Phumelela Gaming and Leisure, a racing and sports betting operator of South Africa is in real need of capital. The operator has reported the worst results in 22 years history of the company and badly needs capital to be injected. The company reported a loss of R95.8m of loss in the last 12 months ending on July 31. The contrast between the financial results with the previous year is so much that even experts have taken aback. The company reported R151.7m of profit in the last fiscal year. The business was first incorporated back in 1997 and this is the worst result the company has ever recorded in the last 22 years.
The revenue of the company was down by 7.9% on a year on year basis. There has been a 9.7% decline in the local betting business as well. However, the international operations grew by a marginal amount even though the business is relatively smaller as compared to local businesses.
Commenting on the worst results the company told that Betting World and Supabets Operations had to go through many customer-friendly results of the football matches. If that endurance was not enough, the staggering economy of South Africa further worsens the matter. The country has imposed 15% VAT since April 2018 that has limited customer spending as well.
The OTC Wagering saw good growth for Phumelela. It includes the domestic digital operations as well as Phumelela’s share of the Premier Gateway International (PGI) of Island of Man. This is a joint venture with Tabcorp of Australia. This has accounted for 26% of betting income for Phumelela. The PGI income grew by 18% year on year.
However, horseracing operations are suffering from Phumelela. The province of Gauteng is revisiting the gaming regulations from April 1. This would eliminate the Phumelela’s 50% cut of the mandatory 6%b betting levy on the winnings of the punter. Since this change for four months, the company has lost R26m. This would result in income falling by 76m when the fiscal year ends in July 2020.
To handle the pressure, Phumelela has reduced the workforce by 15% and closed some of the retail premises as well. The company has also taken a very hard approach to the other expenses to make up the loss. However, domestic racing is at an unbelievable moment and the company wishes to have a dialogue with the authorities and the government to improve the situation in the near future.
Among many other efforts, the company has frozen the dividend payments and has renegotiated the payment of its debts. For future considerations, the company is working to build fixed-odds betting operations or FOBO.
The company has already secured an R50m Credit Facility which is acting as the lifeline for the company. However, that may not be enough. Phumelela is still hoping for further credit or some regulatory relief from the authorities to withstand the pressure. If it fails to get either of it in near future, Phumelela might head towards an irrecoverable situation.