GAMING AND LEISURE
A winning strategy as Phumelela’s diversification gets good results
PHUMELELA Gaming and Leisure said cost-cutting measures and diversification strategies the group undertook last year had begun to pay off.
Chief executive Rian du Plessis said the group executed the undertaking it announced during the full-year results in July last year that it would modernise and reposition its operations to save costs.
“The voluntary retrenchment programme was completed within budget and the management structure has been changed to reflect the way the group is managed.
“Unfortunately, 236 employees left us as a result of voluntary retrenchments,” Du Plessis said.
Phumelela has diversified from its traditional horse racing business to betting operations, media operations and administrative and support services.
Last year, the group acquired 50 percent of Supabets Holdings for R437 million and 51 percent of Afribet.
Supabets is one of the leading and fastest-growing sports betting and gaming groups in Africa, with a focus on the high-growth fixed-odds sports-betting market.
Yesterday, the group said the acquisitions boosted its normalised headline earnings by 52 percent to R102.5m during the six months to January, while normalised headline earnings a share increased 12 percent to 100.82 cents.
Initiatives Du Plessis said the results reflected strong performance from wholly-owned Betting Operations and Supabets.
“Despite a difficult macro-economic backdrop,” Du Plessis said, “our local betting operations are performing satisfactorily in a competitive market place, while our international betting operations continue to make good progress and further initiatives are in the pipeline.”
Du Plessis said the demand for quality South African horse racing content abroad was positive for the group’s Media business.
The board declared an interim gross cash dividend from income reserves of 42c a share, up by 24 percent compared with 34c last year.
Betting operations contributed 68 percent to the group’s earnings, while the media unit netted Phumelela 29 percent.
“Our long-term strategic vision to diversify has resulted in considerable additional earnings streams over the years and increased our financial scale. The total asset base is now R1.6 billion and shareholder equity is R1bn,” Du Plessis said.
Consolidated net income increased by 4 percent to R808.7m, of which local income accounted for 80 percent, in line with the prior period, while operating expenses increased by 5 percent to R752.2m, including the R27.1m voluntary retrenchment programme expense.
Operating profit decreased 19 percent to R20.2m, including the voluntary retrenchment programme that the group embarked on.
The group has embarked on a franchise initiative by offering Betting World franchises and Tab agencies in provinces where new betting licences are to be issued to local previously disadvantaged individuals.
Du Plessis said the group planned to consolidate its business by organic growth in the future and consider acquisitions if the right opportunities present themselves.
Phumelela shares gained 1.79 percent on the JSE yesterday to close at R14.25.