Operating expenses at TAB NZ out of control as profit declines
by Brian de Lore
Published 11 February 2023
The double-edged sword of incomings versus outgoings dealt the racing industry two more deep slashes in its death by a thousand cuts when TAB NZ released its December 2022 result last week.
Disastrous December!
Profit came in at only $14.0 million compared to $16.1 million for December 2021. This result came despite the most recent December having five Saturdays compared to three raceday Saturdays for 2021. It’s traditionally the day of the biggest turnover by sheer weight of race meetings, sporting events, and weekend punters.
Operating expenses have blown out to $10.6 million or $700,000 more than in the previous year, December 2021. The year-to-date costs for the August to December first five months of the season show an upward hike from $47.6 million in 2021 to $53.7 million in 2022 – an increase of $6.1 million or 13 percent.
$12.2 million behind with seven months to go
Add the increased costs to the profit decline; $67.8 million down to $61.7 million, a difference of another $6.1 million, and you have a five-month deficit of $12.2 million. Extrapolate that out to season’s end, and TAB NZ is heading for a $25 to $30 million shortfall on the 2022 end-of-season profit.
Are you shocked, or did you know? You didn’t have to be Einstein to predict it.
New Zealand buyers of thoroughbred yearlings at Karaka for Book One and Book Two two weeks ago reflected the failure of the TAB to provide the code with adequate prizemoney by spending $10 million less than they did in 2022. Kiwi buyers turn up in fewer numbers as each year passes.
Prizemoney drives every facet of the industry. The lack of it drives people out.
Seemingly, TAB NZ has decided to ignore the crisis. Otherwise, they would surely have taken measures to minimise costs. But then again, does anyone in an executive position at the TAB care about making a stand for the future of racing?
The pitiful scenario doesn’t even consider the downturn the economy is reputably heading towards, with inflation driving higher interest rates and a shrinkage of the expendable dollar Kiwis have traditionally spent at the TAB in the past.
Poor management – operating expenditure too high
This mismanaged TAB mirrors the behaviour of a hapless NZ Government that has continuously printed money in the misguided belief the roosters wouldn’t come home to roost. Both guilty of not controlling costs.
To paraphrase a famous mixer of metaphors, ‘we are in the shit without a paddle.’
TAB NZ may partly blame the Government, partly blame COVID, and partly blame the codes, but never themselves. Is anyone in an executive position at the TAB concerned about their spiralling operating expenditure on a decreasing profit line? And, is anyone on the boards or in an administrative position in the codes doing anything at all to halt this decline?
The answer to both questions is an unequivocal NO because nothing ever changes.
NZTR’s wage bill at year-end 2022 had increased 35 percent to $5.4 million on the previous year. At its current rate, TAB NZ will have operating expenses of $129 million by season’s end – ludicrously extravagant. Even if the TAB reaches a partnering deal in the next month or so, it’s unlikely to kick in until 2024.
Examine the graph accompanying this narrative, and decide for yourself. All the figures have come from the monthly TAB trading updates; the indisputable numbers carefully checked for accuracy.
Ask yourself this: If you owned and managed a company that started to return diminishing profit margins, would you or would you not examine the outgoings and cut your cloth accordingly? Not at the TAB; its costs have risen by $6.1 million in five short months.
The TAB continuing this performance can only mean one thing; a $25 to $30-odd million deficit on last year’s result and another forthcoming announcement (probably March) on a second reduction in the distribution to the codes. They cut the distribution by $15 million in December, announcing in a letter to the codes they even considered a cut of $24 million.
Failure to meet budgets
The TAB’s budgeting is so astray it has dealt with only half the problem.
If TAB NZ, under the advice of PWC, insists they keep a reserve of $100 million, New Zealand stakes money will get slashed across all three codes – would that mean the guillotine for racing as opposed to death by a thousand cuts – the same result but a far quicker conclusion?
The rhetoric and decision-making by the under-one-year experienced incumbent TAB CEO, Mike Tod, is enough to set alarm bells clanging. He came from Air Zealand two jobs ago and didn’t take long to head-hunt two other former Air New Zealand employees.
Jodi Williams (Chief Marketing and Customer Experience Officer) and Fred Laury (Chief Digital Officer) joined the TAB in May and August, respectively, in 2022.
Mike Tod has this hare-brained idea about rebranding the TAB for a $15 to $20 million cost, and employing Jodi Williams seemingly became part of that plan. Her bio on the website says, “Jodi developed the brand platform that Air NZ sprung off to international acclaim and worked on Kiwibank’s new brand strategy and repositioning.”
$450,000 annually
Reputedly but unconfirmed, Jodi Williams gets paid a salary of $450,000 annually – information supplied second-hand from a reliable source. But without a TAB profit line that’s going well enough, the rebranding is now on hold. So, what does Jodi Williams do?
Well, her quotes appear in a TAB announcement entitled ‘TAB NZ reaches quarter-million milestone,’ released on the same day as the awful December result, strategically timed to divert attention away from the poor figures with veiled lies about how well the TAB is doing.
It talks about record active numbers of customers, up from 225,000 to 250,000, the success of past events such as the Melbourne Cup and Woman’s Rugby World Cup, weekly customer betting numbers of 78,000, how much they look forward to fight nights and the Super Bowl, while asking for NZ punters’ loyalty to TAB NZ.
It fails to mention the poor financial result for December or the year to date. It says nothing about why turnover is up and profit is down, how poorly the TAB’s ‘bonus back’ promotion is tracking in a desperate attempt to maintain their diminishing market share, or why Jodi Williams’ employment is part of the massive increase in operating expenses.
Williams the new Spin Doctor
To read the entire spin, here’s the link: https://www.tabnz.org/tab-nz-reaches-quarter-million-milestone
Alternatively, here’s a few Jodi Williams quotes: “We’ve made great strides in the last year to offer a world-class betting experience, and it’s great that Kiwis want to get involved.”
“On the back of customer improvements like boosted odds in sports and racing, and removing deductions from racing, our customers have embraced some of the amazing events we’ve had over the past year.
“Kiwi punters are loyal punters, and we want our racing codes, national sporting organisations and communities to thrive.
“The best way for New Zealanders to do that is by betting with TAB NZ, as every dollar spent with us helps to fuel racing, sports and communities all over the country, and we want to thank those loyal customers who get in the game through TAB NZ,” -Jodi Williams.
Racing people won’t swallow this tripe
Have your eyes glazed over, and you’re now feeling nauseous? Do Jodi Williams and Mike Tod believe the racing industry is dumb enough to swallow any of this tripe which gets worse with each profit-contracting month?
If Kiwi punters are loyal, as Williams claims, why is the TAB pleading with the DIA for legislation to geo-block New Zealanders in an attempt to stifle overseas-based betting agencies and monopolise the market? Everything else in the quotes is pure spin.
Williams has now hired former leading apprentice Hazel Schofer and created a position called ‘Elite Relationship Specialist,’ in which Williams says Schofer will provide support to TAB NZ’s high-value customers. WHAT!
Schofer proved herself a talented apprentice, winning 78 races in the 2020-21 season, but with all due respect, how will this 24-year-old add value and provide a quantifiable return in dealing with the TAB’s biggest punters? It’s not difficult to imagine how operating expenses have raced out of control.
Another memorable Williams quote: “Hazel has joined the team to deliver a world-class experience to our elite customers.” Really, ‘world-class’? Nothing has happened at TAB NZ for years that could be deemed ‘world-class.’
Racing’s survival not a priority at TAB NZ
Racing survival is no longer a priority for those running TAB NZ. The disconnect is so obvious, and some recent decisions have worked against turnover and profit. Consider the big Auckland wet two weeks ago when parts of Auckland flooded, effecting 0.3 percent of dwellings in the greater Auckland area.
The TAB made an across-the-board decision to close all Auckland TAB retail outlets the following day, Saturday, despite the vast majority residing in dry areas where retail around them remained open. Why?
The TAB is now closing down all TAB accounts of New Zealanders living overseas, despite some of these Kiwis having had betting accounts for many years. Why would they suddenly do that when no legislative changes have recently occurred?
An account holder who runs businesses in Thailand and has resided there for 30 years questioned the TAB about it upon receiving his closure email notice. He received the following reply:
“Unfortunately we were forced to close all accounts that were listed as having an overseas address in order to remain compliant with New Zealand’s Anti-Money Laundering laws. The TAB NZ app and site should not be able to be accessed outside of New Zealand.”
Why would it suddenly breach our laws when nothing has recently changed? Thailand has its own anti-money laundering laws, but the man in question with his TAB NZ account now closed, soon after legally opened an account with Bet365.