The good news and the bad news

The September 1950s publication that says the TAB was the concept of The New Zealand Racing Conference and the New Zealand Harness Conference and was underwritten by the race clubs of New Zealand.

The good news: the codes own the TAB!
The bad news: the TAB is broke!

by Brian de Lore
Published 20th March 2020

Today’s stuff.co.nz article blaming the coronavirus for RITA having to go to the Government, cap in hand, for a cash hand-out to save the TAB is yet another blatant example of attempting to pull the wool over the eyes of racing’s long-suffering stakeholders.

RITA is today saying it needs a Government bail-out to alleviate a projected $14 million loss through sporting event cancellations and a $3.8 million error they made from offering bonus bets, but the truth of the matter is that the TAB was broke before coronavirus cancelled most sports.

It brings to mind that famous quote from American politician Rahm Emanuel: “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”

Coronavirus has thrown RITA a life-line excuse – or they think it has. It will also become a matter of fact the yet to be released half-year result (ending January 2020) will show RITA was about $4 million behind budget and regardless of the Covid-19 explosion worldwide was heading for another disastrous end of year result.

In the SOI (Statement Of Intent) RITA said: “Net profit before distributions for the 2019/20 financial year is budgeted at $165.8 million, an increase of $29.1 million (+21.3%) on the net profit before distributions for 2018/19 of $136.7 million. It is underpinned by a combination of revenue growth including full-year benefits from the new Fixed Odds Betting platform, recovery in elite betting activity, growth in gaming and other key revenue initiatives, and a reduction in operating expenses.”

The $165.8 million is a pipedream and is now likely to be closer to $130 million

That appeared on the RITA website on 12/11/19. The $165.8 million is a pipedream and is now likely to be closer to $130 million; a budget-miss result of something like $35 million – it’s inevitable the TAB will soon announce stakes money decreases because it’s hard to see the Government fronting with any cash.

The reason it gets worse between now and year’s end is because the RITA budget took into account increased profits from two new sport betting options introduced from February, which included something called ‘hockey stick.’  But it hasn’t happened and now with sport cancelled the budget falls into the ‘miss by a mile’ category.

The other thing about this story is that it reeks of stage-management by RITA. How else could this story have gone to Stuff had it not been sent in a press release to the media website or a Stuff staff reporter had not received an invitation to attend?

Stephen Henry: Coronavirus is threatening to bring down the TAB, which has asked for a cash injection from the Government so it can keep operating.

In the story, it said: “Coronavirus is threatening to bring down the TAB, which has asked for a cash injection from the Government so it can keep operating.

“It’s serious enough that we have briefed Government today on what it means for us and how they can help, and that includes injecting cash into the business so we can continue to operate.

“Henry told stunned workers that everything was being done to minimise its operating costs, including:

* Using fewer cameras at race meetings, doing away with Trackside presenters on course, sending fewer production staff, and not operating betting totes.
* Cutting a wide range of expenses like travel and overtime – “we should have cut the sausage rolls today.”

Chief Operating Officer Stephen Henry quoted above has been part of the leadership team for a considerable period and coincidentally was with the Ministry of Foreign Affairs with John Allen before arriving at NZRB – not long after John Allen made the shift.

Everyone in racing should be offended by the Henry joke about saving the sausage rolls

Everyone in racing should be offended by the Henry joke about saving the sausage rolls when he has been part of the NZRB gravy-train that over two-and-a-half years ago was earmarked for ‘urgent review of the operating costs.’

Needless to say, that review never happened, and Henry remains one of six in the RITA leadership team on a $300,000/year or above salary, and the costs of RITA according to the last annual report was $211 million. Also, Henry mentioned saving travel expenses – that shouldn’t be too difficult given the same annual report says they have been spending $54,000 a week on travel and accommodation.

A decent CEO could have gone into NZRB/RITA at any stage in recent history and slashed the costs, but no one in power has displayed either the know-how or the appetite to do it, or both. John Allen was politically appointed, and his tenure cost the industry $200 million when you consider the cost of building the FOB was $50 million and the on-going commitments to pay Paddy Power and Open Bet for five and 10-year terms.

Henry’s cost-cutting is too little, too late, and his plea to the Government for a hand-out is certain to get some eyes rolling at the Beehive

Henry’s cost-cutting is too little, too late, and his plea to the Government for a hand-out is certain to get some eyes rolling at the Beehive. If three years ago, we’d had a CEO saving just 10 percent per annum of costs – a very achievable target – today we would be $64 million better off.

Just 10 percent per annum for three years and racing would not owe the ANZ Bank $35 plus million and wouldn’t be asking the Government to bail-out an institution that is now flat broke. But the thing that racing can say to the Government is that “you have been making all the appointments and this gravy-train is full of ex-Foreign Affairs and Post Office employees – so it’s mostly your fault.’  

Since NZRB finished and RITA arrived, the fortunes of racing have continued to decline. Racing was let-down by the failure of RITA to put a big broom through the management and start with Messara’s blank sheet of paper. Nothing changed of any consequence which brought to mind Einstein’s definition of insanity – ‘doing the same thing over and over again and expecting different results.’

That definition is now a cliché in racing. Dean McKenzie replaced John Allen in January, but on appearances, he looks to have become part of their team rather than making any waves with the introduction of an alternative style of leadership to turn the tide. RITA’s submission to the Select Committee was a massive disappointment to the industry, and McKenzie’s decision to leave the building immediately afterwards and not listen to the three-code submission was rightly viewed with some derision.

Information received today tells a different story to the $3.8 million error on bonus bets that Hendry is claiming. And that is, it wasn’t an error but involves some creative accounting that requires an independent investigation. The word of description was ‘smokescreen.’

The original intention this morning wasn’t to write any of the material you have read above. The focus was intended to be a document entitled ‘NZ Racing and Trotting Conferences Off-Course Betting Scheme,’ which came into my possession about three weeks ago. It’s possibly the most important paper for New Zealand racing’s future if indeed it can survive the immediate issues of coronavirus, insolvency, and the prospect of racing closing for a period.

The document sets out the formation of the TAB – it’s dated 20th September 1950. It clearly states that the New Zealand Racing Conference and the New Zealand Trotting Conference came together to start the TAB and that the start-up costs were underwritten by the racing clubs of New Zealand.

Racing has said this anecdotally for years, but to see it in writing is a big deal – it’s proof the codes and the clubs own the TAB and that the tail has been wagging the dog for years, and that now needs to change. The document is 70-years-old, but unless a subsequent paper exists which cedes the ownership to the Government (and none exists), racing is the rightful owner.

The beautiful thing is it makes the proposed legislation of the Racing Reform Bill redundant. The Bill at its first reading can be summarised as a paper that took away all of racing’s rights and decision making, stole the IP, provided the Minister with the eternal right of interference and control, and opened the door for sports to come in and be a partner in the business at no cost to them. It did nothing to improve racing.

Ownership of the TAB means that racing can, with pride and a significant degree of scorn towards the pretenders, hold up its middle finger to all that nonsense and say, ‘we’ll have back what’s ours, thank you very much.’

The Transport and Infrastructure Select Committee had a meeting yesterday with the PCO (Parliamentary Counsel Office) to initiate the Bills rewriting, which is expected to incorporate something like 120 changes and became a document far more acceptable to the needs of racing.

The second reading of the Racing Reform Bill could now be by mid to late April – that’s if Covid-19 hasn’t closed down parliament by that time?

To read the entire Stuff article entitled Coronavirus: TAB in crisis over sports cancellations, click here: https://www.stuff.co.nz/national/health/coronavirus/120423822/coronavirus-tab-in-crisis-over-sports-cancellations?cid=facebook.post&fbclid=IwAR06SbVv7X_g6OVHDJyJC5X-FRzjhdzsia-J26iG5uOjWgcXfiR42_s2xNg