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.
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.
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%).
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.
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.