Gold Circle Membership Revolt

LETTER TO GOLD CIRCLE MEMBERS FROM CONCERNED
MEMBERS GROUP
Date: 5 November 2010
_____________________________________________________________________
Dear Fellow Gold Circle Member,
CONCERNS REGARDING GOLD CIRCLE AND REQUISITION OF A
GENERAL MEETING OF MEMBERS OF THE GOLD CIRCLE RACING
CLUBS
We, the undersigned are Members of the Gold Circle Racing Clubs who have a
number of collective concerns regarding aspects of the business and affairs of Gold
Circle. Whilst a number of our concerns have been raised and/or tabled in formal
meetings held with members of the Gold Circle Board, during the December 2009
AGM and during the informal meeting of Members held in KwaZulu-Natal in
October 2010 (“the KZN Meeting”), certain of the responses provided by the Board
were either inadequate or have proved to be erroneous or optimistic as time has
passed and Gold Circle’s financial situation has deteriorated.
This letter serves to you to inform you of our concerns and the action we have taken.
A. General Meeting of Members
In terms of the provisions of the constitutions of the Gold Circle Racing Clubs we
have requested the Secretary of the Clubs to call a General Meeting of the Members
of each of the Clubs to pass the resolutions summarized in Section C below.
The subject and object of the meeting are for Members to better be able to examine
and seek to address the poor financial results reported by Gold Circle (Pty) Ltd (“Gold
Circle”) and to require the Directors of Gold Circle to fully inform its shareholders
and Members regarding strategies to address the problems.
We believe it is very important that the information we have requisitioned Gold Circle
to provide, be provided to Members in an open and transparent manner to enable them
to better understand the current situation. Some of us intend standing for election
shortly in the KwaZulu-Natal Region in the rescheduled election process and by
Members having this information they will be better positioned to provide a mandate
to candidates regarding future actions to be taken to contribute to solving the current
problems Gold Circle faces.
B. Members’ Concerns
Concerns which have given rise to the action taken include:
1. Strategic & Governance Concerns
a. Despite being informed during the KZN meeting that whilst Gold Circle
remained open to strategic discussions with a number of parties including
Phumelela, the Gold Circle Board had apparently had informed Phumelela
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during August 2010 that it was holding negotiations with them in abeyance. It
is believed though that Western Cape appointed Board members have
continued with private negotiations which commenced earlier in the year on
behalf of the Western Cape Region with Phumelela and the Racing
Association (“the RA”) regarding a deal between Phumelela and the RA and
the Western Cape Region. These negotiations were apparently initiated and
continued without the sanction of, or reporting back to, the Gold Circle Board.
This is confusing in the light of being informed by interim Chairman Mr.
Labuschagne and Western Cape Regional Chapter Chairman Mr. Vidrik
Thurling during the KZN Meeting that Gold Circle was operating well as
“one company” and that the relationship between the two racing regions was
harmonious and good.
a. The effect of possible continued poor financial performance of Gold Circle on
its sustainability and that of the racing industry generally.
b. Members were informed in the KZN Meeting held in October that a
presentation of the various strategies being worked on to resolve the problems
being faced by Gold Circle by the Gold Circle Board appointed sub-committee
would be made to Members during the AGM scheduled to be held on 2
December 2010. We believe that the decision of the Board to delay to AGM
should not also result in delaying the presentation to Members.
2. Financial Concerns
a. Gold Circle having incurred pre-tax losses of R15,4m in 2009 and R 16,4m in
2010. The 2010 loss was reduced from R20,1m by an amount of R3,7m
resulting from Gold Circle revising the useful lives of assets.
b. The losses incurred by Gold Circle for the past 2 years comparing with pre-tax
profits of R108m and R98m earned by Phumelela Gaming and Leisure in the
same periods.
b. The extent of continuing trading losses being incurred by Gold Circle in the
Western Cape Region.
c. The reluctance and/or refusal of the Gold Circle Board to provide Members
with financial information detailing the profits and losses earned or incurred
by Gold Circle in its KwaZulu-Natal and Western Cape regions. This
information has been requested on a number of occasions including during the
December 2009 Annual General Meeting.
d. The budgeted profit for the current 2011 year and trading results to date.
During the December 2009 AGM, former Chairman, Mr. John Bescoby
informed Members that the budget for the full 2010 year was pre-tax profit of
R 5 million, and that after the first quarter a profit of R 2,37million had been
earned, more than 68% over budget. Members were informed during the KZN
Meeting that a pre tax trading loss of R 21 million had been incurred for the
2010 year, this being the first notice received by members that Gold Circle had
incurred a loss.
e. If losses continue to be incurred, how they will be funded.
C. Resolutions Proposed
The following are a summary of the resolutions proposed for consideration at the
requisitioned General Meeting of members:
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1. For Gold Circle to provide income statements for the 2010 financial year in a
similar format to that published in the annual report showing the income and
expenditure earned /incurred by the KwaZulu-Natal and Western Cape regions
respectively and the consolidated amounts.
2. For Gold Circle to provide a budgeted income statement for the 2011 financial
year showing the budgets for the KwaZulu-Natal and Western Cape regions
and the consolidated one together with the consolidated budgeted balance
sheet at 31 July 2011.
3. For Gold Circle to provide a year to date consolidated income statement for
the period since 1 August 2011, comparing the actual items of income and
expenditure with the budgeted ones for the period.
4. For the Directors of Gold Circle to provide explanation as to what immediate
action they have determined to take if losses continue to be incurred or start
being incurred in the current year and how such losses will be funded.
5. For the Directors of Gold Circle to provide details of the strategic action and
plans they have put in place for the future to return Gold Circle to its former
higher levels of profitability together with timelines as to when the various
actions to be taken will be implemented and when they expect to Gold Circle
to become profitable on a sustainable basis.
We request members to support our initiative and vote in favour of the resolutions to
be tabled at the General Meeting of Members as we believe that the provision of
information requested and actions to be taken will benefit Gold Circle and will
contribute to Members better understanding Gold Circle’s current predicament. Such
understanding will in turn will contribute solutions being found to benefit Gold
Circle. It is critical for the sustainability of Gold Circle and the future of the racing
industry in both the KwaZulu-Natal and Western Province Regions that effective and
sustainable solutions are found or devised quickly, but carefully, and that Members be
kept informed of progress in a clear and unambiguous manner.
Yours faithfully,
Concerned Members Group
V. Archaby, D. Bechoo, Baroness H. Bergsma, D.J. Broughton, N.P. Butcher,
P.J. Coles, B.J.C. de Charmoy, M.P. de Marigny, P.J.M. de Marigny,
P.L. de Marigny, C.G. Eudey, T. Fourie, R.J. Harrald, J. Jackson, B. Jonsson,
R. Katzwinkel, M.A. Kidd, W.F. Lambert, M.D.J. Liley, L.M.J.R. Maingard,
L.M.J.P. Maingard, T.M. Maingard, P.G.R. Mathieu, G.F. Mamet, J.J.M. Maujean,
P.J. Maujean, M.J.R. Mauvis, M. McConnell, G. Meaker, L. Meaker, R. Meaker,
R. S. Meaker, A.V. Michel, M.D. Miller, R. Miller, Roy Moodley, S. D. Moodley,
B.S Naidoo, R. Poley, C. J. Saunders, C Touzel, G. H. Rowles, K.S. Russon,
G.A. R. Sturlese , I. M. Todd.