An update from NZRB CEO, John Allen, to the New Zealand Racing Industry for May/June 2018
The New Zealand Racing Board has been progressing a range of priorities that I am pleased to update you and your members on as we approach the end of the current racing calendar.
Over the past couple of months I have met with many trainers, jockeys, drivers, owners, breeders, club members and bettors at several industry forums and race meetings.
The conversations have been wide ranging in topic, challenging and informative in questions and very valuable in content. Not surprisingly the review being pulled together by John Messara has been a topic of interest. Clearly I do not know what will end up in the report, but I am very optimistic that it will provide a real opportunity for the future of racing in New Zealand. There are many parallels with New Zealand when we look at what Mr Messara has delivered in Australia. Tax relief, racefields legislation, investment in racing venues and infrastructure and increased stakes have had a material impact on racing in New South Wales and I imagine similar priorities will be on his horizon here.
We’ve also had solid conversations in relation to venues and infrastructure with the development of a draft Future Venue Plan well underway. The Joint Working Group managing this exercise is working through various scenarios with the goal of racing in 10 years’ time taking place on great tracks, with the right infrastructure and facilities around them and actively supported by the participants and local communities. The codes and the NZRB intend to present the draft plan to clubs in September with a likely deadline for feedback of November.
Increasing revenue to racing
We’ve also spent time discussing NZRB's profitability and our intent to lift total distributions to racing from $160m this year to more than $200m in 2020/21. There are several initiatives that are going to get us there.
Customer growth is critical and it’s pleasing to report growth of nearly 20% on last year. Overall average monthly customers in May stood at 112,600 (+19.4%) for the 12 months to May 2018 with net deposits up 11.4%. This month the FIFA World Cup acquisition campaign is in full swing with a ‘Free Kick at $5m’ promotion competition securing 45,590 entrants, of which, 45% of entrants were non-existing customers. So far our financial projections for the World Cup are on track. In this financial year to date, all marketing campaigns that are specifically targeted to acquire customers from sporting events have resulted in 27% of those new customers placing a bet on racing.
For our TAB App users, the next product update releases will include Betslip and global design changes, event display enhancements and various bug fixes.
The Fixed Odds Betting (FOB) platform is another key project with multiple benefits. Firstly, our customers will enjoy a world-class betting experience. The number of books available will lift from a few thousand, to up to potentially 100,000. With sports betting, in-play betting options will increase, while the duration that games are suspended (due to adjusting the odds) will decrease significantly. Betting on sport plays an important part of distributions back to racing, with about 40% of betting on sport going straight back to racing.
There is no doubt FOB is a major programme with $37-39m invested and a projected pay-back of 3.3 years, as well as a significant ongoing lift to profit over the long-term. The value of the programme is significant and a key driver in our positive outlook over the coming years. The investigation to proceed with our partners Openbet and Paddy Power Betfair was robust and we remain absolutely confident it was the right decision for the long-term sustainability of our industry. With the ‘build’ now nearly complete, the team are working through extensive testing phase and we’re on track to launch later this year.
Another priority for us right now is ensuring the TAB has has systems and controls in place to detect and deter money laundering and terrorism financing. From 1 August 2019, we will need to comply with the anti money laundering requirements, which requires more precise customer identification as well as more stringent record keeping and transaction monitoring requirements. This requirement entails understanding who our customer is, and the legitimacy of the money they want to place with us. It also requires monitoring customer transactions and accounts and generating reports about prescribed transactions, as well as suspicious transactions. Over the next year we will work closely with our staff, our customers, racing clubs, tote operators etc to manage these requirements as efficiently as possible.
NZRB Board meeting
Every month the NZRB Board receive detailed updates on our financial performance and organisation’s priority projects and provide feedback on our strategies and direction.
We’re currently on track to meet our end of year targets, despite challenges we are facing from delays to the expected level of revenue which was forecast for this year from the racefields legislation which we had expected to be in place by now. For May, operating profit was slightly below forecast but 8.5% ahead of last year, with turnover coming in below forecast and lower than last year driven by fewer equine races both domestically and overseas (-5.3%), two domestic race abandonments (-$0.3m profit impact) and strong margin results adversely impacting betting churn, particularly high value customers. Gross betting revenue was broadly in line with last year due to strong product margins while gaming turnover for the month hit a new record up 17.7% on last year. Total operating expenses were below forecast and lower than last year, including staff expenses.
The Board also considered our 2019/21 Statement of Intent (SOI), which we are required to present to the Minister of Racing by the end of July. This was the second time the Board reviewed the document with feedback from the three codes incorporated following consultation. The SOI will be publicly released in August, following its tabling in Parliament by the Minister.
The Board also signed off the NZRB’s budget for 2018/19, which included an anticipated lift in net profit by more than 20% and distributions to the codes of $151.6m, aligning with the projections for 2017/18.
The other priority that the Board received an update on was customer safety measures being implemented in the retail network to reflect health and safety considerations. This includes the rollout of new security signage, greater cash management measures, investment in staff training & education and more proactive health & safety communications.
If you have any topics or considerations you’d like covered off in these updates please email our Head of Government and Industry Relations, Ian Long at [email protected] with comments and suggestions you might have.