With 2015 nearing its end, it is always a good time to reflect on the year gone by and to see how it has measured up in terms of personal goals. Have all goals been achieved, which one’s have not and of these are any worthy of further pursuit or should they be adjusted or shelved?
Leon Smuts writes that he has no doubt that betting operators will also be reflecting on their achievements and failures and the many challenges that lie ahead. Phumelela has often been criticised on racing related issues and I have personally been quite vocal in my criticism of our local operator at times.
Although the criticism has mostly been justified it would be very unfair to not acknowledge the many successes that they have had since the corporatisation of racing through the establishment of Phumelela. Shareholders have every reason to be happy with the progression in the value of their shares since inception as well as solid dividends paid along the way.
This has been a very good achievement considering the plight that racing found itself in and the considerable challenges continually faced along the way.
The company has gone from being solely a race operator to being a gaming company with diversified interests and a far more sustainable business model. This has however drawn much criticism from racing purists as funding have mostly been channelled into other more lucrative and more profitable ventures.
Phumelela’s Rian Du Plessis
The list is long and impressive with PGI, Betting World, the recent ARC and Supabets deals being prime examples of a business driven by an evolving vision and forward thinking. Once again the purists and traditionalists will see some of the diversification initiatives as deviating from the racing roots that the company was founded on. Mr Du Plessis and his management team deserve considerable praise for constantly pulling rabbits from the hat in an industry where profit bunnies are in short supply.
My personal criticism has and will always be directed at what Phumelela and other operators are not doing rather than at what they are doing, especially as they do most things rather well considering the constraints and the challenges that a declining local racing landscape is placing on overall company performance. Any astute businessman will agree with the consolidation in racing interests and in the creation of a leaner cost structure to aid sustainability. It is regrettable that a few historic and quality race courses had to make way as part of the exercise but this was an unavoidable part of a very necessary process. After all of this local racing is still struggling to contribute positively to the bottom line which shows that there really was no sensible alternative.
Phumelela deserves accolades for what their management team has been able to deliver and for the consistent performance under difficult regulatory and economic circumstances.
I hope that over the next few years we will be able to congratulate them for not only excellent company performances and the preservation of local racing, but additionally the passionate expansion thereof. The one criticism that I will continue to direct at them is for their failure and reluctance to introduce long term capacity building projects directly aimed at expanding the racing customer base.
The motivation and obligation to allocate resources in areas with the highest yield and near term realisation potential is understandable, as maximising the three R’s (ROC, ROA, ROE) are expected from a listed company performance perspective.
Longer term capacity building projects are an unknown quantity, given historical failure to do so, and as a successful project will realistically produce results only after years and not months, make it an understandably difficult objective to support.
Avoidance of this very necessary strategy will however place mounting pressure on the bottom line in coming years, if racing operations are to continue, and undo much of the gains from good strategic initiatives that are being put into place.
Racing can be turned around by laying the foundation now and reaping the rewards a few years down the line. Whether local racing is a current priority or not, the opportunity exist to ease the growing burden that racing is placing on the financial performance, and for a turnaround strategy to lead to a renewed positive bottom line contribution and a much stronger and more sustainable group performance.
Phumelela could become pioneers for a global recovery that will not only benefit the company and shareholders but every stakeholder in an industry crying out for a solution and committed support. My wish for 2016 and beyond is that operators will consider the advantage of finding true racing solutions over and above all the other profitable initiatives that they have embarked on.
Operators should not allow historical failure to dictate future actions around the racing portfolio, as with the right initiatives there will be life in the old dog yet.
