Racecourses publish report on income, expenditure and prize money

The Racecourse Association has published a report on its members’ income, profitability and prize money contributions designed to achieve transparency in racecourse finances

The Racecourse Association has released a document to help provide transparency over racecourse finances and how income is spent amongst its 59 racecourse members.

The document’s publication come days after the BHA announced its nine-point plan for the next phase of racing’s recovery after the impact of Covid19.

One of the key objectives of the plan is to seek to maximise prize money for 2021 balanced against the financial constraints of stakeholders and the sport’s projected revenues, through new commercial agreements between racecourses and the Horsemen Group which includes owners and trainers.

Highlights from the document are:

• Racecourse total turnover from racing activities in their latest accounts was £575m with operating profit after capex of £28m
• 29% of total income was spent on prize money, 33% on event costs and 27% on overheads
• Prize money totals have increased 72% in the past 8 years (which equates to 42% in real terms)
• Prior to Coronavirus, racecourse profitability was expected to fall in 2020 due to a significant decline in media rights income from the closure of betting shops
• Coronavirus’ impact on racecourses was total losses of £8m per month during lockdown and £4m per month whilst racing behind closed doors
• 47% of Racecourse forecasted income for 2020 was expected to be generated from racegoers and 39% from bookmakers (in the form of Levy and Media Rights)

The 16-page document includes publicly available data as well as information sourced from Project Enable—the sport’s extensive examination of its commercial model supported by Portas Consulting.

The Racecourse Association say the document is intended to address any misconceptions around racecourse finances within the sport and allow all parties to understand the circumstances under which racecourses make financial decisions.

Racecourse income

The document says a common misconception regarding racecourse finances is the view that media rights revenue accounts for the majority of income.

Media revenues are simply one revenue stream for racecourses, accounting for 24% of all income in 2020; spectators account for a far greater proportion (47%) of racecourse turnover.

This, the document says, further demonstrates the critical need to return crowds to racecourses – during 2020 all racecourses are having to deal with revenue reductions approaching 75% and all are expected to be loss making.

Taking the subject further, income streams vary significantly depending on the size of racecourse. Large racecourses rely on racegoer expenditure for 60% of their income, 15% from sponsorship and 11% media rights, however for a small racecourse this reverts to 30% from racegoer expenditure, 37% from media rights and just 3% from sponsorship.

Racecourse profitability

Racecourses are carrying significant debt, mostly incurred to support development of facilities on course which requires servicing and repayment – net debt in the most recent racecourse accounts stood at £455m.

Those with cash balances often reserve this for capital expenditure projects to enhance the raceday experience, be it for racegoers or participants, with the end result benefitting the sport in both cases.

The total operating profit for all racecourses in 2020 was forecasted to be £65.6m, with half of this being reinvested into capital expenditure projects and 39% being used for interest and debt repayment.

Racecourse return on investment is 3.35% – which is described as a very modest figure compared to most other industries.

Prize money

Racecourses say they are aware that a significant part of attracting and retaining owners depends on the prize money offered. Whilst many owners do not solely invest in the sport expecting a full commercial return, clearly prize money remains of an integral part of the ownership experience.

In response, racecourses have made a 72% increase in prize money over 8 years, record levels for the sport. Racecourse Executive Contribution has risen by 79% over the same period and has now overtaken industry funding as the primary source of Prize Money in Britain.

Significant investment has been made into the on-course experience for owners which, for many racehorse owners, is the primary reason for investing in the sport: the thrill of seeing their horse run and having a fantastic day out.

Over the past five years, £15m has been invested in on-course facilities for owners and trainers, with a further £6.7m forecasted was planned to be spent over the next two years.

Maggie Carver, Chairman of the Racecourse Association, commented:

“The RCA is pleased to publish this detailed analysis of racecourse finances which we hope will pave the way for further collaboration across the sport as we rebuild after the pandemic. The financial effects of Covid-19 have been devastating to racecourses of all sizes with revenues impacted up to 75% in some cases.

“The recovery will not be swift, though by working together I am confident the sport will be in much better position to face the challenges of the futures.”

David Armstrong, Chief Executive of the Racecourse Association, said:

“There has been plenty of discussion in the media about the financial position of racecourses in the context of the wider sport.  We are pleased to see this detailed financial document published as it pulls together work from several sources into a single picture of the intricacies of running a racecourse. It should also address the questions that are asked about transparency.

“The impact on Racecourses of the pandemic is huge with lost revenues likely to be in the range of £250-300 million in 2020 alone. The return of racegoers is the vital next step in the recovery plan and we look forward to upcoming pilot events and the return of crowds to all racecourses as soon as possible.

“We look forward to sharing this information with our stakeholder partners and coming together to help the sport emerge from the challenges of the pandemic.”

♦ The full document can be downloaded here  https://racecourseassociation.co.uk/wordpress-cms/wp-content/uploads/2020/08/RCA-Racecourse-Finances-Presentation-Final.pdf