Results presentation Audited results for the twelve months ended 31 July Rian du Plessis, CEO

Transcription

1 Results presentation Audited results for the twelve months ended Rian du Plessis, CEO

2 Agenda Five year track record Investor proposition Key financial features Key operational features Tellytrack and piracy update Horseracing economics Outlook Appendix detailed data 2

3 Five year track record Rian du Plessis, CEO

4 Building a track record of delivery Strategic imperative to expand outside Phumelela s traditional roots Compound annual growth rate in HEPS of 15% Compound annual growth rate in DPS of 9% Return on shareholder equity averages 20% HEPS cents (left axis) DPS cents (left axis) ROE % (right axis) % % % % % 80 5% % 4

5 Income increases from R0,9 billion to R1,5 billion Compound annual growth rate of 11% Driven by fixed odds, international and acquisition R million

6 Investing for growth Five year cumulative stay-in-business and expansion investment R530 million (R196 million gross in the past two years alone) Includes recent investments Interbet (26%) and Afribet (51%) Expanding racing visuals and tote betting internationally Retail fixed odds footprint Developing a franchise model Fixed odds software Proposed Supabets (50%) investment an additional R437 million 6

7 An important source of taxes for the SA fiscus Compound annual growth rate of 8% in VAT, betting tax and income tax A result of successful investment in growing the financial contribution from sports other than thoroughbred horseracing Total taxes paid to government up 17% to R255 million in 2016 Giving back to the SA economy and creating/preserving jobs R million

8 Investor proposition Rian du Plessis, CEO

9 Investor proposition Expansion of broadcast media rights internationally provides quality contractual income of a recurring nature through delivery of a proven SA racing product Transactional income assisted by investment in technology, customer experience, accessibility, acquisition and increased efficiencies International penetration has further potential within existing and new territories for sports in general media rights for SA horseracing content, including online streaming Long term strategic vision combines with management execution - a material proportion of profit barely existed five years ago Cost and capital discipline 9

10 Key financial features Rian du Plessis, CEO

11 Key financial features Earnings per share up 54% to 163,62 cents Headline earnings per share up 41% to 164,51 cents Headline earnings up 40% to R123 million Final dividend up 17% to 70 cents for an annual dividend of 104 cents EBITDA not a reflection in isolation of management effort as equity accounted profits reflect crucial executive input: Phumelela and Tabcorp in 50/50 PGI strategic partnership Complementary alliances with local associates Net cash balance of R11,8 million 11

12 Key operational features Rian du Plessis, CEO

13 Key operational features local Fixed Odds excelled across all betting streams as strategy increasingly yields anticipated returns operating profits more than trebled 75 fixed odds retail shops Interactive is now 30% of tote bets placed A pleasing contribution from Interbet for 12 months vs. 9 months Tote betting volumes on horseracing were stable for the year Prize monies increased by 7%, reflective of 2015 result 13

14 Key operational features international Premier Gateway International returned a sterling performance Increased demand for the export of SA horseracing content Win, place and swinger bets commingled into Hong Kong tote wef May Arena Racing Company media rights contributed wef 1 June 2016 Rand averaged R21,43/ vs. R18,11/ 18% adverse move benefitted foreign income translated to rand 47% improvement in pre-tax profit to R163 million 14

15 Tellytrack and piracy update Rian du Plessis, CEO

16 Tellytrack and piracy update Piracy of the Group s intellectual property by certain bookmakers is unconscionable Civil and criminal lawsuits have been filed and will continue to be filed 274 bookmakers now subscribe to Tellytrack with 255 bookmakers subscribing to live international televisual Competition Commission has found Tellytrack fee not to be excessive 16

17 Horseracing economics Rian du Plessis, CEO

18 Horseracing economics Horseracing remains loss making due to inequitable contributions in the funding of the sport Diversification of income sources has allowed Phumelela to report Group profits and growth Cooperation, fair dealing and a level playing field in the best interests of all Alternative scenario is for Phumelela to unbundle betting operations 18

19 Proactive strategy to innovate and diversify income streams 200 HORSERACING TOTE BETTING ON SPORT LPM'S SITE OWNER REVENUES FIXED ODDS BETTING WORLD GROUP Pre-tax income per segment R million Horseracing comprises cost of racing net of tote revenues from betting thereon and local and international media revenues

20 Commercial context a scenario of unbundling betting operations Unbundling Phumelela, Gold Circle and Kenilworth Racing's betting operations Pro-forma financial information Year ended 31 July 2015 R'000 Racing operations Expenditure Stakes National Horseracing Authority Local media costs Racing, training, transport, facilities etc Cost of racing Sundry income Stable rentals Bookmaker standup and information fees Net contribution from race day hospitality/sponsorships Sports development levies (3% of punters winnings on bets with bookmakers) Net cost of racing before contribution from tote Tote contribution Assume bets with tote operators contribute same % as with bookmakers International contribution Net international royalties on racing IP Share of equity accounted investee IOM Net funding shortfall To be funded based on pro-rata market share of betting on horse racing - Tote operators (40%) Bookmakers (60%) Net funding shortfall

21 Outlook Rian du Plessis, CEO

22 Outlook Supabets acquisition to be funded by a rights issue of R284 million - earnings enhancing Strong international demand for a quality 364 day a year SA racing product Opening up new markets to South African punters Arena Racing Company will contribute meaningfully Investment in fixed odds PDI franchises Delivering anticipated returns from investments made in the fixed odds retail footprint - further improvement in profitability expected Targeting another year of real growth in earnings per share 22

23 Appendix Local Tote and Fixed Odds and International operations data

24 Group result R' % chg Income Income from local operations % Income from international operations % Total income % PBITDA % Profit before equity a/c income % Equity accounted profit % Attributable profit % Headline earnings % Headline earnings per share cents 164,51 117,06 41% Ordinary dividend per share cents 104,00 88,00 18% Financial position Total assets % Investment % Net cash % Net asset value per share cents 688,33 600,79 15% A satisfactory overall result underpinned by strong growth from international and fixed odds operations A weaker Rand helped lift international Cash generated by operating activities up 52% to R143m Balance sheet remains strong with modest gearing and a substantial reserve borrowing capacity R76m invested in acquisition of assets Dividends from equity accounted investees up 36% to R71m 24

25 Tote betting and horse racing and broadcasting R' % chg Horseracing net betting income % Other sports net betting income % Other income * % Investment income % Net income % Stakes (prize monies) % Operating expenses % PBITDA % Depreciation % Finance costs % Equity accounted profits % Pre-tax loss % Local operations * see appendix for breakdown of income Gambling Board sports development levies, unclaimed dividends & breakages, product fees & commingling levy, LPMs, Tellytrack, stable rentals, hospitality, forex, advertising, etc. Total net betting income grew by 3% to R702m with sports other than horseracing up by a pleasing 12% to R248m Other income up 3% - including LPM s, Gambling Board levies, hospitality, commingling levy, Tellytrack, stabling and forex Prize money up 7% Like-for-like normalised expenses in the local tote operations, excluding stakes and depreciation, grew by 8% Depreciation up 12% on increased investment in racing and betting Interbet positively affected equity accounted income Loss before tax and after equity accounted investees increases to R105m Staging of horseracing and conducting tote betting thereon remains loss-making 25

26 Local operations Fixed odds (Betting World) R' % chg Net betting income % Other % Total net income % Operating expenses % PBITDA % Depreciation % Finance cost % Pre-tax profit % PBITDA increased by 161% with pre-tax profit up 228% to R70m NBI increases by 63% to R263 million - 33% on horseracing, 47% on numbers bets and 20% on other sports Fixed odds net betting income on sports other than horseracing increased by 39% to R53m, by 92% to R123m on numbers and by 47% to R87m on horseracing 51% equity investment in Afribet expands Betting World to 75 retail outlets Expense growth of 45% reflects substantial business development expenses 26

27 International operations Horseracing media rights & betting royalties R' % chg Net income % Operating expenses % PBITDA % Equity a/c profits % Pre-tax profit % PBITDA up 14% and PGI equity a/c profits up 97% PBT up 48% to R164m Pleasing growth in income out of UK, France, Australasia, Greece, Cyprus, Macau and Singapore Tote commingled income up 32%, tote stand alone commission up 31%, fees paid by offshore bookmakers up 45% International comprises 127% of group PBT 27

28 Group income R' % chg Income % Net betting income % Horseracing % Other sports % Other % Other income % Investment income % Net income % Stakes (prize monies) % Intellectual property rights fees % Operating expenses % PBITDA % Depreciation & amortisation % PBIT % Interest expense % Profit before equity accounted profit % Equity accounted profit % Mark to market adjustment ASL Betting World Nigeria impairment Group profit before tax % 28

29 Local operations Analysis of other local operations income Local Other income R' % chg Gambling Board sports development levies % Unclaimed dividends & breakages % Products fees/commingling levy % Limited payout machines % Tellytrack subscriptions % Forex % Stable rentals Miscellaneous* % Total % Miscellaneous includes advertising, sales & hospitality and other 29

30 Local Tote betting handle mix money wagered per year R million Significant growth in Sports other than horseracing LOCAL MEETINGS INTERNATIONAL MEETINGS SPORTS

31 Local Tote betting handle mix percentage share of money wagered per year % 60% 50% 40% 65% 61% 56% 56% 52% 50% Sports other than horseracing almost a third of money wagered 30% 20% 10% 25% 25% 23% 18% 19% 18% 10% 14% 21% 26% 29% 32% 0% LOCAL MEETINGS INTERNATIONAL MEETINGS SPORTS

32 Local Tote betting handle placement of bets 80% 70% 74% 72% 69% 68% 60% 50% 40% 30% Interactive more than a quarter 24% 26% 29% 30% 20% 10% 0% 2% 2% 2% 2% ON COURSE BRICKS & MORTAR INTERCATIVE

33 Local Tote betting handle by province 80% 70% 70% 70% 71% 71% 60% 50% Gauteng dominates at 70% plus 40% 30% 20% 10% 0% 5% 4% 4% 4% 8% 7% GAUTENG MPUMALANGA LIMPOPO FREE STATE NORTHERN CAPE % 7% 5% 5% 5% 5% 1% 2% 1% 1% 5% 5% 6% 7% 7% 7% 5% 5% EASTERN CAPE NORTH WEST 33

34 Local Tote betting handle by province percentage change on previous comparative period 10% 8% Growth achieved in most provinces 8,7% 6% 5,9% 5,9% 4% 3,2% 2% 1,0% 1,3% 0% -2% -4% -2,5% GAUTENG MPUMALANGA LIMPOPO FREE STATE NORTHERN CAPE 2016 EASTERN CAPE NORTH WEST 34

35 Local Tote betting handle percentage change in wagers by placement source on previous comparative period 8% 6% 4% 2% ON COURSE INTERACTIVE BRANCHES AGENTS TOTAL 6,6% 4,0% 3,3% 1,9% 0% -2% -4% -6% -8% -10% -12% -9,8% Interactive growth continuing

36 Fixed Odds betting handle mix money wagered per year R million 615,4624,5 489,0505,4490,0 462,5 Sports handle up by 118% since ,3 274,3 220,9 168,9178,6 145,1 Exponential growth in Numbers betting 140,6 273,5 575,5 886, HORSERACING SPORTS NUMBERS 14,4 40,

37 Fixed Odds betting handle mix percentage share of money wagered per year % 70% 60% 75% 70% 61% Sports other than horseracing and Numbers betting has risen to over half of money wagered 50% 48% 49% 40% 30% 20% 42% 34% 23% 24% 22% 23% 19% 17% 17% 29% 39% 10% 0% HORSERACING SPORTS NUMBERS 2% 6%

38 Fixed Odds betting handle by province percentage share 40% 35% 30% 32% 31% 31% 29% 34% 28% 25% 24% 23% 22% 20% 15% 19% 16% 16% 18% 12% 10% 9% 9% 8% 8% 8% 5% 0% 5% 2% 1% 1% 1% 0% 4% 2% 2% 5% 1%

39 Fixed Odds handle by province percentage change on previous comparative period 150% 100% 85% 106% r 120% 100% 50% 0% 17% 20% 5% -10% -50% -100% -100% -150%

40 Fixed Odds betting handle percentage change in wagers by placement source on previous comparative period 70% INTERACTIVE RETAIL TOTAL 65% 60% 50% 40% Retail presence stimulates growth 35% 53% 30% 20% 22% 25% 10% 0% -10% -20% -10%

41 Fixed Odds betting handle per year R million Betting handle up 186% between 2011 and , , ,5 714,7 809,2 956, HANDLE

42 Fixed Odds net betting income per year R million Net betting income up 198% between 2011 and , , ,2 93,4 104,8 114, NET BETTING INCOME

43 Fixed Odds net betting income mix 60% 50% 52% Numbers and sports other than horseracing proving exceptionally popular 47% 40% 40% 37% 43% 39% 33% 30% 29% 24% 20% 19% 17% 20% 10% 0% HORSERACING SPORTS NUMBERS

44 International income by percentage mix 45% Tote combined is over 50% 40% 35% 40% 36% 36% 34% 30% 25% 20% 15% 17% 17% 15% 14% 25% 25% 23% 21% 23% 17% 14% 14% 10% 5% 6% 5% 8% 10% 0% TOTE COMMINGLED TOTE STAND ALONE INTERNET (STREAMING) BOOKMAKERS ISLE OF MAN (MAINLY COMMINGLED) 44

45 Net asset value per share in cents per year NET ASSET VALUE PER SHARE

46 Dividends/distributions and earnings per share in cents per year ,1 163,6 164,5 132, ,0 76,0 88,0 88,0 88,0 104,0 113,6 114,5 106,0 90,9 91,0 82,5 83,2 117, DIVIDEND/DISTRIBUTION EPS HEPS

47 Phumelela share price relative to other gaming stocks and JSE All Share Index over five years based to 100 Sun International Tsogo Phumelela JSE All Share O-13 N-13 D-13 J-14 F-14 M-14 A-14 M-14 J-14 J-14 A-14 S-14 O-14 N-14 D-14 J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15 N-15 D-15 J-16 F-16 M-16 A-16 M-16 J-16 J-16 A-16 S-16 O-16 47

48 Results presentation Audited results for the twelve months ended Thank you