Dear Member

Throughout the past 18 – 24 months the Australian Jockey Club has faced considerable challenges in operating the business. These challenges, many of which are outside the control of Board or Club administration include: decreased revenue as a result of racefields legislation, falling race day attendances, affects of the global financial crisis off the back of World Youth Day and EI, plus the increasing financial burden of operating NSW’s major training operation.

The Board and Executive have adopted initiatives to find cost savings in the operating budget throughout this difficult period but in looking ahead more needs to be done.

As custodians of Members’ interests the current Board faces the unenviable task of looking to our budget for the 2010 period to find even more savings which will ensure the Club can weather the current financial environment and continue to operate sustainably.

It is the responsibility of the AJC Board to inform Members of the decisions made. Please know that these decisions and timings are purely coincidental and in no way have been affected by the recent merger discussions.

Please find attached a media release which will be distributed to the media later this evening outlining the actions of the Board.

At this time we implore the need for unity amongst our members and stakeholders – your support is vital to the AJC’s financial sustainability.

As always we encourage member feedback so please don’t hesitate to email us at members@royalrandwick.com . Our membership department will ensure your views are communicated to the Board.

Yours sincerely

Ron Finemore AO
Chairman

 

AJC RESPONDS TO TOUGH OPERATING ENVIRONMENT

Operating conditions have continued to deteriorate due to factors outside the control of the board and management of the Australian Jockey Club, Chairman Ron Finemore, AO, said today.

Racing in NSW is under siege from Corporate Bookmakers and Betfair who are undermining the core wagering revenue stream. $30 million in wagering income is being withheld from the race clubs because of the challenge to race field legislation. The AJC fully supports the Racing NSW stance on this issue.

The global financial crisis has caused a flattening of the Club’s local operating market that had not fully recovered from the impact of EI and World Youth Day disruptions.

This is on top of the AJC continuing to carry the financial burden of operating NSW’s major training facilities at Randwick and Warwick Farm at a cost to the Club of $5m a year for the 1,300 horses in work daily.

“Recent instability at the Club has not helped the current financial situation, however, we now have a united and proactive board and management who are fighting hard to keep the Club viable in the face of wagering income challenges imposed by Corporate Bookmakers, Mr Finemore, AO said. “I had hoped that given time and a positive race fields outcome we could bring about noticeable change to both racing and the business of the AJC.”

Every aspect of the Club’s business has been examined with the view to finding savings, efficiencies and opportunities to restructure or rationalise as the Club is preparing to announce a loss from operations in excess of $5 million for the current financial year.

The board and management of the Club have worked hard and made some incredibly difficult decisions to find savings and efficiencies and have identified and implemented $8.5 million in cuts to our 2010 budgeted operating expenditure including prize money.

We have had the unenviable task of announcing a further seven redundancies at the Club today, which brings the total staff headcount down by 19 over a twelve month period, representing a 19 per cent reduction in the total permanent employee base.

The current environment means the Club cannot survive the challenges and sustain the current staffing. Good people will be lost, perhaps permanently to the industry as a consequence. We will give support to these people financially and in a career transition sense.

Everything possible has been done to take operating costs out of the business. However, because of the impact of the Corporate Bookmakers, we have also been forced to reduce prize money (the lifeblood of owners, trainers and jockeys) to remain viable.

With the help of an extra $1 million from Racing NSW, the Club has been able to maintain the minimum levels of prize money for non feature Saturday and mid-week races in the coming financial year.

If the money retained from Corporate Bookmakers was able to be released, the AJC would quickly look to restoring feature prize money as well as improved facilities for our members and customers. We estimate at least $9 million (and growing) of monies caught up in the Corporate Bookmaker related litigation would be available to the AJC.

The Club has decided against a proposal to raise track fees by 500 per cent as an alternative to prize money reductions. Track fee increases would have impacted all AJC owners and trainers, Mr Finemore, AO said.

It is not possible for the AJC to continue to protect prize money in the face of Corporate Bookmakers assault on critical wagering revenues. There was no other option but to reduce the level of prize money on feature races to achieve a breakeven budget for 2010.

For the coming financial year prize money for feature races will be reduced by $3.96 million from $13.51 million.

“The AJC was faced with a lose-lose situation. Our choice was, however, increasing track fees or reducing base prize money which effects all AJC stakeholders, whereas reducing elite prize money effects a much narrower group of stakeholders,” Mr Finemore, AO said.

“The AJC continues to operate its business in the best interests of its members and stakeholders and these actions are separate and coincidental to any discussion about a merger with the Sydney Turf Club.

“The AJC’s long commitment to prize money is clear. Over the past ten years the AJC has paid the best part of $40 million more in prize money than any other club in NSW.

“In addition, we estimate our training subsidy has cost the club in excess of $30 million over the same period and it would far outweigh the training contribution by any other club in Australia by a significant margin.”

NSW Trainers Association board member, Anthony Cummings said “The leakage of crucial revenue to Corporate Bookmakers is the biggest challenge facing the NSW racing industry, and it is having a devastating effect on the operations of the clubs.

"It is disappointing that these prize money reductions have had to be made by the AJC, but with it’s revenue stream being undermined by current circumstances I can see how they have been left with little choice.

"We acknowledge that the new AJC Board has taken significant steps to reduce other costs in order to limit these prize money reductions as much as possible.

"We think it essential for the financial future of the NSW racing industry that Racing NSW succeeds in defending the Court proceedings initiated by Corporate Bookmakers and Betfair who are challenging the NSW race fields legislation and/or the fees payable by them to help fund NSW racing."