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JJ Flash

RITA 6 Month Results

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3 July 2020
 

The Racing Industry Transition Agency (RITA) approved the organisation's Half-Year Financial Statements 2020 at its most recent Board meeting.  The net profit result of $75.5 million was $0.8 million below budget and distributions to the racing codes were $82.3 million.

Like most businesses across the globe, RITA has experienced the disruption and uncertainty of COVID-19 during this Financial Year. In March this year, we indicated we would not meet our previously forecast net profit target of $165.8 million. This reflected the mass-postponement and cancellation of the majority of domestic and international sporting fixtures and racing events which underpin our product offering. 

However, the effects of Covid have been confined to the second half of the year. Management accounts for the first six months to January 31 showed an improvement against the same period last year, but were marginally down against Budget due to reduced turnover based on reductions in high value retail activity, an accounting error in the treatment of Bonus Bets and a delay in delay to implementation of new products.

The subsequent impact of Covid during the current half of the year will be already apparent to most. In particular, the announcement of the Government’s $72.5 million support package for the racing industry outlined the serious underlying structural issues within the industry, and the TAB business. Detailed analysis on performance in the second half of the year will be made available in our Annual Report due after the conclusion of the racing season. 

Like a lot of businesses, the timing of COVID-19 impacted a number of our business as usual activities, including finalising the voluntary reporting of our half year accounts. 

Dean McKenzie
Executive Chair

Detailed Highlights
Management Statements (Six Months to January 2020)

Betting and Gaming Turnover

Total Turnover (Betting & Gaming) of $1,500.0 million was $90.0 million (6.4%) above last year and $47.9 million (-3.1%) below budget. An increase in betting turnover vs last year (7.3%) was largely driven by Promotions which were solely offered on Fixed Odds. This resulted in churn to lower margin products.

Gaming turnover continued to grow at +2.2% to $263.3 million ($0.5 million or 0.2% above budget) driven by successful TAB refurbishments and EGM conversions.

Revenue

Total Revenue of $187.1 million was $3.6 million (2.0%) above last year and $1.2 million (-8.0%) below budget. Performance against budget was largely driven by lower betting turnover from Elite and VIP customers combined with unfavourable results experienced in Racing and Sport fixed odds during the half year. Growth in Gaming revenue of $0.4 million (+1.8%) was partly offset by a decrease in New Zealand racing shown overseas (-$0.9 million or -7.4%) compared to the same period last year. Net betting margins were healthy at 11.9% but 0.4ppts below budget and last year due to product mix and unfavourable results.

Other revenue increased by $0.4 million (+3.0%) on last year; key movements in this category included growth in merchant fee revenue of $0.5 million (+20.8%) and racing services income of $0.6 million (+8.0%) offset by a reduction in various other revenue items of $0.6 million (-22.2%).

Expenses

Turnover related expenses increased by $4.0 million (+11.3%) on last year, saving $0.5 million (1.3%) against budget. Performance includes higher National Sports Organisations payments of $2.1 million (+47.7%) as a result of higher Sports betting turnover and $1.9 million revenue share fees and performance margin due to higher gross betting revenue year on year.

Operating expenses remained flat year on year (saving $0.6 million or 0.9% against budget) which include increases in technology costs due to managed services (up $1.4 million); interest costs due to comparatively higher balances of external borrowing (up $0.6 million); and merchant fees (up $0.8 million) resulting from increased credit card transactions by customers; these are offset by savings realised in staff costs of $3.0 million which reflects RITA's continued disciplined cost management.

Distributions

Total betting distributions to the racing Codes was $82.3 million, up $1.2 million (+1.5%) from last year which is consistent with Budget. Total gaming distributions of $9.2 million, up $0.5 million (+5.7%) on last year, includes $7.8 million funding to the racing industry and $1.4 million grants to Sporting Community Organisations.
 

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Obviously not as bad a result as many on here predicted but it covers the period up to January 31 , a date when things really turned to custard with Betting Platform issues and leading into the outbreak of covid which really hit home the lack of equity .

The commentary is careful to accentuate the positives where the numbers compare favourably with either previous year or with budget.

No sales figures for codes , but hints that Sports betting continues to increase ,ditto gaming /pokies .

It mentions the higher balances of external borrowing which will become apparent in year end Balance Sheet along with the lack of equity and basic insolvency.

IMO the key statement is "the serious structural issues within the Industry and TAB business".

And obviously nothing of any note had been done by 31 January to decrease operating expenses......co-vid certainly changed this !

Before folk ask the Board fees, travel accom , Consultancy ,Audit, legal ,and merchant fees are always included in notes under "Other expenses".

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1 hour ago, Patiti said:

Why are they crying poor when the revenue was more than the previous year?

Because it was $16m short after distributions and they were charged by the Minister with maintaining the distributions without that loss on the bottom line.

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32 minutes ago, Trump said:

On the face of it, I fail to understand why EXPENSES have not been slashed? Staff expenses still over budget - let alone severely reduced! What is wrong with the Board allowing this to continue? 

Redundancy costs?? Inherit 700 staff from NZRB and now down to 400 with the top table review well underway

 

Greg

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1 hour ago, Trump said:

On the Revenue side? But what about Expenses? 

I talked to a person who is a large presence in the industry who said 20m has recently been stripped out of costs. I dont know if the person was privy to the information so wont give the name.

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I'm not happy that things that can engender participation like media and the face to face aspect have got stripped out or are under notice,

But its rock bottom and the new admin will need to analyse data like buggary and put stuff back in to re- engage the punters and participants. To try and rebuild.

 

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16 minutes ago, Nerula said:

I talked to a person who is a large presence in the industry who said 20m has recently been stripped out of costs. I dont know if the person was privy to the information so wont give the name.

I could quite believe that given the actions taken by RITA board thusfar.

Despite this and howls of protest about cost reduction  measures i also heard that turnover has been very good since racing recommenced.

 

Greg

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2 hours ago, JJ Flash said:

Redundancy costs?? Inherit 700 staff from NZRB and now down to 400 with the top table review well underway

 

Greg

Yes, and those staff cuts were as a result of getting their asses into gear as a result of Covid

Not much action had been taken until Covid

Never waste a good pandemic

Mikie

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2 hours ago, poundforpound said:

I’m no accountant but that does look a very good result considering the climate we’re in 

Not according to all the naysayers and non accountant types P4P. You know the type , never happy 😃😃

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4 hours ago, Patiti said:

Why are they crying poor when the revenue was more than the previous year?

Because they only made $75m while they paid out $88m - i.e. they are giving more to the codes than they are making.  False economics and the merry-go-round has stopped now with Covid in the 2nd half year.  Desperate times.  Thanks John Allen (and Bayliss, Brown, Hansen).

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4 minutes ago, Don't You Believe It said:

Because they only made $75m while they paid out $88m - i.e. they are giving more to the codes than they are making.  False economics and the merry-go-round has stopped now with Covid in the 2nd half year.  Desperate times.  Thanks John Allen (and Bayliss, Brown, Hansen).

True , but keep in mind that depreciation is a book figure and not cash .Plus the NZRB/Rita was always charged to pay out to codes their surplus.

Hence there was nothing for a rainy day or to spend up on the new Betting platform.

Herein lay their problem ,accentuated by the new platforms teething issues.

Plus JAllen had been hanging his hat on the imminent windfall.....Racefields legislation , Point of consumption Fee ,and abolition of Gambling Duty.Duty alone had been $13 mill in 2018.

So they had been paying out more than they earned for a good few years , with these changes in mind !

Unfortunately they made little apparent effort to slash costs such as salaries.In fact they wanted a 'world class ' betting system with hundreds of thousands of betting options per day [especially in Sports] which in view of NZ's size seemed questionable.

Plus they were trapped by the lack of a collaborative approach from the Codes as a whole thru Regional bias etc which has dogged the Industry for 50 years as all towns regions want their track in their town.....this has been sucking the Industry dry ,yet even after Co-vid and the basic Insolvency of the TAB folk are still wanting to retain these distant venues with little horse population that are costing both owners, the communities and the TAB a small fortune to service.

No one wants to change !

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19 minutes ago, tasman man 11 said:

Herein lay their problem ,accentuated by the new platforms teething issues.

 

There's no teeth left .

 

20 minutes ago, tasman man 11 said:

towns regions want their track in their town.....this has been sucking the Industry dry

Still waiting for someone , anyone , been asking this question for a while , to show exactly which tracks/clubs , and for how much each of these clubs has been "sucking the industry dry " . Just the names and figures will do . Don't need rhetoric .

The 2 clubs i know of do it almost exclusively thru volunteer effort and grants , got nothing to do with NZTR/RITA . If they have ever got anything it certainly wasn't helping to suck the industry dry .

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5 hours ago, poundforpound said:

I’m no accountant but that does look a very good result considering the climate we’re in 

This was pre-covid remember. A net after distribution loss of $16m is a very good half-year result? About double the similar result for 2018. And cf a 1.8m after distribution profit for the first 6 months in 2017.

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Nice to see a result to grow on, because RITA inherited a mess. 
 

However it must be remembered that these revenue/turnover figures are after a new system was implemented to grow them.....I am guessing the new betting platform has not produced the results forecasted...

 

I personally would like to see a comparison to last year not budget. Is that available JJ Flash?

thanks

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12 hours ago, shaneMcAlister said:

I personally would like to see a comparison to last year not budget. Is that available JJ Flash?

To be honest Shane i have no idea . I suspect that if it were anywhere it would be on old NZRB website if it still exists. Failing that you could approach RITA direct.

Of greater relevance will be the balance sheet after 12 months which will  include recent Governments contribution and Covid effects on gaming and wagering

 

Greg

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12 hours ago, shaneMcAlister said:

Nice to see a result to grow on, because RITA inherited a mess. 
 

However it must be remembered that these revenue/turnover figures are after a new system was implemented to grow them.....I am guessing the new betting platform has not produced the results forecasted...

 

I personally would like to see a comparison to last year not budget. Is that available JJ Flash?

thanks

Forget the above, ive done some hunting and suggest you go to RITA site and see the annual reports on bottom left hand corner. All the info is there . Hope this helps

 

Greg

 

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44 minutes ago, JJ Flash said:

To be honest Shane i have no idea . I suspect that if it were anywhere it would be on old NZRB website if it still exists. Failing that you could approach RITA direct

 

Greg

        2020 Budget 2020 2019 2018
               
               
Betting and gaming turnover   1,499,989 1,571,469 1,410,013 1,430,037
               
REVENUE            
Net betting turnover     146,957 148,211 143,200 151,057
Net Gaming turnover     15,001 14,927 14,606 13,298
NZ racing shown overseas turnover 11,689 12,584 12,624 11,146
Other revenue     13,497 12,624 13,106 12,584
TOTAL REVENUE     187,144 188,346 183,536 188,045
               
TURNOVER RELATED EXPENSES 39,355 39,874 35,388 36,259
               
               
OPERATING EXPENSES          
Broadcasting     4,727 4,497 4,529 4,718
Communication and technology   14,168 14,685 12,833 10,303
Premises and equipment   3,739 3,461 7,230 7,442
Staff       29,223 29,113 3,217 31,780
Depreciation and amortisation   11,163 11,715 8,227 10,334
Foreign exchange loss   194   127 24
Other       9,032 8,677 6,803 8,216
TOTAL OPERATING EXPENSES 72,246 72,148 71,596 72,817
               
TOTAL EXPENSES     111,601 112,022 107,354 109,076
               
NET PROFIT BEFORE DISTRIBUTIONS 75,543 76,324 76,182 79,009
               
               
Distributions     88,267 88,700 86,618 84,798
Provisons for undistributed gaming surplus 3,198   4,775 2,668
               
NET LOSS AFTER DISTRIBUTIONS -15,922 -12,376 -15,211 -8,457

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On 7/8/2020 at 11:51 AM, poundforpound said:

I’m no accountant but that does look a very good result considering the climate we’re in 

pardon? The 'result' ends 31 Jan 2020 which has nothing to do with the 'climate we're in'. 

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On 7/8/2020 at 12:23 PM, JJ Flash said:

Redundancy costs?? Inherit 700 staff from NZRB and now down to 400 with the top table review well underway

 

Greg

But NONE have gone yet...it seems its taking a long time to get their snouts out of the trough..all the minows were dealt to swiftly..why not the other end too???

 

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12 hours ago, Leggy said:
        2020 Budget 2020 2019 2018
               
               
Betting and gaming turnover   1,499,989 1,571,469 1,410,013 1,430,037
               
REVENUE            
Net betting turnover     146,957 148,211 143,200 151,057
Net Gaming turnover     15,001 14,927 14,606 13,298
NZ racing shown overseas turnover 11,689 12,584 12,624 11,146
Other revenue     13,497 12,624 13,106 12,584
TOTAL REVENUE     187,144 188,346 183,536 188,045
               
TURNOVER RELATED EXPENSES 39,355 39,874 35,388 36,259
               
               
OPERATING EXPENSES          
Broadcasting     4,727 4,497 4,529 4,718
Communication and technology   14,168 14,685 12,833 10,303
Premises and equipment   3,739 3,461 7,230 7,442
Staff       29,223 29,113 3,217 31,780
Depreciation and amortisation   11,163 11,715 8,227 10,334
Foreign exchange loss   194   127 24
Other       9,032 8,677 6,803 8,216
TOTAL OPERATING EXPENSES 72,246 72,148 71,596 72,817
               
TOTAL EXPENSES     111,601 112,022 107,354 109,076
               
NET PROFIT BEFORE DISTRIBUTIONS 75,543 76,324 76,182 79,009
               
               
Distributions     88,267 88,700 86,618 84,798
Provisons for undistributed gaming surplus 3,198   4,775 2,668
               
NET LOSS AFTER DISTRIBUTIONS -15,922 -12,376 -15,211 -8,457

Thanks leggy. So post the new betting platform our net betting turnover is still less than the old system....

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