted headline earnings 7 106 159 99 545
Adjusted headline earnings per share (cents) 7 141,48 131,70
Dividend to shareholders
Interim dividend
Dividend per ordinary share (cents) 28,00 28,00
Final dividend
Dividend per ordinary share (cents) 60,00 60,00
Number of shares in issue 74 525 485 75 586 838
Weighted average number of shares in issue for basic, headline
and adjusted headline earnings per share calculation 75 032 549 75 586 838
Weighted average number of shares in issue for diluted earnings
per share calculation 78 616 685 79 356 413
Summarised consolidated statement of financial position
Audited Audited
as at as at
31 July 31 July
2015 2014
R’000 R’000
ASSETS
Non-current assets 575 088 567 518
Property, plant and equipment 444 682 426 712
Goodwill 12 362 12 362
Intangible assets 52 104 48 733
Interest in equity-accounted investees 51 732 34 954
Investments 695 18 263
Long-term loan 10 603 19 929
Deferred taxation asset 2 910 6 565
Current assets 200 751 220 537
Inventories 879 5 849
Trade and other receivables 100 812 114 705
Pension fund surplus 7 075 973
Income tax receivable 10 941 4 106
Assets held for sale 23 046
Cash and cash equivalents 57 998 94 904
Total assets 775 839 788 055
EQUITY AND LIABILITIES
Total equity 447 743 478 791
Share capital and premium 1 863 1 890
Retained earnings 445 743 477 250
Non-distributable reserves 137 (643)
Equity attributable to ordinary shareholders 447 743 478 497
Non-controlling interest 294
Non-current liabilities 54 735 9 397
Deferred taxation liability 4 652 2 555
Borrowings 49 595 6 317
Finance lease liability 488 525
Current liabilities 273 361 299 867
Trade and other payables 249 707 285 999
Bank overdrafts 11 537
Borrowings 2 400 2 400
Contingent consideration liability 707 4 056
Income tax payable 1 625 408
Betting dividends payable 7 385 7 004
Total equity and liabilities 775 839 788 055
Summarised consolidated statements of cash flow
Audited Audited
12 months 12 months
31 July 31 July
2015 2014
R’000 R’000
Net cash inflow from operating activities 3 761 40 724
Cash generated by operations 117 405 103 360
Movements in working capital (23 446) 22 685
Cash generated by operating activities 93 959 126 045
Income tax paid (19 579) (20 436)
Investment income received 1 598 2 815
Finance costs paid (5 828) (1 183)
Dividends to shareholders (66 389) (66 517)
Net cash outflow from investing activities (54 057) (11 293)
Acquisition of property, plant and equipment
and intangible assets (84 037) (66 565)
Proceeds on disposal of property, plant and
equipment and intangible assets 1 322 2 244
Dissolution of PGE joint operation 24 031
Investment in equity-accounted investee and
contingent settlements on investments (33 801) (9 650)
Loans recouped/(advanced) 10 271 (12 495)
Dividend received from equity-accounted investees 52 188 51 142
Net cash inflow from financing activities 1 073 8 586
Repayment of finance leases (474) (131)
Non-controlling interest acquired (130)
Net borrowings raised 43 278 8 717
Shares repurchased (41 601)
Net (decrease)/increase in cash and cash equivalents (49 223) 38 017
Effect of conversion of foreign operations on cash
and cash equivalents 780 (3 313)
Cash and cash equivalents at beginning of year 94 904 60 200
Cash and cash equivalents at end of year 46 461 94 904
Summarised consolidated statement of changes in equity
Share Non- Retained Equity Non- Total
capital distributable earnings attributable controlling equity
R’000 reserves R’000 to ordinary interest R’000
R’000 shareholders R’000
R’000
Balance at 31 July 2013 1 890 2 670 427 477 432 037 308 432 345
Total comprehensive income for the year (3 313) 111 290 107 977 (14) 107 963
- Profit for the year 110 409 110 409 (14) 110 395
- Remeasurement of defined benefit obligation 881 881 881
- Foreign currency translation reserve (3 313) (3 313) (3 313)
Transactions with owners recorded directly
in equity
- Share-based payment 5 000 5 000 5 000
- Dividends paid to equity holders (66 517) (66 517) (66 517)
Balance at 31 July 2014 1 890 (643) 477 250 478 497 294 478 791
Total comprehensive income for the year 780 79 516 80 296 6 80 302
- Profit for the year 79 516 79 516 6 79 522
- Foreign currency translation reserve 780 780 780
Transactions with owners recorded directly
in equity
- Loss on acquisition of non-controlling interest (130) (130) (130)
- Share-based payment (3 230) (3 230) (3 230)
- Shares repurchased (55) (19 791) (19 846) (19 846)
- Shares issued in terms of executive share
option scheme 28 (21 783) (21 783) (21 783)
- Dividends paid to equity holders (66 089) (66 089) (300) (66 389)
Balance at 31 July 2015 1 863 137 445 743 447 715 447 715
Results analysis
A year of continued innovation and diversification
Two sizeable non-trading items negatively impacted net attributable income - neither of which has a cash
effect on the Group result. Furthermore, abnormally high legal and consulting costs were incurred by the
Group. These three items collectively exceed R32 million or the equivalent of 32% of the Group’s pre-tax
income of R99 million.
The first of the non-trading items is a fair value adjustment of R13 million on the writing down of the
Group’s investment in Automatic Systems Limited (ASL) in Mauritius to market value as at year end. This is
due to the share price of ASL declining. The investment is classified as held for sale. The mark-to-market
loss on ASL is not adjusted for headline earnings per share (HEPS) calculation purposes and is therefore
included in HEPS.
The second non-trading item is a R9 million impairment of the Group’s 26% interest in Betting World Nigeria
Limited (BWN). This negatively affects attributable income but is adjusted for HEPS calculation purposes
and is therefore excluded from HEPS. The Group indicated at the interim stage that BWN was incurring losses
and that the company had approached controlling shareholders for additional funding. Shareholders in BWN
were not prepared to agree to provide their proportionate share of the funding and accordingly BWN ceased
trading on 13 March 2015. Our investment in BWN and all monies owed to us have accordingly been written
off in the R9 million impairment.
The third and final item is the R11 million in abnormally high legal and consulting fees expended in
combating abuse of intellectual property by certain bookmakers and related legal matters. This is a cost
to the Group that would ordinarily not occur to anywhere near the degree that it has.
The 28% decline in attributable profit to R80 million and the 27% decline in earnings per share (EPS) to
105,98 cents includes the negative impact of the two non-trading and non-cash flow items, namely ASL and
BWN, and the costs of abnormally high legal and related expenses.
The 12% decline in headline earnings to R88 million and the 11% decline in HEPS to 117,06 cents includes
the mark-to-market loss on ASL but excludes the BWN impairment.
The 7% increase in adjusted headline earnings to R106 million and the 7% increase in adjusted HEPS to
141,48 cents excludes the mark-to-market loss on ASL together with the tax effect thereon, it excludes
the BWN impairment and it also excludes the legal and related costs together with the tax effect
thereon.
The growth of 7% in adjusted headline earnings to R106 million was achieved notwithstanding a more
challenging international trading environment, particularly in the first half, that negatively
affected overseas derived income.
The Group’s total net betting income from local operations grew by 13% to R841 million.
Net betting income from local tote operations increased by 7% to R679 million. Net tote betting income
from sports other than horseracing grew by a pleasing 17% to R221 million and net tote betting income
on horseracing increased by 3% to R457 million.
Other operating income from our local operations grew by 19% to R219 million. Among some of the more
noteworthy items, share of profits from limited payout machines installed in retail outlets grew by
16% to R20 million, Gambling Board levies increased by 15% to R61 million and royalties and commingling
fees increased by 6% to R39 million. Tellytrack subscriptions were flat at R21 million. Stable rentals
were up by 4% to R8 million. A weaker Rand exchange rate resulted in a foreign exchange gain of
R12 million.
The 9% increase in expenses in the local operations excluding fixed odds to R681 million includes the
impact of the abnormally high legal and consulting fees associated with combating abuse of intellectual
property by bookmakers and related legal matters. Other than these expenses, we have kept a tight rein
on our normal running costs.
Prize monies increased by 2% to R190 million in accordance with the agreement with the Racing
Association.
Strong growth from soccer tote bets and other income resulted in a 59% reduction in the loss from local
operations excluding fixed odds to R9 million. Including equity-accounted investees, the loss before
tax reduced by 46% to R11 million from R21 million.
Profit from tote betting on sports other than horseracing, limited payout machines and fixed odds
continued with a very good performance through the second half and is going from strength to strength as
we invest in the development of an attractive offering for our customers.
Substantial business development expenses in a licensed and regulated industry results in a time lag
between up-front costs incurred, such as establishment and shop fitting of premises, employment and
training of personnel and day-to-day running expenses, incurred prior to trade commencing, and then
the income that subsequently flows.
Fixed odds betting on horseracing ended the year on a strong note with a 30% growth in net betting
income to R60 million. Net fixed odds betting income on sports other than horseracing increased by
a significant 96% to R38 million with fixed odds net betting income on numbers also putting in a
splendid performance by growing 31% to R64 million. Net betting income from fixed odds overall grew
by 42% to R162 million.
Operating expenses in our fixed odds operations increased by 32% to R138 million, mainly as a result
of the increase in the number of retail outlets off which revenue will flow in due course.
Phumelela’s complementary soccer, numbers and other sports betting offerings are popular with customers.
We facilitate this through the provision of increased weekly betting opportunities off an expanding retail
footprint. Betting World ended the year with 67 retail outlets in business, up 58% in less than two years.
Profit before income tax expense in our fixed odds business increased by a substantial 153% to R21 million.
We have the scope to further improve returns from our assets as a larger proportion of development costs
is in the base, providing us with positive operating leverage.
Net income from international operations, through which Phumelela has rights to export live visuals of
South African horseracing and import live horseracing from other countries, decreased by 13% to
R206 million. This decline is mainly as a result of reduced betting on South African horseracing via the
Isle of Man-based associate Premier Gateway International Limited (PGI) and by France, which delayed
commingling into Phumelela tote pools. Operating expenses, including intellectual property rights fees
and day-to-day running costs, decreased by 14% to R140 million. Profit from international operations
was down by 11% to R66 million.
New competitive dynamics affected PGI’s margins and betting volumes. PGI, which suffered a 38%
reduction in profit in the first half, earned a similar level of income in the second half of the financial
year to that of the corresponding period in 2014 as a result of improved contractual terms and thus closed
the year down 22%. Phumelela’s share of PGI’s profit of R45 million compares with R57 million in the
prior year.
The second half performance from PGI exhibited an improving momentum during the period which we
anticipate will be better reflected in the 2016 results. An exciting pipeline of new betting opportunities
has opened abroad, including commingling into Hong Kong’s tote pools.
Profit before tax for the international operations decreased by 16% to R111 million.
International operations contributed R111 million or 92% of Group profit before income tax expense of
R121 million, excluding the fair value adjustment of ASL and the impairment of the BWN investment. On a
comparative basis, profit before tax for the international operations was R131 million in the prior year which
equated to 111% of the Group profit before income tax expense of R119 million, excluding the profit of
R11 million on conversion of the equity-accounted investment in ASL to an investment.
Group profit before finance costs, tax, share of profit from equity-accounted investees, and the
mark-to-market loss on ASL increased by 28% to R79 million. If abnormally high legal costs incurred in
relation to the ongoing Tellytrack/bookmaker litigation are excluded, the like-for-like improvement in
Group profit is 43%.
Phumelela continues to invest in growth and development and in creating job opportunities, spending a
considerable R115 million on capital expenditure and acquisition of assets during the financial year.
Phumelela’s initiatives to bring more variety of betting opportunities to customers in South Africa and
expand the provision of South African horseracing content and betting thereon to international markets
is proving successful.
With effect from 1 November 2014, a strategic shareholding was acquired in Interbet, an online horseracing
and sports betting business based in the Western Cape. Interbet began as a betting exchange platform for
bookmakers and in the past decade has opened up web-based betting opportunities to the South African public.
This is an exciting new development that dovetails very well with our income diversification strategy.
Phumelela’s black economic empowerment credentials are an important component of its mandate to operate
in South Africa and a cornerstone of its financial viability and social responsibility to the broader
community. We are therefore proud of the fact the Company moved up to eighth place from 20th place on
the Johannesburg Stock Exchange in the most recent top 100 most-empowered companies for 2015 ranked by
Empowerdex. While the amended codes present a challenge for companies, Phumelela has nevertheless been
at the forefront of business transformation, achieving AAA level 2 B-BBEE status two years ahead of
schedule, with an ethos that this is not simply one of compliance, but also of business sustainability.
Financial position
Phumelela retains a sound financial position, with a substantial reserve borrowing capacity, and the
Group is invested in strategically well placed assets.
Property, plant and equipment have a carrying value of R445 million, goodwill and intangibles are valued
at R64 million and equity-accounted investees are valued at R52 million. Total assets amount to R776 million
and the Group ended the year with shareholders’ equity of R448 million, which equates to a net asset value
per share of 600,79 cents.
Against this strong equity base there is minimal net borrowings of R6 million, representing a debt to equity
ratio of only 1,3%.
Cash generated before movement in working capital was R117 million compared with R103 million in the
previous year. R23 million was applied to working capital versus a similar amount being retained from working
capital in the prior year.
As previously indicated to shareholders, the Group invested substantially during the year under review,
which resulted in a drawdown on cash and banking facilities. Acquisition of fixed assets, intangibles and
equity-accounted investments amounted to a gross R118 million. Including dividends received from
equity-accounted investees in the amount of R52 million, of which R50 million in dividends received from PGI
in the Isle of Man is the largest, the net cash outflow on investing activities was R54 million compared with
R11 million in the prior year.
Bridging finance in the amount of R20 million has been committed to the Mashonaland Turf Club.
During the year, R42 million was spent buying back shares to fulfil obligations in respect of shares that
may become exercisable in terms of the executive option schemes.
The weighted average number of shares in issue was 0,73% lower and the number of shares in issue at period
close was 1,4% lower as a result of share repurchases in fulfilment of option scheme obligations.
Share capital
There was no movement in authorised or issued share capital during the year under review.
In order to fulfil obligations in respect of shares exercisable per the executive option schemes, the
Company repurchased 2 200 617 shares and 1 139 264 shares were issued in terms of the executive share option
scheme.
Investment
Effective from 1 November 2014 the Group concluded an agreement to acquire a strategic stake in Uptonvale
Services (Pty) Limited, a company that owns a bookmaking concern named Interbet.
Summarised segmental analysis
The Group stages and broadcasts horseracing events and offers betting opportunities on both South African
and international product in two geographic segments, namely South Africa and the rest of the world. The
reporting segments are set out as local and international operations with local further segmented into fixed
odds and tote and other operations.
Summarised segmental analysis
% Audited Audited
change 12 months 12 months
31 July 31 July
2015 2014
R’000 R’000
Local - excluding fixed odds
Income 5 873 469 831 567
Net betting income 7 678 923 632 592
- Horseracing 3 457 454 443 746
- Other sports 17 221 469 188 846
Other income 19 219 325 184 849
Investment income 61 1 609 999
Net income 10 899 857 818 440
Stakes 2 (189 772) (186 299)
Operating expenses 9 (681 335) (625 009)
Profit before depreciation and amortisation 303 28 750 7 132
Depreciation and amortisation 33 (37 385) (28 039)
Loss before finance costs and income tax expense (59) (8 635) (20 907)
Finance costs 709 (5 065) (626)
Loss from operations (36) (13 700) (21 533)
Share of profit of equity-accounted investee 390 2 324 474
Loss before income tax expense (46) (11 376) (21 059)
Local - fixed odds
Income 43 193 593 135 840
Net betting income 42 161 583 113 999
- Horseracing 30 59 521 45 720
- Other sports 96 38 158 19 503
- Other 31 63 904 48 776
Other income 4 10 944 10 572
Investment income (64) 83 229
Net income 38 172 610 124 800
Operating expenses 32 (138 428) (104 632)
Profit before depreciation and amortisation 69 34 182 20 168
Depreciation and amortisation 9 (12 150) (11 198)
Profit before finance costs and income tax expense 146 22 032 8 970
Finance costs 37 (763) (557)
Profit before income tax expense 153 21 269 8 413
International
Income (11) 199 143 224 702
Other income (12) 205 416 234 466
Investment income (76) 382 1 587
Net income (13) 205 798 236 053
Intellectual property rights fees (68 453) (82 504)
Operating expenses (11) (71 151) (79 643)
Profit before depreciation and amortisation (10) 66 194 73 906
Depreciation and amortisation 113 (290) (136)
Profit from operations (11) 65 904 73 770
Share of profit of equity-accounted investees (22) 44 736 57 509
Profit before fair value adjustment and equity-accounted (16) 110 640 131 279
profit/(loss) on conversion/impairment
Total for the Group
Income 6 1 266 205 1 192 109
Net betting income 13 840 506 746 591
- Horseracing 6 516 975 489 466
- Other sports 25 259 627 208 349
- Other 31 63 904 48 776
Other income 1 435 685 429 887
Investment income (26) 2 074 2 815
Net income 8 1 278 265 1 179 293
Stakes 2 (189 772) (186 299)
Intellectual property rights fees (68 453) (82 504)
Operating expenses 10 (890 914) (809 284)
Profit before depreciation and amortisation 28 129 126 101 206
Depreciation and amortisation 27 (49 825) (39 373)
Profit before finance costs and income tax expense 28 79 301 61 833
Finance costs 393 (5 828) (1 183)
Profit before share of equity-accounted investee 21 73 473 60 650
Share of profit of equity-accounted investees (19) 47 060 57 983
Profit before profit on conversion to equity-accounted investee, fair value
adjustment and equity-accounted investee impaired 2 120 533 118 633
Profit on conversion of equity-accounted investee to investment 11 135
Fair value adjustment in respect of assets held for sale (12 753)
Equity-accounted investee impaired (8 545)
Profit before income tax expense (24) 99 235 129 768
Capital commitments
Commitments in respect of capital expenditure approved by directors.
2015 2014
R’000 R’000
Contracted for 2 709 4 939
Not contracted for 120 004 97 856
Capital commitments will be financed out of cash and cash equivalents on hand or borrowing facilities as and
when required.
Reporting entity
Phumelela Gaming and Leisure Limited is a Company domiciled in South Africa. The summarised consolidated
financial statements as at and for the year ended 31 July 2015 comprises the Company and its subsidiaries and
the Group’s interests in equity-accounted investees and joint operations.
Statement of compliance and presentation
The summarised consolidated financial statements have been prepared in accordance with the framework
concepts, the recognition and measurement requirements of IFRS, the presentation and the disclosure requirements
of IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the
Listings Requirements of the JSE Limited and the requirements of the South African Companies Act. The financial
information does not include all the information required for full annual financial statements and should be
read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 July
2015.
The summarised consolidated financial information is presented in South African Rand rounded to the nearest
thousand, which is the Company’s functional and Group’s presentation currency. They are prepared on the
historical cost basis, except for certain financial instruments that are recognised at fair value.
The accounting policies applied in the presentation of the summarised consolidated financial information are
consistent with those applied for the year ended 31 July 2014, except for new standards and interpretations
that became effective on 1 August 2014 and deemed applicable to the Group. The adoption of these standards and
interpretations had no impact on the results for the year nor has it required the restatement of any prior
year figures.
The Group currently reflects its investment in ASL, a company registered on the Mauritius Stock Exchange, at
fair value of R4,3 million in assets held for sale as the investment is no longer considered strategic and is
to be sold. In the prior year the investment was reflected at fair value of R17 million in investments. The
investment is categorised as level 1 as there is a market value readily available.
The Board endorses the recommendations set out in King III and supports the Code of Corporate Practices and
Conduct set out therein.
Report of the independent auditors
The auditors, KPMG Inc., have issued their opinion on the Group’s consolidated financial statements for the
year ended 31 July 2015. The audit was conducted in accordance with International Standards on Auditing. They
have issued an unmodified opinion. A copy of the auditors’ report together with a copy of the audited
consolidated financial statements is available at the Company’s registered office.
These summarised preliminary consolidated financial statements have been derived from the Group’s
consolidated financial statements and are consistent in all material respects with the Group’s consolidated
financial statements. The consolidated financial statements have been audited by the Group’s auditors who have
issued an unmodified opinion. The auditors’ report does not necessarily report on all of the information
contained in this announcement. Any reference to future financial information included in this announcement
has not been reviewed or reported on by the auditors. Shareholders are advised that in order to obtain a full
understanding of the nature of the auditors’ engagement they should obtain a copy of that report together with
the accompanying financial information from the Company’s registered office.
Subsequent events
There are no significant subsequent events that have an impact on the financial information at 31 July 2015.
Corporate interests
Phumelela is a respondent in three consolidated complaints lodged by the Gauteng Off-Course Bookmakers’
Association (GOBA), the KwaZulu-Natal Bookmakers’ Society (the KZNBS), the Western Cape Bookmakers’ Association
(WCBA) and various individual bookmakers with the Competition Commission during 2014 and 2015 regarding, inter
alia, alleged excessive pricing and abuse of a dominant position. The complaints are being investigated by the
Competition Commission and Phumelela has submitted extensive information and documents to the Competition
Commission to assist it with its investigation.
Phumelela has lodged a counter complaint with the Competition Commission in relation to certain bookmakers
having engaged in a concerted practice by cooperating with one another regarding the determination of a uniform
price at which they will agree to receive the Tellytrack service. The conduct of these bookmakers constitutes
the fixing of a purchase price in contravention of the Competition Act. The complaint has been referred to
the Cartels Division of the Competition Commission and is under investigation.
On 4 March 2015 the KZNBS lodged a complaint with the Independent Communications Authority of South Africa
(ICASA). The complaint consists of two parts, the first against the joint parties of Tellytrack, Phumelela,
Gold Circle and Kenilworth Racing and the second against Telemedia (Pty) Limited, for alleged contraventions
of the Electronic Communications Act pertaining to the provision of commercial broadcast services without the
correct licences. The complaints are being investigated by ICASA and the parties are assisting with its
investigation.
Litigation
On 9 October 2014 the Gauteng Gambling Board handed down an interim order directing Phumelela to ensure that
the status quo ante, regarding the provision of the entire Tellytrack channel to bookmakers, is immediately
restored at the price at which the Tellytrack channel was provided in 2013 together with inflation. Any excess
costs incurred by Tellytrack’s clients are to be credited to such clients. Phumelela instituted an application
in the Gauteng High Court to review and set aside the order made by the Gauteng Gambling Board. In the
interim a number of bookmakers have reverted to paying the previous fee which is being held in a trust account
by the Group’s attorneys.
Phumelela is a respondent in an application instituted by the KZNBS, GOBA and the WCBA in the High Court of
South Africa, Gauteng Division, Pretoria. The applicants seek an order interdicting Phumelela from offering
totalisator betting on sports other than horseracing. Phumelela has filed its answering affidavit and the
applicants are required to file their replying affidavit. The WCBA has advised that it has withdrawn from the
matter.
The outcome of the relevant actions noted above, and under corporate interests, remains uncertain and may
have an impact on future earnings.
Related parties
Other than for the strategic investment in Interbet, there have been no significant changes in related-party
relationships since the previous year.
Other than in the normal course of business, there have been no significant transactions during the year
with equity-accounted investees, joint operations and other related parties.
Social responsibility
Phumelela is an AAA level 2 broad-based black economic empowerment contributor. The Company is proud to
report that its most recent verification audit (March 2015) confirmed an improved score to 91,99%, up from
86,12% in the previous year. Phumelela was ranked eighth on the Johannesburg Stock Exchange in the most recent
top 100 most-empowered companies for 2015 ranked by Empowerdex.
The Group recognises that it has a responsibility to the broader community to act in a socially responsible
manner, for the benefit of all South Africans. Contributions to selected training, sports and community
service-related projects continue. The Group has adopted appropriate BEE and employment equity, training and
procurement policies.
Directors
There were no changes to the composition of the Board during the year under review.
Mrs Freda Moloi was appointed Company Secretary effective from 16 February 2015.
Prospects
The Group is making good progress in diversifying and expanding its business. In 2016 we anticipate yielding
improved returns from investments made. Our financial position is robust, we benefit from Rand weakness, we
have negligible debt and we have substantial investment capacity.
The success of our international operations is predicated on both quality of content, the year-round South
African horseracing product, and the quality of the dissemination of that content through a simulcast
televisual experience. Demand is buoyant and we are adding to our geographic mix.
Phumelela will continue to invest in the traditional business of thoroughbred horseracing to ensure it
remains viable as an important local industry and one which international markets demand access to. Positive
trends in tote betting volumes, on-course attendance and yearling sale prices are encouraging.
Phumelela is committed to achieving an equitable funding dispensation for the sport of South African
thoroughbred horseracing and to this end Tellytrack is resolute in taking all such measures as are open to it
to combat theft of its intellectual property and achieve a fair economic return on its intellectual property.
Shareholders are reminded that the Company is in negotiations which, if successfully concluded, may have a
material effect on the Company’s securities and are therefore advised to exercise caution until such time as
a further announcement is made.
Any forward looking statements of forecasts contained in these results have not been reviewed or reported on
by the Group auditors.
Cash dividend to shareholders
Notice is hereby given that the Board has declared a final gross cash dividend from income reserves of 60
cents per share (51 cents per share net of dividend withholding tax at a rate of 15%) payable to shareholders
recorded in the register on Friday, 30 October 2015. The issued share capital at the declaration date is 77 101
885 ordinary shares. Shareholders are advised that the last date to trade cum distribution will be Friday, 23
October 2015. As from commencement of business on Monday, 26 October 2015 all trading in Phumelela shares will
be ex dividend. Payment will be made on Monday, 2 November 2015. Share certificates may not be dematerialised
or rematerialised between Monday, 26 October 2015 and Friday, 30 October 2015, both days inclusive. The
Company’s tax reference number is 9171/393/84/7.
For and on behalf of the Board
MP Malungani WA Du Plessis
Chairman Chief Executive Officer
Turffontein, Johannesburg
2 October 2015
Directors
MP Malungani (Chairman), WA du Plessis* (Group Chief Executive), AW Heide* (Finance Director and COO),
R Cooper, MJ Jooste, B Kantor, SKC Khampepe, NJ Mboweni (Mrs), VJ Moodley*, Dr E Nkosi, ML Ramafalo*,
JA Stuart*, CJH van Niekerk, JB Walters (*Executive)
Company Secretary
F Moloi (Mrs)
Sponsor
Investec Bank Limited
Registered Office
Turffontein Racecourse
14 Turf Club Street, Turffontein
Transfer Secretaries
Computershare Investor Services (Pty) Limited
Share code
PHM ISIN: ZAE000039269
Sponsor
Investec Bank Limited
Website
www.phumelela.com
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