LISTED tote operator Phumelela Gaming and Leisure on Tuesday reported a 25% jump in diluted headline earnings per share to 111.69c for the year ended July, and said its decline in domestic profits had vindicated its international expansion.
CEO Rian du Plessis said Phumelela had achieved "a good all-round set of results" for the year, lifted by a 56% surge in international profits and a 60% increase in net betting income from tote sports betting.
Phumelela’s share price rallied 6.67% to close at R16 on Tuesday.
During the year, group income rose 8% to R1bn, while group profit before tax was up 15% to R111m — with profit before tax on international operations up 56% to R97m. This means international operations now account for 87% of group profit.
Phumelela’s profit before tax from local operations was down 59% to R14m, with local tote revenues on horseracing falling 5%. Excluding the contribution of the group’s fixed-odds operation Betting World, Phumelela’s local operations made a R7.7m loss.
The group’s final dividend per ordinary share of 60c was up 18% on the prior year.
Phumelela’s rise in international profits includes a 72% increase in the profit share from equity-accounted investees, primarily the group’s investment in the Isle of Man.
Income from the export of South African thoroughbred horseracing media rights was up 28%, bolstered by the weak rand.
Mr du Plessis said the group had invested R104m in its capital infrastructure during the period, which included a R40m investment into a synthetic track and a general upgrade of facilities at the Fairview racecourse in the Eastern Cape.
The project was completed post year-end and would make the operation "more weather resilient", as would Phumelela-partner Gold Circle’s work on a synthetic track at Greyville Racecourse.
Phumelela had lost a higher-than-usual, 22 race meetings, during the period due to inclement weather, which impacted affected its local operations.
Mr du Plessis said the group was "still talking to government and bookmakers about spreading the burden of funding horseracing a bit more evenly", given that Phumelela, which was relatively labour intensive, felt it carried a disproportionate share of taxes relative to bookmakers.
Although Phumelela’s international operations were dependant on good quality horseracing fixtures in South Africa South Africa, Mr du Plessis said if the group had not diversified and invested abroad, "we would have been in deep trouble".
"It’s because we conduct such good horseracing in South Africa, that we actually have a product which we can export so successfully."
Mr du Plessis said the retail footprint of Betting World "is growing exponentially".
"Some three years ago we had only 40 outlets and our aspiration within the next three to four years is to go up to 100 outlets." In the new financial year, Phumelela intended opening "no less than 16 outlets".
Mr du Plessis said the trend where people wanted to bet smaller amounts into larger pools had led Phumelela to make changes to its Pick 6 rules after the year-end. "It’s early days, but going by what we have seen in the first three weeks, it has just shot the lights out for us."
With expected growth from international operations, soccer-betting and Pick 6, Mr du Plessis said: "I think that we are well positioned for growth for the new year."
"The group’s sports pools, fixed odds operations and international operations have started the new period well. Initial indications are that changes to the Pick 6 rules have had a markedly positive effect on pool sizes.
"New bets planned for the 2014 financial year include an attractive daily bet with large pools," he said.
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