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Johannesburg – Phumelela Gaming and Leisure says its diversification strategy is paying off.

The group on Friday said earnings per share increased 4 percent to 90.78 cents in the six months to January.

Headline earnings per share, a key measure of profitability, were up 3 percent to 90.19 cents per share and headline earnings per share in constant currency, which strips out foreign exchange movements, gained 26 percent to 109.80 cents per share.

The company notes it had a pleasing performance from international operations, although domestic economic conditions impacted tote operations. 

International operations contributed R91.3 million in pre-tax income, which was up 18 percent on the comparative period.

CEO Rian du Plessis explains the international operations put in an exceptional performance despite a stronger rand with pre-tax income up 18 percent to R91.3 million, an increase of 38 percent on a constant currency basis.

“Our international operations not only provide a foreign currency hedge but also diversified income across multiple regions.” The international operations comprise the export of live televisual South African horse racing, import of live televisual international horseracing and pari-mutuel betting through PGI in the Isle of Man.

The South African operations were negatively impacted by a challenging consumer environment with tote betting down 7 percent to R1.7 billion.

“We continue to be a leading racecourse owner, betting operator and racing media provider in South Africa and tote betting on local horseracing maintained a 50 percent share of total betting turnover,” says du Plessis.

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A highlight during the year was the successful inaugural Sun Met at Kenilworth sponsored by Sun International and co-sponsored by GH Mumm, which was further evidence of the continued appeal of horseracing as on-course entertainment as well as for those viewing and betting locally and internationally, it says. “This affirms our continued investment in horseracing facilities.”

The group’s strategy to diversify not only geographically but in terms of offering is beginning to pay dividends, it says.

“The initiatives we have been putting in place over the years have resulted in a better spread in earnings, a wider choice for our customers and an increased market value for the group,” says Du Plessis. In addition the group seeks to keep its betting offerings up to date, which includes embracing technological advancements.

“Online betting has proven beneficial to customers as it eliminates transport costs although a bricks and mortar presence remains necessary as customers enjoy the social interaction it provides.”

However, Du Plessis cautions of continued political uncertainty and the negative impact of a weak South African economy on consumer spending.

“Local tote operators are expected to remain under pressure, while our fixed odds operations are expected to continue leveraging off our investments in facilities.”

The group will also continue to implement cost savings and managerial efficiencies. Supabets provides an exciting new area for the group and is expected to contribute positively for the full year results with opportunities for synergies already identified.

The international operations are also expected to continue performing well with real growth in foreign currency income anticipated. 

The group declared an interim dividend of 34 cents.