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PHM
PHM
PHM - Phumelela Gaming - The Group`s Unaudited Condensed Consolidated Interim
Financial Statements For The Six Months Ended 31 January 2007 and
distribution declaration
Phumelela Gaming & Leisure Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/016610/06)
Share code: PHM & ISIN: ZAE000039269
The Group`s unaudited condensed consolidated interim financial statements for
the six months ended 31 January 2007
- PROFIT BEFORE TAX FROM CONTINUING OPERATIONS UP 26%
- OPERATING CASH FLOWS UP 66%
- DISTRIBUTION TO SHAREHOLDERS UP 25%CONDENSED CONSOLIDATED INCOME
STATEMENTS
% Growth Unaudited 6 Unaudited Audited
year months 31 6 months 12 months
on year Jan 2007 31 Jan 31 Jul 2006
R`000 2006 R`000
R`000
Revenue 10 1 143 882 1 043 306 2 118 719
Net betting income 7 237 307 221 522 447 848
Other operating
income
- local operations
Continuing 10 58 704 53 236 100 761
operations
Compensation for
early termination
of Newmarket lease 36 300
Proceeds on 40 000
termination
Impairment of
Newmarket night (3 700)
racing lights
- international 56 34 974 22 357 53 118
operations
Net income 367 285 297 115 601 727
Operating expenses
and overheads
- stakes 9 65 716 60 030 122 554
- local operations 8 190 478 176 446 347 969
- international 30 23 701 18 171 43 385
operations
Profit from 106 87 390 42 468 87 819
operations
Finance costs 371 782 1 738
Profit before
associated 109 87 019 41 686 86 081
company`s income
Share of associated
company 1 647 (113) 251
profit/(loss)
Profit before 113 88 666 41 573 86 332
income tax
Income tax 24 178 12 549 25 778
Profit for the 122 64 488 29 024 60 554
period
Attributable to:
- Equity holders of
the parent 64 488 28 807 60 338
- Minority - 217 216
interests
122 64 488 29 024 60 554
Earnings per share
(cents)
- Basic 117 86,53 39,81 82,97
- Diluted 125 84,28 37,39 79,36
SUPPLEMENTARY
INCOME STATEMENT
INFORMATION
Reconciliation of
headline earnings
Earnings
attributable to
equity holders
- derived from
continuing 14 32 915 28 807 60 338
operating
activities
- compensation for
early termination
of Newmarket lease
after income tax
and impairment of 31 573
the Newmarket night
racing lights
64 488 28 807 60 338
Adjusted for:
Net loss/(profit)
on disposal of
property, plant and 273 (73) (387)
equipment
Impairment of
Newmarket night 2 627
racing lights after
deferred tax
Headline earnings 135 67 388 28 734 59 951
Headline earnings
per share (cents) 128 90,42 39,71 82,44
Headline earnings
per share excluding
compensation for
early termination 12 44,53 39,71 82,44
of the Newmarket
lease
Net asset value per
share (cents) 29 353,04 273,06 297,08
Dividends per
ordinary share 14,00 8,00 38,00
(cents)
Distribution out of
share premium 6,00 8,00 8,00
(cents)
Number of shares in 74 998 135 72 804 585 73 909 635
issue
Weighted average
number of shares in
issue for basic and
headline earnings 74 529 825 72 363 559 72 724 683
per share
calculation
Weighted average
number of shares in
issue for diluted
earnings per share 76 515 006 77 044 981 76 033 155
calculation
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Jan 2007 31 Jan 2006 31 Jul 2006
R`000 R`000 R`000
Cash generated by 99 270 45 862 97 431
operations
(Increase)/decrease in (5 236) 10 861 10 202
working capital
Cash generated by 94 034 56 723 107 633
operating activities
Net finance costs,
investment income and (22 611) (17 676) (29 191)
taxation paid
Post retirement benefit 79 (79) (79)
asset funding
Dividends paid (22 411) - (6 002)
Net cash inflow from
operating activities 49 091 38 968 72 361
Net cash outflow from
investing activities (12 392) (19 832) (13 353)
Net cash
inflow/(outflow) from
financing activities 2 925 3 602 (17 359)
before capital
distribution
Capital distribution - (17 435) (23 272)
Net increase in cash and
cash equivalents 39 624 5 303 18 377
Cash and cash
equivalents at beginning 69 502 51 125 51 125
of period
Cash and cash
equivalents at end of 109 126 56 428 69 502
period
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
31 Jan 2007 31 Jan 31 Jul
R`000 2006 2006
R`000 R`000
ASSETS
Non-current assets 207 151 223 582 215 761
Property, plant and 188 415 183 187 187 052
equipment
Intangible assets 9 269 29 507 19 482
Deferred taxation - 2 209 -
Investment - associated 9 097 8 098 8 857
company
Investments 370 370 370
Long term receivable - 211 -
Current assets 153 420 101 405 111 956
Inventories 255 217 250
Trade and other receivables 44 039 22 760 42 204
Receivable for sale of
Newmarket Racecourse - 22 000 -
Cash and cash equivalents 109 126 56 428 69 502
Assets classified as held 4 185 - 4 185
for sale
Total assets 364 756 324 987 331 902
EQUITY AND LIABILITIES
Total equity 264 774 198 798 219 576
Share capital and premium 6 199 8 283 3 274
Retained earnings 258 423 190 368 216 250
Non-distributable reserves 152 (43) 52
Minority interests - 190 -
Non-current liabilities 6 848 17 254 7 842
Deferred taxation 4 720 8 362 5 793
Financial liability - 6 506 -
Retirement benefit 2 128 2 386 2 049
obligations
Current liabilities 93 134 108 935 104 484
Trade and other payables 71 412 55 990 74 808
Income tax payable 11 939 10 458 11 350
Short- term financial 9 783 20 487 18 326
liability
Short- term borrowings - 22 000 -
Total equity and 364 756 324 987 331 902
liabilities
CONDENSED STATEMENT OF CHANGES IN GROUP EQUITY
Non-
Share Share Distributable Retained
Capital premium Reserves Earnings
R`000 R`000 R`000 R`000
Balance at 31 1 795 21 791 3 161 288
July 2005
Issue of share
capital - options 53 2 907 - -
exercised
Profit for the - - - 60 338
year
Minority share of
previous year
loss realised - - - 27
Share based - - - 424
payment
Foreign currency
translation
reserve - Isle of - - 49 10
Man Tote Limited
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 1 848 1 426 52 216 250
July 2006
Issue of share
capital - options 27 2 898 - -
exercised
Profit for the - - - 64 488
period
Share based - - - 96
payment
Foreign currency
translation
reserve - Isle of - - 100 -
Man Tote Limited
Distributions
paid to equity - - - (22 411)
holders
Balance at 31
January 2007 1 875 4 324 152 258 423
CONDENSED STATEMENT OF CHANGES IN GROUP EQUITY cont
Minority
Total Interests Total
R`000 R`000 R`000
Balance at 31 July 2005 184 877 - 184 877
Issue of share capital
- options exercised 2 960 - 2 960
Profit for the year 60 338 216 60 554
Minority share of
previous year loss
realised 27 (27) -
Share based payment 424 - 424
Foreign currency
translation reserve -
Isle of Man Tote 59 (10) 49
Limited
Dividend paid to
minority shareholders
of Isle of Man Tote - (165) (165)
Limited
Acquisition of minority
shareholding in Isle of
Man Tote Limited - (14) (14)
Distributions paid to
equity holders (29 109) - (29 109)
Balance at 31 July 2006 219 576 - 219 576
Issue of share capital
- options exercised 2 925 - 2 925
Profit for the period 64 488 - 64 488
Share based payment 96 - 96
Foreign currency
translation reserve -
Isle of Man Tote 100 - 100
Limited
Distributions paid to
equity holders (22 411) - (22 411)
Balance at 31 January
2007 264 774 - 264 774
BASIS OF PRESENTATION
The interim financial results have been prepared and presented in accordance
with International Financial Reporting Standards and the Companies Act 1973.
ACCOUNTING POLICIES
The accounting policies used in preparing the interim financial statements
are consistent with those used in the annual financial statements for the
year ended 31 July 2006.
REVIEW OF RESULTS
Headline earnings increased by 135% on the comparative period attributable
mainly to the proceeds of R40 million (R34,2 million post tax) received on
termination of the Newmarket use agreement and a 169% increase in the profit
from international operations to R11,3 million (2006: R4,2 million). HEPS
increased by 128% to 90,42 cents per share (excluding compensation for the
early termination of Newmarket lease, HEPS increased by 12% to 44,53 cents
per share).
Revenue for the six months increased by 10% on the comparative period with
local revenue up 7% and international revenue up 110%. The increase in local
revenue flowed through to net betting income that was up 7% on the
comparative period.
The strong growth in international operations continued with operating income
up 56% on the comparative period to R35 million (2006: R22,4 million), the
benefits of unlocking further value from existing European agreements and
concluding new agreements in the Asian and Australasian markets coupled with
favourable foreign exchange rates flowing through.
Local operating expenses, including stakes increased by 8% on the comparative
period with the Group`s on-going program of investing in expanding and
upgrading the retail, internet, interactive voice recognition platform and
telebetting channels continuing.
International expenses increased by 30% on the comparative period with
international operations investing in additional resources, satellite and
broadcasting networks and capital infrastructures to meet the increased
demand for international products and services and strengthening the global
platform.
FINANCIAL POSITION
The financial position of the Group which is set out in the balance sheet
shows total assets of R364,8 million (2006: R325 million) including cash
balances of R109,1 million (2006: R56,4 million).
Cash and cash equivalents increased by R39,6 million during the six months to
R109,1 million at 31 January 2007. Cash generated by operating activities of
R94 million funded taxation payments of R24,7 million, dividends paid of
R22,4 million and capital expenditure of R16,8 million.
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.
Unaudited Unaudited Audited
31 Jan 31 Jan 31 Jul
2007 2006 2006
R`000 R`000 R`000
LOCAL
Revenue (net of VAT) 1 096 980 1 020 949 2 044 463
Net income 332 311 274 758 548 609
Stakes 65 716 60 030 122 554
Other net operating expenses 190 478 176 446 347 969
Profit from operations 76 117 38 282 78 086
Assets 330 985 282 221 294 450
Liabilities 82 051 89 195 83 997
INTERNATIONAL
Revenue 46 902 22 357 74 256
Net income 34 974 22 357 53 118
Net operating expenses 23 701 18 171 43 385
Profit from operations 11 273 4 186 9 733
Assets 33 771 42 766 37 452
Liabilities 17 931 36 994 28 329
TOTAL
Revenue (net of VAT) 1 143 882 1 043 306 2 118 719
Profit from operations 87 390 42 468 87 819
Assets 364 756 324 987 331 902
Liabilities 99 982 126 189 112 326
CAPITAL COMMITMENTS
Commitments in respect of capital expenditure approved by directors.
2007 2006
R`000 R`000
Contracted for 40 800*
Not contracted for 17 400 21 200
*Includes R35 million for illumination of the Turffontein race tracks for
night racing.
POST BALANCE SHEET EVENTS
There are no significant post balance sheet events that have a material
impact on the financial statements at 31 January 2007 other than noted below.
An agreement for the sale of the property comprising Bloemfontein Racecourse
for R32 million was concluded on 1 February 2007. The purchaser has provided
Phumelela with the required bank guarantee securing the selling price.
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. The trial date scheduled for 12 October
2006 was postponed by the Court due to the non-availability of a judge for
the anticipated period of the trial. A new 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.
PROSPECTS
The strong growth in international operations is expected to continue in the
second half of the year following the renewal of the agreement with Racing UK
Limited (RUK) to the exclusive broadcasting rights to 30 of the leading
racecourses in the UK held under the RUK agreement until 28 February 2010.
Local operations should continue to benefit from the on-going investment in
the retail footprint and betting technology and should yield real earnings
growth in the second half of the year.
DISTRIBUTION TO SHAREHOLDERS
Notice is hereby given that the Board has declared an interim dividend of 14
cents per share and a cash distribution out of share premium of 6 cents per
share payable to shareholders recorded in the register on Thursday 26 April
2007. Shareholders approval for the distribution out of share premium was
obtained at the annual general meeting held on 7 December 2006. Shareholders
are advised that the last date to trade "cum distribution" will be Thursday
19 April 2007. As from commencement of business on Friday 20 April 2007 all
trading in Phumelela shares will be "ex distribution". Payment will be made
on Monday 30 April 2007. Share certificates may not be dematerialised or
rematerialised between Friday 20 April 2007 and Thursday 26 April 2007, both
days inclusive.
For and on behalf of the Board
M P MALUNGANI J S TENNANT
Chairman Chief Executive
Johannesburg
22 March 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 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: 22/03/2007 17:19:35 Produced by the JSE SENS Department.
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