Horse racing operator Phumelela Gaming and Leisure said on Friday that it urgently needs fresh capital after a year to end-July that was the worst in its history, with the company considering introducing black owners as a matter of urgency.

The company maintains that its relationship with the government is untenable, saying an introduction of an equity partner could help settle its relationship with various regulators, with the future of the horse racing industry up in the air.

The current priority is to stabilise finances, said CEO John Stuart, with thousands of people economically-dependent on the industry, with black ownership “high on the agenda”.

The company opted not to declare a final cash dividend as it seeks to hold cash, warning of further cost-cutting even after retrenching 15% of its workforce after it was battered by regulatory changes and depressed economic conditions in SA.

International operations contributed R223.4m in pre-tax profit during the year, but local operations lost R332.4m, with the company repeating its warning that losses at its horse racing business cannot be sustained. Stuart said international revenue cannot offset losses in SA.

The company said it will either need to introduce an equity partner, or restructure debt, or go to shareholders.

The group retrenched 415 people during the year, saying it has “no alternative but to take further decisive measures to cut costs”.  It reported a headline loss of R98.2m, compared with headline earnings of R155.6m previously. This led to a headline loss per share of 98.20c, from headline earnings of 154.23c previously. Net debt rose 21% to R279.2m. 

“The group has had its worst year since the business was first incorporated in 1997,” it said.

Losses were compounded by regulatory changes, with the withdrawal of the group’s 50% share of the 6% levy on punters’ winnings on fixed-odds bets on horse racing in Gauteng, with effect from April 2019.

The company is seeking to settle this issue, although changes in political leadership has resulted in delays, said Stuart.

The company's share price was unchanged at R2.20 on Friday afternoon. Phumelela’s share price has fallen 80% so far in 2019, following a 34.8% loss in 2018, giving it a market capitalisation of R225.5m.