Companies / 2 December 2019, 10:00am / Sandile Mchunu
JOHANNESBURG - South Africa’s largest horse-racing operator, Phumelela Gaming and Leisure, just managed to beat the Friday deadline set by the JSE to release its long-overdue results for the year to the end of July.
Phumelela was facing suspension from the JSE after it failed to submit its provisional report within the three-month period stipulated in the JSE’s listing requirements.
Two weeks ago, the JSE trading system had annotated the group with an “RE” to indicate that it has failed to submit its provisional report timeously, and that the listing of the company’s securities was under threat of suspension and possible removal.
However, on Friday Phumelela dodged the suspension by releasing the results, with the company admitting that it had its worst year since the business was first incorporated in 1997.
It said its international operations were continuing to perform at a high level and the local operations, both horse racing and betting, had had a terrible year. “International operations contributed R223.4million in pre-tax profit, but local operations lost a combined R332.4m, up from R51.9m compared to last year,” the group said.
Phumelela attributed its poor performance to a number of factors, including political turbulence, labour unrest, criminality, a stagnant economy, low business and consumer confidence, increasing unemployment, higher tax and inflationary administered prices.
“The increase in value-added tax (VAT) to 15percent with effect from April 1, 2018, is a direct cost to the group, and there is little doubt that the VAT increase has further depressed discretionary spending,” it said.
Phumelela also incurred a R31.9m impairment against the franchise operation in North West during the period.
The group said its losses were exacerbated by the withdrawal, with effect from April 2019, of the group’s 50percent share of the 6percent levy on punters’ winnings on fixed-odds bets on horse racing in Gauteng.
“This cost the group approximately R26m for the four-month period to July and will have an annualised negative impact of approximately R75m. The group has had no alternative but to take further decisive measures to cut costs, with in excess of 15percent of the group’s workforce retrenched and premises closed,” Phumelela said.
The group incurred a cumulative R57m in the past two financial years in restructuring charges and is targeting an annual cash saving of R60m.
Phumelela reported a headline loss of R98.2m compared with headline earnings of R155.6m, and headline loss a share of 98.2cents a share compared with headline earnings per share of 154.23c reported last year.
Loss for the year amounted to R95.82m compared with a profit of R151.75m.
Its betting operations segment in South Africa saw its income decline by 10percent. Tote betting income declined by 6percent and fixed odds betting income declined by 19percent.
In the media operations segment, the combined loss of both local and international operations increased by 31percent to R368.1m.
Phumelela shares closed unchanged at R2.20 on the JSE on Friday.