Month: October 2018

by Brian de Lore
Published 8 November 2018

On the eve of departing to attend this year’s Melbourne Cup, Racing Minister Winston Peters was not surprised by the NZRB’s latest pre-AGM statement which paints itself in good light and suggests a rosy result for the financial year ending 31 July.

Under the heading of ‘Record growth in customer numbers underpins New Zealand Racing Board result, Chair Glenda Hughes and CEO John Allen make comments such as, “continues to increase its support to New Zealand racing, financial highlights, a record $148.2 million, an increase of $10.6 million on last year,” and “these results continue our track record of increasing profits.”

But the Minister who isn’t deviating from his previous observation that ‘he’s knows a dead horse when he sees one,’ and was once again happy to speak to The Informant at short notice, responded by saying, “No, I am not surprised by the NZRB statement but has that statement emanated from a final result that has been audited?”

This writer was unable to give the Minister a definitive answer to that question but what could be said was that the auditing was usually the last process to be applied to a set of annual accounts and the NZRB annual accounts were a full month away from the release date.

In addition to the NZRB release, a story also appeared on the TV1 website written by Katie Bradford which was entitled, ‘The Racing Board hopes a large profit will help convince Minister Winston Peters the board is doing its job.’

Peters tempered the authority of the story by saying with a chuckle, “Katie Bradford owns a share a share in a horse, but that was where the extent of her knowledge of the industry started and finished.”

If the auditing of the accounts has been completed and signed off, and in turn signed off by the board, then why would the Annual Report for 2017/18 not be available until the actual day of the AGM which is to be held at the NZRB offices at Petone on December 7^th?

This was revealed in the last line of the statement which can be found on the NZRB website from the menu under ‘News.’ To read of the entire document would suggest to the uninitiated that all is well in ‘the State of Denmark.’

Given that Petone is about as far away in either direction from racing stakeholders as you could get, and the NZRB offices would be seen as a home fixture, and no annual report would be available prior to the meeting, from which questions could be raised, would it be a surprise if no one turned up?

The simple answer is, no. Also, the 7^th of December is also too early in the tomato growing season, of which this writer is an avid grower, to have laid enough ripe tomatoes out in the heat of the summer to have gone rotten; presupposing we will have heat in the summer.

NZRB has again forgotten that the Racing Act of 2003 says they exist to provide benefits to the three codes of racing and not to either alienate themselves from the stakeholders by taking up defensive positions behind the ramparts at Petone.

The decision not to produce an annual report before the meeting, as they also failed to do last year, and TV! Coverage of the Gore races last week and now the Katie Bradford story seriously looks like a campaign to undermine the adoption of the Messara Report.

The statement released by the NZRB raises concerns on several fronts. Firstly, the unexplained difference between the operating profit of $155 million (do we to assume this is an audited figure which isn’t specified) and a reported net profit number of $146 million.

They have also spent a further $9 million of industry money on so-called “strategic initiatives.” Will we have to wait for the AGM to find out what this is all about?

And the $12 million of distributions proudly proclaimed in the announcement has been funded by taking on debt which requires servicing and repayment. Borrowing to operate you’re your day to day business is well-known as a path to failure.

So what can we expect to occur next year? Perhaps, more borrowings to fund the current level of distributions? How is the Board planning on servicing this growing mountain of debt and then repaying it? At this rate, with debt needed to be repaid out of future earnings, we may be faced with potentially lower distributions and thus lower stake levels – surely a recipe for disaster.

Claims of record growth of account customers sounds impressive, but in reality, a number of these customers could be moving their transactions to on-line from other channels and therefore don’t represent new customers. More smoke and mirrors from this Board and senior management that has failed to mention an increase in overall betting revenue.

Signing up families by giving them a free $20 bet when they open an account with $10 is hardly training up punters who will be staying for the long haul.

The statement was conspicuous for its lack of any hype about the upcoming launch of the Fixed-Odds-Betting platform which is set for blast-off on its fourth rescheduled launch date of December 3^rd. Should we be concerned or even surprised if it doesn’t occur?

The whole industry should be crossing its fingers and hoping it’s successful because the last thing we want is a repeat of the Typhoon System which wasn’t strong enough to blow out a candle, was never turned on, and in about 2011 cost the industry an estimated total of $30 million.

And on the NZRB’s statement, Minister Peters added, “If what they are saying in that first statement is they have a profit value measurement on what they are doing that’s misleading that would be a dangerous practice.

“If they were wise they would be telling the Racing Minister what they are talking about, but I’m not waiting for them, I have been focused on getting the legislative agenda, time spaces for representative approval and the mandatory establishment of RITA.”

“There is a way of concertinaing the process, but at present, I can’t say much about that. What I can say is that we are all on target for achieving what can be legitimately done.”

And while the industry participants see progress going at the pace of the retreating Fox Glacier, Peters himself is happy with the speed of production. He said, “The submissions were closed off on the 19^th of October, and we have almost finished evaluating them. The evaluations will tell us what the racing and breeding public of New Zealand are in agreement with and what areas they hold differing views.

“The DIA is evaluating them, and when they asked for a full month to do the job, I said no they could only have a week and a half and I will provide the resources to get the job finished on time.

“Meanwhile, we have to put our minds on our immediate strategy and that is underway as we speak. When we finish that we will get it signed off.”

When suggested to the Minister that we wouldn’t be seeing much action before December he retorted, “We will be a long way on top of it by December 7^th, the date of the NZRB AGM.”

by Brian de Lore
Published 18 October 2018

Limboland is a made-up word which one anxious racehorse owner has used in the past week to describe the current industry predicament of waiting for the next move from Racing Minister Winston Peters.

That owner along with a sizeable proportion of the racing industry is anxious because of the increasing awareness of the financial unsustainability of a deteriorating industry which the Messara Report describes as being in, ‘a state of serious malaise.’

The Minister has since repeated those words. That was early in his speech when launching the Messara Report on August 30th – a speech in which other salient points he raised now seem to have faded from the memory of those stakeholders now making the most noise about what’s happening next.

In that speech, Peters said, “The next step for us is to all fully digest this report. Many of the recommendations have serious merit, but they require careful consideration.

“My intention is to have officials draft a cabinet paper with a set of recommendations for decision – this is appropriate for due-process especially if government and structural proposals are being contemplated.

“In summary, that cabinet decision will determine what revised legislation is required to reset the industry, consider TAB licensing, revenue and tax incentive re-settings and other relevant matters to set future directions.

“It is a matter of public record that many aspects raised in this report are matters which I have expressed concerns about before. In particular government structure and incentivising ownership investment – if you think I am the harbinger of racing doom and gloom, then read the racing board’s annual report out this year.”

Just as the Messara Report requires serious reading and then re-reading, so does the Minister’s speech which, between the two, does provide all the questions, and all the answers. Not everyone will agree with what’s to come, but change is coming.

Peters is not a man who can be rushed, and nor has he ever been. ‘Fools rush in where angels fear to tread’ as the saying goes, but while Peters isn’t the type to claim angel status, he’s also not one for hasty decisions.

When the Minister received the Messara Report in late July, what would he have been expecting?  A 10 or 12-page document with broad recommendations, perhaps?  Instead, he received a comprehensive 85-page report that was not only deliberate in its approach but very authoritative and which required a highly considered response.

He was never going to go off ‘half-cocked,’ and hasn’t. Instead, Peters made a very pointed speech two months later at the launch in which he posed logical questions to the industry participants and gave every opportunity for all stakeholders to make their submissions and have their cases recorded and considered. 

As the closing date of those submissions nears (October 19th), we are drawing closer to an announcement about the Report’s broad industry acceptance, ambivalence or rejection, or part in percentage thereof. No one has been denied the opportunity of having a say or being heard.

But to know what’s most likely to happen, go back to that Peters speech and also re-read the Messara Report in full and you’ll get the idea. Only those double-blinkered with double ear muffs and double Vicks stuffed up their nose will miss the point and not smell the roses.

To illustrate the point, let’s take a look at one of the submissions that have been made public. The NZRB has recently posted its submission on its website – a 39-pager that clearly flies in the face of the Minister’s speech and crucial elements of the Messara Report.

It starts with a Glenda Hughes letter which divides the Report into five issues and firstly states, “The Board does not support the need for a Racing Industry Transitional Agency (RITA). The Board already has an established mandate that can operate as a transition agency up until legislation is enacted that formalises any new arrangements. Several vacancies for Board appointments now exist.

“Furthermore, the Board is leading two existing programmes with all Codes which are progressing venue consolidation and evaluating outsourcing. These programmes would be slowed, and business continuity would be lost by the establishment of a new agency.”

But again looking back on the Minister’s speech, he says “A transitional agency will smooth the operational process, particularly if there are changes in racing’s governance structure and I envisage it playing an important role in changing signals either today or by decisions to be made by cabinet.

“It would also play an instrumental role in racecourse consolidation.  It will be called RITA (Racing Industry Transition Agency) which requires good communication, good coordination and proper consultation with the racing community.”

Get out of here! Good communication, coordination, and consultation – that’s been a rarity in this industry.

The Hughes letter further says, “The Board opposes unilaterally proceeding with outsourcing the TAB before a commercial evaluation of this option is complete which has established it is clearly in the best long-term interests of New Zealand racing. Outsourcing is, in practical effect, a sale. There is no real likelihood of reversing back to a New Zealand owned and run TAB once an outsourcing process has started. There are a number of real risks with this type of structure, and it is crucial that other options (such as corporatisation) are in active consideration, and the status quo is used as a counterfactual.”

But the stakeholders are fully aware that the NZRB board know precious little about wagering and outsourcing. There is no one on that board that has any depth of experience in such matters, and despite past claims, no serious examination of outsourcing has ever been conducted.

An outsourcing deal would take a year to negotiate, and the commercial evaluation occurs during those negotiations – you only do the deal when and if it’s commercially advantageous to New Zealand.

Also, contrary to Hughes’ claim, highly successful Racing NSW CEO Peter V’landys told The Informant in August, “Having people running wagering who don’t fully understand the product is like having a podiatrist do brain surgery – he might know something about it, but he doesn’t to the level that’s required.

“The wagering business is very complicated – it’s not one that you can just go and get a CEO out of the commercial world and succeed. There are so many intricacies to it you need to know including the psychic of the punter – there’s a mountain of things you need to know,” said V’landys.

Hughes further states, “For yet another year under the current management, the Board will deliver on its forecasts. Distributions are up, staff costs are down, and we will exceed our operating profit target for 2018 of $153.9 million.”

Please – we are well over listening to this stuff! The above does not paint a remotely honest picture. The Minister in his speech said, “This year a three-year revolving credit facility was established to complement the NZRB balance sheet. Total equity is budgeted to decline by $15.6 million in just this year alone.”

NZRB were relying on a grab of the racefields income to repay the $24 million it has borrowed between this season and the previous to maintain the minimum stake at $10,000. It was a two-year deal. What happens to stakes money allocation for next season?

This industry has been saying for a long time it wants the truth. With the aid of smoke and mirrors, the annual accounts can say whatever they want, but the reality is NZRB has not delivered, and as a board, they may be heading down the Mainzeal path.

Directors are accountable for their actions. The racing industry shouldn’t put up with a continuation of sub-standard governance, and the entire NZRB board should resign now. It’s not a case of the TAB slogan ‘now you are in the game,’ but instead ‘the ‘game’s up!’

If the NZRB want more clichés then, ‘the writing is on the wall.’ The Minister in his speech made this blatantly obvious with his, “I know a dead horse when I see it,” remark which was aimed directly at NZRB.

He also said, “Racing has for years been right under the political radar screen, and sadly so. Let’s hope that racing reform today and into the future is now above politics and we get on with fixing the industry the way we should have a long time ago. We didn’t commission this report from an expert to strip it from its value.

“If we accept a series of changes they will create a cycle to revitalise this industry. Are you prepared to accept the closure of a local venue if your club remains in existence and there is a better-shared venue just down the road? Would you accept track closures if it means saving your club and creates a better pool of prizemoney to generate further investment in ownership?

“And would you be prepared to accept that the individual codes have greater powers with different distribution models and betting levies. Now, the choice is yours. The status quo has an inevitable outcome – a sad, not happy one – change we know is challenging and difficult, but we all know it’s the pathway of restoration of this great industry.”

The resignation of the entire board would bring a collective stakeholder cheer louder than we heard for the start of The Everest. Let’s keep an ear open for it.

by Brian de Lore
Published 4 October 2018

For too long now the stakeholders of New Zealand racing have benignly accepted whatever’s has been dished up to them by an increasingly intolerable NZRB.

In the 15 years since the Racing Act of 2003 became the enforcing legislation the plight of the racing industry has deteriorated into an all-time low while still-passionate horse people go about their business in lessening numbers with only the name ‘Messara’ repeated in their murmurings of hope.

Every organisation within the thoroughbred code; the NZTR, the Trainers’ Association, the Owners’ Association, and the Breeders’ Association has failed, fallen behind, faltered or whatever you want to call it.

That opinion will grate on some, but no organised group in the thoroughbred code has made any headway at all in that time. Not one body has offered innovation, leadership or enough consternation or noisy protestations even to get a headline.

Has NZTR (Love Racing) performed well over the 15 years since the Act became legislation? In recent times the level of discontent and criticism for it has increased significantly. The feeling amongst stakeholders, rightly or wrongly, is that not enough has been done to curb an increasingly out-of-control NZRB and that communication with the stakeholders and, in particular, the clubs, has been poor.

NZTR will hotly defend itself by saying it is shackled by the Racing Act and has no power or room to move and its communication with the stakeholders has been sufficient. Well, Colin Meads didn’t become a champion All Black by being shy or playing entirely by the rules. The big achievers in this world just make it happen.

In the out-of-date NZTR website under ‘Overview and Structure,’ it says, ‘Represent the interests of thoroughbred code stakeholders, principally the 67 thoroughbred racing clubs operating on 51 galloping tracks.’

It would be much better if the website was up-to-date with the correct number of tracks and clubs and said, “represent the ‘best’ interests” rather than just the interests. But I digress and now, having been successfully removed from every Christmas card list for 2018 and beyond, the focus of this story is about the deception perpetrated on the stakeholders by NZRB.

Sunday’s Weigh In program featured NZRB CEO John Allen who came on for 20 minutes to be questioned by Sheldon Murtha and Michael Guerin about the Messara Report.

During that interview, Guerin asked Allen what the key points were in the Messara report from an NZRB viewpoint to which he replied, “The key points are that we do support racefields and the abolition of the racing duty. We do need investment in racing infrastructure, and so we strongly support the three synthetic tracks that Mr. Messara has advocated.”

Allen then talked about the lack of infrastructure at the clubs, and then added, “Lastly, we do think the option of outsourcing the TAB has to be very carefully thought through. The TAB is a significant asset for our industry.”

How can you have a review of the Messara Report and completely ignore the main thrust of the Report – part one, which calls for the renaming of the NZRB as Wagering NZ and promotes the transfer of all racing functions to the individual codes.

In effect, part one defrocks the NZRB completely and saves in the vicinity of $70 million in running costs when part two is activated with the outsourcing of the TAB. But no mention is made of this which itself flies in the face of the Racing Act of 2003 which under ‘Objectives of the Board’ 8(c) says,’ to maximise its profits for the long-term benefit of New Zealand racing.’

We all know that hasn’t happened and NZRB has been living the high life at the expense of the real people of racing and especially the racehorse owners who pay for everything. Remember that Messara says prizemoney can be doubled if we adopt his report in its entirety.

The reality is that the NZRB has long been a law unto itself and has disregarded parts of the Racing Act (the good parts that offered the stakeholders some protection) and its impropriety has not been acted upon by a benign NZTR.

Take, for instance, the last NZRB board appointment which was nothing less than a shoulder-tap for Bill Birnie from the friendly Chair in Glenda Hughes. The appointment was conducted outside the terms of the Act and while NZTR was fully aware of it they did nothing. What would make the stakeholders of racing angrier – the appointment of Birnie or the roll-over lack of reaction from the codes?

Back to the point, Trackside TV is part of the TAB which is the main arm of NZRB. Guerin works for NZRB and Allen is the CEO. Do I need to say any more? Were rules in place about the questioning?

How badly can the stakeholders in this racing industry be treated? This is not democratic television or neutral reporting we are talking about, it’s something more akin to a repressed society, and it shows a level of contempt from authority to participants not usually associated with this country.

Next, in the interview, Guerin brought up racefields when he said, “The Minister on Friday said the racefields legislation would not be going to parliament. He indicated he wasn’t happy with it; it wasn’t fit for purpose was his words. Is there no communication between the Minister and yourself because he hadn’t told you in advance?

Allen replied: “I don’t know he’d told anyone in advance of that particular decision. Perhaps he couldn’t because of the parliamentary process. I’m not sure, but the reason I was concerned and remained concerned is because we need the money.”

To call this deception is being kind. Anyone that has followed the racefields legislation progress knows that the Minister has been saying since last year the wording of the legislation wasn’t fit for purpose having been written pre-election by national party people who don’t understand racing.

That fact has been stated several times here in The Informant. The Minister stated it himself at the launch of the Messara Report (and debated it with Graeme Rogerson), and he has always said we get only one chance at doing the legislation and everything has to be done at once. It was no secret.

For Allen to claim he knew nothing about it is more than mischief. Guerin then said, “can you not ring Winston Peters and ask these questions – has your relationship not been established; is there a breakdown of communication because you are in charge of NZ Racing and he’s the Minister of racing, but you guys don’t seem to talk very often.”

These were legitimate questions to which Allen answered, “But as you’ve said he’s extraordinarily busy; he has a multitude of portfolios; he’s got to lead his party in a reasonably complex coalition; he’s the Deputy Prime Minister but the answer to your question of do we talk – no we don’t.”

The fact that the CEO of the NZRB and the Minister of Racing don’t talk is an indictment of the appalling lack of intent of NZRB to act in the best interests of the industry stakeholders.

Texting the Minister to get the story straight, he phoned back almost immediately with this response: “I’m at the airport about to fly out so can’t talk for very long, but the essence of it is that I have a timeline for parliamentary legislation that I have to use wisely.

“I cannot keep on jamming things into the parliamentary schedule, and it made sense to pull that out of the schedule and incorporate whatever good parts there are into a new bill as fast as I can.

“That’s it in a nutshell; as a piece of legislation which has dragged on for all this time, it doesn’t fit the comprehensive bill we are trying to fix up in one piece of legislation. As I’ve said previously, the way the legislation was written was not fit for the comprehensive purpose of fixing the racing industry up.”

“So can I confirm,” I asked the Minister, “that we are rewriting that legislation and it must fit into the context of the rewrite of the entire Act.”

“Precisely – I think the misreporting of it is from people that were got to – I’m seriously suspicious but I’m not going to name people until we get further down the track – but they are not going to get away with that.

“They are presiding over a damn mess in an industry they know stuff all about, and I’m not going to have them running around saying what we are going to do. Our industry participants are being led down the garden path.

“If our people are not smart enough to work that out already, what can we do for them?  We have to wait for the submissions date to close on the 19th of October, but in the meantime, I have a team working on the chronological program, and that doesn’t have to wait until the consultations are in.

“To an extent, the consultations will shape it, but we are not waiting around for that because we are working on the program as we speak. The submissions are being analysed as they come in now. We just need to have them all in.

“I also have to work on the resources to do the teamwork to get this thing up and running.  This is all uncharted territory as nothing was budgeted for that.  I know I have to get those resources, get the team ready and get those things done. And have it all in place as fast as I possibly can.”

And when pressed on RITA Peters responded, “I’m not talking publicly on RITA because I don’t want to have people torpedoing me on what’s happening next.”