Artwell Dlamini

PHUMELELA says its global expansion will shelter the gaming and leisure group from the harsh economic downturn on the local market.

CEO Rian du Plessis said yesterday the group was in talks with a few international parties with the view to making an acquisition. International operations contributed about 16% of the group’s profits, he said.

“I believe that we can organically grow our international business substantially in excess of inflation,” Du Plessis said. “We are also looking to augment our organic growth through strategic acquisitions.

“Our stated vision is to expand the international arm of the business to 50% of total profits in the next three years.”

As part of this strategy, PGE — a partnership between Phumelela and Gold Circle — acquired 20% of Automatic Systems, a company listed on the Mauritius Stock Exchange, for R5,7m in December.

Through PGE, Phumelela owns the exclusive worldwide (UK and Ireland excluded) broadcasting rights to 30 UK racecourses; and operates a television studio that broadcasts live horse- racing audio, visual and data from SA, the UK and other international racecourses to betting shops and private subscribers worldwide.

Costs associated with the global expansion are mounting — international operating costs surged by 37% — but Du Plessis said these costs were “justified” and were being monitored closely. The costs were related to investing and promoting the broadcasting rights held under the RUK agreement, the Isle of Man Totalisator operation, with further costs incurred on acquiring additional human capital.

But local operating costs increased by 10%, with the group continuing to invest in its local retail operations and betting technology.

Releasing financial results for the year to July, Du Plessis said: “We have a solid business which, despite the economic downturn in both local and global markets, has yielded an increase in revenue and in headline earnings from ongoing operations.”

Headline earnings per share from ongoing operations rose 12% to 117,20c. Revenue from local units was up 9% to R2,5bn, and revenue from international operations up 118% to R256,6m. A dividend of 43c was declared.

Profit before interest and tax from ongoing operations for international units increased by 12% to R23,9m, and local operations by 13% to R100,8m.

Du Plessis said Phumelela — which operates tote betting in seven provinces and conducts horseracing in four — said the short to medium-term trading conditions in SA were expected to be affected by the economic climate, compounded by higher inflation and interest rates, which hurt consumer spending.

Management remained confident that its international operations were well positioned to unlock further growth, Du Plessis said.

Source: Business Day