Slipping Phumelela bets on technology
October 6, 2009
By Slindile Khanyile and Audrey D'Angelo
Phumelela will introduce new betting games and enhance its technology-based offering to mitigate the economic downturn, which has seen earnings tumble significantly at the JSE-listed betting and horseracing group.
Rian du Plessis, the chief executive at Phumelela, said yesterday that one of the new games would be the All Up bet, which was popular in Mauritius. This game allows the customer to take a win or place a bet on selected horses across the various races in any single race meeting.
Rules for the Rugby 4 game have been approved, but the tote intends to introduce this bet only later next year.
The group, which already offers gamblers a chance to place bets on the internet and through call centres, has also introduced a cellphone-based service.
"Technology makes the service more accessible to a larger population because you don't have to physically go to place a bet. The majority of the people in the country have cellphones already," said Du Plessis.
In the year to July, Phumelela was hit by the economic downturn because its services rely on consumers having disposable income. Du Plessis said players were spending less money.
As a result revenue grew only marginally at 3 percent to R804.3 million, much less than the average inflation rate.
Earnings before interest, taxation, depreciation and amortisation, excluding the profit on sale of the Bloemfontein racecourse, declined 8 percent to R120 million.
Headline earnings decreased 21 percent to R70.9m while headline earnings a share slumped 20 percent to 93.67c. A final dividend of 43c a share was declared.
Du Plessis said the company was satisfied with the results and he was confident that management did what it could under the circumstances.
"We will continue to pay strong attention to cost containment. We expect trading to be tough and although there are initial indications that there may be an upturn, we think it is likely to stay as it is," Du Plessis said. "We will remain cautious."
As has been the trend for some time, the international operations performed better than the local operations.
Tony Wintour, the company secretary, said that in addition to running the tote on the Isle of Man, about 25 percent of Phumelela's business came from satellite broadcasts to 40 other countries, in which it ran totalisator pools on South African horseracing.
In the past year this had attracted about 2.5 billion betting contracts from countries including Singapore, Australia, Italy, France and Germany.
"We started this about five years ago," he explained, "and we are world leaders in it. Some other companies have started doing it but they have a lot of catching up to do and we see a lot more opportunity."
Du Plessis said the company was on the lookout for acquisitions in South Africa and abroad but said it was too soon to give any further details.
Phumelela has a property portfolio with a book value of R' million. The residential development of 182 units around Arlington racecourse is on hold pending improved market conditions.
There are also plans for a new development at Turffontein and Phumelela has applied for the sub-division and rezoning of 12.5ha. The group is spending R40m to improve the lights at Turffontein.
The shares rose 8.9 percent to R12 yesterday, valuing the company at R925m.
For table on the popularity of horse racing - click here
For horse racing fast facts - click here
For Phumelela share graph - click here
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