RITA is finally doing what NZRB should have started many years ago

[Hesi]

Well costs are coming down finally, but any business has to have growth as measured above by revenue, if it does not have growth, then costs will slowly climb again, so no growth, then the return to the codes must be less to balance the budget, something that is unpalatable and cause many to leave 

Conclusion, has to be increase in revenue, like major initiatives, or might as well flag it

[Maximus]

Short term (6-18 months)

Maintain or increase stakes paid to owners

Use fewer racecourses, minimise travel distances. Encourage trainers to be concentrated in key 'racing districts; eg Waikato, Canterbury, CD, Southland.

Invest in appropriate infrastructure/facilities/services accordingly.

Get racing back on free-to-air TV.

Outsource TAB

 

Edited May 7, 2020 by Maximus

[Hesi]

Latest Brian de Lore piece

Please note the pre-Budget announcement by Peters next week

RITA forced into action but have waited too long

by Brian de Lore
Published 8^th May 2020

Better late than never, but Wednesday’s announcement by RITA that it’s finally decided to reduce costs is a classic case of ‘too little, too late.’

It may be a short-term respite for RITA’s chronic cash-flow condition, but it neither addresses the long-term competitiveness of the racing industry in any shape or form and nor will it off-set the expected substantial decline in code distributions, hence the pending prizemoney decline for 2020-21.

That predicament is notwithstanding RITA’s application to Treasury for a COVID-19 bailout for a figure purported to be $80 million. Should it be approved with Minister Peters giving it his solid support, the bank debt of $45 million and current liabilities might be covered, but it would leave little for anything else.

The brief COVID-19 Update which appeared on the RITA website on Wednesday, states: “The proposal includes a reduction of approximately 30 percent of roles across all areas of the organisation and is in addition to other cost-saving measures aimed at reducing total expenditure.”

NZ Rugby has announced job losses for its full-time staff of 180 at 50 percent, with the remaining 50 percent having to reapply for their roles.

According to New Zealand employment law, the proposed cuts will have to be presented to staff for consideration, then be up for discussion with feedback taken before the final decision in late May. NZ Rugby has announced job losses for its full-time staff of 180 at 50 percent, with the remaining 50 percent having to reapply for their roles.

NZ Rugby lost more than $7 million last year but is estimating a fall in revenue this year of around $100 million. By comparison, NZRB/RITA lost $28.5 million last financial year, and increased bank debt, but did nothing about its ridiculously top-heavy employee level. It has carried them through to May 2020 where they have reached the point of no choice.

When NZRB became RITA on July 1^st last year, a great opportunity existed for the widest Bunnings broom to go through and clear out the blatantly obvious deadwood and instill some confidence in the stakeholders of racing. A great opportunity missed, and ever since, the rise in debt is paralleled only by the decline in industry morale.

Wednesday’s Update from RITA clearly blames COVID-19. Executive Chair Dean McKenzie is quoted as saying, “The TAB has taken a major hit from COVID-19 with revenue last month 47 percent below forecast and customer numbers down more than 35 percent.

“Despite far reaching efforts to reduce costs across the TAB, including salary reductions, staff taking leave and reducing all non-essential expenses, it simply was not enough to offset the blow COVID-19 has had, and will have, on our industry.” – Exec Chair Dean McKenzie

“Despite far reaching efforts to reduce costs across the TAB, including salary reductions, staff taking leave and reducing all non-essential expenses, it simply was not enough to offset the blow COVID-19 has had, and will have, on our industry.”

My version is quite different. RITA was insolvent before COVID-19 turned up. It’s a simple matter of tangible assets failing to equal the size of the mounting bank debt. And while revenue might be down 47 percent as claimed by McKenzie, having no New Zealand racing since the day Alert Level 4 commenced has meant having to make no payments to the codes for stakes money.  Then, with the wages subsidy supplementing salaries, the TAB has been accepting bets on Australian racing on a ‘betting information use charge’ – a far less onerous form of conducting business. 

McKenzie goes on to say, “The reality is the TAB will need to be a leaner, more efficient business with fewer roles, and focused on driving our core wagering and gaming business.” Why wasn’t he heard to say that last July?

The Update concludes rather tersely with, “No further comment will be made until a final outcome is confirmed.” It’s a relatively short Update that fails to mention the monetary savings which would accrue from the downsizing which is the most important figure.

…it would be surprising if savings annually on this move exceeded $10 to $12 million or only five percent of the total costs.

Thirty percent of roles sounds significant but given they have 700-odd employees including the RIU which doesn’t include consultants which numbers 70 in this cost-cutting measure, it may not make too much of a dent on the total running costs of 2019 which amounted to $211 million. Drawing information from the Annual Report and last SOI, it would be surprising if savings annually on this move exceeded $10 to $12 million or only five percent of the total costs.

In the Budget of 2019, the Government provided $3.5 million to the racing industry to: “make the best use of the $3.5m Crown contribution to the cost of industry change ensuring that this funding buys change.”

Has the $3.5 million been used for anything yet or saved for this RITA debut of cost-cutting, which seems unlikely given the parlous state of its financial position over the past year. We don’t know – RITA has never mentioned it.

Racing needs a revolution with a business-savvy leader to get rid of the deadwood, address the skill level required, understand IT on a global level, and deliver a balance sheet for New Zealand’s racing future. No sign of it yet!

The Deloitte Report was dismissed out of hand by an NZRB which adopted a contemptible ‘we know better’ attitude towards the codes.

The Deloitte Report is now three years old (May 2017) but is as relevant now as it was then – it was authoritative but was dismissed out of hand by an NZRB which adopted a contemptible ‘we know better’ attitude towards the codes. Deloitte had significant experience in the thoroughbred business and drew upon its Australian expertise to compile the report.

Deloitte said: “The lack of scale means it is unlikely NZRB will be able to achieve a sustainable competitive advantage against international wagering competitors. Based on our experience of the benefits achieved with industry consolidation in other settings and our analysis of the NZRB current cost structure, we are of the view material cost synergies would be achievable if a more substantive outsourcing or similar initiative were to be pursued with an appropriate party. Our initial assessment is that gross annual benefits could be in the vicinity of $63 million.

Since NZRB ignored that advice, the racing industry in New Zealand is something like $250 million worse off when you take into account the lost opportunity and a commitment towards a $50 million FOB platform plus ongoing deals with Openbet (10 years) and Paddy Power-Betfair (5 years). That may have been about the time they made the movie, Dumb and Dumber.

The RITA SOI (Statement of Intent ) released last November stated: “We are optimistic this result (previous year) will be a one-off and we will deliver on our forecasted net profit in 2019/20 of $165.8 million.” That budget currently looks like missing by $55 million or so with a bottom-line result of between $100 million and $110 million. They can blame COVID all they like but the industry isn’t that dumb, or dumber, to swallow that one.

We only have to go back and compare New Zealand with Western Australia to realise what a pig in the trough scenario we have endured.

The 2019 Annual Report says NZRB/RITA spent $22,500 per week on consultants. Travel and Accommodation amortised out at $54,000 per week. Other expenses were totalled up at $14.25 million or $273,396 per week. In the notes to discover what they were, the list is shown but the final item reads as ‘Other Operating Expenses, ’ which is $2,047,000 or $39,400 per week.

To have ‘Other Expenses’ and then a sub-title under that listing another ‘Other Operating Expenses’ which amounts to $39,400 per week with no notes as to how the money was spent, is symptomatic of the lack of proper accounting, transparency and accountability to which the participants of New Zealand racing have been subjected to for many years.

Finally, have a look at what happens in Western Australia to which I have made comparisons on numerous previous occasions. RWWA (Racing and Wagering Western Australia) has one organisation running wagering and racing whereas New Zealand has five. Under RWWA’s board they have five committees. By their own admission they believe it’s far from perfect, but compared to NZ, WA is efficient.

	NZ Racing (2019)	Racing Western Australia (RWWA) (2019)
Net Betting Margin	$285m	$305m
Salary & Wages	$63m	$40m
Employees	~700	370
Senior Managers (Note 1)	23	7
Margin/employee (Note 2)	$400k	$800k

Notes
1. NZTR, NZ Harness, NZ Greyhounds and the RIU do not disclose salary information for senior managers. For the purposed of comparison with RWWA have assumed two managers each paid $200k
2. Key racing industry efficiency and competitiveness measure

	New Zealand	Western Australia
Population	4.886m	2.589m
No. race meetings	311	283
No. races	2,582	2,140
No. starters	4,744	3,197
$Loss for $2018-19	($28.5m)	($3.12m)

NZ has a much larger population, but otherwise, the racing statistics are closer to us than any other state in Australia. The big difference is they are leaner, have a better model, and perform better.

Footnote:

The Optimist has learned that a pre-budget announcement will be made next week by our Minister of Racing, the Rt Honourable Winston Peters. I am told it is big and a game-changer for the industry. Could it be about the bail-out application? Might it be fake news? On the previous form on big announcements, in a head to head it’s $2.60 on the loan approval and $1.40 on the fake news. All bets accepted as soon as my betting license arrives.

FacebookTwitterEmailShare

5 thoughts on “RITA forced into action but have waited too long”

1. Brian de Loresays:
   May 8, 2020 at 10:25 pm

   Mr Gil Dymock posted this comment close to publishing today’s blog. I have therefore reposted it as the content is generic. The Optimist.

   First, a point of order, Mr Chairman.
   Winston Peters is not the Minister of Racing, he is the Minister for Racing. And anyone who thinks the distinction doesn’t matter needs to bone up on their political science studies.
   Following on from that, if the sport had been administered in anything like a businesslike manner over the past century, it would have no need, none at all, for a Minister, either of Racing or for Racing.
   The idea that racing’s problems have all arisen recently is a nonsense; they’ve been building since not long after British soldiers raced their mounts along the Petone foreshore before heading off to face Te Rauparaha or whoever else was bothering their masters.
   I could list a dozen things that need fixing but let’s just concentrate on one — the number of race courses in New Zealand.
   Here’s a way to boil it down: New Zealand (population 4.8mil) has 52 racetracks for thoroughbreds; New York state (population 19.4mil) has four.
   OK, NZ is a different shape to NY and at 268,000 sq km covers an area twice as large as NY’s 140,000 sq km.
   But, fair dinkum? Fifty-two racetracks for 4.8 million people? It’s insane.
   Northland (pop 180,000) has two. One is OK, the other a joke. Yet when there was a move to shut Dargaville down ten or so years ago, Graeme Rogerson led the charge to keep the joint open. And every subsequent attempt has been met by a cavalcade of bleeding hearts, appealing to community this, community that, and community every other thing.
   If an industry leader like Rogerson can’t see what the problem is, in fact advocates for the stupid side, then is it any wonder that the game is stuffed. Of course, when someone of the status of Rogerson attends Dargaville races, they’re not expected to slum it with the peasants so maybe their perception of the place is somewhat slanted.
   I’ve resided for the past 25 years in the Kaipara District, for which Dargaville is the administrative centre. I’ve been to the races there once and won’t be going back. Why? Because on my only visit I copped an arseful of splinters from a weatherbeaten seat and when I sought a beer I was directed to the tractor shed, where I was handed a can, warm. At least they’d taken the tractor out, so that’s something they got right.
   Up until the 1950s, it was easier for racing to be taken to the people. But since the 1960s, at the latest, and more so in these times of modern motor vehicles and reasonably good roads, it is just as easy for the people to get to the races. The need for every town, village and hamlet to have its own race course disappeared so long ago that the only people who remember the case are sitting in rest homes wondering whether Covid-19 or the Queen’s telegram will arrive first — if they can wonder at all.
   Skewing all this was the move in the 1990s to televise racing and, in one of racing’s most egregious decisions, to make it free to view. In one fell swoop, the on-course crowds were removed; ten years later, the internet killed the TAB’s retail arm.
   So now, with pretty much every punter sitting at home with his own private betting terminal, what is the point of having fifty-plus venues?
   New Zealand could probably get away with four but, let’s be generous, and have say eight in the North Island and six in the South.
   If racing’s movers and shakers can get their heads around that set-up they would be making the first move toward running the sport for the good of all participants.

   Reply
2. steve Herlihysays:
   May 9, 2020 at 12:36 am

   Do any of our RITA board have an association with any of the follow people,
   Kim Jong un,
   Hillary Clinton,
   Bill Gates,
   Vladimar Putin,
   If not, then I believe RITA have deliberately run our Industry to the wall.

   Brian, thanks for your reseach, stats, and proof to the above statement.
   But can you tell me why , and why are the Stakeholders putting up with
   the ARROGANT DICTATORSHIP mirrored by the above meantioned people in their personal differant ways ,with a similar result that RITA force upon us?

   Brian, you have brought to our attention the EXTRAVAGANCE of RITA.
   It amazes me how the RITA Board who would have family and friends within
   our industry, and would treat them with a type of hatred, (opposite to friend)

   Had King Winston ruled at the begining of Racing in the 17th century, and had instructed His Board to make the changes and two years later, no improvment .

   Well they didn,t sack people in those days.
   Let me put it this way , the King would have created a completly new board.

   I try to imagine what my fellow Stakeholders are thinking ,I wonder if I could have access to their cheque books, and wonder if they would allow me the same spare no expense privileges as RITA, in return for JACK.

   As I have asked you , will you continue to sit on your hands ?

   So now you see a need to sweep the floor.
   How?
   The best and most direct way , either Strike or start a new Entity.

   How would I start this new Entity, with just one race course, my admin team, including race day would be …..
   there would not be too many on salary.

   My last comment is this ,
   Are people in our industry afraid to speak out ? The reality is my comments
   will soon be like an old news paper , my yesterday was a great day of
   no real value now,
   but tommorrow belongs to those of us that can count.

   Reply
3. McKenzie Waynesays:
   May 9, 2020 at 8:06 am

   Thanks Brian .With insight and previous history the Minister must NOT bailout the TAB . Hopefully Price Waterhouse call the receivers. The Minister then can fund a new betting platform . Clubs retain IP and everything starts to fall into place . Let Racing Administrators run the show . Thanks

   Reply
4. Graham Brutonsays:
   May 9, 2020 at 9:57 am

   Gil …..please stop being ‘the voice of reason’ haha …loved your post.

   The sad fact is that the NZ TAB should have been the most profitable business ever launched in this country …FACT….and not 60 mill in the hole.
   It was like being handed Phar Lap ….the Pavlova …the All Blacks ….Split Enz ….Dave Dobbin …..and anything else that was a roaring success in NZ and flushing it down the dunny! ….the mind boggles.
   Graham B.

   Reply
   1. Brian de Loresays:
      May 9, 2020 at 4:51 pm

      You are so right, Graham!

      Our TAB is a body corporate. We are now getting the 2% betting levy back which will be $13 million annually in year three. All the profits come back to the codes theoretically and they would be substantial if we administered racing leanly and efficiently. The Australian corporates have to pay dividends to shareholders after paying a tax we are not required to pay. We should be creaming it – it’s the perfect model. But instead, the top heavy, big salaried administrators who are not racing people are creaming it. It’s nothing short of theft – and Winston is condoning it by doing nothing!