by Brian de Lore
Published 17 April 2020
We have no racing; we have no idea when Jacinda & friends will permit the resumption of racing; the TAB is likely to be in breach of the law for trading while insolvent; racing falls further into debt as each week passes.
The 135 employees quoted in this headline is really 136 but because Executive Chair Dean McKenzie who took over from John Allen on January 1st is on an unknown remuneration, he is left out of the calculation. They are not my figures but come from a reputable accountant equally concerned about the current state of racing and its apparent inability to adjust to the moving floor beneath it.
| Salary Range | Employees | Cost per annum | Average cost |
| NZ$100k-$150k | 98 | 11,690,000 | 122,000 |
| NZ$150k-$200k | 28 | 4,870,000 | 174,000 |
| NZ$210k-$390k | 11 | 3,265,000 | 297,000 |
| Total | 135 | $19,825,000 |
A second, reputable and long-standing accountant in the industry, John Aubrey, has made an assessment of the fiscal state of the industry from last year’s Annual Report which is reproduced below. He also emphasises that the 2019 figures now have some age while expressing concern that the half-year result to January 31st has not yet surfaced despite the fact that we are now in the second half of April.
You don’t have to be Einstein to understand that New Zealand racing right now is flyblown (as the Aussies would say), destitute, insolvent, impecunious, penniless, impoverished, broke or on the rocks. Everyone knows it, but whatever adjectival description you prefer, no one wants to say it.
Let’s maintain the stiff-upper-lip they would say, as Kiwis with English and Scottish ancestors would have done; maintain your dignity, never say die and carry on to the bitter end. For NZ racing, however, the bitter end might be avoidable if we could only extract the truth and recognise those in charge are clueless.
RITA is awaiting the outcome of an application for a Government bail-out, citing the COVID-19 as the issue, no doubt. Will the people at Treasury with the Minister of Racing pushing the issue buy into it and give racing an estimated $80 million hand-out/loan?
If it was a level playing field the answer would probably be, no! But in New Zealand politics nothing much is on the level, I would suggest, and the forthcoming answer isn’t one to bet on without inside knowledge.
NOTES ON RITA FINANCIALS by John Aubrey
WHAT IS THE BOARD’S FINANCIAL POSITION?
NOTE: The figures below have been taken from the 31 July 2019 Financial Statements. The statements for the half year to 31 January 2020 are not yet available.
- The financial statements of the NZ Racing Board (now called Racing Industry Transition Agency, or RITA ) do not show a strong position. As at 31 July 2019, the reported net profit before distributions was $136 million, down on 2018 by $9 million. Distributions to the Clubs and Gaming totalled just on $162 million.(2018, $159 million)
- The equity or capital (assets less liabilities) of RITA has at 31 July 2019 dropped to a disturbing $24.8 million. In 2016 the comparable figure was $74 million. Go back to 2011 and the equity was $81 million.
- Where have the funds gone ? The accounts disclose that some $105 million was spent on computer software. Presumably, most of this is on the fixed odds betting platform. This author’s calculation differs from that set out in the notes to the financial statements. Of the total cost, $65 million has been amortised to date leaving a book value at 31 July 2019 of $40 million.
- In addition to expenditure on betting software RITA was propping up the codes/clubs by payments exceeding the available profit. In 2019 the payments to the codes and sports bodies exceeded the net profit by $28 million and in 2018 by $16 million.
- The question that must now be asked is simply “is a second-hand betting software worth the $40 million?” Note 19 to the financial statements states that the software has an estimated useful life of 3-7 years and the amortisation is charged annually on a straight-line basis. Note 19 also states that “Intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.” Given the current liquidity issues and the COVID 19 outbreak would the auditors insist on an increased amortisation sum? If the amortisation was for some reason to be “speeded up” the equity of RITA would be getting close to zero, or worse.
- On a straight assets less debts calculation, the TAB, or RITA, is worth nothing, However, the real asset is the monopoly right to conduct betting in New Zealand. This comes in two forms. Firstly, the sole or exclusive right for this country. Secondly, the ability to conduct betting over a number of years. In Australia this latter sum is huge, but most of the funds paid have gone to Government for payment of a gaming licensing fee for 20 or 30 years. The value of this intangible asset can be realised only by an outsourcing arrangement or an outright sale of the TAB to another operator.
- The notes to the 2019 RITA financial statements say only that the broadcasting licences are carried at cost less accumulated amortisation and impairment losses. There is no mention of the term of the licences but the original costs amounted to $2.9 million. The current book value, cost less depreciation or amortisation, is just over $1 million.
- The RITA has an unsecured revolving credit facility totalling $45 million. $10 million was drawn in the 2018 year and $25 million in 2019, leaving $10 million undrawn. Rumour in the industry has it that this has been drawn down subsequent to balance date.
- Disturbingly, the 2019 Statement of Financial Position discloses Current Assets of $49 million but Current Liabilities amount to $71 million.
- Quick Assets ratio. This is the ratio of liquid current assets ($18.1 million) to all current liabilities ($47.8 million). As at balance date 31 July 2019 the ratio is .38. This is very poor. The betting account deposit and vouchers, ($23.4 million) balanced by the trust term deposit of $25 million have been removed from this calculation.
- The RITA update of 2 April 2020, following the COVID 19 shutdown, makes distressing reading. RITA advise that the product available for betting is down about 75%. The telling comment is on page 2 – “…when we can’t sell any bets we can’t make any money and in fact with the fixed costs of the business (rent, insurance etc) continuing we are losing money.“ Not making a profit means no funds for the clubs.
- RITA obviously have grave financial issues. If betting cannot be restored to reasonable levels in the next couple of months RITA must surely be close to insolvency. One definition of insolvency is “unable to pay debts as they fall due in the normal course of business” and another, “having liabilities in excess of a reasonable market value of assets held”.
Watched RITA presentation at Select Committee hearing. Very disappointed & not adhering to the majority of submitters at all. Not happy. John Aubrey is a very able person to look at our dire position. Who is taking note? Surely Winton needs to really look at RITA and what they have achieved for their outrageous salaries.
I am an executive bookeeper (retired) but can understand the implications of the position we find ourselves in. So bad, am considering not breeding this season.
I must be a rocket scientist,the NZ racing industry has been on a slippery slide for how long ?
And ALL YOU STAKEHOLDERS HAVE JUST REALIZED, and yet you have continued in your support at appalling stakes levels
I DONT race horses here.
wake up , its over.
There are 116 days to august 1st racing resumption,
so we are told, (IT WONT BE HAPPENING )
trainers fee say $80 a day x 116 day =$9,280.
Be prepared for stakes of less than $7,500. (rocket science )
I want it to crash. NO, I want RITA to come clean and tell me ITS OVER.
Covid is not the nail in the coffin, its the REALIZATION that RITA are
taking your run,your industry, your livelihood.
Rita employees and industry stakeholders will soon be on a level playing field,
We will all BROKE or UNEMPLOYED.
I think the world have had enough of top heavy administration and over paid sports people .
Isn,t freedom of speech wonderful.
Yet I feel so alone, got to go , off to THE CUP , need to make plans.
Steve Herlihy
I agree – as an owner who went from having a fit horse paid up and qualified for group 1 & group 2 races to now sitting in the paddock getting fat the tough call has to be made .
Time to accept defeat and the TAB should be sold for a $1 to Aussie TAB subject to them paying stakes guaranteed at levels no less than programmed 2019/2020 season for 10 years . They take the profit but run the show including TV – they effectively do the programming now – judiciary , NZ codes become like NSW – Victoria etc under an Australia/NZ head body for each code and pay the stakes with our clubs continuing .
It’s that or racing will collapse and all our horses will be sold to Aussie etc .
NZ remain a nursery with own stud book administered by the NZ body for each code .
Radical but do we ( RITA ) want an Air New Zealand loan deal at 9% + interest as that will send us back to where we are in 3 years to finally try to do a deal with someone at worse than fire sale price .
The govt could ban pokies – that would help .
I am a NZ swabbing officer with the integrity unit. I have done the dangerous, on hand work for 20 years I have asked for a pay rise for the last 3 years but told there is no allocation to cover swabbing officers and are now being paid below the minimum wage. However, I know stipendiary officials have had at least 3 pay rises and get a nice long sleeved waterproof ‘integrity’ embroidered jacket each year. I can’t even get safety gear supplied (until I emailed osh, a lawyer and Mike godber (NZ racing bigwig) or a proper long sleeved jacket. Stipes get paid excessively in my view. The racing minister needs to do an audit on what is being spent within the stipes and their expense accounts.
Helen Broome
Singapore Turf Club are paying owners $1500 per month,(2 mths so far) per horse while racing is suspended and waiving trainers rental for stables
Yes RITA and NZ Racing is in one hell of storm and the Minister of Racing had no better opportunity during the COVD-19 lockdown to take control and appoint an ‘Commissioner’ until such time as the new Racing Bill is enacted.
The Minister us well aware of the current state of affairs and must be disappointed that the intent of RITA has fell well short of his expectations and his letter of intent that spelled out what he required of them.
RITA intergrity and so called transparency has been a joke to say the least and communication is not a strong point let alone not having any form of business risk management plan to fall back on.
The Minister no doubt has his hands tied behind his back by Mrs Ed who’s support for racing, gambling and alcohol is not strong at this time. Gov’t will have to bail the industry out in some form soon but there will be caveats or conditions put in place.
I, like all, await an announcement on Monday to move to Level 3 effective most likely from either 28 April or 4 May; if earlier then good which will in turn allow the industry to prepare for some form of racing late June or early July.
If the worse comes, then our Codes need to take the bull by the horns and insist Gov’t that the CODES take over the reins of the TAB and appoint recognised person CEO (no Board) who will restructure and weed out unnecessary waste and process. If this means staff being released then so be it.
I have always maintained, NZ in population is to small to operate a wagering operation to fully support and fund its industry. Partnering or out sourcing its betting side to a established world wide operator such as BET365 as an example is the only option. These operators already have the established platform and infrastructure in place to meet our Countries gambling needs. Why do we want to invest in betting infrastructure which value is worth stuff all after 3 years and needs replacing or updating on a continuance basis. Let some other Wagering business manage that for a fee. Has no heard of ‘Service Level Agreements’
Think I have said enough and keep up the cause Brian! Please be aware these comments are my personnel comments as a dedicated OWNER within the Racing Industry. Keep Safe All
Hi Bernie,
welcome to the forum, and for your comments.
I understand that you are the NZ Racehorse Owners Chairman.
Would you accept an invitation to meet with your fellow Stakeholders
here in Taranaki to discuss all relevent dictatorial / directional to our once
proud thoroughbred participants ?, and ofcoarse at your convenience.
I will cover your travel and accommodation costs.
kind regards, and keep safe.
Steve Herlihy
Who’s Mrs Ed that you refer to?
Your better than name calling
Good stuff spoilt by silly name
Thank you Brian for your continuing efforts to bring the truth and reality to the surface.
As you are aware I told the Select Committee at the public hearing on 19/20 February that in my opinion RITA was “insolvent”. Well if by any strange chance it wasn’t then it surely is now and in my view has been for some time.
Thank you for seeking John Aubrey’s input to this edition. If industry participants are not aware John is a highly regarded and respected authority on “Racing Legislation/Taxation and business structures. I believe his knowledge has been sought by the Industry and successive Governments over many many years.
His analysis set out in this editorial is spot on.
I do hope the Select Committee recognise and adopt some of his recommendations, our industry will be all the better for it.
My mind takes me to such places as “Mainzeal ” Fletchers” “Fonterra” “NZ Rugby etc etc
where the common thread has been heads in the clouds, business as usual {BAU} sounds familiar- where trading and diversification took them away from their basic knitting and the source of their product was abandoned. Salary structures became the “game” and GOVERNANCE was also abandoned-big time.
Now when financial weaknesses are exposed either an enterprise disappears or a new set of goals, policies and objectives have to come into play.
They [RITA i.e.] may well blame Covid-19 but that won’t wash-the financial weakness had been clear much earlier on. See John Aubrey’s Note 12.
So my final word is NZRB and it’s successor RITA had and have both run their race-both failed miserably leaving a trail of debt-destruction and utter confusion.
RITA must be removed before further irreparable damage is inflicted on our industry.
Stan Alexander
What a great time to start with a blank page, restructuring will be the norm all around hence all industry participants should cut their cloth accordingly if this industry is to remain in place otherwise it will fade into oblivion. Government leaders have set the standard with a reduced pay packet, followed by major insurance companies offering a return to their members. Also demands are being made via major trading houses for their staff to take a reduced wage. Plus sports have negotiated lighter payments to those in the professional codes. It is time for adjustment in the racing industry otherwise we will be racing for ribbons !!
Cheers Robt
Steve, you’re not alone it’s just so disappointing that the tab, racing board, and lately rita have continued feeding the same bullshit to the stake holders. And it has been going on for the last five years or so. It’s so frustrating that it feels like there’s only a few in our industry that care. Our code boards see to be powerless to do anything where they should be smashing their fist through the table demanding some explanations.
I thought with rita taking over we, the codes, were going to get back in control of the industry, but all we are going to get back is the titanic and it has already hit the iceberg, but we were sinking way before covid came around. Will we get a government bailout who would know. And I get the feeling, if the TAB didn’t try and keep up with the big corporate betting agency’s around the world by trying to offer thousands of different betting options and needing a new platform to achieve this at a horrendous cost to the industry when they weren’t in a financial position to do it, we would be way better off.
Hi Murray ,
Thank you for your comments.
I would like to have a ph conversation with you to discuss our common ground
and direction forward.
kind regards,
Steve.
PS or any of the others on Brians forum
Thanks for providing this forum Brian, and also thanks to John for the analysis. Someone should make an OIA request for the half-yearly accounts.
I am disappointed that Dean McKenzie has not felt it necessary to be absolutely transparent about the position of the industry. I think he fells he just needs to satisfy him employer, the Minister (now completely MIA – Messara must be very cross!). It should be obvious to him that those with a real concern, and a sunk stake – that will never repay itself, are watching and paying attention.
RITA and the TAB should be down to an absolute skeleton staff, and those they can’t dismiss should have their salaries halved, at least – pending a major restructure. We should also be fast-tracking discussions with TAB Corp, but ensure we are not selling critical assets/rights. As John points out, these rights cover future revenues that are essential to our survival.
But as a small-scale breeder (who has just retired two mares) and owner (with an own-bred horse held-up by the shutdown), I think this crisis point is a very good time to remember that you can have a betting site, a venue and a stake, but if you don’t have owner-breeders prepared to pay to train and develop horses that can be sent to the races they are of absolutely no use.
RITA, the TAB (in particular) and even the codes have taken owners for absolute granted for far too long. It’s got to the point it feels like battered-wife syndrome – we keep going back for more punishment, poor stakes, little acknowledgement at venues, no recognition of the value we bring to the game.
I am intrigued to see that a Canadian racing jurisdiction has pooled stakes that can’t be contested and set up a fund to support owners to keep their horses in work. Unfortunately as we allowed Glenda Hughes and John Allan et al. to burn through the industry’s rainy day fund built up over decades in a matter of a few years, we’re unable to do something similar here.
So RITA, the clubs and codes are talking about a resumption – with no consultation with the owners (and I’m not talking about the completely under-powered and resourced owners associations). They just expect the battered wives of racing to get back in the kitchen.
No longer. I am calling on other owners to think about withholding their “product” until such time as there has been adequate consultation and some consideration given to recompensing us for getting our horses back into work and to race fitness – at our own cost.
Here’s an idea: create a fund from uncontested stakes and a proportion of the salaries of those earning over $100,000 at RITA.
Why should owners continue to be the ones expected to provide the industry’s life-blood?
I am happy to be part of a committee formed among owners to make this case to the Govt.
sincerely
Alan Groves
Very good comments above …a lot of relevant points.
But let me say this about Dean McKenzie. I know Dean personally and he has not only raced horses for the last 25 years and knows a lot about the game (unlike his predecessors) he also has a VERY good business brain.
The problem nobody has mentioned is this …..he was the last passenger invited onto the Titanic! …….and the Titanic had already hit the iceburg…FACT.
So I would say Dean took on an impossible task as the ship was never going to be refloated.
If he had been appointed BEFORE Glenda Hughes and John Allen then maybe he was a chance but the damage has now been done unfortunately….and as an owner and punter I am filthy that they let this carnage happen.
Racing will NEVER return to the halcyon days ….but we could have enjoyed it for a lot longer if it had been handled properly….its a great pity ….but Brian DeLore only speaks facts.
Graham Bruton Petone.
Graham, put simply, he is out of his depth in this situation. Before RITA was born the past two balance sheets of the RIB were confusing the true picture of fiscal wellbeing. As an accountant and worldly person, why would he take on the role of Executive Chairman if he was was so savvy?
Cheers
John
Hi Stakeholders,
My belief is that the Goverment will surface with a bail out.
Can you imagine the on going unemployment bill to the race industry.
But who could give the goverment the assurance of any positivity
going forward (BACKING).
It would need to be someone with wealth beyond measure.
Who currently have a huge interest in the racing industry.
They would also have to have alot to lose .
My BET is on NZ BLOODSTOCK, well they totally run our breeding,
NO RACING , NO BREEDING.
Any backing or assurance is at 9% on the 100 million we would need.
Rocket Science
Hi Graham
Don’t believe anyone is specifically criticising Dean McKenzie, but then again the NZ Racing Industry and Public just want Transparency and Accountability by those in theses roles. Communication is a Boards best friend and what we want is honest and specific statements of fact. The silent approach that is happening is not a good look. In Racing Administration we remember those who ‘failed’ whereas in racing itself we remember the ‘champions’!
The Racing Industry applauded the appointment of MAC and later RITA, but they as team of people have not followed the Ministers intent and terms of reference which were again documented in a letter in November to the Chair. Regardless of this RITA has incurred further debt instead of pulling in the reins when they were first appointed. In a commercial world that is called ‘trading while insolvent’. Why would they change Banks? I will leave it at that, as I don’t have the background or information.
I agree that MAC/RITA entered in a time when the ship was well and truely at the bottom of the ocean, but I know that when you do enter a situation that they entered into you ‘HOLT’ and only continue what is necessary to meet clients and basis needs. Don’t believe this happened.
I don’t blame RITA but let’s be honest and tell it how it is!
I think a lot more corona’s will be drunk before we get to the end of this long and wounding road to recovery.
Best Regards
Bernie
Can’t argue with any of that Bernie ….I just thought that Dean took on an impossible task.
Now that punters are jumping ship in droves it can only get worse before it gets better.
The Aussie corps are handing out matched deposits up to $500 (and thats not just for new clients)……..up to 10 bonus bets daily…….. 6 price boosts on any runner you choose….. and refunds on placed horses up to $200 per race ………not THAT is attracting business whilst our TAB sits on its hands instead of offering incentives in these dire times!
Talk about getting on the front foot….NOT….. and as we all know …’No punters …No TAB’ …and thats it in a nutshell.
Graham B. Petone.
Well said Alan. Withhold the product, good idea.
We are certainly in challenging times and with all the information that has been available on The Optimists posts it has I guess softened the shock of our the financial future. Being part of an administration overseeing the day today running of our local clubs we would have been completely in the dark about what the past performance of the TAB slash RITA . We have never received any of this information from the codes which as been disappointing as we all know that the financial mess we’re in has been brewing for a number of years.
I have a soft spot for our committees and volunteers that help make our wonderful industry operate. To keep these people motivated in the future will be a task. It’s a bitter pill to swallow when we’ve been consistently saving the pennies but no one up the ladder has been saving the pounds.At the moment we are hanging our hat on government assistance in way of a loan but the criteria is the worry especially having to show that we were in a financial state prior to lock down .I went to Dean McKenzies road show and he told us we were on target with budget so for Peace of Mind why haven’t we be able to see the 6 monthly financials . When they signed of the SOI for that period according to budget there should be a 90 million profit and surely that’s not too much to ask for.
RITA’s COVID-19 Update make interesting reading especially around there comment “RITA is unable to reliably quantify the full financial impact………….over the coming weeks”. We must have chipmunks running the Finance Department. They should be aware of their position as of 31 Jan 20 (half yearly report) as they were still operating in full capacity. Whats happen since 23 March is a no brainer. If this was a Public Liability Company the shareholders would have well and truely intervened and took control; so why hasn’t Gov’t or the Codes.
Nothing surprises me now in regards their Public Statements.
Yes Steve, you may contact me on 027 273 8111.
Hi Fellow owners of the New Zealand thoroughbred race horse,( THE PRODUCT).
I have just read the RITA proposed guesstimate on race resumption.
NO MENTION of stake money, WHY? because there isn,t any.
So They (RITA) expect me to go to rugby training 6 days a week for the next 3 months and present myself on the field , for their enjoyment, and for their justification of their positions in receiving a weekly pay packet ,when I,m doing the hard physical yards and I,m doing the paying for a sack of carrots on race day.
I got a better idea, and I request the TOTAL support of this forum.
RITA ,let me make this loud and clear, You (RITA ) are to pay me and my follow stakeholders $500.00 a week per horse in full work ,starting from today.
Pre training $350.00 a week per horse.
Agisment $250.00 per week per horse.
On race day ,you will surply transport, pay for the jockey and provide food and beverages as a form of gratication to me and my fellow stakeholders commitment to the CAUSE.
Well ,my horse has lost his job, he needs to eat, if you value HIM , show me you care, COUGH UP , stop the plagued thats killing off your participants.
Forum members , IT IS TIME TO STAND UP AND BE COUNTED.
I expect a phone call from you all .
regards,
Steve Herlihy
027 6233020
I have just read Tony Pikes questionaire to the RITA.
Im amazed how the Boards can continually treat the life blood to there salaries with total and utter contempt by the lack of a responce to Mr Pike.
Who in my opinion comes across as an Honourable man in the fact that he is not happy about being unable to give his clients any real return on their investment, (even if it wins)
This is the first time I,ve heard the trainers representative speak of withholding product.
This Plague has put all of us participants on the same Cruise Liner, same ticket price.
Who is the person responsible for pushes the send button to pay our Board Executives and the codes employees each week.
Do you know that the continuation of your actions constitutes a prolonged resumption to race day.
Where by, you collect a paypacket and we don,t , even though you draw from an insolvent organisation.
My question ,is that lawful ?
Steve isn’t it funny how nobody has owned up for their mistakes. Racing board disbanded no questions asked John Allen gone glenda Hughes gone to the dogs. Why are these people not made accountable. At least own up and say we got this this and this wrong. And there is still a few people still working at the tab who helped implement the direction they had taken. Rita are supposed to hand the power of the tab back to the codes, but are the codes up to it?i fear in the end the owners will be left carrying the can.there should be a government inquiry before any hand out is given to rita if any and I’m pretty sure there is a lot of big companies in the que before us. I say again come on John, Gary, and the old racing board tell us where things went wrong and don’t covid. At the moment your silence is deafening.
the RITA needs a restructure(all RITA employees 2 resubmit cv and have a review of if your job isn’t essential to keep the industry going 2 then time 2 go and get down 2 a Skelton crew, other companies who care about the future all took pay cuts even politicians did, 2 get through this crisis but the sad news is that racing has and will b in crisis for awhile now but now is the time 2 actually do something about it, I started working in the thoroughbred industry in 1985 I have seen the ups and down but atm all that’s is happening is the downs