Phumelela - shareholder, stakeholder communication

12 September 2019 11:22
Phumelela is a licensed totalisator, fixed odds and racing operator. The Company administers the sport of horse racing and conducts the business of a totalisator in, inter alia, Gauteng.

The prevailing legislative and operational dispensation dates back more than two decades and has resulted in significant socio-economic benefits throughout the horse racing value chain. Phumelela plays a pivotal role in the sport and prides itself on being a good corporate citizen.

Because the staging of thoroughbred horse racing and the conduct of totalisator betting thereon has traditionally been loss-making, and remains so, Phumelela has made significant strides to diversify its revenue base, locally and internationally, and in the face of competitive pressures from casinos and the national lottery. If Phumelela had stayed the business it was when first incorporated in 1997, there would be no business today, 12 September 2019.

Over more than twenty years, Phumelela has lived up to the letter and spirit of the original objectives of Government with respect to horse racing and, together with interested stakeholders who have a passion for the sport and the many who derive a living from the sport, participated in developing a proudly South African world-class offering.

In the interests of continued open and transparent communication with shareholders and stakeholders in general, the Company discloses the following information.

On 28 August 2019, the Province of Gauteng issued an Extraordinary Provincial Gazette in respect of the Gauteng Gambling Act (4/1995) ( the Act'), as amended. The purpose of the General Notice was to invite an expression of interest to develop, own and operate a race meeting licence in the Gauteng Province and to invite an expression of interest to operate a totalisator licence in the Gauteng Province.

The content of the General Notice is replicated below, without amendment, in italics. The General Notice is available for download free of charge at www.gpwonline.co.za

The Gauteng Gambling Board ("GGB") is established in terms of section 3 of the Gauteng Gambling Act, no. 4 of 1995 ("the Act"), as amended, to regulate the gambling industry in Gauteng. In terms of Act, the board is authorised to regulate the gambling industry within the Gauteng Province.

Section 19 of the Act read with section 91 of the Act empowers the board to invite applications for a race-meeting licence. Currently, there is only one race meeting licence issued in the Gauteng Province. This licence was issued at the dawn of the democratic dispensation in South Africa. In the spirit of fostering competition in the horse racing betting industry, the board is expected to determine if there is a need and appetite for additional race-meeting licences.

In order to arrive at a decision whether to issue or invite for applications for a race-meeting licence in terms of section 19 of the Act, the board has nominated to test the market, amongst others, by way of calling for the interest in applying for a race-meeting licence in terms of the Act.

The responses to the call, must address amongst others, the following:
* operational details inclusive of the broadcasting of race-meetings, number
* of envisaged race-meetings per annum, compliance with all other horse racing stakeholders' rules and regulations; and any other relevant matter;
* funding model of the prospective project;
* transformation imperatives; and
* any other relevant information.

The deadline for submission of the expression of interest is 30 September 2019.

The Company conducts business in accordance with the Act and the attendant Gauteng Gambling Rules and Gauteng Gambling Regulations and believes that the legislative dispensation has worked well, both for licensed operators and for the public who choose to participate responsibly in gambling.

Phumelela is the appointed agent and duly licensed to conduct race meetings but has not been consulted in respect of this invitation and neither is it privy to the thinking and objectives in this regard. Given the integral role played by Phumelela, we are entitled to fair, open and honest communication rather than being kept in the dark.

This latest announcement creates more confusion for the Phumelela executive in a very competitive and difficult market where gaming margins are dropping all the time.

Moreover, the Company is facing legal actions principally relating to amendments to the Gauteng Gambling Regulations and the Public Protector's report into thoroughbred horse racing. This is public domain information.

The Regulations provide, inter alia, for the GGB to pay half of the betting tax deducted on winnings on horse racing bets over to Phumelela. However, the GGB has withheld Phumelela's share since April 2019, with the deprivation having had a material adverse financial effect forcing Phumelela to take corrective action. Phumelela finds it confusing that an institution with the credibility and fine record of the GGB would place them in this invidious position.

Phumelela would far prefer a constructive and sensible conversation for the good of the many people, and their dependents, who make their living from horse racing and from gaming. If Phumelela were faced with possible liquidation, the ripple effect throughout the horse racing value chain would be catastrophic and irreversible, threatening the livelihood of thousands of people and stakeholder dependant on the sport.

The Company is now in closed period but gave a comprehensive voluntary trading update on 12 July, ahead of year end. The year-end results are schedule to be released on or around Friday, 4 October.

Further to the announcements dated 12 July 2019 and 12 August 2019, the Company remains under cautionary. Shareholders are advised to continue exercising caution when dealing in the Company's securities until a further announcement is made.

I'm sorry if I'm a bit slow, but fortunately, we have an online community that is a whole lot quicker.

What the f is this? I read it, twice, looking for the point. I think that I understand that no matter where you are in SA, that Phumelela is the hub from which racing is mostly dominated. GC is still independent, but facts are that Gauteng has the turnover and therefore the muscle that dominates the image and income of the sport. The other independent body, the RA, with overlapping interests doesn't ever seem to contradict anything or anyone, so it's assumed independence doesn't help.

So bashing these people doesn't help, but what is this now? It follows last months gibberish press release after the now-famous "nothing happened" and "I can't comment" meeting, and the RA's Cape Town "stand by" and "feel free to slander" meeting on Monday.

I did reach for the tissues because it looks like this missive is supposed to make me feel sad I think, sad and worried and confused about the GGB who have now, according to Phumelela (who are permanently in litigation with them), a "fine record".

Can someone just confirm that the 3% tax kickback was never a permanent deal, but was specifically given for a specific period? Or is that fake news too?

SENS

Message sent to the stock exchange and shareholders before the end of year statement

A lot of legal-speak / waffle designed to confuse everyone even more - imo

My synopsis:

Woe is PGL!

1. Took over a loss making business.
2. Managed to find new avenue streams or else they would have been long bust.
3. Casinos and lotteries are their main Achilles heel.
4. GCB doesn't like them:holding back the tax; reviewing PGLs sole licensing agreement; didnt consult with them on this.
5. Even the PP is after them.
6. If PGL gets liquidated, it's not the executives fault.

Apparently the 3% GGB --> Phumelela contributions were based on Phumelela's agreement to remain within the acceptable realms of transformation - in this case 26% ownership.

According to Larry on Monday - whether entirely correct or not - Phumelela was within these parameters from the outset, but with black shareholders selling their shares over time, they now find themselves at around 12% black owned.

Concerns are that the bar may be raised to force Phumelela to move to 31% Black ownership before they are recognised as BBBEE compliant again.

I may be a bit dof ito financial agreements and the often confusing terms that define them, but - how can anyone agree to a condition that you have no control over - in this case surely P has no control over whether some (black) shareholder would be selling their shares - thereby invalidating the terms of the agreement ?

So although one can perhaps have some sympathy with P ito the 3% shortfall now being withheld (quite within their rights imo) by the GBB; I think one has to question the wisdom involved when agreeing to these conditions

Re the black shareholding: can PGL show what steps it took to actively and earnestly court black investors. Just saying that they did have the required amount and that some of them sold up isnt good enough imo. There are plenty black investment companies out there looking for opportunities.

If they did and where unsuccessful I would like to know why not? And if that has anything to do with the stance being taken now by the GCB?

Just asking....

Whichever way you look at the recent activities, press releases and meetings held by either Phum or RA or both, it is clearly obvious that racing in SA is in serious trouble. The government authorities in SA are tricky to deal with, and if they smell money they in boots and all, that we have seen now for many years.

The question is, are they willing to take the risk that racing and gambling then via the tote shuts down completely and they will get zero out of it except strikes, protests and mayhem or are they more willing to discuss and come to a compromise which benefits all parties?

I am in no way supporting what Phumelela did as regards the dividends pumped out of racing, that should have been handled a long time ago when we were all complaining but I am sure those involved in that, if they are still in racing regret it. Its now basically from what I can see going on a panic situation where some are in the know of what the financials are looking like and are trying to convey this message to those who are not in the know.

If it collapses and horse racing stops (it must be a possibility otherwise this kind of press release would not have been made) then who stands responsible for the collapse and the tragic consequences that will follow?