Phumelela shares rise on news of initiatives to raise capital

PHUMELELA Gaming and Leisure share price leapt more than 13 percent yesterday after the horse racing and tote betting company announced it is considering capital raising initiatives.

The company is targeting broad-based black economic empowerment (B-BBEE) equity ownership.

The group also said it was still engaging with the Gauteng Gambling Board (GGB).

“The company remains under cautionary as engagements with the MEC and the GGB are still in progress,” the group said in a note to its shareholders as it battles to get the report recommendations set aside.

“Should these initiatives be successfully concluded these may have a material effect on the company’s securities,” the group added.

Public Protector Busisiwe Mkhwebane in April last year recommended that GGB must stop paying Phumelela the group’s 50 percent share of the 6 percent levy on punters’ winnings on fixed-odds bets on horse racing in Gauteng.

The removal of the 50 percent share had a direct cost of R26 million to the group for the four-month period to July and an annualised negative impact of R75m.

The group’s shares climbed to its highest peak in one month to R2.16 a share at 10.10am, before closing at R2 on the JSE yesterday.

However, the stock was still down by more than 84 percent in a year, hit by the delay of the release of its results for the year to end July.

Phumelela finally released its year-end results at the end of November and admitted that it was its worst performance since 1997, after it reported a headline loss of R98.2m, compared to headline earnings of R155.6m a year earlier.

The group at the time attributed its poor performance to a number of factors, including political turbulence, labour unrest, criminality, a stagnant economy, low business and consumer confidence, increasing unemployment, higher tax and inflationary administered prices.

The group also had to contend with the increase of value-added tax, which was increased to 15 percent, with effect from April 1, 2018.

Phumelela said it had a direct cost to its operations and had further depressed discretionary spending.

It also incurred a R31.9m impairment against the franchise operation in North West during the year.