PHUMELELA GAMING & LEISURE – Continuing to Set the Pace in SA Gambling

Sports gambling revenue in South Africa continues to evidence healthy, yearly growth, with revenues ahead of Nigeria and Kenya. If the industry continues to grow in line with the predictions released by the National Gambling Board (NGB) in June 2019, forecasting a compounded rate of more than 5%, the South African gambling industry will be worth R35bn by 2021.

Casino and lottery dominate the share of gambling industry sectors, sports betting is responsible for 21% of gross gaming revenue in the country. “Recent football tournaments, including last year’s World Cup, have helped boost these figures,” Roy Coughlan, online acquisition specialist, and head of performance marketing at Kwiff, told iGB Affiliate, “but sports betting promises further opportunities for expansion.”

A cursory glance at Google Trends indicates that the market’s potential is clear to see, showing how interest in sports-specific betting terms has increased since 2014. Many new operators have since arrived, with an influx of local and international players looking to make their mark; there are currently more than 40 active Western Cape-licensed bookmakers in both the retail and online spheres.

“Traditional retailers are mobilising their online offerings and new online-only brands are offering the South African public a smooth and easy way to place their bets,” is Roy Coughlan’s take. “The question is, what is the market betting on? Unsurprisingly, global sports such as football and horse racing are taking the lion’s share of the money, followed by rugby, cricket and tennis.”

COLLECTIVE STRENGTH

Phumelela is both a licensed totalisator (tote) and racing operator, and “from its inception, has set about implementing strategies to enable horse racing to withstand the impact of competition from other forms of gambling and simultaneously create a solid platform for racing’s long-term viability.”

A key aspect of its capturing of the SA market, and increasing horse racing’s competitiveness in the face of stiff competition, has been Phumelela’s recognition of the power of collaboration and co-operation. To address the needs of horse racing as a sport, Gold Circle, Kenilworth Racing and Phumelela have co-operated in several areas, and perhaps most importantly in the creation of a combined national tote under the TAB banner.

The trio also manage the production of one national horse racing database, which forms the core intellectual property upon which informed betting is based. Tellytrack, meanwhile, is a joint operation which manages the production of televised horse racing as both a local and export product.

TellyTrack made headlines last year when it joined the World Broadcast to show live coverage of the Investec Derby, from Epsom Downs Racecourse in the UK. More than 30 broadcasters across the globe, among them major networks such as NBC, CBC, ESPN, ITV and SuperSport, covered the £1,625,000 what many see as the greatest flat race in the world.

Phumelela is having to rely more than ever on the strength of its partnerships following its latest financial report. Just beating the deadline set by the JSE to release its results for the previous year to the end of July, Phumelela posted its worst year since the business was first incorporated in 1997.

Phumelela had been facing suspension from the JSE after it failed to submit its provisional report within the three-month period stipulated in the listing requirements, putting the company’s securities at risk of suspension and possible removal.

The eventual release of the results did not bring cause for fanfare, sadly, It said its international operations were continuing to perform at a high level but conversely the local operations, both horse racing and betting, had come in way below par. “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 expanded.

Phumelela attributed its poor performance to a number of factors, including political turbulence, increasing unemployment, higher tax and inflationary administered prices.

“The increase in value-added tax (VAT) to 15% with effect from April 1, 2018, is a direct cost to the group,” it added.

“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 15% of the group’s workforce retrenched and premises closed,” Phumelela said.

MOVING FORWARD

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 the 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.

These figures of course did not make for pleasant reading, but Phumelela is not new to having to weather storms and defy the odds; back in 2016 it was able to achieve, as it put it, “solid progress in all business areas,” against a backdrop of low economic growth and continued pressure on consumers. It was also during a period of intensive investing in diversification and international growth.

Phumelela is moving forward under new stewardship, with the retirement of longstanding chairman Bernard Kantor prompting the announcement in January of his replacement, Moses Tembe, who joined Phumelela as lead independent director in 2018. “The board would like to thank Bernard Kantor for his contribution and leadership as chairman,” were the warm wishes directed his way.

“The board also wishes Kantor every success in his future endeavours.” Tembe takes the reins as the group considers how to best shape the next stage of its story. Since it came into being nearly a quarter of a century ago the group has enjoyed many momentous moments. The establishment of TellyTrack, its exclusive television channel for horse racing, perhaps reigns supreme; all horse racing in South Africa and selected overseas races are now screened live on TellyTrack, an independent television channel (239) on the DStv bouquet.

It has also been behind the introduction of major new events, including the Triple Crown, Africa’s richest series of races for three-year-olds, Champions Day and the SANSUI Summer Cup in 1999. Champions Day and the Summer Cup now represent two of the “Big 4” on the South African horse racing calendar.

Phumelela will now look to make further history to add to a history stuffed with accomplishments. There has been an almost immediate bounce-back on the part with a leap in January of the group share price by more than 13%, after Phumelela announced that it is considering capital raising initiatives.

“The company remains under cautionary as engagements with the MEC and the GGB are still in progress,” IOL reported from a statement to shareholders. “Should these initiatives be successfully concluded these may have a material effect on the company’s securities,” the group concluded. Phumelela has always bid to invest on the long-term sustainability of its sports and markets, and will surely rise from this latest setback in better form than ever.