Audited results for the twelve months ended 31 July 2016 · 31 July 2016 Investor proposition ... 31 July 2016 Tellytrack and piracy update • Piracy of the Group’s intellectual

Results presentationAudited results for the twelve months ended 31 July 2016

Rian du Plessis, CEO

Twelve months ended31 July 2016

Agenda

• Five year track record

• Investor proposition

• Key financial features

• Key operational features

• Tellytrack and piracy update

• Horseracing economics

• Outlook

• Appendix – detailed data

2

Five year track record



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%

4

0%

5%

10%

15%

20%

25%

30%

60

80

100

120

140

160

180

2011 2012 2013 2014 2015 2016

HEPS cents (left axis) DPS cents (left axis) ROE % (right axis)


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

5

400

600

800

1 000

1 200

1 400

1 600

2011 2012 2013 2014 2015 2016


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


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

100

120

140

160

180

200

220

240

260

280

2011 2012 2013 2014 2015 2016

R’ million

7

Investor propositionRian du Plessis, CEO


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

Key financial featuresRian du Plessis, CEO


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

Key operational features



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


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

Tellytrack and piracy update



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

Horseracing economics



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


-7

80

16 22

111

-8

113

16 8

130

-66

134

20 12

99

-99

143

20

70

134

-150

-100

-50

0

50

100

150

200HORSERACING

TOTE BETTING ON SPORT

LPM'S SITE OWNER REVENUES

FIXED ODDS BETTING WORLD GROUP

2013 2014 2015 2016

Pre-tax income per segment R million

Proactive strategy to innovate and diversify income streams

Horseracing comprises cost of racing net of tote revenues from betting thereon and local and international media revenues

19


Commercial context – a scenario of unbundling betting operations

20

Unbundling Phumelela, Gold Circle and Kenilworth Racing's betting operationsPro-forma financial informationYear ended 31 July 2015R'000

Racing operationsExpenditure

Stakes 355 313 National Horseracing Authority 56 329 Local media costs 81 481 Racing, training, transport, facilities etc. 355 929 Cost of racing 849 051

Sundry incomeStable rentals -13 566 Bookmaker standup and information fees -2 329 Net contribution from race day hospitality/sponsorships -59 509 Sports development levies (3% of punters winnings on bets with bookmakers) -118 724 Net cost of racing before contribution from tote 654 923

Tote contributionAssume bets with tote operators contribute same % as with bookmakers -97 511

International contributionNet international royalties on racing IP -134 366 Share of equity accounted investee IOM -45 637 Net funding shortfall 377 409 To be funded based on pro-rata market share of betting on horse racing- Tote operators (40%) 150 964 - Bookmakers (60%) 226 445 Net funding shortfall 377 409

Outlook



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

Appendix

Local Tote and Fixed Odds and International

operations data


Group result

• 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

R'000 2016 2015 % chgIncomeIncome from local operations 1 226 382 1 067 062 15%Income from international operations 274 415 199 143 38%Total income 1 500 797 1 266 205 19%PBITDA 104 569 129 126 -19%Profit before equity a/c income 43 098 79 301 -46%Equity accounted profit 94 694 47 060 101%Attributable profit 121 944 79 516 53%Headline earnings 122 604 87 834 40%Headline earnings per share – cents 164,51 117,06 41%Ordinary dividend per share – cents 104,00 88,00 18%Financial positionTotal assets 943 950 775 839 22%Investment 76 443 117 838 -35%Net cash 11 849 -5 534 -314%Net asset value per share – cents 688,33 600,79 15%

24


Tote betting and horse racing and broadcasting R'000 2016 2015 % chgHorseracing net betting income 453 977 457 454 -1%

Other sports net betting income 248 498 221 469 12%

Other income * 226 369 219 325 3%Investment income 4 116 1 609 156%Net income 932 960 899 857 4%

Stakes (prize monies) 202 871 189 772 7%

Operating expenses 790 270 681 335 16%

PBITDA -60 181 28 750 -309%

Depreciation 41 918 37 385 12%Finance costs 9 237 5 065 82%Equity accounted profits 6 447 2 324 177%

Pre-tax loss -104 899 -11 376 822%

Local operations • 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

* 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.

25


Fixed odds (Betting World)

R'000 2016 2015 % chg

Net betting income 263 076 161 583 63%

Other 26 234 10 944 140%

Total net income 289 950 172 610 68%


PBITDA 89 115 34 182 161%

Depreciation 19 266 12 150 59%

Finance cost 131 763 -83%

Pre-tax profit 69 718 21 269 228%

Local operations

• 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


Horseracing media rights & betting royalties

R'000 2016 2015 % chg

Net income 274 415 205 798 33%


PBITDA 75 635 66 194 14%

Equity a/c profits 88 247 44 736 97%

Pre-tax profit 163 595 110 640 48%

International operations

• 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


R'000 2016 2015 % chgIncome 1 500 797 1 266 205 19%Net betting income 965 551 840 506 15%

Horseracing 541 323 516 975 5%Other sports 301 544 259 627 16%Other 122 684 63 904 92%

Other income 526 443 435 685 21%Investment income 5 331 2 074 157%Net income 1 497 325 1 278 265 17%Stakes (prize monies) 202 871 189 772 7%Intellectual property rights fees 104 015 68 453 52%Operating expenses 1 085 870 890 914 22%PBITDA 104 569 129 126 -19%Depreciation & amortisation 61 471 49 825 23%PBIT 43 098 79 301 -46%Interest expense 9 368 5 828 61%Profit before equity accounted profit 33 730 73 473 -54%Equity accounted profit 94 694 47 060 101%Mark to market adjustment ASL 5 578 -12 753Betting World Nigeria impairment -8 545Group profit before tax 134 002 99 235 35%

Group income

28


Local – Other incomeR'000 2016 2015 % chgGambling Board sports development levies 66 856 60 678 10%Unclaimed dividends & breakages 30 020 31 404 -4%Products fees/commingling levy 38 331 39 023 -2%Limited payout machines 21 841 20 088 9%Tellytrack subscriptions 22 830 20 004 14%Forex 8 072 11 885 -32%Stable rentals 8 201 8 223 Miscellaneous* 30 218 28 020 8%Total 226 369 219 325 3%

Local operations

Analysis of other local operations income

Miscellaneous includes advertising, sales & hospitality and other

29


1790

682

288

1786

713

420

1699

678613

1727

562

819

1 744

618

969

1 731

618

1 093

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

LOCAL MEETINGS INTERNATIONAL MEETINGS SPORTS

2011 2012 2013 2014 2015 2016

R ’million

Significant growth in Sports other than horseracing

Local Tote betting handle mix – money wagered per year 2011–2016

30


65%

25%

10%

61%

25%

14%

56%

23%21%

56%

18%

26%

52%

19%

29%

50%

18%

32%

0%

10%

20%

30%

40%

50%

60%

70%

LOCAL MEETINGS INTERNATIONAL MEETINGS SPORTS

2011 2012 2013 2014 2015 2016

Sports other than horseracing almost a

third of money wagered

Local Tote betting handle mix – percentage share of money wagered per year 2011–2016

31


2%

74%

24%

2%

72%

26%

2%

69%

29%

2%

68%

30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

ON COURSE BRICKS & MORTAR INTERCATIVE

2013 2014 2015 2016

Interactive more than a quarter

Local Tote betting handle – placement of bets

32


70%

5%8%

5%

1%

5% 6%

70%

4%7%

5%2%

5%7%

71%

4%7%

5%

1%

5%7%

71%

4%7%

5%

1%

5%7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

GAUTENG MPUMALANGA LIMPOPO FREE STATE NORTHERN CAPE

EASTERN CAPE NORTH WEST

2013 2014 2015 2016

Gauteng dominates at 70% plus

Local Tote betting handle by province

33


3,2%

-2,5%

5,9% 5,9%

1,0%

8,7%

1,3%

-4%

-2%

0%

2%

4%

6%

8%

10%

GAUTENG MPUMALANGA LIMPOPO FREE STATE NORTHERN CAPE

EASTERN CAPE NORTH WEST

2016

Growth achieved in most provinces

Local Tote betting handle by province – percentage change on previous comparative period

34


-9,8%

6,6%

1,9%

4,0%3,3%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%ON COURSE INTERACTIVE BRANCHES AGENTS TOTAL

2016

Interactive growth continuing

Local Tote betting handle – percentage change in wagers by placement source on previous comparative period

35


489,0

145,1

14,4

505,4

168,9

40,4

490,0

178,6140,6

462,5

220,9273,5

615,4

274,3

575,5624,5

316,3

886,9

0

100

200

300

400

500

600

700

800

900

1 000

HORSERACING SPORTS NUMBERS

2011 2012 2013 2014 2015 2016

Exponential growth in Numbers betting

Sports handle up by 118% since 2011

Fixed Odds betting handle mix – money wagered per year 2011–2016

R ’million

36


75%

23%

2%

70%

24%

6%

61%

22%17%

48%

23%

29%

42%

19%

39%34%

17%

49%

0%

10%

20%

30%

40%

50%

60%

70%

80%


2011 2012 2013 2014 2015 2016

Sports other than horseracing and Numbers betting has risen to over half of money wagered

Fixed Odds betting handle mix – percentage share of money wagered per year 2011–2016

37


31%

24%

34%

9%

2% 1%

32%

23%

28%

9%

5%

1% 2%

31%

19%

22%

8%

12%

1% 2%

5%

29%

16% 16%

8%

18%

0%

4%

8%

1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2013 2014 2015 2016

Fixed Odds betting handle by province – percentage share

38


17%

85%

106%

-100%

20%5%

-10%

120%

100%

-150%

-100%

-50%

0%

50%

100%

150%

2016

r

Fixed Odds handle by province – percentage change on previous comparative period

39


22%

65%

53%

-10%

35%

25%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%INTERACTIVE RETAIL TOTAL

2015 2016

Retail presence stimulates growth

Fixed Odds betting handle – percentage change in wagers by placement source on previous comparative period

40


638,5714,7

809,2

956,9

1465,2

1827,7

0

200

400

600

800

1000

1200

1400

1600

1800

2000

HANDLE

2011 2012 2013 2014 2015 2016

Betting handle up 186% between 2011 and 2016

Fixed Odds betting handle – per year 2011–2016

R ’million

41


88,2 93,4104,8

114,0

161,6

263,1

0

50

100

150

200

250

300

NET BETTING INCOME

2011 2012 2013 2014 2015 2016

Net betting income up 198% between 2011 and 2016

Fixed Odds net betting income – per year 2011–2016

R ’million

42


52%

19%

29%

40%

17%

43%

37%

24%

39%

33%

20%

47%

0%

10%

20%

30%

40%

50%

60%


2013 2014 2015 2016

Numbers and sports other than horseracing proving exceptionally popular

Fixed Odds – net betting income mix

43


14%

40%

6%

23%

17%15%

36%

5%

21%23%

17%

36%

8%

25%

14%

17%

34%

10%

25%

14%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

TOTE COMMINGLED TOTE STAND ALONE INTERNET (STREAMING)

BOOKMAKERS ISLE OF MAN (MAINLY COMMINGLED)

2013 2014 2015 2016

Tote combined is over 50%

International income by percentage mix

44


513534

572

633601

688

0

100

200

300

400

500

600

700

800

NET ASSET VALUE PER SHARE

2011 2012 2013 2014 2015 2016

Net asset value per share in cents – per year 2011–2016

45


68,0

82,5 83,276,0

90,9 91,088,0

113,6 114,5

88,0

146,1

132,1

88,0

106,0117,1

104,0

163,6 164,5

0

20

40

60

80

100

120

140

160

180

DIVIDEND/DISTRIBUTION EPS HEPS

2011 2012 2013 2014 2015 2016

Dividends/distributions and earnings per share in cents –per year 2011–2016

46


Phumelela share price relative to other gaming stocks and JSE All Share Index over five years based to 100

47

60

70

80

90

100

110

120

130

140

150

160O

-13

N-1

3

D-13 J-1

4

F-14

M-1

4

A-14

M-1

4

J-14

J-14

A-14

S-14

O-1

4

N-1

4

D-14 J-1

5

F-15

M-1

5

A-15

M-1

5

J-15

J-15

A-15

S-15

O-1

5

N-1

5

D-15 J-1

6

F-16

M-1

6

A-16

M-1

6

J-16

J-16

A-16

S-16

O-1

6

Sun International Tsogo Phumelela JSE All Share

Results presentationAudited results for the twelve months ended 31 July 2016

Thank you

Documents

Audited results for the twelve months ended 31 July 2016 · 31 July 2016 Investor proposition ... 31 July 2016 Tellytrack and piracy update • Piracy of the Group’s intellectual