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PHUMELELA GAMING & LEISURE LIMITED - Audited preliminary results for the year ended 31 July 2015 and dividend declaration

Release Date: 02/10/2015 07:05
Code(s): PHM     PDF:  
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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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