1. Phumelela Gaming and Leisure Trade & Industry PC Presentation
Review of National Gambling Legislation
MPHO RAMAFALO

2. Agenda INTRODUCTION & BACKGROUND
SOCIO-ECONOMIC IMPACT OF LEGALISED GAMBLING
IMPACT OF MISLEADING ADVERTISING
REGULATION OF CROSS-BORDER GAMBLING
EFFECTIVENESS OF THE CURRENT REGULATORY
ENVIRONMENT
INTERACTIVE GAMBLING
Q&A
Phumelela Gaming & Leisure Limited

3. INTRODUCTION & BACKGROUND
Phumelela is licensed to operate *horse racing & totalisator in *Eastern Cape, *Free State, *Gauteng, Limpopo, Mpumalanga, *Northern Cape & North West
5 racecourses & allied training centres in 4 *provinces (contributing to staging approximately 250 race meetings annually)
Over 230 betting shops (TAB branch & agency network) in seven provinces
2 Call Centres in Eastern Cape & Gauteng
Betting website (
Phumelela Gaming & Leisure Limited

4. INTRODUCTION & BACKGROUND - Cont
Phumelela commingles its horse racing & sports betting totalisator pools with Gold Circle in SA
Gold Circle operates in KZN & Western Cape
Phumelela & Gold Circle also have interest in fixed odds (bookmaking) through their shareholding in Betting World (Pty) Ltd
Phumelela & Gold Circle are the core of the horse racing industry, employing tens of thousands of people (both directly & indirectly)
Jointly own the intellectual rights, including the broadcasting of horse racing through Tellytrack, a DStv channel
Phumelela Gaming & Leisure Limited

5. INTRODUCTION & BACKGROUND - Cont
Phumelela continues to expand its international presence, capitalising on its simulcast products & coverage, as well as strong technological platform that allows for international commingling pools
Phumelela, through its jointly controlled operation, Phumelela Gold Enterprises (PGE), a partnership between Phumelela and Gold Circle:
Owns a majority share in Phumelela Gold International Limited, a company incorporated in The Isle of Man (IOM)
Owns the exclusive worldwide broadcasting rights to 30 of the UK racecourses (outside UK & Ireland)
Operates a television studio that broadcasts live horseracing audio, visual & data from South Africa, UK & other international racecourses to betting shops & private subscribers worldwide
Phumelela Gaming & Leisure Limited

6. Target Market Demographics
There are 2.2 million adults in South Africa who are interested in horse racing and 1.5 million regular punters with the following profile:
82% Black
62% Male
60% are between the ages of years
50% of punters are LSM 6 - 7
Concentrated mostly in Gauteng, followed by KZN, Free State and Western Cape
Source: TGI 2008
Phumelela Gaming & Leisure Limited

7. Horse Racing Punters Demographics
Source: TGI 2008
Phumelela Gaming & Leisure Limited

8. The Popularity of Horse Racing Globally
Globally, more than 100 million racing fans attend events across the world and US$100 billion is gambled globally on horse racing at Tote outlets.
COUNTRY
ANNUAL ATTENDANCE
Japan
United Kingdom
Australia
Hong Kong
France
Ireland
South Africa
New Zealand
United Arab Emirates
Source: Economic Impact of British Racing Report, Deloitte 2006; Phumelela data
Phumelela Gaming & Leisure Limited

9. Quantifying Local Horse Racing’s Annual Global Reach
Nearly 1 million people attend the 400+ SA races
+100 million contacts occur off-course
Local media assets result in an additional 224 million points of contact
2.8 billion+ contacts annually
GLOBAL
SA races are broadcast to +40 countries globally
This creates 2.5 billion contacts with consumers each year
Source: Phumelela and Gold Circle Information
Phumelela Gaming & Leisure Limited

10. Comparative Reach Analysis
Sport
Local Interest
Global Interest
fans
3 742 hours TV coverage
fans
104 member unions
Cricket
fans
270 million actively involved
207 member unions
fans
hours TV coverage
Football
fans
4 699 hours TV coverage
fans
115 member unions
Rugby
fans
4 380 hours TV coverage
fans
80 member unions
Horse Racing
Source: TWSM Report; BMI Sporttrack Reports
Phumelela Gaming & Leisure Limited

11. Geographical Spread of Local Race Meetings
Gauteng
65 race meetings
Free State
69 race meetings
Northern Cape
35 race meetings
KZN
114 race meetings
Eastern Cape
66 race meetings
Western Cape
87 race meetings
Phumelela Gaming & Leisure Limited

12. Vertically Integrated Model
Staging of thoroughbred racing events : Phumelela
Domestic Totalisator Betting : TAB
International Totalisator Betting : PGE
Fixed Odds Betting : Betting World
Domestic Broadcasting : Tellytrack
International Broadcast : Racing International
Phumelela Gaming & Leisure Limited

13. Phumelela Gaming & Leisure Limited
Group Brands
Phumelela Gaming & Leisure Limited

14. PHUMELELA GAMING AND LEISURE Phumelela Gaming & Leisure Limited
Divisional Structure
PHUMELELA GAMING AND LEISURE
BETTING
(Tote and Fixed Odds)
RACING
CONTENT
(TV, Web and Print)
Branches
Agents
Racecourses
Telephone betting
Internet
WAP
International commingling
Betting World
Turffontein
Vaal
Kimberley
Arlington
Fairview
Randjesfontein
Tellytrack
Local Broadcast
International Broadcast (RUK)
Computaform
Computaform Express
TAB Win
Racing Express
Tab Express
Phumelela Gaming & Leisure Limited

15. SOCIO-ECONOMIC IMPACT OF LEGALISED GAMBLING
Employment, Ownership & BBBEE
Although totalisator betting operations (including the operation of horse racing) account for the less than 10% market share of the gambling industry, it is responsible for the generation of tens of thousands of jobs in the industry, directly & indirectly
Phumelela has a level A Empowerdex BBBEE rating, with 50.23% black ownership
Directly employs people
Taxation &Fees
The sector contributes significantly to the fiscus, with Phumelela having contributed over R 160 million in national & provincial taxes in the year ended 31 July 2009 (approximately R 200 million prior year). This does not include the various license fees payable to provincial gambling boards.
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 15
Phumelela Gaming & Leisure Limited

16. SOCIO-ECONOMIC IMPACT OF LEGALISED GAMBLING - Cont
Regulated & Responsible Gambling
Regulation & Compliance
The industry is highly regulated, with emphasis on player protection& the various gambling boards are strict in enforcing compliance
National Responsible Gambling
Phumelela, like most operators in the industry, contributes a percentage of their gross gambling income to the National Responsible Gambling Programme (“NRGP”) & implements various NRGP initiatives aimed at detecting & limiting the potential negative effects of problem gambling. NRGP figures indicate that the sector compares favourably to the global trends on problem gambling
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 16
Phumelela Gaming & Leisure Limited

17. IMPACT OF MISLEADING ADVERTISING
Advertising is done in accordance with the national & provincial regulations on advertising aimed at ensuring that people are protected from misleading advertising
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 17
Phumelela Gaming & Leisure Limited

18. EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT
General 
The gambling industry is South Africa is probably one of the most regulated globally, but needs to be reviewed to ensure a balanced approach - taking into account the commercial aspects of the operations as well
Efficiency
The current regulatory environment is less efficient with 9 provincial gambling boards & a national gambling board
All with different standards & little cooperation
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 18
Phumelela Gaming & Leisure Limited

19. EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont
Efficiency (cont)
This tends to significantly increase the costs of doing business &compliance overall
Unnecessary, cumbersome & inefficient processes
Phumelela has to deal with all provincial, mostly with different requirements & standards throughout
Some provinces still regulate betting on the old ordinance, as their legislation has never been updated & this makes it even more difficult to operate properly in those provinces
Different gambling tax, levies & fees regimes (e.g. different rates, on different revenue basis, excessive fees & tax rates in other provinces, etc).
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 19
Phumelela Gaming & Leisure Limited

20. EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont
   
Tax rates by province
Province
Tax Rate
Gauteng
6.5% on Take out
Mpumalanga
2.5% on Turnover
Limpopo
3.5% on Turnover
North West
Eastern Cape
10% on Take out
Northern Cape
8 % on Take out
Free State
3 % on Turnover
Kwazulu Natal
1.5% on Turnover
Western Cape
6.0% on Take out
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 20
Phumelela Gaming & Leisure Limited

21. EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont
(Unfair) Competition
Overbearing regulation leads to lost opportunities & unfair competition
For instance, the totalisator is required to submit new rules for approval by the gambling boards prior to introducing any new product & these tends to take a very long time to consider
Bookmakers & the lottery are not subjected to this requirement
Lottery can also open outlets anywhere, anytime
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 21
Phumelela Gaming & Leisure Limited

22. EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont
(Unfair) Competition (cont) – Open Bet
Bookmakers currently allowed to offer the so-called “open bet”, that is, offering bets which were not “fixed odds” or using totalisator’s results & dividends as a basis for determining payouts
This has effectively allowed them to “unlawfully” compete with the totalisator & utilize the totalisator’s intellectual property without due consideration
The open bet is estimated to cost the totalisator & horse racing approximately R 200 million nationally
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 22
Phumelela Gaming & Leisure Limited

23. EFFECTIVENESS OF THE CURRENT REGULATORY ENVIRONMENT - Cont
(Unfair) Competition (cont) – Open Bet
This means that bookmakers do not adequately contribute to horse racing, while weakening the totalisator’s ability to fund horse racing
Every R100 bet on the totalisator yields R20 on average for horseracing, of which about R6 goes directly into stakes (prize money for horse owners)
In the normal course, a R100 fixed-odds bet with a bookmaker yields R2.70 for horseracing. This assumes a 10% profit for fixed-odds operators with them retaining R10 of every R100 wagered with them. Of the assumed R90 left over, R84.60 is returned to customers, with R2.70 for provincial taxation & R2.70 to horseracing in some provinces
Open betting has also contributed to significant decline of totalisator revenue in Germany over past ten years.
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 23
Phumelela Gaming & Leisure Limited

24. Phumelela Gaming & Leisure Limited
INTERACTIVE GAMBLING
The delay in licensing & regulating interactive gambling may mean that South African operators have lost significant ground
South Africans are already patronising available interactive gambling sites elsewhere
Some of the proposed regulation on interactive gambling may render South African websites unattractive
For instance, the proposed player registration process is too onerous compared to other jurisdictions.
Numbers show our industry is not recession proof.
Local operations impacted by economic climate and concomitant downturn in consumer spend coupled with inclement weather conditions. Half year local up 3% and international up 56%.
International revenue growth driven by 9% increase in sale of broadcast rights and 76% increased in IOM Tote turnover.
Betting World share of profit down by 43% to R2,4 M 17% ROI
ASL share of profit R1 M 26% ROI
Dividend cover policy of between 1.8 and 2.2 exceeded. Current dividend 1.4x cover. Div. Yield on R11 = 6%
Cash reserves decreased by R44 M. WC increase R21,6 M, Tax R61,5 M, Div pd R51,6 M, Capex R33,5 M and share repurchases of R6,1 million.
Capex spend includes R12 M at Turffontein (R3M new parade ring, upgrade of hospitality suites, security, carparks R3M night racing etc.) Split Vaal turf track R1M, IT and betting hardware R5,8 M, Betting retail outlets new and upgrades R7,4m 24
Phumelela Gaming & Leisure Limited

25. Thank You Questions and Answers
MPHO RAMAFALO 25