| Wed 29 Sep 2004, 18:54 | | Audited Financial Results |
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Phumelela Gaming And Leisure Limited - The Group`s Audited Financial Results
For The Year Ended 31 July 2004
PHUMELELA GAMING AND LEISURE LIMITED (Registration number 1997/016610/06) Share
code: PHM
ISIN: ZAE000039269
FINAL DIVIDEND OF 20 CENTS PER SHARE
PROFIT BEFORE TAX UP 14,9% DESPITE EQUINE FLU
WELL POSITIONED FOR GROWTH
The Group`s audited financial results for the year ended 31 July 2004 are as
follows:
ABRIDGED CONSOLIDATED INCOME STATEMENT
2004 2003
R`000 R`000
Betting turnover 1 707 958 1 642 532
Net betting income 376 177 359 720
Other operating income 97 630 100 053
Net income 473 807 459 773
Operating expenses 417 173 409 752
Profit from operations 56 634 50 021
Finance costs 35 503
Profit before associated company`s income 56 599 49 518
Share of associated company`s income 305 -
Profit before taxation 56 904 49 518
Taxation 18 985 5 441
Earnings attributable to ordinary 37 919 44 077
shareholders
Adjusted for:
Surplus on disposal of property, plant (452) (555)
and equipment
Amortisation of goodwill 1 072 1 071
Headline earnings 38 539 44 593
Weighted average number of shares in 70 057 416 70 000 285
issue
Basic earnings per share 54,13 62,97
Diluted earnings per share (cents) 51,29 60,63
Headline earnings per share (cents) 55,01 63,70
Net asset value per share based on number 193,10 162,76
of shares in issue (cents)
Dividend per share (cents) - interim 10,0 7,5
Dividend per share (cents) - final 20,0 12,5
ABRIDGED CONSOLIDATED BALANCE SHEET
2004 2003
R`000 R`000
ASSETS
Non-current assets 158 692 154 658
Property, plant and equipment 145 921 142 626
Goodwill 3 126 4 198
Deferred taxation 100 1 214
Long-term debtor 3 905 6 370
Investment in associated company 5 390 -
Investments 250 250
Current assets 70 804 43 176
Inventories 151 547
Trade and other receivables 24 499 18 045
Cash and cash equivalents 46 154 24 584
Total assets 229 496 197 834
EQUITY AND LIABILITIES
Capital and reserves 136 424 113 931
Share capital and premium 23 012 22 688
Accumulated profit 113 412 91 243
Non-current liabilities 27 376 30 493
Retirement benefit obligations 5 999 9 353
Long-term borrowings 21 246 21 140
Deferred taxation 131 -
Current liabilities 65 696 53 410
Trade and other payables 51 085 47 323
Provisions 1 224 4 458
Taxation 13 387 1 629
Total equity and liabilities 229 496 197 834
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
2004 2003
R`000 R`000
Cash generated by operations 58 006 43 916
Movement in working capital (3 332) 8 075
Cash generated by operating activities 54 674 51 991
Net interest, investment income, post (19 189) (14 654)
retirement benefit asset funding,
dividends paid and taxation
Net cash inflow from operating activities 35 485 37 337
Net cash outflow from investing (17 846) (8 850)
activities
Net cash inflow/(outflow) from financing 3 931 (10 834)
activities
Net increase in cash and cash equivalents 21 570 17 653
Cash and cash equivalents at beginning of 24 584 6 931
year
Cash and cash equivalents at end of year 46 154 24 584
ABRIDGED STATEMENT OF CHANGES IN GROUP EQUITY
2004 2003
R`000 R`000
Shareholders` interest at beginning of 113 931 74 038
the year
Change in accounting policy - staff share - 16
trust
Net gain on financial instrument (AC133) - 1 050
Issue of share capital 324 -
Net profit for the year 37 919 44 077
Dividends paid (15 750) (5 250)
Shareholders` interest at end of year 136 424 113 931
COMMENTS
REVIEW OF RESULTS AND FINANCIAL POSITION
The Group`s performance in achieving both betting turnover and operating profit
growth for the year ended 31 July 2004 was more than satisfactory given the
impact of the equine flu from early December 2003 to late February 2004. Betting
turnover lost due to the outbreak is estimated at approximately R150,0 million
which, under normal business conditions, would have returned real earnings
growth.
When racing resumed subsequent to the flu outbreak, the programme was
supplemented with the staging of additional races and this together with a
successful advertising campaign to renew punter interest helped restore betting
turnover growth, which increased by 8,8% for the six months to 31 July and
turned the first half reduction of 3,4% to a 4,0% increase for the year.
Pre-tax profit grew 14,9% assisted by continued focus on expense management,
lower racing costs due to fewer race meetings held over the full year, and
higher interest income. The profits now being fully taxed and STC of R2,0
million on dividends paid resulted in a 13,6% decline in headline earnings.
Cash generated by operations of R58,0 million was more than sufficient to fund
the increase in working capital, to cover the dividend payments and STC thereon
and the R17,8 million in investments.
SEGMENTAL ANALYSIS
The group currently operates in the business segment of horseracing and betting,
and mostly in one significant geographic segment, South Africa.
ACCOUNTING POLICIES AND AUDIT
The financial statements are prepared on the historical cost basis in accordance
with South African Statements of Generally Accepted Accounting Practice and
incorporate accounting policies that are consistent with those applied in the
prior year except for the consolidation of the Phumelela Staff Share Trust to
conform with JSE requirements. The effect of this change was limited to the
Group`s balance sheet and cash flow statement as the Trust does not hold any
unallocated shares. Comparative figures have been restated, the major impact
being an increase in both current assets and long-term borrowings of R1,1
million.
The results have been audited by Ernst & Young and Ngubane & Co and their
unqualified report is available for inspection at the registered office.
SOCIAL RESPONSIBILITY
Phumelela is an empowered company with appropriate BEE and employment equity,
training programmes and procurement policy.
EQUINE FLU INSURANCE CLAIM
Phumelela has lodged an insurance claim under the business interruption section
of its insurance policy for the loss of profits caused by the equine flu, but
the insurer has not accepted the claim. Phumelela has instituted legal
proceedings against the insurer.
ACQUISITIONS
Racing UK
Phumelela-Gold Enterprises (PGE), the partnership with Gold Circle, concluded an
agreement on 21 May 2004 with Racing UK, the holder of television and related
race day data rights to 30 of the major racecourses in the United Kingdom. PGE
now has the exclusive worldwide rights outside the United Kingdom and the
Republic of Ireland to exploit the television broadcast of their horseraces from
which PGE will earn management fees plus a share of the revenue generated once
minimum threshold levels have been exceeded. Concurrently PGE and the UK
Totalizator have agreed to commingle totalizator pools on UK and South African
racing. PGE has licenced bookmakers in Sri Lanka, the Caribbean and Germany and
totalizator operators in Russia, Armenia, France, Kenya, Ghana and Italy to
receive and bet on the UK and South African racing products.
Data licensed exclusively to PGE by Racing UK continues to be offered in the
international market place by the previous broadcaster and an application has
been made to the United Kingdom courts to prevent the unlawful use of these
intellectual property rights with the court case currently scheduled for early
October.
Betting World
Effective 1 March, a 40% interest was acquired in the horseracing and sports
fixed odds betting business, operated by Gold Circle in the Western Cape and
KwaZulu Natal and which has now expanded to the Gauteng and North West provinces
with a current total of 21 outlets.
Isle of Man
Exchange control approval has been obtained to commence operating this
strategically important totalizator licence.
LITIGATION
The Minister of Trade and Industry and the National Lotteries Board have
withdrawn their Soccer 6 action and tendered party costs. This clears the way
for further development of the sports betting market.
On 12 February 2004 Phumelela succeeded in obtaining a Pretoria High Court
ruling that bookmakers may not take bets which are in any way linked to tote
dividends, as this amounted to unlawful competition and the judge further ruled
that acceptance of open bets in Gauteng is in contravention of the local
Gambling and Betting Act. This matter is being taken on appeal to the Supreme
Court of Appeal.
PROSPECTS
The improving trend in betting turnover, an expanded retail network, developing
technologies, a stronger local economy, fixed odds betting and overseas
developments, are expected to deliver real growth in operating profit.
DIVIDEND
Notice is hereby given that the Board has declared a final dividend of 20 cents
per share payable to shareholders recorded in the register on Friday 22 October
2004. Shareholders are advised that the last date to trade `cum dividend` will
be Friday 15 October 2004. As from commencement of business on Monday 18 October
2004 all trading of Phumelela shares will be `ex dividend`. Payment will be made
on Monday 25 October 2004. Share certificates may not be dematerialised or
rematerialised between Monday 18 October 2004 and Friday 22 October 2004 both
days inclusive.
For and on behalf of the Board
M P MALUNGANI B D MEHL
Chairman Chief Executive
Johannesburg
29 September 2004
Directors: M P Malungani (Chairman), B D Mehl* (Chief Executive),S E Abrahams, K
J Hlongwane, B Kantor, S K C Khampepe, J S Tennant* (Finance), G J Thula, 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
70 Marshall Street, Marshalltown, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Share code: PHM ISIN: ZAE000039269
Sponsor: Investec Bank Limited
Web site: www.phumelela.com
