Date: 3 April 2019
INDUSTRY UPDATE -APRIL
With four months of the current racing season left I wanted to update you on a variety of topics, including NZRB’s performance and forecasts, which I know are currently being discussed within some parts of the industry,
You will know that the NZRB distributed $150.8m (excluding proceeds from gaming) in funding to the Codes for the 2017/18 season - the year before, it was $138.6m. This year we expect the Board to meet its commitments to Codes in relation to distributions which will match 2018/19 levels and anticipate a net profit before distributions ahead of last year of around $155m.
While it’s positive to be able to sustain increased distributions for yet another year, our expected profit is below what we had originally forecast due to a variety of factors. The delay in implementing necessary legislation around racefields and point of consumption charges has had a material impact, as has the later than anticipated launch of our new fixed odds betting platform. We also saw a reduction in betting from some of our largest customers over the first few months of the year and a number of sporting results went against us - a factor also experienced by our international competitors.
Looking forward to next season, the reality is that with the range of changes currently being discussed it is simply not possible to provide concrete certainty about distribution levels. Nonetheless, we do anticipate the Ministerial Advisory Committee will be prioritising changes that will enable increased returns to the sector. I am hopeful racefields and point of consumption charges will be legislated and can be collected from the commencement of, or at least early in the season and that the requirement for the Board to pay duty on betting will be abolished. If this happens it will lead to new revenues being distributed to the Codes.
It is important to stress the much needed investments we have made in fixed odds betting capability, outside broadcast technology, and improvements in our retail network all position the industry for the next decade of growth. There are short-term pressures for the business but we expect these to be managed through revenue growth, debt and cost control. The Board is of course highly profitable but may need to look at future distributions if no progress was made by the end of this season on statutory changes to help drive revenue growth.
Fixed odds betting performance
Since the implementation of our Fixed Odds Betting platform we have seen a significant increase in sports betting activity - particularly in inplay betting, albeit the margin has been lower than anticipated, largely as a consequence of some adverse results and some large payouts. In relation to racing, turnover has been down on what we expected which is a consequence of having less racing product to bet on in both Australia and New Zealand (the number of starting horses in New Zealand in March was for example down 367 on March last year) and a slower than anticipated takeup of the new betting platform by some traditional racing punters. We are however deriving higher than expected margins from our racing betting.
As a result of initiatives we have taken over the last few months we have seen many punters betting with us again and active account betting numbers improve to around 108,000 per month. The total number of account customers betting with us in the last year was 231,900, well ahead of the corresponding number in the previous year.
As we continue to improve the functionality and services on the site we remain confident that, despite the slower start over the first ten weeks, we will achieve the growth we had anticipated. Our next major release of updates and improvements to the site and App will take place soon.
Ministerial Advisory Committee (MAC)
We have supported the work of the MAC since it was established in December and have confidence in their approach and direction. Working alongside the Codes we have provided the Committee with information and answers to all their requests.
The NZRB is involved with the Codes in these discussions. Given that many of these discussions will lead to decisions by the Minister and Government, we are treating the outcomes of these meetings in confidence. While I understand that many of you would like more insight into what is being discussed, ultimately this is the Minister's Advisory Committee and it is not appropriate to disclose any information on his behalf.
We're all in this together to improve the outcomes for the racing community and it's pleasing to see all parties working well together. We don't agree on everything but we are determined to move ahead with as much pace as possible. Like the rest of the industry we are keen to see what the next steps are.
I will be holding meetings with the industry throughout the country in April and May and will be updating progress at these meetings. I will also look to do some short video updates for those who can’t attend the meetings and I welcome any topics you are keen for me to address in them.