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PHM
PHM
PHM - Phumelela - The Group`s Audited Condensed Consolidated Financial
Statements for the Year Ended 31 July 2007
PHUMELELA GAMING AND LEISURE LIMITED
(Registration number 1997/016610/06)
Share code: PHM
ISIN: ZAE000039269
The Group`s audited condensed consolidated financial statements for the year
ended 31 July 2007
- PROFIT BEFORE TAX FROM CONTINUING OPERATIONS UP 31%
- HEPS FROM CONTINUING OPERATIONS UP 27%
- OPERATING CASH FLOWS UP 70%
- DISTRIBUTION TO SHAREHOLDERS UP 30%
CONDENSED CONSOLIDATED INCOME STATEMENTS
% Audited Audited
growth 31 July 31 July
year on 2007 2006
year R`000 R`000
Revenue 13 2 385 408 2 118 719
Net betting income
- local operations 10 488 284 442 464
- international operations 151 13 495 5 384
12 501 779 447 848
Other operating income
- local operations
Continuing operations 11 117 861 106 145
Compensation for early 35 573
termination of Newmarket lease
Proceeds on termination 40 000
Impairment of night racing (4 427)
lights and immovable non-
current assets
- international operations 40 66 640 47 734
Net income 20 721 853 601 727
Operating expenses and
overheads
- stakes 8 132 701 122 554
- local operations 10 384 322 347 969
- international operations 35 58 786 43 385
Profit from operations 66 146 044 87 819
Finance costs 471 1 738
Profit before share of profit 69 145 573 86 081
of associated company
Share of profit of associated 2 805 251
company
Profit before income tax 72 148 378 86 332
Income tax 39 436 25 778
Profit for the year 80 108 942 60 554
Attributable to:
- Equity holders of the parent 81 108 942 60 338
- Minority interests - 216
80 108 942 60 554
Earnings per share (cents)
- Basic 75 145,33 82,97
- Diluted 81 143,36 79,36
SUPPLEMENTARY INCOME STATEMENT
INFORMATION
Reconciliation of headline
earnings
Earnings attributable to equity
holders
- derived from continuing 29 77 991 60 338
operating activities
- compensation for early 30 951
termination of Newmarket lease
after tax
108 942 60 338
Adjusted for:
Net loss/(profit) on disposal 430 (387)
of property, plant and
equipment after tax
Impairment of Newmarket night 3 249
racing lights and immovable non-
current assets after tax
Headline earnings 88 112 621 59 951
Headline earnings per share 82 150,24 82,44
(cents)
Diluted headline earnings per 88 148,20 78,85
share (cents)
Headline earnings per share 27 104,62 82,44
excluding compensation for
early termination of Newmarket
lease (cents)
Net asset value per share 31 390,45 297,09
(cents)
Interim dividend/distribution 25 20,00 16,00
Dividend per ordinary share 14,00 8,00
(cents)
Distribution out of share 6,00 8,00
premium (cents)
Final dividend
Dividend per ordinary share 33 40,00 30,00
(cents)
Number of shares in issue 75 765 285 73 909 635
Weighted average number of 74 961 502 72 724 683
shares in issue for basic and
headline earnings per share
calculation
Weighted average number of 75 993 693 76 033 155
shares in issue for diluted
earnings per share calculation
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Audited Audited
31 July 31 July
2007 2006
R`000 R`000
Cash generated by operations 156 213 97 431
Decrease in working capital 27 088 10 202
Cash generated by operating activities 183 301 107 633
Net finance costs, investment income and (27 094) (29 191)
taxation paid
Post retirement benefit asset funding (79)
Dividends paid (32 975) (6 002)
Net cash inflow from operating activities 123 232 72 361
Net cash outflow from investing (53 682) (13 353)
activities
Net cash inflow/(outflow) from financing 4 591 (17 359)
activities before capital distribution
Capital distribution (4 527) (23 272)
Net increase in cash and cash equivalents 69 614 18 377
Cash and cash equivalents at beginning of 69 502 51 125
year
Cash and cash equivalents at end of year 139 116 69 502
CONDENSED CONSOLIDATED BALANCE SHEETS
Audited Audited
31 July 31 July
2007 2006
R`000 R`000
ASSETS
Non-current assets 236 302 215 761
Property, plant and equipment 223 176 187 052
Goodwill 3 312 3 312
Intangible asset 16 170
Interest in associated company 9 044 8 857
Investments 770 370
Current assets 188 984 116 141
Inventories 956 250
Trade and other receivables 44 727 42 204
Cash and cash equivalents 139 116 69 502
Assets classified as held for sale 4 185 4 185
Total assets 425 286 331 902
EQUITY AND LIABILITIES
Total equity 295 829 219 576
Share capital and premium 3 338 3 274
Retained earnings 292 314 216 250
Non-distributable reserves 177 52
Non-current liabilities 5 913 7 842
Deferred taxation 3 645 5 793
Retirement benefit obligations 2 268 2 049
Current liabilities 123 544 104 484
Trade and other payables 105 125 74 808
Income tax payable 18 419 11 350
Short-term financial liability 18 326
Total equity and liabilities 425 286 331 902
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN GROUP EQUITY
Non-
distribu-
Share Share table Retained
capital premium reserves earnings
R`000 R`000 R`000 R`000
Balance at 31 July 2005 1 795 21 791 3 161 288
Issue of share capital - 53 2 907 - -
options exercised
Total recognised income and - - 49 60 375
expense for the year
- Profit for the year - - - 60 338
- Foreign currency translation - - 49 10
reserve - Isle of Man Tote
Limited
- Minority share of previous - - - 27
year loss realised
Share based payment - - - 424
Dividend paid to minority - - - -
shareholders of Isle of Man
Tote Limited
Acquisition of minority - - - -
shareholding in Isle of Man
Tote Limited
Distributions paid to equity - (23 272) - (5 837)
holders
Balance at 31 July 2006 1 848 1 426 52 216 250
Issue of share capital - 46 4 545 - -
options exercised
Total recognised income and - - 125 108 942
expense for the year
- Profit for the year - - - 108 942
- Foreign currency translation - - 125 -
reserve - Isle of Man Tote
Limited
Share based payment - - - 97
Distributions paid to equity - (4 527) - (32 975)
holders
Balance at 31 July 2007 1 894 1 444 177 292 314
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN GROUP EQUITY (Contd)
Total Minority Total
R`000 interest equity
R`000 R`000
Balance at 31 July 2005 184 877 - 184 877
Issue of share capital - 2 960 - 2 960
options exercised
Total recognised income and 60 424 179 60 603
expense for the year
- Profit for the year 60 338 216 60 554
- Foreign currency 59 (10) 49
translation reserve - Isle
of Man Tote Limited
- Minority share of previous 27 (27) -
year loss realised
Share based payment 424 - 424
Dividend paid to minority - (165) (165)
shareholders of Isle of Man
Tote Limited
Acquisition of minority - (14) (14)
shareholding in Isle of Man
Tote Limited
Distributions paid to equity (29 109) - (29 109)
holders
Balance at 31 July 2006 219 576 - 219 576
Issue of share capital - 4 591 - 4 591
options exercised
Total recognised income and 109 067 - 109 067
expense for the year
- Profit for the year 108 942 - 108 942
- Foreign currency 125 - 125
translation reserve - Isle
of Man Tote Limited
Share based payment 97 - 97
Distributions paid to equity (37 502) - (37 502)
holders
Balance at 31 July 2007 295 829 - 295 829
BASIS OF PRESENTATION
The annual financial results have been prepared and presented in accordance with
International Financial Reporting Standards and the Companies Act 1973. The
presentation and disclosure requirements of IAS 34: Interim Reporting have been
complied with in this announcement.
ACCOUNTING POLICIES
The accounting policies used in preparing the annual financial statements are
consistent with those used in the annual financial statements for the year ended
31 July 2006.
AUDIT REPORT
The consolidated results for the year have been audited by KPMG Inc. and their
unqualified audit report is available for inspection at the Company`s registered
office.
REVIEW OF RESULTS
Revenue increased by 13% year on year to R2,4 billion (2006: R2,1 billion) with
revenue from local operations up 11% to R2,3 billion and revenue from
international operations up 70% to R126 million.
Earnings attributable to ordinary equity holders was favourably impacted by the
proceeds of R40 million received on termination of the Newmarket use agreement
and increased by 81% to R108,9 million (2006: R60,3 million) with headline
earnings per share (HEPS) increasing by 82% to 150,24 cents per share (2006:
82,44 cents per share). Excluding the compensation on termination of the
Newmarket use agreement, HEPS increased by 27% to 104,62 cents per share.
The strong growth in international operations continued with operating profits
increasing by 119% on the previous year to R21,3 million (2006: R9,7 million),
the benefits of unlocking further value from existing European agreements and
concluding new agreements in the Asian and Australasian markets flowing through.
Local operating costs increased by 10% year on year with the Group continuing to
invest in its retail operations and betting technology. Operating costs were
generally contained within inflation other than costs incurred on health and
safety, staff training, social responsibility projects, marketing and the new
Bingo hall at Turffontein racecourse.
International operating costs increased by 35% year on year due to the growth in
international contracts concluded and increased operating costs incurred in
investing in the Isle of Man Totalisator operation.
FINANCIAL POSITION
The financial position of the Group which is set out in the balance sheet shows
total assets of R425,3 million (2006: R331,9 million) including cash balances of
R139,1 million (2006: R69,5 million).
Cash generated from operating activities increased by 70% to R123,2 million
(2006: R72,3 million), R53,7 million (2006: R13,3 million) was applied in
investing activities with R60,7 million (2006: R34 million) invested in
property, plant and equipment and R0,06 million was generated from (2006: R40,6
million utilised for) financing activities resulting in a net increase in cash
and cash equivalents of R69,6 million (2006: R18,4 million) for the year.
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
Audited Audited
31 July 31 July
2007 2006
R`000 R`000
LOCAL
Revenue 2 259 527 2 044 463
Net income 641 718 548 609
Stakes 132 701 122 554
Other net operating expenses 384 322 347 969
Profit from operations 124 695 78 086
Assets 398 984 294 450
Liabilities 119 645 83 997
INTERNATIONAL
Revenue 125 881 74 256
Net income 80 135 53 118
Net operating expenses 58 786 43 385
Profit from operations 21 349 9 733
Assets 26 302 37 452
Liabilities 9 812 28 329
TOTAL
Revenue 2 385 408 2 118 719
Profit from operations 146 044 87 819
Assets 425 286 331 902
Liabilities 129 457 112 326
CAPITAL COMMITMENTS
Commitments in respect of capital expenditure approved by directors.
2007 2006
R`000 R`000
- contracted for 56 712 717
- not contracted for 54 008 39 283
POST BALANCE SHEET EVENTS
There are no significant post-balance sheet events that have a material impact
on the financial statements at 31 July 2007 other than that noted below.
The conditions precedent to the disposal of the Bloemfontein Racecourse for R32
million were met during August 2007 and as a result the sale will be accounted
for in the 2008 financial year.
SOCIAL RESPONSIBILITY
Phumelela 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.
LITIGATION
The Company`s legal action instituted against its insurance underwriters in
respect of the business interruption claim arising from the loss of profits
caused by the equine flu is on going. A trial date has been set for 31 October
2007. No income accrual has been recognised by the Company to date.
DIRECTORS
Mr. A B Hogg was appointed to the Board on 1 February 2007 and resigned from the
Board on 24 June 2007.
PROSPECTS
Given reasonably stable economic conditions, management remains confident of the
trading prospects of the local and international operations in the year ahead.
Real earnings growth in continuing operations is expected in the interim
results.
DIVIDEND TO SHAREHOLDERS
Notice is hereby given that the Board has declared a final dividend of 40 cents
per share (2006:30 cents per share) for the year ended 31 July 2007 to
shareholders recorded in the register on 26 October 2007.
Shareholders are advised that the last date to trade "cum" the dividend will be
Friday, 19 October 2007. As from commencement of business on Monday, 22 October
2007, all trading in Phumelela shares will be "ex" the dividend. Payment will be
made on Monday, 29 October 2007. Share certificates may not be dematerialised or
rematerialised between Monday, 22 October 2007 and Friday, 26 October 2007, both
days inclusive.
For and on behalf of the Board
M P MALUNGANI
Chairman
J S TENNANT
Chief Executive
Johannesburg
1 October 2007
Directors: M P Malungani (Chairman), B D Mehl (Deputy Chairman),
J S Tennant* (Chief Executive), S E Abrahams, D R H Attenborough*,
M J Jooste, B Kantor, S K C Khampepe, N J Mboweni (Mrs), Dr E Nkosi,
M L Ramafalo*, C J H van Niekerk, J B Walters (*Executive)
Company Secretary: A F Wintour
Registered Office: Turffontein Racecourse, 14 Turf Club Street, Turffontein
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd
Sponsor: Investec Bank Limited
Web site: www.phumelela.com
Date: 01/10/2007 14:27:01 Produced by the JSE SENS Department.
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