Month: May 2020

by Brian de Lore
Published 29 May 2020

Minister of Racing Winston Peters has today announced the departure of RITA henceforth and from June 1st racing will fall under the administrative control of WCTU NZ (Women’s Christian Temperance Union of New Zealand).

The Minister said he was forced to put the WCTU in charge when he came to his senses and realised it would be better, both for his image and for racing, to go bankrupt under the control of an organisation with good Christian values, which they exemplified on the website in their stance against the use of alcohol, tobacco, drugs, white slavery, child labour, and army brothels, than to fail under RITA which he embarrassingly appointed as MAC 18 months ago.

Peters also said that it would be healing for racing folk to follow these Christian beliefs of giving up drinking and smoking rather than go broke under the administrative ineptness of…

Of course, I’m making this up. It’s a spoof. None of the above is true except the bit about going broke – that still seems to be happening; listed on racing’s agenda and perhaps progressing at a faster rate than previously expected. What we have yet to discover is, is RITA going broke the cheap and fast way or will the Minister do what he alluded to in his pre-budget speech, and string it out for a more expensive canter into the sunset?

Either way, it seems the same destination has been dialled in on the GPS and getting there is looking more and more conclusive, the more you examine the finances.

Betting turnover at the TAB is well down – almost fifty percent below forecast according to the May 26^th Update

Betting turnover at the TAB is well down – almost fifty percent below forecast according to the May 26^th Update posted on the RITA website. But the loss of betting revenue is off-set by RITA not having to pay stakes money to the codes with harness and dogs only recently restarted and no thoroughbred racing until July.

The result of that could mean a positive cash-flow position for the TAB from April through to season’s end on July 31^st. A hiatus of sorts during which time the TAB has been acting as an agent for Australian racing.

Costs are still incurred in idling mode for the codes and clubs, though, but might be only in the order of $3 million as opposed to an estimated $14 million had 2020 race meetings been numerically on par with 2019.

The $50 million isn’t going to save TAB, so something more has to be coming because the Minister must know the business model is broken and even though this week’s TAB redundancies are saving $11 million, it’s only five percent of RITA’s annual costs. The TAB has gone past the tweaking stage – it’s akin to mouth to mouth resuscitation while complying to the two-metre rule.

…the $50 million hasn’t yet turned up at RITA, so the owed $26 million remains unpaid…

To compound the situation, the $50 million (like a lot of other promised Government bail-outs) hasn’t yet turned up at RITA, so the owed $26 million remains unpaid, and this week was said privately by one observer to have been understated and the true amount was $35 million.

We’ll use the amount quoted by the Minister of $26 million for this exercise. Add $4 million for the redundancies and another $3 million for the codes and clubs sustainability in idle-mode, and that leaves $17 million from the 50 without thinking about repaying any of the ASB bank debt of $47 million.

That’s approximately the insolvent position of the TAB at the end of July. All the economists are saying we are heading into a recession post-COVID-19, so from August 1st, the level of revenue generated by the TAB is the big unknown. The loss of continuity, the loss of service by the TAB through media shutdowns, the loss of 35 percent of the customer base, and fewer races with smaller fields at fewer race meetings will all impact on TAB revenue in a downward spiral.

That unknown factor must make setting a calendar with stakes levels a tough assignment. It’s a given we will see numerical declines everywhere and especially in total stakes money for the season – based on a result of a $100 million bottom line season, the reduction is probably in the order of 40 to 50 percent.

To retrieve market share, customer-facing employees are vital but few remain after this week’s redundancies which impacts 30 percent of roles but saves only five percent of overall costs and leaves the executive team in place for the time being.

The FOB (Fixed Odds Betting) platform is an unqualified disaster and more than anything else is responsible for a decline in turnover and a loss of customers to Australian based corporates.  They have better and more advanced technology, do far better promotions, and from sheer scale alone cannot be outperformed by anything east of the Tasman Sea.

…a one-time big punter who once turned over an average of $250,000 a month on the NZ TAB

For an independent view, I consulted a one-time big punter who once turned over an average of $250,000 a month on the NZ TAB. He said: “I  won’t be going back as it makes no sense whatsoever when there are much better options off-shore.

“The TAB has lost focus on customer support. They have lousy pricing and no price boosts. The corporates offer price boosts and multi boosts on every race day, which is really looking after the customer and makes a whopping difference to the bottom line for punters.

 “The New Zealand TAB go unders on every horse in a race, so punters searching for the best price will never bet with them again. That means they can dump anything they don’t want at a better price in Australia and turn a profit on the wager.

“Also, most off-shore corporates offer up to six ‘money back’ second or third (up to $200) a day, which is a great incentive if you horse places.

“To put it simply mate,” he said, “they saved a bit of money in salaries but sacked all the wrong people and took away on-course presenters so that we can no longer read trainers and drivers body language which was my go-to – and totally ruined any chance of redemption.”

In Australia, the market competitiveness of the corporate bookmakers sees some spend as much as $100 million annually on promotion. How are we supposed to compete in New Zealand trying to ‘lone it’ with no balance sheet and a $50 million FOB that is already breaking down and half obsolete?

The $17 million per annum committed to Paddy Power-Betfair and Openbet wasn’t fully paid up in year one…

The $17 million per annum committed to Paddy Power-Betfair and Openbet wasn’t fully paid up in year one of the FOB because of the lack of funds, which is just one of the many reasons why the whole thing has failed. We have Hughes, Allen and Saville to thank for that as the three protagonists who preferred job security in preference to the industry interests and seriously considering the authoritative Deloitte Report – it was the classic case of experts being reviewed by mugs.

RITA has existed for just on 11 months and unless the Minister extends their tenure, the Agency will wind up by June 30^th. The Minister has to give 28 days notice in advance for an extension of time, so the announcement is required by this coming Tuesday, June 2^nd. The following Monday, June 8^th, is the day the rewriting of the legislation is tabled for the second reading.

The word in the corridors of the Beehive is, the Transport and Infrastructure Select Committee has done a sterling job for the racing industry and has changed most of that contemptuous proposed legislation in the first reading, which was early December. They have not achieved everything asked for, but a rewriting and substantial changes will mostly be in the interests of the submitters, and the participants of New Zealand racing.

At his pre-budget speech, the Minister said, “…an immediate grant was the most effective means to prevent default. PWC also advised close consideration should be given to recapitalising RITA. This work will proceed over the next three months.”

We want the legislation to say the codes and the clubs own the TAB, and the decision-making is devolved to the codes and the IP retained.

The racing industry doesn’t want recapitalisation of RITA because that would mean an extension of tenure. Where would the money come from, anyway? We want the legislation to say the codes and the clubs own the TAB, and the decision-making is devolved to the codes and the IP retained.

The Minister’s speech also said, “ More New Zealanders are turning to the off-shore online gambling through off-shore platforms. It is our intention to regulate the off-shore online gambling sector, and reset the on-shore online gambling sector. If there is going to be gambling by New Zealanders then it is our country that will benefit, not another.”

The Minister should probably know that the merger of Sportsbet and BetEasy was made official in the first week of May. It was a $10 billion merger which means Flutter, which owns Paddy Power, Betfair and Sportsbet, has merged with Stars Group which owns BetEasy.

The group has 13 million customers worldwide. They expect to save millions in costs and taxes. They are pooling all their resources for a better result; they understand that scale wins every time. How will the NZ TAB compete against them, is the question?

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by Brian de Lore
Published 22 May 2020

Politics, self-interest, hidden agendas, lies, charlatans, nepotism, egotism, creative accounting, jealousies, incompetence, lack of vision, hatred, arrogance, foolishness, self-indulgence and ignorance – traits that have reared their head in various individuals that have played a part in the decline of racing over the last dozen years.

Plenty of good people who have done their best and contributed positively to racing have come and gone. But few of those have been the big decision-makers and administratively-speaking racing has a disastrous history under NZRB (New Zealand Racing Board) and now RITA (Racing Industry Transition Agency).

It’s the only conclusion you can reach when you look at the table below and see how far the decline has come in 12 years. The second line of the table shows that in 2008 the industry had net tangible equity of $104 million, which has declined to a deficit today of $40 million.

That was before last Tuesday week’s bail-out by Minister Peters who handed over $50 million to RITA so they could pay bills of $26 million and halt administration three days later. The balance of $24 million will, in part, need to be used by the clubs and codes just to ensure their survival while in idling-mode as racing comes back. How much will be left to reduce debt is unknown.

The TAB is fundamentally a good cash business that should be in good shape and servicing the racing industry well with maximum prizemoney levels while keeping its costs to a minimum

The TAB is fundamentally a good cash business that should be in good shape and servicing the racing industry well with maximum prizemoney levels while keeping its costs to a minimum, like any well-run business. But for a long time now, it has been servicing itself well on the pig’s back, and on a gradual basis, lessening the percentage returns to the codes for prizemoney distribution.

Why was it allowed to happen? Go back and read the first paragraph of this blog and you have your answer or answers. Politics played the most significant role followed by cronyism, and before long, we had racing run almost entirely by non-racing people. Having no skin in the racing game, these charlatans thought it was pretty cool, and it presented an excellent opportunity to bring some mates in and put them on big salaries.

The Racing Act of 2003  was supposed to protect the racing industry from these acts of human frailty, but nothing was ever policed, and the era of no accountability and no transparency commenced.

The Act said: 8. Objectives of Board The objectives of the Board are— (a) to promote the racing industry; and (b) to facilitate and promote racing betting and sports betting; and (c) to maximise its profits for the long-term benefit of New Zealand racing.  

9. Functions of Board (1) The functions of the Board are— (a) to develop policies that are conducive to the overall economic development of the racing industry, and the economic well-being of people who, and organisations which, derive their livelihoods from racing.

No piece of legislation was ever ignored more than those clauses, but no one ever contested NZRB’s actions or demanded accountability. Why?

Summary of the financial results of years of mismanagement of the TAB.
Key: 1. Nathan Guy takes over as Minister of Racing – NZRB
2. Nathan Guy is Minister for Racing, Glenda Hughes (Chair) and John Allen CEO – NZRB
3. Winston Peters commences as Minister of Racing – NZRB and RITA
4. RITA is formed – Dean McKenzie appointed Chair and then Executive Chair

Have another look at that table and imagine an out-of-control gravy-train roaring down the tracks while the starving coal-face of racing look on in despair. Then, the new Minister Winston Peters arrived and engaged Messara to write the Messara Review and everyone thought Christmas had arrived early. Alas, it wasn’t Christmas, it was Armageddon Day and the nightmare was starting over again.

MAC was briefed to operationalise the Messara Review but decided it knew better and would fix things its own way. MAC became RITA (Racing Industry Transition Agency) and has since ignored the Minister’s Letter of Expectation and the needs of the racing industry as a whole.

Here’s what the first part of the legislation said, which became law last July: The objectives of the Agency are—(aa) to reform New Zealand racing in a manner that supports effective governance and improves industry sustainability; and (a) to promote the racing industry; and (b) to facilitate and promote racing betting and sports betting; and (c) to maximise its profits for the long-term benefit of New Zealand racing.

Please raise your hand if your think RITA has done its best to achieve the above. Please raise your hands if you think they have both carried out the terms of reference for MAC and Letter of Expectation from the Minister. I don’t see anyone raising their hand.

McKenzie was informed of the bail-out from going into administration only a day or two before it happened.

The second-hand hotline tells me that Executive Chair Dean McKenzie hardly ever gets to talk with Minister Peters, and that Minister Peters gave him a bollocking just before his announcement last Tuesday week. It also tells me that McKenzie was informed of the bail-out from going into administration only a day or two before it happened.

Whatever way you look at it, McKenzie and RITA have been a disaster. Sure, they received a hospital pass from NZRB, but the Agency knew what they were getting into well before that, and in horse parlance, have failed even to raise a remedial canter. RITA is the unqualified disaster for racing of 2020 but is using COVID-19 to stay afloat.

They cannot stay afloat for very long, however, because as already explained, the $50 million does not alter the long-term prognosis without any appetite for changing the structure, the people or the executive team that has already failed NZRB. Where is this industry heading in the next few months?

We know RITA is heading for a budget miss of $65 million or over

We know that the codes are all broke and the clubs mainly destitute, bar the Auckland Racing Club, and Riverton. We know RITA is heading for a budget miss of $65 million or over, and that the TAB won’t bring in very much profit even with the resumption of racing in July on a restricted calendar. And here we are on May 22nd and RITA is still holding back its Half-Year Report – albeit we don’t expect it to be riveting reading.

We know that COVID-19 has been a blow, but the TAB was trading as insolvent before the virus took effect. We know that available prizemoney on 2019/20 assessments will be down 40 to 50 percent for the 2020/21 season on the expected result.

But we also know that by August-September, the TAB turnover will be significantly down as we go into recession caused by Covid-19. No one knows how detrimental it could be, but estimates from educated sources suggest perhaps only half of the previous year.

Then, thinking bad news had run out of momentum, the piroplasmosis detected in a mare about to be exported to Australia has halted all thoroughbred exports across the Tasman and left the industry isolated with an equine equivalent of COVID-19. The borders are closed which has left the immediate future of horse exports in the balance.

Price Waterhouse Cooper’s stated that RITA ‘has a very weak equity position.’

When the Minister made his speech last Tuesday week he admitted that Price Waterhouse Cooper’s stated that RITA ‘has a very weak equity position.’ He also said that they advised that RITA should be recapitalised and this work will proceed over the next three months.

The Minister further said, “we are calling upon the industry to deliver serious reform, and that is necessary for the Government to be confident that any future investment is well directed.”

What? What is the Minister expecting when no structural change to governance has taken place, and he is dealing with the same team of failed executives that built the already redundant Fixed Odds Betting platform? Why do we keep coming back to Einstein’s definition of insanity: Doing the same thing over and over again and expecting a different result.

As well, don’t forget the contribution TAB makes to the NZ tax base which is $100 million annually -plus GST, betting, training fees, sale of horses, PAYE, Gaming duty, which more than offsets the $72.5 million donation made last week. Also, add the $10 million racing gets for sports annually which the government would need to front up with if racing wasn’t doing it for them.

That’s not to even mention compensation for the gross mismanagement of the TAB over the past 12 years by Government appointees who were nothing more than civil servants with zero qualifications.

Winston Peters: We have had enough of old men leaning against the rails scratching their derriere and blaming everyone else. Fortunately, common sense is prevailing.”

The Minister in his speech went on to say: “RITA and the codes have tightened their belts. Sadly, there has been some internal squabbling in racing circles. Some blame the transition agency for the problems it inherited. We have had enough of old men leaning against the rails scratching their derriere and blaming everyone else. Fortunately, common sense is prevailing.”

Well, sorry, Minister, but unfortunately, common sense is not prevailing because you have grossly missed all the points. The codes are now united but your RITA represents neither your brief nor the interests of the racing industry, and we can only presume they represent themselves.

by Brian de Lore
Published 15 May 2020

Tuesday’s announcement by Racing Minister Winston Peters contained some very interesting messages, but none more so than his delivery of $72.5 million which is a feat only Winston Peters could do for an industry about to go bankrupt.

Peters has to be given credit for his ability to pull a rabbit from the hat at the eleventh hour but will the participants of racing receive any tangible benefits from this windfall, or is it too late?

COVID-19 took the blame for racing’s state of affairs,but anyone following this racing industry closely for the past few years will know about this lengthy spiral of decline, which has continued unabated.  

In his speech on Tuesday, he said, “Our response is driven by an attitude that with the right investment it can be a fast recovery. Today’s Pre-Budget announcement is the initial response – not only critical to racing but critical to our national interests.”

The problem I have with that statement is that this is not an investment; it’s a bailout. And it’s not a bailout of the racing industry; it’s a bailout for RITA, which has failed to produce any decisive decision-making since it came into being on July 1^st, last year.

Winston Peters: RITA’s lenders advised they could no longer extend credit. It means RITA has faced the risk of defaulting on supplier commitments by this Friday.”

RITA’s Executive Chair Dean McKenzie’s recent denial that RITA was insolvent was shattered by the Minister’s admission, “RITA’s lenders advised they could no longer extend credit. It means RITA has faced the risk of defaulting on supplier commitments by this Friday.”

No one should be surprised the ASB was refusing to extend credit on the debt now reputed to be $47 million, or that RITA hasn’t been able to settle supplier commitments which have mounted up to a staggering $26 million.

McKenzie’s blaming of COVID-19 and the Minister backing that up by saying, “RITA, was partway through a reform programme and then COVID-19 arrived and created the perfect storm,” isn’t going to wash with a racing industry that’s been listening to excuses and hearing unfulfilled promises of better times ahead for the past decade.

It’s common knowledge that RITA inherited a hospital pass from NZRB when they took control last July, but RITA has delivered no tangible benefits since that time and McKenzie’s leadership has been indecisive and far less communicative to the industry than was promised when they began as MAC 17 months ago.

promise of ‘clarity and certainty to the racing industry,’ – RITA

The Minister appointed RITA and will defend the Agency until the end. But taking the helicopter assessment of RITA reveals increased debt, poorly conceived budgeting, failing to deliver on their Interim Report promise of ‘clarity and certainty to the racing industry,’ non-inclusiveness with the codes and diverting from the original brief to operationalise the Messara Report.

The writing was on the wall when RITA failed to clean-out the executive team of NZRB. Here was the team which advised CEO John Allen and Chair Glenda Hughes to make decisions that were not only poor but have ultimately cost the industry above $200 million – wasted. Yet, RITA, in its wisdom, kept this same team on to advise McKenzie.

A former industry leader and well-retired octogenarian with a lifetime of experience in bloodstock recently told The Optimist that in his long experience, the best leader he ever encountered during his career was Sir Woolf Fisher of Fisher and Paykel fame. Fisher started the company with partner Maurice Paykel and managed a vast team of staff, and also founded Ra Ora Stud and stood Champion Sire Sovereign Edition.

In a book named ‘Defying Gravity, ’ which gives a detailed account of the complete history of Fisher and Paykel, an excerpt relevant to the leadership skills of Sir Woolf Fisher is worth repeating here.     

‘Where there are problems, the last person you get rid of is the little guy; you start at the top.’ – Sir Woolf Fisher  

In the book it states: “Woolf Fisher may have ruled with an iron rod, but recognised the contribution from the bottom up, insisting: ‘Where there are problems, the last person you get rid of is the little guy; you start at the top.’”

RITA has done the opposite by getting rid of the little guys and keeping that seemingly bulletproof team of high rollers at the top. The strange thing is the redundancies include people who are the conduit between the TAB and the punters – the voices that directly encourage betting.

Tuesday’s announcement by the Minister was for $72.5 million which included a $2.5 million allocation for DIA to work on drafting some new betting options to come into play which allegedly will increase TAB turnover. Apparently, RITA had hoped to bring these options in by February and allowed for increased profit margins when budgeting this season for $165.8 million profit, but which now could realistically result in a figure as low as $100 million. That equates to a new season total stakes money decline of about 40 percent.

This pie-in-the-sky, crystal ball gazing belief that new ways of betting will increase the TAB betting revenue and provide higher profits flies in the face of the conservative and more believable industry view that Kiwi punters don’t bet as much as Aussies, and have only so much discretionary cash with which to place their bets after payday has arrived.

The contention that exotic betting options at the TAB would increase revenue to the extent they could budget for increased profits is very John Allenesque.

The contention that exotic betting options at the TAB would increase revenue to the extent they could budget for increased profits is very John Allenesque. It’s also unproven and likely born out of a complicated non-gambling brain that possesses a brilliant and never previously used algorithm.

The $20 million allocated for the two synthetic tracks at Awapuni and Riccarton Park poses new problems for both Race Incorporated and the Canterbury Jockey Club. Like all race clubs throughout New Zealand, the cupboards are bare, but each will have to front up with approximately $6 million to complete these projects and get the tracks in place.

In a phone call to CJC CEO Tim Mills to inquire as to the possible whereabouts of this potential deal-clinching windfall, Tim Mills admitted the Club did not have the money available, but the committee would soon be meeting to discuss all available fund-raising options.

In referencing the allocation for the synthetic tracks during his speech, the Minister stated: “The Messara review into our racing industry urged greater use of synthetic tracks.”

…of a suite of 17 recommendations and all had to be adopted to make it work… – The Messara Review

He indeed did. But it’s also true the Review said it only worked as one of a suite of 17 recommendations and all had to be adopted to make it work to see a revival of the industry. Messara was doubtless not recommending the building of synthetic tracks without all the revenue-driving streams in place such as outsourcing, racefields, and the point of consumption tax.

The Messara Review is a book of 82 pages, and the probability is that very few people have bothered to read every word of it and digest it properly. In the frontispiece letter to the Minister in the Review dated 31^st July, 2018, it says at the start of the second last paragraph on page 10, “I emphasise the integrated nature of the recommendations.”

Many times I have heard John Messara himself say, if New Zealand does not adopt recommendation seven, then you may as well bin the other 16 because seven is pivotal. Number seven says, “Begin negotiations for the outsourcing of the TAB’s commercial activities to be an international wagering operator to gain the significant advantages of scale.”

In the Terms of Reference given to MAC (Ministerial Advisory Committee), the committee was asked specifically to operationalise the Messara Review. Seventeen months hence, they have never looked like taking that instruction seriously, and that lack of action should have embarrassed the Minister, albeit he doesn’t appear to embarrass easily.

It should also be remembered that Cabinet approved and signed off on the Messara Report. Their approval did not occur without due consideration so RITA’s ambivalence towards it is more than mysterious.

The point is this; John Messara did his Review in record time on a pro bono basis. To commission such a review on a professional basis from someone of his track record and standing, would have cost our industry in excess of $500,000. The fact that he did for free, and has continued to offer free advice, says something about the string-pullers currently ignoring Cabinet and the codes and claiming they are following the Messara Review, but only cherry-picking it to the tune of 25 percent.

The $50 million allocated to RITA is nothing more than a RITA bailout and nothing for participants to get excited about. Racing people, owners, at the coalface of the industry who are back working with horses won’t benefit by a cent. The fact that RITA owes $26 million to square up with suppliers adds credence to the claim I made in the middle of last year that RITA would be insolvent by Christmas. They were and had been accruing debt ever since.

The $26 million to square up will leave only $24 million.

The $26 million to square up will leave only $24 million. But what do you do with that when you owe $47 million to the bank and have no more credit, leaving the industry only in a less sharp corner than it was previously.

Turnover related expenses in last year’s annual report amounted to $69 million. Add those to the total operating costs of $142 million, and total expenses amount to $211 million. Redundancies just done will save $10 million in year one, but in the current financial year it will cost $3.5 million to pay out those redundancies.

The bailout will keep RITA going who otherwise would have gone in administration today. But will that bailout be followed by the Minister declaring an extended life for RITA, which on its current performance is no more than delaying the inevitable?

One puzzling comment from the Minister was, “…more New Zealanders are turning to online gambling through offshore platforms.

“It is our intention to regulate the offshore online gambling sector and reset the on-shore online gambling sector.” – Minister Peters

“For that reason, the Government is fast-tracking a programme of work to identify how we can mitigate these concerns. It is our intention to regulate the offshore online gambling sector and reset the on-shore online gambling sector.”

Does the Minister mean the Government will block New Zealanders from betting with overseas-based betting operators as Australia did about three years ago, and allow Kiwis only the monopoly of the NZ TAB, thereby ruling out any question of outsourcing?

He added: “If there is going to be gambling by New Zealanders, then it is our country that will benefit, not another.”

On RITA, the question is this: We have the same executive team running racing. We have the same business model. The five-year shift in equity has gone from plus $75 million to minus $23 million, even with the $72.5 million bailout. Where are we heading with outsourcing and a major change in structure and cost-cutting?

The old idiom of ‘throwing good money after bad,’ which simply means spending money on something problematic in the futile hope of fixing it, seems relevant to racing’s current dilemma.  

The loss of venues announced today and the legislation getting ready for its second reading, are all irrelevant if the quicksand is already up to neck level.

END

by Brian de Lore
Published 8^th May 2020

Better late than never, but Wednesday’s announcement by RITA that it’s finally decided to reduce costs is a classic case of ‘too little, too late.’

It may be a short-term respite for RITA’s chronic cash-flow condition, but it neither addresses the long-term competitiveness of the racing industry in any shape or form and nor will it off-set the expected substantial decline in code distributions, hence the pending prizemoney decline for 2020-21.

That predicament is notwithstanding RITA’s application to Treasury for a COVID-19 bailout for a figure purported to be $80 million. Should it be approved with Minister Peters giving it his solid support, the bank debt of $45 million and current liabilities might be covered, but it would leave little for anything else.

The brief COVID-19 Update which appeared on the RITA website on Wednesday, states: “The proposal includes a reduction of approximately 30 percent of roles across all areas of the organisation and is in addition to other cost-saving measures aimed at reducing total expenditure.”

NZ Rugby has announced job losses for its full-time staff of 180 at 50 percent, with the remaining 50 percent having to reapply for their roles.

According to New Zealand employment law, the proposed cuts will have to be presented to staff for consideration, then be up for discussion with feedback taken before the final decision in late May. NZ Rugby has announced job losses for its full-time staff of 180 at 50 percent, with the remaining 50 percent having to reapply for their roles.

NZ Rugby lost more than $7 million last year but is estimating a fall in revenue this year of around $100 million. By comparison, NZRB/RITA lost $28.5 million last financial year, and increased bank debt, but did nothing about its ridiculously top-heavy employee level. It has carried them through to May 2020 where they have reached the point of no choice.

When NZRB became RITA on July 1^st last year, a great opportunity existed for the widest Bunnings broom to go through and clear out the blatantly obvious deadwood and instill some confidence in the stakeholders of racing. A great opportunity missed, and ever since, the rise in debt is paralleled only by the decline in industry morale.

Wednesday’s Update from RITA clearly blames COVID-19. Executive Chair Dean McKenzie is quoted as saying, “The TAB has taken a major hit from COVID-19 with revenue last month 47 percent below forecast and customer numbers down more than 35 percent.

“Despite far reaching efforts to reduce costs across the TAB, including salary reductions, staff taking leave and reducing all non-essential expenses, it simply was not enough to offset the blow COVID-19 has had, and will have, on our industry.” – Exec Chair Dean McKenzie

“Despite far reaching efforts to reduce costs across the TAB, including salary reductions, staff taking leave and reducing all non-essential expenses, it simply was not enough to offset the blow COVID-19 has had, and will have, on our industry.”

My version is quite different. RITA was insolvent before COVID-19 turned up. It’s a simple matter of tangible assets failing to equal the size of the mounting bank debt. And while revenue might be down 47 percent as claimed by McKenzie, having no New Zealand racing since the day Alert Level 4 commenced has meant having to make no payments to the codes for stakes money.  Then, with the wages subsidy supplementing salaries, the TAB has been accepting bets on Australian racing on a ‘betting information use charge’ – a far less onerous form of conducting business. 

McKenzie goes on to say, “The reality is the TAB will need to be a leaner, more efficient business with fewer roles, and focused on driving our core wagering and gaming business.” Why wasn’t he heard to say that last July?

The Update concludes rather tersely with, “No further comment will be made until a final outcome is confirmed.” It’s a relatively short Update that fails to mention the monetary savings which would accrue from the downsizing which is the most important figure.

…it would be surprising if savings annually on this move exceeded $10 to $12 million or only five percent of the total costs.

Thirty percent of roles sounds significant but given they have 700-odd employees including the RIU which doesn’t include consultants which numbers 70 in this cost-cutting measure, it may not make too much of a dent on the total running costs of 2019 which amounted to $211 million. Drawing information from the Annual Report and last SOI, it would be surprising if savings annually on this move exceeded $10 to $12 million or only five percent of the total costs.

In the Budget of 2019, the Government provided $3.5 million to the racing industry to: “make the best use of the $3.5m Crown contribution to the cost of industry change ensuring that this funding buys change.”

Has the $3.5 million been used for anything yet or saved for this RITA debut of cost-cutting, which seems unlikely given the parlous state of its financial position over the past year. We don’t know – RITA has never mentioned it.

Racing needs a revolution with a business-savvy leader to get rid of the deadwood, address the skill level required, understand IT on a global level, and deliver a balance sheet for New Zealand’s racing future. No sign of it yet!

The Deloitte Report was dismissed out of hand by an NZRB which adopted a contemptible ‘we know better’ attitude towards the codes.

The Deloitte Report is now three years old (May 2017) but is as relevant now as it was then – it was authoritative but was dismissed out of hand by an NZRB which adopted a contemptible ‘we know better’ attitude towards the codes. Deloitte had significant experience in the thoroughbred business and drew upon its Australian expertise to compile the report.

Deloitte said: “The lack of scale means it is unlikely NZRB will be able to achieve a sustainable competitive advantage against international wagering competitors. Based on our experience of the benefits achieved with industry consolidation in other settings and our analysis of the NZRB current cost structure, we are of the view material cost synergies would be achievable if a more substantive outsourcing or similar initiative were to be pursued with an appropriate party. Our initial assessment is that gross annual benefits could be in the vicinity of $63 million.

Since NZRB ignored that advice, the racing industry in New Zealand is something like $250 million worse off when you take into account the lost opportunity and a commitment towards a $50 million FOB platform plus ongoing deals with Openbet (10 years) and Paddy Power-Betfair (5 years). That may have been about the time they made the movie, Dumb and Dumber.

The RITA SOI (Statement of Intent ) released last November stated: “We are optimistic this result (previous year) will be a one-off and we will deliver on our forecasted net profit in 2019/20 of $165.8 million.” That budget currently looks like missing by $55 million or so with a bottom-line result of between $100 million and $110 million. They can blame COVID all they like but the industry isn’t that dumb, or dumber, to swallow that one.

We only have to go back and compare New Zealand with Western Australia to realise what a pig in the trough scenario we have endured.

The 2019 Annual Report says NZRB/RITA spent $22,500 per week on consultants. Travel and Accommodation amortised out at $54,000 per week. Other expenses were totalled up at $14.25 million or $273,396 per week. In the notes to discover what they were, the list is shown but the final item reads as ‘Other Operating Expenses, ’ which is $2,047,000 or $39,400 per week.

To have ‘Other Expenses’ and then a sub-title under that listing another ‘Other Operating Expenses’ which amounts to $39,400 per week with no notes as to how the money was spent, is symptomatic of the lack of proper accounting, transparency and accountability to which the participants of New Zealand racing have been subjected to for many years.

Finally, have a look at what happens in Western Australia to which I have made comparisons on numerous previous occasions. RWWA (Racing and Wagering Western Australia) has one organisation running wagering and racing whereas New Zealand has five. Under RWWA’s board they have five committees. By their own admission they believe it’s far from perfect, but compared to NZ, WA is efficient.

Footnote:

The Optimist has learned that a pre-budget announcement will be made next week by our Minister of Racing, the Rt Honourable Winston Peters. I am told it is big and a game-changer for the industry. Could it be about the bail-out application? Might it be fake news? On the previous form on big announcements, in a head to head it’s $2.60 on the loan approval and $1.40 on the fake news. All bets accepted as soon as my betting license arrives.