And so let the blood letting begin

[mardigras]

2 minutes ago, curious said:

It's essentially unsustainable now. TAB revenue is down 50%. OK. They've finally started to make some cuts but $11m is a drop in the ocean and a year late. What I'm worried about is they think the revenue will increase once NZ racing and sports are back. That may be to some extent especially if there are latent sports betting punters that would reactivate but I can't see it anything like doubling to previous levels. Not sure that will put them back in the black let alone generate much for racing even if they can survive that long.

Yep for sure. But I am just awaiting the industry to declare that completely.

[VC!]

1 hour ago, mardigras said:

Darwin??

Snap 

Thats exactly where I was thinking for the South Island imports, a lot closer for them to fly home from Darwin

They should get plenty of action at Fannie Bay

[curious]

https://www.scoop.co.nz/stories/PO2005/S00341/racing-industry-in-tatters.htm

[Hesi]

230 TAB staff given their marching orders but leadership team still being reviewed

By Barry Lichter • 26 May 2020

The Racing Industry Transition Agency today confirmed it has shed 230 staff, but none of its top managers has yet been removed.

Staff were yesterday told of their job losses, among them 150 full time workers across all areas of the TAB.

In announcing what he described as a “very difficult decision” RITA executive chair Dean McKenzie said the cuts would save more than $11 million a year.

None of the executive leadership team is included but McKenzie said an independent review of the structure of the team is underway.

Consultation on any proposed changes was expected to start next week.

The top six earners at RITA took home $2.5 million between them last season, and include chief operating officer Stephen Henry, GM Media and International Andy Kydd, GM betting Glen Saville, GM Customer and Channels Gary Woodham and GM Technology Simon Mackay. RITA’s chief financial officer Shaun Brooks was quietly farewelled earlier in the year.

McKenzie said RITA was left with no alternative with TAB monthly revenue almost 50 percent below forecast and customer numbers down more than 35 percent.

“There are incredibly talented, experienced and committed people at the TAB who have delivered so much to our customers and the wider racing industry over many years. We will be very sorry to see them go.

“We have had to make some tough decisions as we focus on the essential parts of our business that generate the funding required to keep the racing industry and many national sporting organisations running.”

McKenzie confirmed all the changes previously reported here including no more Trackside Radio, substituting self service terminals for manual betting facilities on course, reduced Trackside TV coverage, fewer presenters fronting only in the studio with the exception of marquee events, no dedicated racing shows, phone betting only on Touchtone and the closure of four retail branches.

[Hesi]

11 mil saving on 211 mil total costs is just over 5%, and hardly significant

[Hesi]

36 minutes ago, curious said:

https://www.scoop.co.nz/stories/PO2005/S00341/racing-industry-in-tatters.htm

Seems well briefed

LACHIE ASHTON

(Clutha-Southland, Conservative)

Age: 57

Family: Married, father of four children

Main jobs: Farmer, farm manager, head shepherd, fencing contractor, real estate agent, customer services manager, professional horseman and private trainer.

Born: Born Milton hospital, raised on a Waitahuna farm. Lives in Dunedin.

[Hesi]

I thought this post from the bronzed one on the other channel, was very very well put

Wake up Dean and the Board. 
Listen to what the grassroots are saying, including your close friends Andrew and Tony.......get rid of those who created the problem, not the young passionate, enthusiastic young people who will do the job for a quarter of the salary. 

Liz

[mardigras]

8 hours ago, curious said:

https://www.scoop.co.nz/stories/PO2005/S00341/racing-industry-in-tatters.htm

Pretty accurate. I wouldn't call ownership of the TAB 'rightful'. Aside from that, the TAB isn't worth anything anyway, so why would the industry want it?

And whilst it wasn't spelled out in that article, I certainly hope the industry doesn't think that it wants to be a betting operator. How stupid would that be? That would show that they haven't learned a thing.

[Hesi]

I will put this scenario out there

1.  They will not let racing as an industry die, which will happen if stakes are dropped to $5K, it will be like the start of the proverbial death spiral

2.  There will not be anymore bailouts

So that means there has to be another solution, what that is, ??????

[curious]

2 hours ago, Hesi said:

So that means there has to be another solution, what that is, ??????

I give up. Tell us?

[Hesi]

It was a genuine question, given that they won't let racing die and they won't bail it out again

[mardigras]

2 hours ago, Hesi said:

I will put this scenario out there

1.  They will not let racing as an industry die, which will happen if stakes are dropped to $5K, it will be like the start of the proverbial death spiral

2.  There will not be anymore bailouts

So that means there has to be another solution, what that is, ??????

Aren't 1 and 2 incongruous? Point 2 is not in keeping with point 1.

Edited May 27, 2020 by mardigras

[Hesi]

Points 1 and 2 are pretty much statements of fact, and a connection is not inferred

[mardigras]

1 minute ago, Hesi said:

Points 1 and 2 are pretty much statements of fact, and a connection is not inferred

I'm  not sure how you can claim them both to be facts. When you suggested yourself in point 1 that things were heading towards death if stakes were $5k.

So the only way they can both be facts is if stakes are not $5k. Because if they were, and with no bailout, the road to death has begun (according to point 1).

So that is therefore the solution. Keep stakes above $5k.

[Hesi]

Winston Peters: Women’s Christian Temperance Union to run racing in NZ

by Brian de Lore
Published 29 May 2020

Minister of Racing Winston Peters has today announced the departure of RITA henceforth and from June 1st racing will fall under the administrative control of WCTU NZ (Women’s Christian Temperance Union of New Zealand).

The Minister said he was forced to put the WCTU in charge when he came to his senses and realised it would be better, both for his image and for racing, to go bankrupt under the control of an organisation with good Christian values, which they exemplified on the website in their stance against the use of alcohol, tobacco, drugs, white slavery, child labour, and army brothels, than to fail under RITA which he embarrassingly appointed as MAC 18 months ago.

Peters also said that it would be healing for racing folk to follow these Christian beliefs of giving up drinking and smoking rather than go broke under the administrative ineptness of…

Of course, I’m making this up. It’s a spoof. None of the above is true except the bit about going broke – that still seems to be happening; listed on racing’s agenda and perhaps progressing at a faster rate than previously expected. What we have yet to discover is, is RITA going broke the cheap and fast way or will the Minister do what he alluded to in his pre-budget speech, and string it out for a more expensive canter into the sunset?

Either way, it seems the same destination has been dialled in on the GPS and getting there is looking more and more conclusive, the more you examine the finances.

Betting turnover at the TAB is well down – almost fifty percent below forecast according to the May 26^thUpdate

Betting turnover at the TAB is well down – almost fifty percent below forecast according to the May 26^th Update posted on the RITA website. But the loss of betting revenue is off-set by RITA not having to pay stakes money to the codes with harness and dogs only recently restarted and no thoroughbred racing until July.

The result of that could mean a positive cash-flow position for the TAB from April through to season’s end on July 31^st. A hiatus of sorts during which time the TAB has been acting as an agent for Australian racing.

Costs are still incurred in idling mode for the codes and clubs, though, but might be only in the order of $3 million as opposed to an estimated $14 million had 2020 race meetings been numerically on par with 2019.

The $50 million isn’t going to save TAB, so something more has to be coming because the Minister must know the business model is broken and even though this week’s TAB redundancies are saving $11 million, it’s only five percent of RITA’s annual costs. The TAB has gone past the tweaking stage – it’s akin to mouth to mouth resuscitation while complying to the two-metre rule.

…the $50 million hasn’t yet turned up at RITA, so the owed $26 million remains unpaid…

To compound the situation, the $50 million (like a lot of other promised Government bail-outs) hasn’t yet turned up at RITA, so the owed $26 million remains unpaid, and this week was said privately by one observer to have been understated and the true amount was $35 million.

We’ll use the amount quoted by the Minister of $26 million for this exercise. Add $4 million for the redundancies and another $3 million for the codes and clubs sustainability in idle-mode, and that leaves $17 million from the 50 without thinking about repaying any of the ASB bank debt of $47 million.

That’s approximately the insolvent position of the TAB at the end of July. All the economists are saying we are heading into a recession post-COVID-19, so from August 1st, the level of revenue generated by the TAB is the big unknown. The loss of continuity, the loss of service by the TAB through media shutdowns, the loss of 35 percent of the customer base, and fewer races with smaller fields at fewer race meetings will all impact on TAB revenue in a downward spiral.

That unknown factor must make setting a calendar with stakes levels a tough assignment. It’s a given we will see numerical declines everywhere and especially in total stakes money for the season – based on a result of a $100 million bottom line season, the reduction is probably in the order of 40 to 50 percent.

To retrieve market share, customer-facing employees are vital but few remain after this week’s redundancies which impacts 30 percent of roles but saves only five percent of overall costs and leaves the executive team in place for the time being.

The FOB (Fixed Odds Betting) platform is an unqualified disaster and more than anything else is responsible for a decline in turnover and a loss of customers to Australian based corporates.  They have better and more advanced technology, do far better promotions, and from sheer scale alone cannot be outperformed by anything east of the Tasman Sea.

…a one-time big punter who once turned over an average of $250,000 a month on the NZ TAB

For an independent view, I consulted a one-time big punter who once turned over an average of $250,000 a month on the NZ TAB. He said: “I  won’t be going back as it makes no sense whatsoever when there are much better options off-shore.

“The TAB has lost focus on customer support. They have lousy pricing and no price boosts. The corporates offer price boosts and multi boosts on every race day, which is really looking after the customer and makes a whopping difference to the bottom line for punters.

 “The New Zealand TAB go unders on every horse in a race, so punters searching for the best price will never bet with them again. That means they can dump anything they don’t want at a better price in Australia and turn a profit on the wager.

“Also, most off-shore corporates offer up to six ‘money back’ second or third (up to $200) a day, which is a great incentive if you horse places.

“To put it simply mate,” he said, “they saved a bit of money in salaries but sacked all the wrong people and took away on-course presenters so that we can no longer read trainers and drivers body language which was my go-to – and totally ruined any chance of redemption.”

In Australia, the market competitiveness of the corporate bookmakers sees some spend as much as $100 million annually on promotion. How are we supposed to compete in New Zealand trying to ‘lone it’ with no balance sheet and a $50 million FOB that is already breaking down and half obsolete?

The $17 million per annum committed to Paddy Power-Betfair and Openbet wasn’t fully paid up in year one…

The $17 million per annum committed to Paddy Power-Betfair and Openbet wasn’t fully paid up in year one of the FOB because of the lack of funds, which is just one of the many reasons why the whole thing has failed. We have Hughes, Allen and Saville to thank for that as the three protagonists who preferred job security in preference to the industry interests and seriously considering the authoritative Deloitte Report – it was the classic case of experts being reviewed by mugs.

RITA has existed for just on 11 months and unless the Minister extends their tenure, the Agency will wind up by June 30^th. The Minister has to give 28 days notice in advance for an extension of time, so the announcement is required by this coming Tuesday, June 2^nd. The following Monday, June 8^th, is the day the rewriting of the legislation is tabled for the second reading.

The word in the corridors of the Beehive is, the Transport and Infrastructure Select Committee has done a sterling job for the racing industry and has changed most of that contemptuous proposed legislation in the first reading, which was early December. They have not achieved everything asked for, but a rewriting and substantial changes will mostly be in the interests of the submitters, and the participants of New Zealand racing.

At his pre-budget speech, the Minister said, “…an immediate grant was the most effective means to prevent default. PWC also advised close consideration should be given to recapitalising RITA. This work will proceed over the next three months.”

We want the legislation to say the codes and the clubs own the TAB, and the decision-making is devolved to the codes and the IP retained.

The racing industry doesn’t want recapitalisation of RITA because that would mean an extension of tenure. Where would the money come from, anyway? We want the legislation to say the codes and the clubs own the TAB, and the decision-making is devolved to the codes and the IP retained.

The Minister’s speech also said, “ More New Zealanders are turning to the off-shore online gambling through off-shore platforms. It is our intention to regulate the off-shore online gambling sector, and reset the on-shore online gambling sector. If there is going to be gambling by New Zealanders then it is our country that will benefit, not another.”

The Minister should probably know that the merger of Sportsbet and BetEasy was made official in the first week of May. It was a $10 billion merger which means Flutter, which owns Paddy Power, Betfair and Sportsbet, has merged with Stars Group which owns BetEasy.

The group has 13 million customers worldwide. They expect to save millions in costs and taxes. They are pooling all their resources for a better result; they understand that scale wins every time. How will the NZ TAB compete against them, is the question?

[Hesi]

TAB possibly worst run business in New Zealand

by Brian de Lore
Published 5^th June 2020

If you have a successful business you’re looking to run into the ground and send broke, the New Zealand TAB has almost completed writing the perfect blueprint, but don’t call its helpline for the recipe because it’s become famous for providing no help.

In fact, the helpline at the TAB has brought to light numerous recent stories of the phone ringing unanswered or operators arguing with disgruntled punters rather than appeasing them, and even hanging it in their ear.

Punters consulted to write this blog produced one who claimed eight of his previous ten calls to the helpline had gone unanswered.

An overabundance of stories about the poor treatment of customers and a reduction in services can only be a reflection of a leadership team that doesn’t care about the bottom-line result.

Rumblings about a toxic culture within the walls of the TAB from various disgruntled TAB employees…

It’s not a new thing. Rumblings about a toxic culture within the walls of the TAB from various disgruntled TAB employees have been audible most the way through the John Allen reign of terror, and since. Good people are known to have left voluntarily, and others who have expressed disagreement in policy direction have experienced the shove.

And now, the customer interface which is where any successful organisation meets its customers and keeps them happy, has been dismantled to save around five percent of the TAB’s annual cost. The reason offered to The Optimist: Executive Chair Dean McKenzie didn’t tackle the problem of redundancies himself but gave the cost-cutting assignment to his executive team, hence Stephen Henry addressing the staff at redundancy meetings and not McKenzie himself.

Any well-run organisation displaying strong leadership would have started with the executive team and worked its way down – not the other way around. The TAB has lost its way because it has focused on IT development with a strange, misguided and overblown self-belief they had the expertise to develop a FOB that would compete in the global wagering market.

Vanity overcame logic, however, and the customer became the casualty. Strange is it not, that of all the businesses that should require extra careful customer attention, The TAB NZs focus on its VIP and Elite Customers while ignoring all us ‘mug punters’ has surely backfired with the loss of 35 percent of its customer base. Don’t accept that COVID-19 was the cause.

John Allen: …the top 1.5 percent of our customers produce 56 percent of our turnover.

Two and a half years ago, the then CEO John Allen said the most accurate thing he ever said: “We need new customers otherwise we are vulnerable to that very small number of elite customers – the top 1.5 percent of our customers produce 56 percent of our turnover. And they are being sought by every betting agency in the world.”  

Needing them and getting them were two separate destinations, but Allen never accepted that scale was against all his plans, and overseas IT development and massive marketing budgets were obstacles too big to conquer. Between Tabcorp and Australian betting operators, the spend on marketing is currently $300 million per annum.

Allen should have heeded his own advice, which in reality, was the advice of his executive team because he didn’t know the business. But his executive team was made up of several former associates at NZ Post/Kiwibank brought with him from his days of NZ Post and a couple of relatively inexperienced employees from Tom Waterhouse Bookmaking in Sydney.

Punters have never been loyal animals, and the depletion of customers has been across the board. Allen, at that time, also talked about his VIP customers:  “the VIP customers who are very large punters – 20 or 30 of them around the world – they are betting on our products if we are competitive as long as they get all the data they require.”

Sportsbet in Australia offered the same man a free $1,500 bet if he deposited $1,000.

Offering substantial rebates to the biggest punters has proved a false economy, and it raises the question of how many of the VIPs remain? One of the Elite customers was this week offered a free $50 bet on the TAB NZ if he deposited $100 into his account. On the same day, Sportsbet in Australia offered the same man a free $1,500 bet if he deposited $1,000. Who’s winning that battle?

The so-called ‘mug punters’ now have no weekly printed formguide to purchase, no radio trackside interviews and talkback, a FOB platform that offers poor odds on a poorly designed website that continually gets ‘hung,’ the closure of more TAB retail outlets and the promise of no live betting operators on-course but instead ‘betting pods’ or self-service terminals that are cumbersome to use and don’t payout.

It’s hard to fathom why years ago the television exposure of racing to the general public was extinguished when Trackside went from free-to-air to pay-TV with the Sky package. How do you get new racegoers interested if the product isn’t free to view?

Then consider that all telephone betting has ceased, including the exempted special cases, and TAB NZ is the only betting operator that charges a debit/credit card fee of $2.15 regardless of whether you deposit $10 or $100, and you reach the conclusion it must now be really managed by the Women’s Christian Temperance Union which has set out to discourage all betting.

…two earn just under $300,000 while the other six earn over $300,000 and reputedly up to $620,000

But that was last week’s joke. This week we still have to consider that the people making these decisions are basically the same eight executives, of which two earn just under $300,000 while the other six earn over $300,000 and reputedly up to $620,000 (McKenzie).

McKenzie said in his Update on May 26^th, “An independent review of the structure of the Executive Leadership team is underway with consultation on any proposed changes expected to start next week.”

Why an independent review? McKenzie is in the job and should by now have worked out how to run it on a shoestring, which he really should have had worked out a year ago. But if making a decision is the issue, then using a paid consultant is historically typical for this organisation.

One former employee passed the comment that if the entire executive team stayed in bed for a month, it would not be detrimental to the TABs performance. The inference was that if the computer was operational, the business would run itself – and as good a cash business as the TAB could be,  it was only ever big enough to feed a few platoons, not an entire army.

Getting the customers back and revenue up to a sustainable level is problematic. COVID-19 has interrupted racing and changed habits, which may never result in a return to our former ways and, in particular relevance to racing, betting practices. Punters have generally concluded they are getting no service and a lousy deal from TAB NZ, and anecdotally the evidence suggests they are looking off-shore in greater numbers.

The saving grace could be the content of the legislation which will be tabled in parliament early next week

The saving grace could be the content of the legislation which will be tabled in parliament early next week and hopefully get its second reading soon after that. If the rewrite favours the consensus of the almost 1,000 submissions and is passed into law by July 1^st as scheduled, racing gets its chance to see the early exit of RITA and the implementation of some positive changes.

A throng of stars needs to align for that rare possibility of hope to become a reality. But while Minister Peters did renew RITA for a further year in a statement he released on Wednesday, when the same announcement appeared on the RITA website later that same day, the caveat on the renewal of RITA appeared in a footnote.

The footnote stated: “The Directors’ terms will end on the enactment of the Racing Industry Bill or on 30 June 2021 – whichever comes first.” The enactment of the Bill is imminent if we are to get a second reading next week.

The Select Committee wasn’t available for comment this week because, under its protocols, it is inappropriate to make comments before the legislation comes up for its second reading. But in previous conversations with both National Select Committee members Andrew Bayly and Ian McKelvie (Shadow Minister for Racing), they are positive about the content.

All this means nothing, however, if an under-performing TAB on the top of RITAs $47 million debt to the ASB Bank trivialises racing in the coming season, because of NZRB/RITAs point-blank refusal to properly investigate the outsourcing/partnering of the TAB and restructuring as outlined in the Messara Review two years ago.

The Review clearly warned the Minister and all of New Zealand that it didn’t have the luxury of waiting, but that warning went unheeded, and today New Zealand racing is paying the price.

[pete]

Good article. I've had enough of the NZ TAB.

I opened a Bet365 account this week and was able to place a bet within 5 minutes. The website is streets ahead of the TAB clunker.

I've had a TAB account for 40 years but they aren't getting anymore of my money.

[JustPlodded]

2 hours ago, pete said:

Good article. I've had enough of the NZ TAB.

I opened a Bet365 account this week and was able to place a bet within 5 minutes. The website is streets ahead of the TAB clunker.

I've had a TAB account for 40 years but they aren't getting anymore of my money.

I have taken your lead Pete. How long do you have to send them your ID documents?
Soon the "top 1.5%" will be the responsible for 100% of the turnover, because they will be the only ones left.

[Freda]

2 hours ago, pete said:

Good article. I've had enough of the NZ TAB.

I opened a Bet365 account this week and was able to place a bet within 5 minutes. The website is streets ahead of the TAB clunker.

I've had a TAB account for 40 years but they aren't getting anymore of my money.

I find the site just about idiot-proof [ cos I find it very simple to use ]  and  money in, money out almost immediately.

[pete]

19 minutes ago, JustPlodded said:

I have taken your lead Pete. How long do you have to send them your ID documents?
Soon the "top 1.5%" will be the responsible for 100% of the turnover, because they will be the only ones left.

You need to get the docs to them before you can withdraw but all you need to do is upload a passport photo and that's pretty much it. 

[pete]

12 minutes ago, Freda said:

I find the site just about idiot-proof [ cos I find it very simple to use ]  and  money in, money out almost immediately.

Are you talking about Bet365 Pam?

[Freda]

50 minutes ago, pete said:

Are you talking about Bet365 Pam?

Ah, yeah.  Not the other outfit.

[pete]

1 hour ago, Freda said:

I find the site just about idiot-proof [ cos I find it very simple to use ]  and  money in, money out almost immediately.

Also blindingly fast at settling bets if you're lucky enough to get a collect.

[JustPlodded]

I thought I would empty my TAB account. But even doing that is difficult with their $40m app doing it’s polar bear in a snow storm imitation.

 

[Hesi]

The numbers don’t lie - accountant ‘follows the money’ to find where the TAB went wrong

By Barry Lichter • 6 June 2020

An accountant who worked at the TAB for 16 years has crunched the numbers, pinpointed where it all went wrong, and concluded only further Government support can keep the racing industry alive.

Peter Johnstone, who was manager of strategic planning for the TAB, did a lot of data analysis and acted as secretary of John Falloon’s Ministerial Committee in 1991, says if you “follow the money” you can better understand the sad decline of an organisation he once proudly worked for.

“The best way to do this in my experience is to look at an organisation’s cash flow statements which I view as superior to all other financial statements for a firm.

“The single factor that really struck me is that over the last 10 years, cash flow from operations increased by only $6 million (just under 4%), despite turnover increasing by $1.183 billion (up 33.7%).

“This is the key to understanding how it has all gone so wrong.

“Many commentators say that costs are out of control, pointing to the increase in payroll costs, yet compared with turnover, they are lower as a percentage than they were 10 years ago, and are actually an identical percentage to 2001 (2.2%).”

Lincoln Farms’ May 9 feature moved Johnstone to delve a little deeper into the published financial information of the New Zealand Racing Board and Racing Industry Transition Agency.Johnstone says while Lincoln Farms’ feature story ‘An A to Z of what brought racing to its knees’ explains a great deal about what went wrong in the current century - particularly the high turnover of chief executives and some of the disastrous decisions they made - cash flow from operations shows the real health of an organisation.

“Strong operational cash flows allow a firm to fund capital projects and distribute funds to stakeholders such as shareholders (or in the case of the TAB, to the racing industry and latterly sports bodies). They also minimise the need for any borrowing and consequent interest costs.”

In 2010, cash flow from operations was $155.8 million, or 9.8% of turnover (and even better in 2011 at 10%). By 2019, this was down to 5.8% which equated to $161.8 million.

41% decline

“This is a decline in the rate of return of almost 41% in a decade. Put another way, had the TAB been able to maintain the 9.8% proportion, operational cash flow last year on the same turnover would have been $271.1 million, roughly $110 million more than it actually was.

“And in that case, very few of the current problems would be apparent. Racing industry returns could have been hugely improved, and capital expenditure may have been funded without the borrowing and asset sales the TAB has had to fall back on.”

Johnstone says Lincoln Farms’ recent interview with Ken Rutherford helped explain the drastic decline.

“Rutherford said he could never understand why a succession of TAB chiefs placed such an emphasis on promoting fixed odds betting when the product at best realised half of the 16.5% of tote betting income.”

In 10 years the TAB’s cash flow from operations increased by only $6 million (just under 4%), despite turnover increasing by $1.183 billion (up 33.7%).In his analysis of the cash flows for the last 10 years (see chart above) Johnstone discovered clearly the biggest change has been in dividends from betting and gaming.

The dividends the TAB paid out in 2010 were 82.4% of turnover and last year that had grown to 86.6%.

“The change doesn’t look that bad on the face of it, but when you consider that is a deterioration of 4.2 cents from every dollar the TAB has handled, it is hugely significant.

Bonus bets have contributed to a reduction of the TAB’s profit margin.“While it’s a little hard to isolate all the causes, we can surmise they include:

* Driving fixed odds betting at the expense of tote betting

* The fickleness of sports betting, the profitability of which can often depend on results going the TAB’s way.

* The impact of bonus bets - “which I never understood the rationale for, given the TAB was always a low margin business.”

* The loss in turnover of easybets - “a subject dear to my heart as along with Alan Mayo I developed the original spec for easybets, which attracted the most favourable rates of commission.”

Johnstone says the small gains from a much higher revenue is like the TAB baked a 40% bigger pie, but put only another 6% of steak in it.

“I find it absolutely incredible that the TAB increased turnover by so much for so little gain.

“What I believe they should have done was to focus on maintaining a healthy margin on every dollar bet, rather than growing turnover at minimum benefit to cash flow or the bottom line.

“You could conclude that had turnover not been increased so greatly there may have been less profit, but even on a $2 billion turnover, the old margins would still have increased operational cash flow by some $34 million, and presumably also produced lower costs.

“Of course, you can’t discount the issue of costs entirely - with increased automation and superior software tools, you’d expect improved productivity and lowered costs.

“However, in general the ratios suggest that the TAB have been effective in controlling costs - in the last 10 years staff and supplier payments fell from 7% of turnover to 6.5%, after reaching highs of 7.5%.”

The Jackson Street building was purpose built for the New Zealand Racing Board in 1989 but in August, 2014 it was syndicated by the Oyster Group and the TAB now leases its space.Property sales

Johnson is critical of the TAB’s handling of its properties in the last 10 years - notes to the financial statements showing buildings in Petone, Christchurch and Auckland all being sold.

“Though I can’t identify all the assets that have been sold the cash flows indicate that $21.3 million was received from the sale of property, plant and equipment and the TAB no longer owns any buildings.

“Presumably, these facilities (or their replacements) are why the TAB’s lease/premises costs have gone from 2010’s $4.7 million to 2019’s $14.3 million.

“While there are costs associated with owning properties, in most commercial leases many of these costs are assumed by the tenant. The decision to divest these properties makes no sense, since it has exposed the TAB to incurring rentals in perpetuity, which must cost more than retaining them.”

The TAB spent $42 million building its new betting platform, to attract sports punters, and it has an annual ongoing cost of $17 million.Capital spending

Johnstone says a further area of concern highlighted by the TAB’s cash flow statements is the level of capital spending.

Over 10 years this has amounted to almost $207 million, with almost $72 million in the 2018 and 2019 financial years.

“This has to be funded by cash flow from operations unless money is borrowed, which has been a necessity in the last two years.”

Johnstone says while he’d need access to much more information than is available publicly, you’d have to question the new $42 million betting platform, of which both Lincoln Farms and Rutherford have been outspoken critics.

“I was especially troubled by Lincoln Farms’ revelation that the TAB has locked itself into an annual licence fee of more than $17 million, in addition to the substantial capital cost.”

Johnstone says what is especially depressing about this is the TAB’s development team in the 1970s, 80s and 90s had exceptional skills.

“They developed a world class betting system largely in-house, with the assistance of a few key contractors. Under manager Mike Thornbury the team delivered great solutions and seemed capable of solving every issue they were confronted with. And the computing environment and tools they had to work with were primitive compared with today.

“I can’t help but wonder what happened to that level of expertise and skill, that an organisation that could build Jetbet now relies on external software providers at the cost of an arm and a leg.”

Like Ken Rutherford, pictured, Johnstone experienced an erosion of the TAB culture.Erosion of culture

Johnstone said just as Rutherford described an erosion of the culture he experienced at the TAB when head of sports betting (in his interview with Lincoln Farms), he too experienced the change and was happy to move on during the first wave of redundancies in 1993.

“Rutherford talked of the external executives that have regularly come and gone, and their failure to truly understand the drivers of wagering.

“I can only conclude that the “old” TAB culture I revered was in many ways superior. People were well paid, yes, but not compared with the exorbitant packages of today.

“More importantly, I think, there was much less external recruiting - the majority of appointments were internal, and thus people in most roles were thoroughly conversant with the culture, they certainly understood wagering, and they knew the strengths and weaknesses of their colleagues.

“Maybe there was an element of “time serving” in some cases, but most of the people I worked with cared deeply about the industry and the role they played within it. I’m certainly not convinced that the change has been beneficial, and the financial evidence would seem to bear that out.”

Most of the TAB’s half yearly reports in the last two decades have been delivered in March, and the latest was on May 1, in 2017. A $3.2 million blunder with bonus bets delayed this year’s report and it has still not been published. “It must be truly dreadful to remain hidden from public view,” says Johnstone.COVID accelerator

Johnstone says rather than COVID-19 being responsible for the TAB’s current troubles, it has merely accelerated the day of reckoning.

“It had to be coming anyway. The 2019 annual report already showed an organisation that was technically insolvent, with $35 million of borrowings (after never being in a position where it showed end of year borrowings before 2018).

“For the third year in a row, total cash flow for the organisation was negative, and total equity had fallen to less than $25 million, whereas in the late 2000s it had exceeded $100 million.

“In this light it is notable that RITA’s website still has no six monthly report for the current year. It is now weeks overdue and my guess is that it must be truly dreadful to remain hidden from public view.

“The government recently “saved” the TAB and hence the racing industry with a multi-million dollar bailout.

“But in view of what I can see from the publicly available figures, I question whether this will be enough. With many of the TAB’s recently announced cost cutting measures potentially threatening to further erode the turnover base (especially in the biggest revenue generator of racing) the industry will remain in a parlous situation for the foreseeable future and it would seem that only continued government support will keep it alive.”

It’s a far cry from the days when Johnstone was responsible for investing the TAB’s profits in the money markets.

“There used to be a torrent of cash in those days and it was when we earned interest rates of 20% plus.”