NZ Racing Board announces half-year result

10 March 2009
For immediate use

New Zealand Racing Board announces half-year result

The New Zealand Racing Board has today announced earnings of approximately $67 million for the first six months of the current Season.

New Zealand Racing Board chairman Michael Stiassny said earnings for the first half of the 2008/09 Season were some 10.9 per cent, or $8.2 million, less than at the same time last year, revealing the impact the global economic downturn has had on the business.

“However, when you adjust last year’s figure to take out the effect of the equine influenza outbreak in Australia, we are only around $4.5 million down on last year’s actual,” Mr Stiassny said.

“Our turnover has held up well compared to some other racing jurisdictions but our margins have been squeezed by changing wagering patterns. There has been more take up of Fixed Odds betting and more races imported from overseas, both of which have lower yields than our traditional Tote activities,” he said.

“Like many other New Zealand businesses, gaming operators and other racing bodies worldwide, our performance has been adversely impacted by the international economic meltdown.”

Regardless of the half-year result, the NZ Racing Board has committed to the three racing Codes – New Zealand Thoroughbred Racing, Harness Racing New Zealand and Greyhound Racing New Zealand – that it will smooth the impact of the recession by using money from its reserves to maintain distributions to the Codes at the level that was forecast for this Season.

“However, there will be an impact next Season, when we estimate distributions will be some $13 million below the current Season’s levels, assuming no further deterioration in the economy.

“When we made our forecast for the current Season in early 2008, we assumed there would be continued strong growth, which has not eventuated. As a result, the Codes have now been provided with fresh forecasts for the next 18-24 months.”

Mr Stiassny said the NZ Racing Board had a number of initiatives underway to combat the effects of the global recession on the racing industry and to minimise the impact of the drop in earnings.

The NZ Racing Board is working with representatives from the three racing Codes to identify savings and efficiencies from closer co-operation at the operating level. For the longer term, a working group led by the NZ Racing Board will be established to develop a sustainable model for the racing industry going forward.

“Within the NZ Racing Board itself, management has also been charged to deliver cost savings of $10 million per annum,” added Mr Stiassny.

“Emphasis is being placed on revenue opportunities, as evidenced by the introduction of the new First4 and Quaddie betting products, and the continued focus on international commingling ventures,” he said.

The NZ Racing Board is also well advanced in its programme to confront the threats to its business from offshore betting organisations as well as the rapidly changing wagering market in Australia.

“More and more money is being bet by New Zealanders with offshore betting organisations. A bet with the TAB here generates a return for the New Zealand racing industry and our sporting bodies. A bet with an offshore agency generates nothing for New Zealand,” Mr Stiassny said.

The NZ Racing Board is set to negotiate a licensing agreement with offshore operators, under which those operators will agree to pay a fee to use New Zealand’s race field and race form intellectual property.

“These measures need to be accompanied by gambling law reform which we will propose to our Minister and the Government. This is important for the future well-being of the industry. The meltdown in economies across the world serves to further emphasise that need,” Mr Stiassny said.

“This is the reality facing the industry, hence the New Zealand Racing Board’s initiatives on both costs and revenues. Improving performance across the industry is clearly the preferred route, with stakes reductions a last resort. That said, though, we understand why New Zealand Thoroughbred Racing has taken the steps it has in an΅ouncing a revised stakes policy, Mr Stiassny said.

“In all of this, it is important to recognise the underlying performance of the New Zealand Racing Board has been strong and has positioned the industry well after many years of decline,” he emphasised.

“Despite the setback this Season, our half-year earnings result is still more than 80 per cent of the full year result for 2003/04. This indicates the gains that have been achieved in the intervening period,” he said.

“The New Zealand Racing Board’s increased distributions to the Codes since 2003/04 have been attributed to factors such as the changes in taxes and the increased demand for New Zealand racing due to the equine influenza outbreak shutting down racing in Australia in 2007.”

“However, if we extract those variances, our core net earnings rose over 30 per cent through the four years to 31 July 2008, and are expected to fall by only 3 per cent this Season, despite the difficult trading conditions. Our ratio of expenses to turnover has been held below the 2003/04 level.”

“This core strength is critical to our future success, but – like every other business – we now have to do better. We look forward to working with the Codes in order to minimise stakes reductions through a co-ordinated one-industry commitment to improvement,” concluded Mr Stiassny.

Ends

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