Nick Rust, the chief executive of the British Horseracing Authority, remains confident the sport’s ruling body will return to surplus by 2016, despite recording a seven-figure deficit in 2014 for the first time since it was formed in 2007.
The BHA’s annual accounts for 2014 show a deficit last year of £1.363m, an abrupt turnaround from the previous year’s surplus of £270k. A loss was expected, and budgeted for, over the year but the final figure, which includes the Authority’s commitments to its pension fund, is about half a million pounds higher than anticipated.
The accounts also reveal that Paul Bittar, Rust’s predecessor, was paid £443,000 in 2014, a 29.5% increase on the £342,000 he received in 2013.
The BHA has two principal sources of income: fees from entries, declarations, owner registrations, licensing and other administrative tasks; and revenue from its commercial arm, Racing Enterprises Limited. Although REL’s turnover, for the most part derived from the licensing of the BHA’s database, rose in 2014, this was more than offset by a drop in income from fees, with entries down by nearly 7.5% from 216,881 to 200,825, and declarations also down, by 3.7% from 99,527 to 95,747.
The BHA’s costs also rose significantly, from £28.8m to £30.6m, an increase of £1.8m. According to the strategic report which accompanies the results, “the increase arose through additional people costs both on day-to-day operations, and also work relating to the fixture list and industry strategy as well as increased legal and professional costs relating to Levy replacement and the [Government’s proposed] Horserace Betting Right.”
In addition to Bittar’s £443,000 salary, the BHA’s “people costs” included a salary of £100,000 for Steve Harman, the Authority’s chairman.
“The BHA is funded by its members and performs a range of activities,” Paul Foster, the Authority’s finance director, said. “Therefore its aim is not to make a profit over a period of time. In 2012 and 2013, we made small profits and on that basis we decided not to increase fees, but to continue with our current activity and additional activity as well.
“The loss of just over £1.36m was roughly £500k higher than we anticipated. Income from owners dropped by about £200k, and in various cost headings like legal and professional, we were spending quite a lot on fixture list and Racing Right and levy work. People costs included restructuring and a 2% pay rise across the business.
“They would be three key reasons to explain why we were over in terms of loss-making, but we were always looking to make a loss to try to pass back some of the profits we’d made in previous years.”
Rust, who took over from Bittar in January, concedes that losses for 2015 are also currently higher than forecast, but predicts a return to a small surplus in 2016.
“We were planning for a very small loss this year, up to £200,000 was what was envisaged,” Rust said. “We’re running at double that on the forecast at the moment, so we’re not wildly off, but there are one or two things to get under control this year.
“We are working on the basis now that we will move back into surplus next year without placing a huge burden on our participants. We have had a 5.85% increase [in fees], and we don’t envisage any form of increase like that again at a time when funding is being cut slightly from the Levy Board for 2016 and when some of the core numbers on the health of our sport are not good enough, frankly, to justify passing on huge amounts of cost to our participants.”
The “core numbers” of most concern to Rust include betting turnover, the number of horses in training and the number of sole owners.
“If you scratch the surface at the top, you could be forgiven for thinking that British racing is extremely healthy,” Rust said. “This year we have record prize money, we’ve had excellent attendances at the major meetings, there was Tony McCoy, even the BBC getting involved again around the edges in certain areas to supplement the work that Channel 4 is doing. There’s some very good indicators on the surface.
“[But] betting on the sport has fallen by £400m in gross win in the last 10 years, the number of horses in training has fallen and the number of sole owners has fallen 15pc in five years. Racecourse attendances are actually flat over the last three years.
“There is some growth at the top in terms of horses in training with a very few owners, and some at the lower investment levels through syndicates, but the heartland, we are losing out on.”
Rust’s appointment to one of racing’s most powerful roles was controversial due to a CV which includes senior positions with both Ladbrokes and Coral. He hopes to use his experience and contacts, however, to advance racing’s seemingly interminable search for an alternative funding system to replace the Levy on betting shop profits, and capture a return from offshore internet betting, which escapes the Levy’s grasp.
But Rust will also set an increase in the number of people betting on racing as an important target.
“One of the key things now is that when people start betting, they’re not starting on racing, they’re starting on other products,” he said. “We’re delighted that they are coming on to racing and betting on it, but we have to remember that increasingly, it’s that way round. People are getting involved in betting through other sports first.
“An area that we are examining is Thursday evening and early evening. That’s a night when the Champions League is not on. I don’t wish to be unkind about the Europa League but it hasn’t caught the imagination of bettors, just like international football weekends do not capture the imagination of bettors.
“Can we provide great showcase racing activity which can appeal to those people who enjoy betting and might regularly enjoy betting on football as well?”
The aim for the horse population is to see 1,000 more horses staying in training each year.
“That was a factor in the decision we took over Newcastle [to allow the track’s owners to replace the turf surface with an all-weather track].
“I accept that it was a deeply unpopular decision among horsemen, the the BHA had an economic report from Deloitte, at a time when a number of horsemen were on the board, which said that between 250 and 400 extra horses would stay in training if there was an all-weather track in the north.
“We want more money flowing into the sport, growth in owners in particular, and we want to see the trend reversed on betting on racing.
“The budget is under control for this year, and we expect to move into surplus next year to start delivering things.”
