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PHM
PHM
PHM - Phumelela - The Group`s audited condensed consolidated financial
statements for the Year ended 31 July 2008 and dividend declaration
Phumelela Gaming & Leisure Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/016610/06)
Share code: PHM ISIN: ZAE000039269
("Phumelela" or "the Company")
The Group`s audited condensed consolidated financial statements for the Year
ended 31 July 2008
- REVENUE FROM INTERNATIONAL OPERATIONS UP 118%
- HEADLINE EARNINGS FROM ONGOING OPERATIONS UP 14%
- DILUTED HEPS FROM ONGOING OPERATIONS UP 13%
- CASH RESOURCES OF R144 MILLION
CONDENSED CONSOLIDATED INCOME STATEMENTS
Audited Audited
12 months 12 months
31 July 31 July
% 2008 2007
change R`000 R`000
Revenue
- local operations 2 473 932 2 259 527
- international operations 118 256 634 117 504
15 2 730 566 2 377 031
Net betting income
- local operations 534 067 488 284
- international operations 13 391 5 118
11 547 458 493 402
Other operating income
- local operations
Ongoing operations 132 438 117 861
Compensation for early termination 35 573
of Newmarket lease
Proceeds on termination 40 000
Impairment of Newmarket night (4 427)
racing lights and immovable assets
Surplus on disposal of Bloemfontein 27 815
Racecourse
- international operations 79 501 66 640
Net income 787 212 713 476
Operating expenses and overheads
- stakes 142 661 132 701
- local operations 423 058 384 322
- international operations 68 999 50 409
Profit from operations 152 494 146 044
Finance costs 180 471
Profit before share of profit of 152 314 145 573
associated company
Share of profit of associated 4 108 2 805
company
Profit before income tax 156 422 148 378
Income tax 43 361 39 436
Profit for the year 113 061 108 942
Attributable to:
- Equity holders of the parent 113 061 108 942
Earnings per share (cents)
- Basic 148,13 145,33
- Diluted 147,73 143,36
SUPPLEMENTARY INCOME STATEMENT
INFORMATION
Reconciliation of headline earnings
Earnings attributable to equity
holders
- derived from ongoing operating 13 88 110 77 991
activities
- compensation for early 30 951
termination of Newmarket lease
after tax
- surplus on disposal of 24 951
Bloemfontein Racecourse and
bookmaking concern after tax
Adjusted for:
Net (surplus)/loss on disposal of (23 606) 430
property, plant, equipment and
bookmaking concern after tax
Impairment of Newmarket night 3 249
racing lights and immovable assets
after tax
Headline earnings (21) 89 455 112 621
Adjusted for:
- compensation for early (34 200)
termination of Newmarket lease and
impairment of night racing lights
and immovable assets after tax
Headline earnings from ongoing 14 89 455 78 421
operating activities
Headline earnings per share (cents) (22) 117,20 150,24
Diluted headline earnings per share (21) 116,89 148,20
(cents)
Headline earnings per share from 12 117,20 104,62
ongoing operating activities
(cents)
Diluted headline earnings per share 13 116,89 103,19
from ongoing operating activities
(cents)
Net asset value per share (cents) 17 457,57 390,45
Interim dividend/distribution 25,00 20,00
Dividend per ordinary share (cents) 25,00 14,00
Distribution out of share premium 6,00
(cents)
Final dividend
Dividend per ordinary share (cents) 43,00 40,00
Number of shares in issue 75 859 571 75 765 285
Weighted average number of shares 76 325 185 74 961 502
in issue for basic and headline
earnings per share calculation
Weighted average number of shares 76 530 533 75 993 693
in issue for diluted earnings per
share calculation
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Audited Audited
12 months 12 months
31 July 31 July
2008 2007
R`000 R`000
Cash generated by 129 848 156 213
operations
Changes in working 20 549 27 088
capital
Cash generated by 150 397 183 301
operating activities
Investment income 12 611 7 892
Net finance costs and (45 867) (34 986)
taxation paid
Dividends paid (49 730) (32 975)
Net cash inflow from 67 411 123 232
operating activities
Net cash outflow from (50 297) (53 682)
investing activities
Net cash inflow from 3 683 4 591
financing activities
before capital
distribution and share
re-purchases
Capital distribution (4 527)
Share re-purchases (15 715)
Net increase in cash 5 082 69 614
and cash equivalents
for the year
Cash and cash 139 116 69 502
equivalents at
beginning of year
Cash and cash 144 198 139 116
equivalents at end of
year
CONDENSED CONSOLIDATED BALANCE SHEETS
Audited Audited
31 July 31 July
2008 2007
R`000 R`000
ASSETS
Non-current assets 307 840 236 302
Property, plant and 280 367 223 176
equipment
Deferred taxation 5 175
Goodwill 3 312 3 312
Intangible assets 400
Interest in associated 18 037 9 044
companies
Investments 549 770
Current assets 202 227 188 984
Inventories 4 469 956
Trade and other receivables 53 560 44 727
Cash and cash equivalents 144 198 139 116
Assets classified as held 4 185
for sale
Total assets 510 067 425 286
EQUITY AND LIABILITIES
Total equity 347 110 295 829
Share capital and premium 1 897 3 338
Retained earnings 345 054 292 314
Non-distributable reserves 159 177
Non-current liabilities 4 100 5 913
Deferred taxation 2 625 3 645
Retirement benefit 1 475 2 268
obligations
Current liabilities 158 857 123 544
Trade and other payables 136 535 105 125
Income tax payable 22 322 18 419
Total equity and 510 067 425 286
liabilities
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN GROUP EQUITY
Non-
Share Share Distributable Retained Total
Capital Premium reserves earnings equity
R`000 R`000 R`000 R`000 R`000
Balance at 31 July 1 848 1 426 52 216 250 219 576
2006
Issue of share 46 4 545 4 591
capital - options
exercised
Total recognised 125 108 942 109 067
income and expense
for the year
- Profit for the 108 942 108 942
year
-Foreign currency 125 125
translation reserve
Share-based payment 97 97
Distributions paid (4 527) (32 975) (37 502)
to equity holders
Balance at 31 July 1 894 1 444 177 292 314 295 829
2007
Issue of share 28 3 655 3 683
capital - options
exercised
Total recognised (18) 113 061 113 043
income and expense
for the year
- Profit for the 113 061 113 061
year
-Foreign currency (18) (18)
translation reserve
Share re-purchases (25) (5 099) (10 591) (15 715)
Dividends paid to (49 730) (49 730)
equity holders
Balance at 31 July 1 897 - 159 345 054 347 110
2008
BASIS OF PRESENTATION AND AUDIT REPORT
These annual results have been prepared in accordance with the recognition
and measurement requirements of IFRS and the presentation and disclosure
requirements of IAS34. The annual results have been summarised from the
complete set of annual financial statements on which the auditors, KPMG Inc.
have expressed and unqualified audit opinion. The audit report is available
for inspection at the Company`s registered office.
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 2007.
Certain comparative amounts have been re-classified within the income
statement in order to make comparative information more meaningful.
REVIEW OF RESULTS
Revenue increased by 15% year on year to R2,7 billion (2007: R2,4 billion)
with revenue from local operations up 9% to R2,5 billion and revenue from
international operations up 118% to
R256,6 million (2007: R117,5 million).
Earnings attributable to equity holders increased marginally year on year
mainly due to the post tax effect on earnings of the R24,5 million surplus on
disposal of Bloemfontein Racecourse in the current year set off against the
R31 million compensation received on termination of the Newmarket use
agreement in the previous year. Excluding the favourable impact of these
transactions, earnings attributable from ongoing operations increased by 13%
to R88,1 million (2007: R78 million) with headline earnings per share (HEPS)
from ongoing operations up by 12% to 117,20 cents per share (2007: 104,62
cents per share).
Earnings growth in the second half of the year slowed as a result of the
economic downturn experienced in both local and global markets. Despite this,
year on year profit before interest and tax (PBIT) from ongoing operations
for international operations increased by 12% to R23,9 million (2007: R21,3
million) and local operations by 13% to R100,8 million (2007: R89,1 million).
Local operating costs increased by 10% year on year with the Group continuing
to invest in its local retail operations and betting technology. Operating
costs were generally contained within inflation other than costs incurred on
social responsibility projects, promotions and marketing, racing information
publications, information technology and the Bingo operation at Turffontein
racecourse.
International operating costs increased by 37% year on year due to increased
costs incurred in investing and promoting the broadcasting rights held under
the RUK agreement, the Isle of Man Totalisator operation with further costs
incurred on acquiring additional human capital.
FINANCIAL POSITION
The financial position of the Group which is set out in the balance sheet
shows total assets of R510,1 million (2007: R425,3 million) including cash
balances of R144,2 million (2007: R139,1 million).
Cash generated from operating activities decreased by 18% to R150, 4 million
(2007: R183, 3 million) and was utilised to fund, inter alia, R45,7 million
(2007: R34,5 million) in income tax payments, R49,7 million (2007: R33
million) in dividends paid to shareholders with R78,2 million
(2007: R60,7 million) invested in property, plant and equipment.
SHARE CAPITAL
During the year the Company purchased 1 007 014 of its own shares traded on
the open order book of the JSE Limited at a total cost of R15,7 million. The
shares are currently held as treasury shares and are primarily intended to be
used for issuing shares under the Group`s share option programme.
ACQUISITIONS
In December 2007 Phumelela Gold Enterprises, a jointly controlled operation
between Phumelela and Gold Circle, acquired an indirect shareholding of 20%
of the issued capital in Automatic Systems Limited (ASL), a company listed on
the Mauritius Stock Exchange, for R5,7 million. ASL is one of two companies
licensed to operate a totalisator on the island.
In May 2008, Phumelela acquired an additional 2,5% equity interest in its
associate company, Betting World (Pty) Limited for R1,4 million, increasing
Phumelela`s equity holding to 42,5%.
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
Audited Audited
31 July 31 July
2008 2007
R`000 R`000
LOCAL
Revenue 2 473 932 2 259 527
Net income 666 505 606 145
Stakes 142 661 132 701
Other net operating expenses 423 058 384 322
Profit from ongoing 100 786 89 122
operations
Compensation for early 35 573
termination of Newmarket
lease
Surplus on disposal of 27 815
Bloemfontein Racecourse
Profit from operations 128 601 124 695
Assets 451 623 398 984
Liabilities 128 836 119 645
INTERNATIONAL
Revenue 256 634 117 504
Net income 92 892 71 758
Net operating expenses 68 999 50 409
Profit from operations 23 893 21 349
Assets 58 444 26 302
Liabilities 34 121 9 812
TOTAL
Revenue 2 730 566 2 377 031
Profit from ongoing 124 679 110 471
operations
Compensation for early 35 573
termination of Newmarket
lease
Surplus on disposal of 27 815
Bloemfontein Racecourse
Profit from operations 152 494 146 044
Assets 510 067 425 286
Liabilities 162 957 129 457
DISPOSAL
On 1 February 2008, Phumelela sold its entire equity interest in its
subsidiary company, Phumelela Gaming and Leisure Services (Pty) Limited
(spread betting operation) to its associate company, Betting World (Pty)
Limited, for R370 000.
CAPITAL COMMITMENTS
Commitments in respect of capital expenditure approved by directors.
2008 2007
R`000 R`000
Contracted for 1 100 56 712
Not contracted for 63 900 54 008
POST BALANCE SHEET EVENTS
There are no significant post-balance sheet events that have a material
impact on the financial statements at 31 July 2008.
Initial discussions for the sale of the two Bingo licences held in the
Group`s subsidiary company, Silks Gaming and Leisure (Pty) Limited commenced
in September 2008. The Group is currently considering an offer received from
a potential purchaser.
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 was dismissed by the Arbitrator in April 2008
DIRECTORS
Mr B D Mehl retired as a Director and Deputy Chairman of the Company on 2
October 2007.
His invaluable contribution, first as CEO and then as Director and Deputy
Chairman of the
Company is acknowledged by the Board.
Mr J S Tennant retired as CEO of the Group on 31 July 2008. The Board
acknowledges his invaluable contribution during his tenure. He will continue
to serve on the Board as an Executive Director until January 2009.
The Board is pleased to announce that Mr W A Du Plessis has been appointed as
Group Chief Executive Officer and CEO of the Company`s international
operations with effect from 1 August 2008.
Mr D R H Attenborough has been appointed to the position of CEO of
Phumelela`s South African based operations with effect from 1 August 2008.
PROSPECTS
Short to medium-term trading conditions in South Africa are expected to be
negatively impacted by the current economic climate compounded by
inflationary pressures and higher interest rates curbing consumer spend.
Management remains confident that its international operations are well
positioned to unlock further growth and are therefore targeting growth in
earnings for the 2009 financial year.
DIVIDEND TO SHAREHOLDERS
Notice is hereby given that the Board has declared a final dividend of 43
cents per share (2007: 40 cents per share) for the year ended 31 July 2008 to
shareholders recorded in the register on 24 October 2008.
Shareholders are advised that the last date to trade "cum" the dividend will
be Friday, 17 October 2008. As from commencement of business on Monday, 20
October 2008, all trading in Phumelela shares will be "ex" the dividend.
Payment will be made on Monday, 27 October 2008. Share certificates may not
be dematerialised or rematerialised between Monday, 20 October 2008 and
Friday, 24 October 2008, both days inclusive
For and on behalf of the Board
M P MALUNGANI W A DU PLESSISChairman
Group Chief Executive
Johannesburg29 September 2008
Directors:
Directors: M P Malungani (Chairman), 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*, J S Tennant*, C J H Van Niekerk, J B Walters (*Executive)
Group Chief Executive: W A Du Plessis Company Secretary: A F Wintour
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 Web site:
www.phumelela.com
Date: 29/09/2008 14:32:30 Produced by the JSE SENS Department.
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