THE RACING MINISTER'S PRESS CONFERENCE (PART 2) .. HRO'S REPORT TAKES YOU RIGHT INTO THE ROOM

By Graham Potter | Friday, July 17, 2015

Bill Byrne, the Racing Minister addressed the media at Parliament House yesterday where he exposed details of the current, critical financial state of affairs at Racing Queensland. Fronting the media alongside Byrne was Ian Hall, the Acting CEO of Racing Queensland. This is an edited extract of what transpired in the forty-five minutes of presentation and question time.

IAN HALL:

As the Minister said the purpose of today is to give you a briefing so that we got a start point to move forward on what the true financial position is at Racing Queensland.

I thought it might be appropriate to simplify this by saying, what is the business model at racing Queensland?

There are three component parts ... revenue, how we do our business and the expense side.

Basically we get wagering revenue. We then operate the business. We provide integrity. We provide marketing for the industry and we give money to participants in the industry. That is the basic model that we follow.

This graph sets out the problem we’ve got in the clearest way (See photo - Graph 1).

The gold line represents the cash reserves of Racing Queensland. As you can see over the last five years those cash reserves have been in steady decline.

The red line below is the profit or loss ... or loss at this stage ... and, as the Minister mentioned, there is a projected loss for next year of $28 million.

One of the questions you are probably asking is why the forecast has moved from the $21 million originally provided by the Premier.

One getting into the business we started looking under the hood. We started looking at all the expenses that were occurring. We started looking line by line through the budget. What we established is we were able to find approximately $6 million in savings.

Then we started looking at the revenue lines and what we found was there were a number of assumptions in the revenue lines that were not sustainable, which has been a major contributor to the loss situation.

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The idea of second graph (see Photo - Graph 2) is just to show you the gap. Normally in business you would like to have the revenue line above the expenses, but in this case we have the expenses line above the revenue line.

As you can see, there was a big jump up in revenue in the 2014/15 year. That was a result of the Tatts arrangement with the $10 million fixed fee coming into play.

Unfortunately expenditure increased at a greater rate than revenue and if we keep on a ‘business as usual’ basis for the next twelve months, without changing anything during the next racing year, expenses are expected to exceed revenue by $28 million.

Basically Racing Queensland gets it revenue from a share of wagering. You can see from the top line that in the 2014/15 year actual racing revenue dropped off by about 2.4 percent.

Racing Queensland’s income did increase though. That again came via the Tatts arrangement.

You can also see that there is an anticipated drop in revenue for Queensland Racing next year.

That is a result of a combination of things. One, the Eagle Farm track has been out of commission. That wasn’t factored into the original budgets. There wasn’t any allowance for wet weather events. We have also noticed a change in betting trends, consequence we get a lower fee from the corporates.

So a combination of all of those events has a contribution to the anticipated reduction in revenue.

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One of the other points ... where does the money go that Racing Queensland gets?

You’ll find that 61% goes in prize-money, to jockeys, owners, trainers. About $14 million ... or 7.5% ... goes on payments to jockeys and harness drivers. That’s superannuation and workers compensation and riding fees.

Approximately $7.5 million goes on breeding schemes and there is $16 million on club subsidies. Racing Queensland itself costs are in the order of $36 million ... or 19%.

Just to give you more of a feel about where Racing Queensland costs go here are some figures.

About $8.8 million goes to operations. That’s in running race-day operations, training and animal welfare. $8.4 million in strategy, marketing, legal and construction ... that includes some infrastructure work in maintaining tracks around the state.

Finance ... $8.6 million. Insurance, IT, HR and Integrity costs are $10.6 million.

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Talking about prize-money ... how has prize-money changed over the years?

The graph shows there was a big increase in prize-money in the 2014/15 year.

As you can guess that is a major contributor to the loss.

Again just to give you a feel of the cost increases, what we’ve done is look at ourselves and say, look, can we do it more efficiently.

There are number of costs where we have tried to stop any increase. Two cost factors have increased though. One is in relation to welfare ... so animal welfare and racing centre costs have increased and that is obviously a key focus that we have going forward. The other one is the breeding schemes.

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So what does that all mean? Where are we in terms of going forward?

The plan is to have business as usual for the next six months ... that is to not make any material changes. For the next three months, the plan is to have consultation within the industry ... to bring the industry together. My intention is to bring the industry together so that we can work through this together come up with a solution.

The consultation meetings will commence forthwith with all participants in the industry and the first meeting will be scheduled in the first week of August. Our intention is to move forward as quickly as we can.

Then in Phase 2, once we’ve done the consultation, we’ll be reviewing and analysing the feedback and developing strategies back to sustainability.

The anticipation is that from January 1, 2016, steps can be put in place to bring the industry back to a sustainable future.

It is clear that the current position of Racing Queensland is untenable. We can’t continue in this current way. We have to take decisive action.

As part of that action I look forward to working with all participants within the industry to come up with a solution that provides an open, transparent and consistent message as we the industry forward.

A question from the floor. How long do you plan to stay on as interim CEO?

IAN HALL

From a practical point of view there are a couple of things that need to be in place.

One is to get the new structure in place. Secondly, to get the board in place and then to get the board to select a CEO. It is important that someone is there to help guide things consistently through this process, so there isn’t a set timeframe for my position but those are the practicalities we face.

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