Phumelela takes a bet on franchise model

Phumelela CEO Rian du Plessis.
Photographer: Russell Roberts

Image source: BDlive

Speaking at the release of strong interim results on Friday, CEO Rian du Plessis said the company, which owns the Betting World brand, was initially testing the franchise concept in partnership with previously disadvantaged individuals in the North West.

"If franchising works for us, then we will roll it out into Gauteng and then other provinces." He said Phumelela was targeting 10 franchise retail outlets for the second half of the financial year.

The franchise model will allow Phumelela, which already has 66 fixed-odds betting outlets, to service smaller urban areas and outlying areas.

Du Plessis has long contended that a challenge for Phumelela was bringing betting to the people. "Some of our customers have to travel vast distances to make a bet with us."

Phumelela’s interim numbers reinforced market perceptions that efforts to diversify away from a traditional horseracing offering were paying off.

Opportune Investments CEO Chris Logan, a long-time Phumelela shareholder, said the diversification effort was showing powerful momentum considering the bigger losses incurred on traditional horseracing.

The company’s profits from tote bets on soccer, fixed odds, and limited payout machines jumped to R128m, with the fixed-odds operations fattening its margin to 13.9% from 11.6% previously.

A breakdown of Phumelela’s domestic operations saw fixed-odds betting up 46%, horseracing up 12%, soccer up 29%, while numbers betting went up a whopping 99%. Tote betting increased 5%.

Phumelela’s losses from its traditional racing business increased 45% to R130m.

Logan reckoned the company’s profit would gallop ahead if management could turn around or check losses in horseracing markedly.

Phumelela’s international operations again trotted out convincing growth numbers, with equity-accounted income more than doubling to R41m and other offshore income up 26% to R132m. The major drivers were Phumelela’s 50% investment in Premier Gateway International on the Isle of Man, and live broadcasts of South African horseracing to six continents.

The combined pretax profit contribution of R77.5m from international operations was up 34% on the corresponding interim period last year.

Du Plessis said there were "commingling" and betting opportunities through the Isle of Man tote, and good demand across a number of territories for domestic horseracing content.

He hinted at further dealmaking by Phumelela, which recently acquired 26% of Interbet, 51% of Afribet, and 50% of Supabets. "With a strong balance sheet (gearing is about 1%), there is substantial headroom for investment in new growth vectors. We will be vigorously pursuing diversification and expansion opportunities locally and abroad."