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PHM
PHM
Phumelela - Group audited financial results for the year ended 31 July 2006
Phumelela Gaming & Leisure Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/016610/06)
Share code: PHM & ISIN: ZAE000039269
The Group"s audited financial results for the year ended 31 July 2006
*HEADLINE EARNINGS UP 32%
*HEPS UP 29% *OPERATING CASH FLOWS UP 69%*DIVIDEND TO SHAREHOLDERS UP 25%
ABRIDGED CONSOLIDATED INCOME STATEMENTS
Restated
Audited Audited
% Growth 31 July 31 July
year 2006 2005
on year R"000 R"000
Revenue 9 2 118 719 1 946 811
Net betting income 8 447 848 415 661
Other operating income
- local operations 1 100 761 99 595
- international operations 57 53 118 33 817
Net income 10 601 727 549 073
Operating expenses and overheads
- Stakes 6 122 554 116 022
- local operations 7 347 969 324 484
- international operations 10 43 385 39 349
Profit from operations 27 87 819 69 218
Finance costs 1 738 1 026
Profit before associated company"s 26 86 081 68 192
income
Share of associated company"s results 251 9
Profit before taxation 27 86 332 68 201
Taxation 25 778 20 324
Profit for the year 26 60 554 47 877
Attributable to:
- Ordinary equity holders of the 60 338 47 877
parent
- Minority interests 216 -
26 60 554 47 877
Attributable to ordinary equity 60 338 47 877
holders
Adjusted for:
Surplus on disposal of fixed odds (730)
operation
Net surplus on disposal of property, (387) (1 655)
plant and equipment
Headline earnings 32 59 951 45 492
Number of ordinary shares in issue 73 909 635 71 809 785
Weighted average number of ordinary 72 724 683 71 022 038
shares in issue for basic and headline
earnings per share
Weighted average number of ordinary 76 033 155 76 462 428
shares in issue for diluted earnings
per share
Basic earnings per share (cents) 23 82,97 67,41
Diluted earnings per share (cents) 27 79,36 62,62
Headline earnings per share (cents) 29 82,44 64,05
Net asset value per share (cents) 15 297,08 257,45
Interim dividend/distribution
Dividend per ordinary share (cents) 8,00 12,00
Distribution out of share premium 8,00
(cents)
Final dividend/distribution
Distribution out of share premium 24,00
(cents)
Dividend per ordinary share (cents) 30,00
ABRIDGED CONSOLIDATED CASH FLOW STATEMENTS
Restated
Audited audited
31 July 31 Jul
2006 2005
R"000 R"000
Cash generated by operations 97 431 67 963
Decrease/(increase) in working capital 10 202 (4 361)
Cash generated by operating activities 107 633 63 602
Net finance costs, investment income and taxation (29 191) (15 691)
paid
Post retirement benefit asset funding (79) (1 535)
Dividends paid (6 002) (22 719)
Net cash inflow from operating activities 72 361 23 657
Net cash outflow from investing activities (13 353) (22 316)
Net cash (outflow)/inflow from financing (17 359) 3 630
activities before capital distribution
Capital distribution (23 272) -
Net movement in cash and cash equivalents 18 377 4 971
Cash and cash equivalents
at beginning of year 51 125 46 154
Cash and cash equivalents at end of year 69 502 51 125
SEGMENTAL ANALYSIS
The group stages and broadcasts horseracing events and offers betting
opportunities on both South African and international product in two
geographic segments, namely South Africa and the rest of the world.
Restated
Audited audited
31 July 31 Jul
2006 2005
R"000 R"000
LOCAL
Revenue (net of VAT) 2 044 463 1 910 443
Net income 548 609 515 256
Stakes 122 554 116 022
Other net operating expenses 347 969 324 484
Profit from operations 78 086 74 750
Assets 294 450 276 362
Liabilities 83 997 99 215
INTERNATIONAL
Revenue 74 256 36 368
Net income 53 118 33 817
Net operating expenses 43 385 39 349
Profit/(loss) from operations 9 733 (5 532)
Assets 37 452 49 570
Liabilities 28 329 41 840
TOTAL
Revenue (net of VAT) 2 118 719 1 946 811
Profit from operations 87 819 69 218
Assets 331 902 325 932
Liabilities 112 326 141 055
ABRIDGED CONSOLIDATED BALANCE SHEETS
Restated
Audited audited
31 July 31 July
2006 2005
R"000 R"000
ASSETS
Non-current assets 215 761 220 624
Property, plant and equipment 187 052 169 932
Intangible assets 19 482 39 720
Deferred taxation 2 209
Investment and loan - associated company 8 857 6 712
Unlisted investments 370 370
Long term debtor 1 681
Current assets 111 956 105 308
Inventories 250 126
Trade and other receivables 42 204 32 057
Debtor for sale of Newmarket Racecourse 22 000
Cash and cash equivalents 69 502 51 125
Assets classified as held for sale 4 185 -
Total assets 331 902 325 932
EQUITY AND LIABILITIES
Total equity 219 576 184 877
Share capital and premium 3 274 23 586
Retained earnings 216 250 161 288
Non-distributable reserves 52 3
Non-current liabilities 7 842 27 746
Deferred taxation 5 793 8 362
Financial liability 16 919
Retirement benefit obligations 2 049 2 465
Current liabilities 104 484 113 309
Trade and other payables 74 808 54 335
Taxation 11 350 16 487
Short-term financial liability 18 326 20 487
Short-term borrowings 22 000
Total equity and liabilities 331 902 325 932
ABRIDGED STATEMENTS OF CHANGES IN GROUP EQUITY
Restated
Audited audited
31 July 31 July
2006 2005
R"000 R"000
Total equity at beginning of year 184 877 158 318
Changes in share capital and premium 2 960 574
Share based payment reserve 424 824
Net profit for the year 60 554 47 877
Foreign currency translation reserve 49 3
Distributions paid to equity holders (29 274) (22 719)
Acquisition of minority shareholding (14) -
Total equity at end of year 219 576 184 877
Attributable to:
- Ordinary equity holders of the parent 219 576 184 877
BASIS OF PRESENTATION
In line with the listing requirements of the JSE Limited, the Group adopted
International Financial Reporting Standards (IFRS) for the first time in the
current year. The information presented has been prepared in accordance with
IFRS applicable at 31 July 2006.
The transitional adjustments from South African Statements of Generally
Accepted Accounting Practice (SA GAAP) to IFRS are set out under the heading
"Transitional Report".
ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous
financial year except for the adoption of new/revised standards mandatory for
financial years beginning on or after 1 January 2005.
The audited financial statements are prepared on the historical cost basis
except where stated otherwise, in accordance with International Financial
Reporting Standards (IFRS) and interpretations of those standards as adopted
by the International Accounting Standards Board and the Companies Act, No. 61
of 1973, in South Africa.
The transitional adjustments from South African Statements of Generally
Accepted Accounting Practice (SA GAAP) to IFRS are set out in the
transitional report below.
REVIEW OF RESULTS
Revenue increased by 9% year on year to R2,1 billion (2005: R1,9 billion)
with revenue from local operations up 7% to R2 billion and revenue from
international operations up 104% to R74 million.
Earnings attributable to ordinary equity holders increased by 26% to R60,3
million (2005: R47,9 million) and headline earnings per share increased by
29% to 82,44 cents per share(2005: 64,05 cents per share).
International operations continued its strong growth with the signing of
further contracts during the year. This helped turn a prior year loss from
operations of R5,5 million to a current year profit from operations of R9,7
million.
Local operating costs, including stakes increased by 7% 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
and marketing.
International operating costs increased by 10% year on year as a result of
the growth in international contracts concluded.
The results have been audited by Ernst & Young and SizweNtsaluba VSP and
their unqualified audit report is available for inspection at the Company"s
registered office.
FINANCIAL POSITION
The financial position of the Group which is set out in the balance sheet
shows total assets of R331,9 million (2005: R325,9 million) including cash
balances of R69,5 million(2005: R51,1 million).
The Group generated a net cash inflow from operating activities of R72,3
million (2005: R23,6 million), R13,3 million (2005: R22,3 million) was
applied in investing activities, R40,6 million was utilised for (2005: R3,6
million generated from) financing activities resulting in a net increase in
cash and cash equivalents of R18,4 million (2005: R4,9 million) for the year.
Distributions comprising cash distributions out of share premium and ordinary
dividends paid to equity holders during the year amounted to R29,1 million
(2005: R22,7 million).
CAPITAL COMMITMENTS
Commitments in respect of capital expenditure approved by directors
2006 2005
R"000 R"000
- contracted for 717 5 809
- not contracted for 39 283 34 191
POST BALANCE SHEET EVENTS
There are no significant post balance sheet events that have a material
impact on the financial statements at 31 July 2006 other than noted below.
In August 2006 Phumelela concluded an agreement to terminate the Newmarket
Racecourse Use Agreement in return for a payment on 31 January 2007 of R40
million. The proceeds will be utilised to, inter alia, relocate the Newmarket
floodlights to Turffontein and to upgrade the racetrack and facilities at
Turffontein.
TRANSITIONAL REPORT
In line with the JSE Limited listing requirements, the Group has adopted
International Financial Reporting Standards (IFRS) with effect from 1 August
2005. As the Group publishes comparative information for one year in its
financial statements, the date for transition to IFRS is effectively 1 August
2004, which represents the start of the earliest period of comparative
information presented.
In preparing the opening IFRS balance sheet, the Group has adjusted amounts
previously reported in the financial statements in accordance with its
previous basis of accounting on SA GAAP. An explanation of how the transition
from SA GAAP to IFRS has affected the Group"s financial position and
performance is set out in the following tables and the notes accompanying the
tables. The adjustments arising from the adoption of IFRS did not have an
effect on the cash flows of the Group.
The following transitional exemptions from retrospective application under
"IFRS 1 - First-time Adoption of International Financial Reporting Standards"
were elected:
Business combinationsThe Group has elected not to apply "IFRS 3 - Business
combinations" retrospectively. The carrying amount of goodwill at transition
date is its carrying amount under the previous SA GAAP and has been tested
for impairment on an annual basis since.
Property, plant and equipmentThe Group has elected to use the fair value as
deemed cost for property, plant and equipment at date of transition.
Share-based paymentsThe Group has elected not to apply "IFRS 2 - Share-based
payments" to equity instruments granted on or before 7 November 2002 or to
equity instruments granted after 7 November 2002 that vested before 1 January
2005.
The quantification of the IFRS adjustments is shown in the reconciliation"s
that follow.
12 months IFRS
31 July transition
2005 1 Aug 2004
R"000 R"000
Reconciliation of total equity
As previously reported under SA GAAP 160 411 136 424
Property, plant and equipment 32 828 29 049
Deferred tax on PPE adjustment (8 362) (7 155)
Total equity restated under IFRS 184 877 158 318
Reconciliation of non-current
liabilities
As previously reported under SA GAAP 19 384 27 376
Deferred tax on PPE adjustment 8 362 7 155
Non-current liabilities restated under 27 746 34 531
IFRS
Reconciliation of non-current assets
As previously reported under SA GAAP 187 796 158 692
Property, plant and equipment 32 828 29 049
Non-current assets restated under IFRS 220 624 187 741
Reconciliation of profit attributable to
ordinary holders
As previously reported under SA GAAP 46 129
Property, plant and equipment 3 779
Deferred tax on PPE adjustment (1 207)
Share based payments (824)
Profit attributable to ordinary holders 47 877
restated under IFRS
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 continue to be made to the National Responsible Gambling
Programme, Work Rider training programmes, the SAPS Mounted Services and
community soccer projects. Phumelela was ranked third in the Travel and
Leisure sector of the 2006 Financial Mail Listed Company Empowerment Survey.
LITIGATION
The Company"s legal action instituted against the Company"s insurance
underwriters in respect of a business interruption claim arising from the
loss of profits caused by the equine flu is ongoing. The trial date scheduled
for 3 November 2005 was postponed at the instance of the Company"s insurance
underwriters and a new trial date has been set for
12 October 2006.
DIRECTORS
During the year Messrs M J Jooste, E Nkosi and C J H van Niekerk were
appointed to the Board.
Mr A Hogg has been invited to join the Board of Directors once the necessary
regulatory requirements have been fulfilled.
PROSPECTS
Extensive international business opportunities exist and are being developed
by our team. Notwithstanding the extended sales cycle, profits from
international operations are expected to grow substantially in the current
year.
The local macro-economic factors are set to impact negatively on consumer
confidence and disposable income, however, the ongoing investment in the
retail network, training and technology should largely ameliorate this
impact.
Management expects to achieve real growth in headline earnings for the
current financial year.
DIVIDEND TO SHAREHOLDERS
Notice is hereby given that the Board has declared a final dividend of 30
cents per share (2005: cash distribution out of share premium of 24 cents per
share in lieu of a dividend) for the year ended 31 July 2006 to shareholders
recorded in the register on 20 October 2006.
Shareholders are advised that the last day to trade "cum" the dividend will
be Friday, 13 October 2006. As from commencement of business on Monday, 16
October 2006, all trading in Phumelela shares will be "ex" the dividend.
Payment will be made on Monday, 23 October 2006. Share certificates may not
be dematerialised or rematerialised between Monday, 16 October 2006 and
Friday, 20 October 2006, both days inclusive.
For and on behalf of the Board
M P MALUNGANI J S TENNANTChairman
Chief Executive
Johannesburg27 September 2006
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; Mrs N J Mboweni; 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
Share code: PHM
ISIN: ZAE000039269
Sponsor: Investec Bank Limited
Web site: www.phumelela.com
Date: 27/09/2006 02:40:11 PM Produced by the JSE SENS Department
