ANNUAL REPORT 2014 2014 HAS BEEN A YEAR OF BOTH CHALLENGES AND RECORD BREAKING SUCCESSES FOR THE NZ RACING BOARD NZ RACING BOARD | ANNUAL REPORT 2014 TABLE OF CONTENTS 4 2014 HIGHLIGHTS 5 ABOUT THE NZ RACING BOARD 6 STATEMENT FROM THE BOARD 8 INDUSTRY AND BUSINESS UPDATE 12 DISTRIBUTIONS FLOWCHART 14 BOARD MEMBERS 17 GOVERNANCE STATEMENT 20 RESPONSIBLE GAMBLING 22 CLASS 4 GAMING DISTRIBUTIONS 26 FIVE YEAR FINANCIAL SUMMARY 28 FINANCIAL STATEMENTS 74 DIRECTORY NZ RACING BOARD | ANNUAL REPORT 2014 3 2014 HIGHLIGHTS 2014 HIGHLIGHTS RECORD BREAKING BROADCASTING TAB Trackside transitioned exclusively to SKY on 14 April 2014, paving the way towards a revamped and refreshed TURNOVER dual channel offering and enabling more than 5,000 For the first time in the organisation’s history the NZ former ‘no TV’ races to be broadcast per year. Racing Board exceeded the $2 billion turnover mark. This was underpinned by solid growth in both Betting and Gaming and came off the back of another record IT DEVELOPMENT breaking Melbourne Cup, and a highly successful Crucial investment in IT infrastructure Football World Cup tournament. has set the basis for future development of digital products and channels including the TAB Mobile App. GAMING TAB WATCH & BET RACING The NZ Racing Board distributed $2.3 million TAB Watch & Bet Racing launched to community sporting organisations from its in December 2013, providing a live Gaming proceeds. This was enabled by growth in stream service to watch TAB Trackside Gaming and the opening of three new Gaming directly from the TAB website and sites in 2013/14. place bets at the same time. RECORD BREAKING FOOTBALL WORLD CUP 2014 Punters spent $32.3 million during Football World Cup 2014, making it the TAB’s biggest ever betting event – outstripping the $30.2 million wagered on the 2011 Rugby World Cup. The event attracted 10,440 new customers. BETTING GROWTH IN ACTIVE TURNOVER CUSTOMERS Total year on year betting AND ACTIVE CUSTOMER ACCOUNTS 6.8% turnover increased by 6.8%. Turnover from domestic Active customers (customers who have bet in the customers is running over last seven days) grew 8% in 2013/14, comparing three times higher than the very favourably with the five year Compound compound average of the Annual Growth Rate of -12%. Active account last four years. numbers increased by 16% over the same period. 4 NZ RACING BOARD | ANNUAL REPORT 2014 ABOUT THE NZ RACING BOARD ABOUT THE NZ RACING BOARD The NZ Racing Board is a statutory body established by the network sites host gaming machines controlled by NZ Racing Racing Act 2003. The NZ Racing Board’s primary purpose is Board. It is estimated the NZ Racing Board operates around to promote and enhance the racing industry, run a profitable 3% of the total number of Class 4 Venues in New Zealand betting business and generate long term profit for the benefit and has around 2% of the total number of gaming machines. of the racing industry. Net proceeds are split with 80% funding racing Authorised The NZ Racing Board operates the country’s official racing Purposes (e.g. the majority is used to fund integrity and sports betting agency, the TAB. The TAB is a major measures such as the Racing Integrity Unit, NZ Racing entertainment business with more than 154,000 active TAB Laboratory Services and Judicial Control Authority), and up account-holders and a retail network consisting of more than to 20% distributed to community sports. 675 outlets. Every bet placed with the TAB makes an integral The NZ Racing Board directly employs around 820 contribution to the growth of racing and sport in New Zealand personnel (full-time, part-time and casual), with the and the livelihoods of thousands of Kiwis involved in the majority of these people involved in the various facets that racing and sport sectors. make up the TAB operation – scheduling daily racing for customers in New Zealand, selling racing and sports bets The NZ Racing Board has a proud through the retail network, online and telephony channels, legacy stretching back to 1951 when or the broadcast of racing on TAB Trackside 1, TAB Trackside 2, and TAB Trackside Radio. the Totalisator Agency Board (TAB) was After operating costs and expenses, the NZ Racing Board established as the sole betting operator surplus is available for distribution to the three New Zealand in New Zealand, and first off-course Racing Codes – NZ Thoroughbred Racing, Harness Racing NZ totalisator service in the world. and Greyhound Racing NZ – in accordance with an agreed funding model. The NZ Racing Board supports betting on more than 68,000 The NZ Racing Board makes a significant contribution to domestic and imported thoroughbred, harness and greyhound the development of sports in New Zealand through the races each season, as well as on approximately 29,000 domestic commission it pays to national sporting bodies for sports and international sporting events. It has betting agreements on which it takes bets. In the 2013/14 year, the NZ Racing with 33 New Zealand national sporting organisations. Board distributed a total of $5.0 million to national sporting organisations across the country. The NZ Racing Board has also held a Class 4 Operator’s Licence since 2011. Currently 33 of our around 675 TAB retail NZ THOROUGHBRED RACING HORSE OF THE YEAR 2013/14 Dundeel PHOTO: Steve Hart Photographics NZ RACING BOARD | ANNUAL REPORT 2014 5 STATEMENT FROM THE BOARD - 2014 STATEMENT FROM THE BOARD - 2014 THE NZ RACING BOARD IS NOW ONE YEAR INTO Moving into 2014/15, the Board is committed to applying ITS FIVE YEAR STRATEGY. IN RACING TERMS YOU increased discipline and rigour to key initiatives. Put simply, COULD SAY THAT WE ARE AT THE FIRST TURN, we must be cost vigilant and unwind cost from the business. OR THAT THE ‘BUNNY’S ON THE RUN’. ANOTHER RECORD BREAKING YEAR It hasn’t been the easiest of starts, and it may yet be a rough race but we are well placed to make the winner’s circle or to Despite the challenges, the NZ Racing Board and the catch that lure. powerhouse that is the TAB also had a record breaking year and one that should be celebrated. Both the 2013 Melbourne 2013/14 RESULTS Cup and the 2014 Football World Cup generated record betting revenue to help contribute to the overall revenue record for the The 2013/14 year has been filled with both challenges and year. We are also experiencing on-going growth in customer record breaking successes. We have again achieved record numbers and active customer accounts, with active customer turnover results, surpassing the $2 billion mark for the first time accounts up 16% on last year. in our organisation’s history. However, our results have been significantly impacted by the rising NZD/AUD exchange rate and This tells us that our core business is very strong and indeed escalating costs. that we are in growth. Our Net Profit before distributions for GOOD NEWS ON ‘LEAKAGE’ 2013/14 was $137.0 million, a marginal Pre-election 2014, our Racing Minister Nathan Guy publicly increase on our 2012/13 result, but one that committed to tackling the issue of offshore betting. We estimate that New Zealanders bet up to $300 million per year did not meet budget. with overseas agencies that isn’t subject to levies or taxes. These agencies are using our racing product without contributing to Total distributions for the NZ Racing Board Group across the industry, they do not pay gambling levies, totalisator duty or racing and sport increased by $2.5 million to $137.4 million. GST, or have measures in place to manage problem gambling or This resulted in a distribution to our three racing codes, NZ corruption that meet New Zealand standards. We look forward Thoroughbred Racing, Harness Racing NZ and Greyhound to the Government taking action in this space and modernising Racing NZ, of $134.1 million. our regulatory environment to the benefit of the racing and sports industries. COST VIGILANCE THE MARKET This year our Net Profit result was impacted by cost overruns across our business critical key initiatives. In some instances these As outlined, the operating performance of the TAB has been key initiatives cost more and took longer to execute than initially outstanding in 2014, especially considering there is a market planned. However, they also delivered some good wins that will trend towards lower margin fixed odds betting, a decline maintain and grow our business in the future including: in domestic racing share of overall turnover and a younger customer base with a voracious appetite for digital channels. • TAB Watch & Bet Racing – live race streaming since This is where the NZ Racing Board must play a critical role in December 2013. continuing to invest in digital products and channels to cater • Three new gaming sites. for the needs of our customers. Our key initiative areas of Re- • Significant investment in underlying IT infrastructure. architecting IT and Digitising the Business will continue to be • TAB Trackside transitioned exclusively to SKY. prioritised in order to protect and grow our business. 6 NZ RACING BOARD | ANNUAL REPORT 2014 NZ RACING BOARD | ANNUAL REPORT 2014 STATEMENT FROM THE BOARD - 2014 OUR INDUSTRY 2014/15 AND BEYOND Continuing to collaborate with our industry for the greater As we enter into the second year of our strategy, we are benefit of our industry has been a key focus for the Board realistic about the ‘rough track’ but we are also confident of and our organisation this year. This is not always easy, but it’s a strong finish.
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