Month: August 2018

by Brian de Lore
Published 30 August 2018

The NZRB is due for a Performance and Efficiency Report of the Board which under the terms of the Racing Act of 2003 is required to take place every five years by a person approved by the Minister.

Strangely, the wording in the Act for the appointment of an auditor to do this report does not specify it has to be an independent person but only that it must, ‘not be a member, former member, or employee of the Board.’

Two previous reports have been completed since the Racing Act came into play at the five and ten-year intervals, and now at 15 years a third is due, but the NZRB has neither referenced it nor scheduled its commencement in any press release.

On the NZRB website, only three press releases have been posted since 2015 – that’s an average of one per year. They have a substantial Communications Department at NZRB, so the output is far from prolific. It also can’t be found referenced in the late July release of the Statement of Intent (SOI), or as I prefer to call it, Statement of Discontent (SOD).

The last P&E Report was a calendar year late, coming out in 2014, and was completed by KPMG. That report suggested that the then CEO Chris Bayliss and his team of star-studded executives that were brought over from the BNZ would take the racing world by storm and take profit by 2018 up to $180 million – oops, they must have hit a few speed bumps, that never happened.

Bayliss, who was appointed by current NZTR Chair Alan Jackson, and his cohorts have disappeared long ago with their severance packages, but they must have departed in haste as a strewn mess was left where they once pretended to work. On one occasion during this Bayliss era, an off-site NZRB managers meeting was held at The Chateau at Mt Ruapehu where the weekend bill was reputed to be $100,000.

On another occasion, Bayliss installed – between two sets of swipe card doors on different levels at the Petone TAB headquarters – a couple of extra security measures in the form of two turnstiles through which employees had to pass to gain entry. They cost more than $100,000 to install but had disappeared just a year later – more unreported wastage.

Even the more serious allegations of goings-on and further monetary wastage in a Wellington Hotel suite that was permanently booked by the NZRB but used only on a couple of days a week, but I digress. This story is supposed to be more about the P&E audit of the board and how they will audit the plethora of misadventures that have occurred during the past five years.

But don’t these audits tend to be a bit friendly towards the organisation paying for them, anyway? When, and if it comes out, it is unlikely to make mention of The Chateau at Ruapehu, the Petone turnstiles or the Wellington Hotel because categories in the accounts have been invented to hide or gloss-over these expenses. These are just three of numerous misuses of industry funds.

What’s highlighted here is stuff that’s been swept under the carpet. In Australia, they expose all the misdemeanors publicly, hand out the penalties and move on. But here things are hidden away from view, and the sores stay festering. Well, these festering sores are about to pop.

Have a breeze through the last NZRB Annual Report released for the year 2016-17 – the one that was conveniently released after the AGM. You will not find any mention in that report of the Private Box at Wellington’s Westpac Stadium which costs $80,000 a year and is used possibly twice a year for the Elite Customers and the mates of TAB executives. Not to be found anywhere.

Let’s discern the facts from the fiction, and there’s plenty of the latter to be found in documents like the latest SOI which states: “We’re delivering on our financial targets, making good progress in the delivery of our strategic initiatives and delivering on our commitments to the racing industry.”

Delivering, delivering, delivering – the only delivery to be seen are the trucks arriving to stock up the gravy train – a hypocritic NZRB also continually claim they are controlling costs when clearly, they are not. As an industry, we are over these false statements.

So, what would be the point of the racing industry paying around $200,000 plus for a new P&E Report when the estimated 58,000 racing participants will simply have the wool pulled over their eyes, anyway. In addition, what would be the future use of such a report on the very eve of the release of the Messara Report which is certain to be the catalyst to propel all the remaining current NZRB board members into outer space. No point at all.

Sorry, but we are over the rhetoric, the lies, the false promises, and the incompetence. Here is ‘the end of the section’ – employees of the NZRB who suspect they contribute less to the racing industry than they take home in salary should be updating their CVs for immediate, future use.

The Messara Report is about to hit the streets and one suspects, if adopted, will result in casualties – blood in the streets for the greater good and the long-term sustainability of New Zealand racing. Will Winston adopt it? Yes, he will. Why? Because it’s a very well-compiled professional report and no alternative exists, and the consequences of not adopting it would bring on racing’s Armageddon.

The Messara Report makes the P&E Report irrelevant because, by its own definition, the latter will be a review of people no longer involved. Perhaps a better report would be a full inquiry into the running of the TAB conducted by a more probing organisation than KPMG. Far more serious allegations than those stated above have yet to surface.

But the most serious issue confronting this industry at present is the progress of the Fixed-Odds-Betting (FOB) platform and its costs which appear to be well out of control. Some NZRB employees have lost faith in the project and are ready to talk.

The costs are already over $40 million, and one insider is saying no possibility exists that the platform will be ready for use before Christmas. Management hasn’t moved from the position of the FOB being ready by Melbourne Cup time, but information received on this desk denies that’s possible.

That informer is saying the odds for the FOB platform being ready this year are 30 to one and drifting. And by mid-December, the festive season has arrived, and you wipe out the next couple of months.

A simple calculation based on the 125 IT people involved in working on this project suggests it would be accumulating over-run costs of $3 million to $4 million per month and that’s not taking into account the loss of the budgeted profit from a system not up and running.

Two months ago, NZRB CEO John Allen at a Riccarton ‘racing conversation’ meeting, admitted that costs were already up to $39 million with the FOB being ready for launch by Melbourne Cup time. But conducting the testing of it, according to our IT information, is a six-month process in total and therefore it will not be ready before Christmas.

Remember that 15 years ago we had assets of $106 million which included $70 million in cash – that has been spent, and NZRB debt in a recent statement of financial position was projected to be $24 million in August of this year.

Forecasted debt figures of $24 million after the 2018/19 season are predicated on the NZRB achieving a very questionable $14 million profit from its strategic initiatives. If this didn’t occur which seems very likely, then the debt will balloon out to around $40 million which is the reason we are in a crisis.

The industry doesn’t have the money so is borrowing it. The net profit distributions generated from wagering to all three codes is presently about $100 million.  If the industry got to a debt level of $40 million with a net income of only $100 million, it would be in a potential disaster situation.

What would then happen if the economy faltered and the banks wanted their money back? The racing industry couldn’t manage with a distribution level of just $60 million – it might be ‘all over red rover.’

The doors of racing would have to close, or the government would otherwise need to bail the industry out – that would seem unlikely going on recent history. If you didn’t previously think this industry was in the state of crises then think again?

The voice of John Messara is still resonating quite loudly when he told this writer upon completion of his report, “I knew when I began reviewing the New Zealand racing industry it was in pretty bad shape; what I didn’t know until later was, just how bad it really was.”

by Brian de Lore
Part Two published 23 August 2018

Racing’s revival in New South Wales at the hands of innovative CEO Peter V’landys has always been a movable feast and resting on his laurels isn’t an option while new projects await discovery and development.

“There’s a lot more to come after The Everest; you can’t sit still,” exclaimed V’landys firmly when asked what could possibly top a promotion that big. “You have to keep inventing new things, and you have to look at the generational change.”

By generational change V’landys was specifically referring to his planning of The Everest in which he targeted an age group: “We specially designed The Everest for the under 35s – it wasn’t designed for the traditionalists; it’s very different, and that’s why I put a full-page add in the Melbourne paper on Melbourne Cup Day.

 “The beauty of the race is that under-35-year-olds won’t do what their parents do; they almost resent it. So, if they love the Melbourne Cup, or let’s pick another race – if the parents love the Epsom, then their kids won’t.”

V’landys is not just an administrator in the traditional sense of his accounting background but has developed an entrepreneurial-marketing skill that would do justice to running a company like Saatchi and Saatchi.

“The thing that attracted me to The Everest was the slots and the fact that publicity will come out of people doing the deals behinds the scenes,” he explained. “And people picking horses that everyone’s going to argue about – I got the idea basically from the Miracle Mile in harness racing – I used to create controversy and make the front page of the newspapers which in those days was unheard of for harness racing.”

During the more than one hour with V’landys in Racing NSW offices in the heart of Sydney’s CBD, he gives no impression he’s is a man with an ego. Conversely, he is down to earth, practical and not at all intimidating.

Usually, V’landys [shies away from interviews so to get this one the Messara influence came into play – he agreed only when ‘JM’ put in a good word which was enough to swing it. The end result made the effort worthwhile, and the bonus came in the form of a Directors Lounge ticket invitation to see Winx score her record 26^th consecutive win in the race renamed in her honour.

Messara and V’landys have been a good team and have obvious respect for each other. They have fought and won quite a few battles together over several years, and the people in racing in NSW owe them a huge debt of gratitude.

“He’s a very effective CEO; he has an eye on the bottom line and costs,” began Messara when asked to sum up V’landys in the role he has occupied for 14 years.  He has a good understanding of wagering which is not found in many and over the years working with different boards he’s been able to get outcomes which have placed NSW today in an extraordinarily strong position.

“He’s tough and uncompromising but fair – he’s certainly the best CEO we’ve had in NSW. His only aim in life is a passion for getting the best results for Racing NSW – there’s no ulterior motive, there are no conflicts.

“People thought that he and I would clash when I became Chairman and that it wouldn’t last as a combination but the fact is we got used to each other’s styles, and he recognised that he was always answerable to the board – but that didn’t deter him from his innovation and aggression.

“His heart has always been in the right place, and he’s very effective. We worked out we were both on the same tram – all these things are team efforts at the end of the day, and Peter was head of the executive team while I was head of the board team, and between us all, we have had some very good outcomes. Peter is a very good man and I have a lot of confidence in him.”

The Informant last week chronicled the V’landys background, his success in developing racefields which produced a tremendous boost in income, guiding the industry through the perilous time of equine influenza and then with Messara gaining tax parity with Victoria after hundreds of hours of lobbying the state government.

Next came The Championships: “The Championships was more John’s (Messara) baby than mine, V’landys explained. “John’s vision – he always had The Championships concept in his head, but all I did was just put it together for him.

“The Championships would never have happened without the tax reliefs from the government – that’s what funded it.”

The tax relief that V’landys is referring to is the Consumption Tax of $40 million annually and the $120 million annually that Racing NSW derives from the godsend of the racefields legislation which was passed through parliament 10 years ago but was held up for the following three years as the corporate bookmakers fought it all the way to the High Court.

Thankfully, for racing’s sake, the bookmakers lost. V’landys was always confident about winning that one but some pangs of doubt did haunt the CEO for a brief period when The Everest took a little time to take off.[G5] 

“We took a risk with the Everest and lots of people thought we would fail,” said V’landys, “but we didn’t – we have proved them all wrong. Some things will fail, but you learn from the failures.

“Ironically, when we got it off the ground everyone that I thought would buy a ticket – didn’t, and for the first couple of weeks I was heading back down to the Centrelink Office because I hadn’t sold a slot but once it started everyone rushed into it, and it became oversubscribed – people were phoning daily trying to get a slot.

“Every slot holder had to be in for three years, but already every single slot holder has renewed for four years. It’s only going to get bigger – $14 million next year and $15 million the year after. I think it will be bigger than the Melbourne Cup in five years. I’ve never seen anything take off as this has.”

Entrepreneurial, yes, but V’landys is also a student of human behaviour and has used the social media trends of younger people to try and attract them to racing: “When the parents went on Facebook all the kids left Facebook and went on Snapchat.  There was a study done that when the parents started buying the iPhone, the kids started buying something else. They don’t want to do what their parents do and we specifically designed this race for the under 35s.

“At Randwick at the very first The Everest the bottom bars didn’t take cash – you had to use paywave. The beauty of that is that you don’t have to manage cash which is always good, but it gives you a mountain of information because every detail is on that credit card – you learn everything.

“So, when we looked at the figures 71% of the people attending were under 35 years. And 61% had never been at Randwick before. The marketing worked – be being disruptive, be being different, we had attracted a younger crowd.

“I got an email from a father and son who wanted to get into a horse, continued V’landys.  The father wanted to win the Melbourne Cup, but the son said no, I want to win The Everest. So, you could see the generational change already.

“But the main reason for me is that sprinters are what we are good at so why would we not have a race for something we are good at? Our sprinters are the best in the world.

“People have said to me why hasn’t The Everest got any internationals, but the basic reason is that they are not good enough. The Melbourne Cup is an iconic race for Australia, and the VRC does a great job.  But we now have a big event for the horses we breed best.”

Just minutes after Winx had won her 26^th successive race in the Winx Stakes at Randwick last Saturday, an ecstatic V’landys told me, “You can’t but buy this sort of publicity for racing; having a champion capture the public’s imagination like Winx has and break Black Caviar’s record is priceless advertising for the sport.”

And the V’landys understanding of the value of ‘good press’ was alluded to earlier in the week when he said, “During the first Everest the daily newspaper circulation went up, and they had a lot more hits on the website, and during equine influenza the newspaper sales dropped because people weren’t buying the paper for the form guide.

“It’s very similar situation with The Everest – it’s got to be controversial. Newspapers still have a place in my eyes because they give you the form guide – it’s hard to replicate a form guide on the internet. Newspapers are far from becoming extinct in my eyes.”

One of the things that makes V’landys so successful is his in-depth understanding of the psychology of the punter. He was betting from a very young age himself, he is self-made from a poor background, and he believes the people who make the decisions should look after the small punter.

He explained: “People think all the betting happens on the internet but it doesn’t; it’s the opposite because 60 percent of all wagering here in NSW comes from TAB agencies – everyone concentrates on going digital but where the tote has a monopoly is in the retail network.

“You never ever kick the people in the guts that have been loyal to you over all these years in the guts, said V’landys to being informed the New Zealand TAB had closed down telephone betting and had closed retail outlets. 

“They did something similar here by trying to fix the minimum to a $5 bet, but that’s one of my greatest achievements – you look after the customers that have looked after you for all these years – why alienate those customers who have been loyal for 50 years. I was getting letters from these grandmothers that loved having a 50-cent bet every Saturday – why take that off them. Racing is for everyone – not just a select few.”

V’landys then quickly dismissed my quip that we’d love to have him running our TAB with that attitude, saying, “far too busy here to be thinking about that” but he was more willing to have a long hard think about what it was about him that was the main factor in his success.

“If you think and have an objective and you want to work hard, then you will get there. But if you want to sit back and do the same thing over and over again that has failed then, you will fail again. They have to put the hard work in, and sometimes you have to take risks – if you don’t speculate then you don’t accumulate.

“Where I differ from most people is that I like to work with ‘can-do’ people. I’m not interested in anyone who says I can’t do it – that certainly gets me into enough trouble at times, but throughout my career I’ve met a lot of people who said they could to do things but many others that have said they couldn’t – the glass half empty people.

“If you are negative and find reasons why you can’t do it then you’ll never do it. By having people around you that have a ‘can-do’ attitude you will always have success – don’t surround yourself with people that are negative or are looking for excuses because they will drag you down.”

When told how much New Zealand racing cost to run annually and that the worst kept secret about our TAB was the big rebates they were giving the VIP customers V’Landys responded: “Giving rebates is really bad because it’s a race to the bottom if you do that.

“As an example, if we had a roomful of recreational punters in this room, they as a group would lose 20 percent of their money. So, for every $100 bet, they lose $20. Out of that 20 percent that’s lost everyone gets a little bit of it, the racing industry gets a little bit of it, the government gets a little bit of it, but the professional punters get most of it because they are taking the recreational punters money in rebates.   

“This is what happened in Tasmania – they were giving away so much in rebates they became insolvent. There’s a strong argument that says without professional punters you are better off because you keep more of the losses. Skimming and rebates isn’t a good thing.

“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 – and I have been in it all my life – is a very complicated business and 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’sa mountain of things you need to know.”

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by Brian de Lore
Part One published 16 August 2018

In Australia, the administration of racing and especially New South Wales has never been in better shape thanks to the intellect, planning, and vision of Racing NSW CEO Peter V’landys and his former chairperson John Messara.

Australian racing administration hasn’t ever had a better duo than these two who came from similar backgrounds, were thrust into Australian life in their youth and who both developed a resolve that left success as the only possible outcome in the environment they faced years ago as new Australians.

Messara was born in the Mediterranean Egyptian town of Alexandria, was French-speaking and only 11-year-old when alone he was sent to his uncle and aunt in Sydney to commence the serious part of his education at an English-speaking school.

His Lebanese father and Italian mother followed only three years later, and by that time the young Messara by the very nature of this experience had developed a good degree of independence and self-preservation.

V’landys was born not that far away to north-east in the Greek Island of Kythera. His family were poor but migrated by ship to Australia when V’landys was just three-years-old, in search of a better life.

“I think John Messara had it even tougher than I did,” V’landys told The Informant at his Sydney office this week, “because I know John’s history. He had to leave his parents for three years and come out to Australia very young.

“Whereas, when I came out I was only three years old – we travelled out by ship because my parents couldn’t afford the air flight – we were a pretty poor family; we battled. That’s often a good thing because when you battle in life you make things cost effective and learn to cope.

“John’s a little bit different to me in that his father was interested in horse racing in Egypt and Australia. As a young guy, I would have to get someone older to bet for me. In fifth class my maths teacher taught me how the tote worked, and he was the one that said to me I should be an accountant – my heart and soul had been set on teaching, but he talked out of it.

“We are different to the average Australian,” conceded V’landys at the suggestion something in each of the two’s DNA set them up to succeed in Australia. The parallels continued later in their lives when both became the recipients of ‘Member of the Order of Australia’ for services to racing.

“You have to work a lot harder than other people do to succeed and I did work harder, but I couldn’t have done it without the example of my father because he’d often work from 8.30 in the morning and come home at midnight after a double shift.

“His quality of life wasn’t great because he sacrificed a lot for us. Work ethic is very important, and I always believed you only get success if you work hard.”

V’landys was appointed CEO and a board member of Racing NSW in 2004 and now after 14 years is easily the longest-serving CEO in Australian racing but also the most successful. He was just three years into the job when the equine influenza outbreak in 2007 and that proved to be the ultimate test.

The equine flu outbreak in NSW had the potential to devastate racing beyond repair, but careful management and innovation by V’landys saw 50,000 full and part-time jobs saved, and the earliest possible return to racing after a five-month hiatus.

V’landys explained, “The influenza saga could have wiped out racing in NSW for decades. What people didn’t realise is that we made the decision to incentivise the trainers to keep the horses in work, and the reason we did that is we wanted to have fit horses once we started to race again.

“Otherwise we may have needed a 10 to 12-week lead-time to get horses fit enough. But when they said we could race we virtually raced on the same day because all the horses were in full work.

“We had made it a daily compensation package, and from memory, it was $100/day. That was for all horses in work, and that had an economic multiplier throughout the industry – we made payments to jockeys, stablehands and everyone in the racing work-force while going through the drama. When the green light was shown we raced immediately with full fields.

“The alternative would have been waiting three months before commencing racing. It included 50,000 people; full-time, part-time, casuals – everybody. We were busy going through all the applications, and I didn’t realise there were that many horses in work – some of them must have come out of retirement,” grinned V’landys, “but we didn’t mind that because the money was getting to people that needed it.

“We harassed the hell out of the state government and got money out of them too and learned a lot in that process. At first, the federal government offered us $5 million and I didn’t think that was appropriate, but we ended up getting $235 million. It was fortunate that we had Peter McGauran as Agricultural Minister and he understood racing – I told him to get me a meeting with the prime minister and sure enough one Sunday he rings me and says he’ll give an hour.

“So, we went to see him and that day he signed the cheque for the compensation package. He understood immediately how it would operate and as soon as he was convinced and approved it was all-hands-on-deck to get the money out.”

The compensation V’landys gleaned from a sympathetic government saved the day, but it was his stroke of genius in inventing racefields that turned the financial fortunes of racing around.

“When I started in 2004 I could see the threat of corporate bookmakers, and I wanted to ensure we would stay financially viable,” remembers V’landys. “I went and got a 200-page advice from a leading copyright solicitor here in Sydney who told me we had copyright and bookmakers should be paying us for using our race fields to bet on horses.

“We promoted the introduction of the legislation but were challenged under the constitution by the corporate bookmakers – what people didn’t realise is that they wanted to pay nothing.

“It was a three-year process that went all the way to the High Court of Australia, and we won. That has resulted in racing and sports earning $260 million annually – money we would never have had. They are still battling in the UK to get it through their legislation.”

V’landys travelled to New Zealand five years ago to encourage the then National Party government to pursue its own legislation but racing Minister of the day Nathan Guy didn’t move on it. Now, it has been addressed but will only be passed into law once it can be married into any new legislation specified in the yet to be released Messara Report.

“That is going to have a monumental effect in New Zealand because it will stimulate prizemoney and have a positive outcome on the racing economy, enthused V’landys.

“Racing NSW alone generates $120 million a year out of racefields legislation, and we wouldn’t be in the financial position we are in without it, and either would any other state in Australia – Victoria relies on it more than any other state.

“It was driven by myself and the board and there was a quite a traumatic period there for a while because people thought we would lose. We got scathing criticism because many believed we were done for, but I never ever thought we would lose. But just in case I went and got the address of Centrelink (unemployment office) But we did win, and it’s had enormous ramifications for not only racing but sport.”

Another huge V’landys win relating to taxation came with John Messara as chairman – NSW was being taxed more than any other state in Australia.

“No government have ever reduced that type of taxation, but John and myself lobbied the board, and we got racing an extra $100 million – a lot of lobbying the government,”

“I nearly got kicked out of the Premier’s office, but we stuck to our guns until we got what we thought was right. We weren’t looking for a hand-out but just to be on a level playing field with every other state in Australia.

“A more recent one which also required a lot of lobbying the NSW Government was the Consumption Tax from which we got an extra $40 million a year. So, we are now in a good financial position, and that’s why prizemoney has increased to the levels it has increased. We pay around $260 million in prizemoney which is about $20 million more than Victoria.”

“We have 200 more race meetings than Victoria, but we have never closed down any clubs or racecourses at any time. Closing them down you save peanuts and lose macadamias because if racing is not present in these areas you become irrelevant – people don’t see racing then – I believe you should have a presence in all these places unless it’s not cost-effective.”

Next week: Peter V’landys Part Two talks about the creation of The Championships, The Everest, the future of racing, and offers some advice to the NZ TAB.