Phumelela breached loan covenants after shake-up of gambling industry
The horse-racing operator's profit is under threat from new rules that have seen a 3% levy on punters' winnings withheld
Phumelela Gaming & Leisure said on Friday it had breached loan covenants on R300m of debt, amid uncertainty over new gambling laws that have already significantly dented its profitability.
Amendments to Gauteng's gambling regulations took effect from April 1, with a 3% levy on punters' winnings being withheld, costing the company R6m on average per month in income, the group said in a statement on Friday.
The group was in a “challenging financial situation” as a result, it said, and was in breach of its loan covenants.
“In view of the reduced profitability and the withholding of the 3% levy, the carrying value of assets may have to be reassessed,” the statement read.
Phumelela's share price fell 4.17% to R4.60 on Friday, its lowest level since July 2004.
In March, Phumelela said the proposed amendment to Gauteng’s gambling regulations could cost it R75m a year while also damaging the local horse-racing industry.
Phumelela has sought to urgently interdict the amendments from taking effect in March, but the matter was postponed.
It has said previously it was in talks with Gauteng policymakers and the province’s gambling board “in an attempt to reach a mutually acceptable resolution”.
The company also faces a legal tussle with SA’s public protector, Busisiwe Mkhwebane.
In May, Phumelela’s legal advisers recommended that it apply to the high court to set aside a report by Mkhwebane into allegations of maladministration and improper conduct regarding “the corporatisation of the horse-racing industry in SA”.
Mkhwebane directed the Gauteng provincial government and the province’s gambling board to withdraw Phumelela’s portion of the 6% levy on punters’ winnings on fixed-odds bets.
Phumelela said on Friday it had filed a separate application, on July 8, to have the public protector's report set aside.
With Nick Hedley.