Growing public popularity
Prize money increasing & a vibrant bloodstock market
A key rural employer
An increasing international dimension
Rising betting turnover
Racecourse profitability
A SPORT ON THE MOVE
It is not often that racing folk agree with each other. It is the nature of the sport to back one’s own opinion after all, even to the extent of staking money on that judgement. Disagreement goes with the territory.
But on one thing, commentators on the sport are all agreed to a man. Jump racing is in rude health, with more horses in training, highest ever standards of training, riding and animal and turf husbandry, larger audiences and sustained inward investment in grandstands, racecourses and training grounds, both from within the industry and from third parties.
Growing public popularity
In 2007, nearly 6m spectators visited one of Britain’s 60 racecourses, of which 2m attended one of the 500 Jumps fixtures. This overall number, combined with high attendance figures for Jump racing’s flagship events, leaves racing as the UK’s second most popular sport behind football.
Indeed, Jump racing’s leading events and courses have shown healthy growth in attendance numbers, sometimes despite having to cap attendances at the most popular events. (See fig 1-top 10 racecourses) And Jumping’s leading events compare very favourably with other leading sports attendances (see fig 2-comparison with other sports).
Jump racing has a thriving nursery in the guise of the Point-to-Point scene, attracting spectators and participants as never before to over 200 meetings between December and early June. These amateur meetings act as a breeding ground for aspirant horses and riders. Indeed the nursery analogy has been taken still further with the introduction 3 years ago of pony racing for children between the ages of 9 and 15.
Back to top
Increasing prize money and a vibrant bloodstock market
Every sport needs a headquarters. Cricket has Lords, football has Wembley, and rugby Twickenham. Jump racing revolves around Cheltenham, once self-appointed home of the Sport, now integral to the success of the sport and a ready accelerant to its growth internationally. Runners attend Cheltenham’s meetings from Ireland, France, Germany, the Czech Republic, and even on occasion from the United States. Building the Sport around one iconic venue has helped to drive inward investment and public interest.
The escalation of prize money in the sport has been a solid foundation for growth in the numbers of horses bought and sold, and placed in training. In last year’s edition, we estimated the value of the Jumps bloodstock market at around £100m during 2006. Only 75% of the market can be identified through public auction, and private sales comprise a significant part of the market. The aggregate figure for horses sold at public auction during 2007 increased to £78.4m (2003 £45.5m).The mean price per transaction increased to £13,419, from £11,837.
Anthony Bromley, a leading bloodstock agent reports, “I probably have slightly less orders this year but I do have some big ones to fill. People are saying if I'm going to buy a new horse I want a really smart one”. Bromley's recent purchases include the 2007 Gold Cup winner Kauto Star, bought for €400,000 privately in France on behalf of Clive Smith, and the same owner's Master Minded, the runaway winner of the Seasons Holidays Champion Chase at the 2008 Festival.
Bromley cites the good top-level prize money as a real incentive for people to buy horses. With career earnings of over £1.3 million, Kauto Star also picked up a £1 million bonus when he won the 2007 Gold Cup.
And in a sure sign of intense competition for the right to sell the best bloodstock, two leading bloodstock auctioneers in Ireland and Britain merged last year, as Goffs and Doncaster Bloodstock Sales pooled their resources and expertise to outplay the market leader in the Flat bloodstock market – Tattersalls. Over here, the investment by Hereford based Brightwells will make a significant impact from 2009 onward.
In 2007, 1,079 separate trainers competed to win the £35m on offer in prize money for their owners. Whilst weather related cancellations meant total prize money was down, the trend is upward, sustained by public appetite for racing, healthy betting turnover and a rising pool of horses to fill the races.
Back to top
A key rural employer
A Deloitte study titled “Economic Impact of British racing” of June 2006 underlined racing’s status as a significant rural employer. The volume of stable staff employed in licensed training yards has risen steadily in recent years to over 7,500 (up 12% in 5 years), and combined with the ancillary service network required to power these businesses, amounts to a healthy contributor to rural employment. Feed merchants, farriers, horse transporters, bloodstock agents, marketing, clerical and administrative staff employed within the racing business help to build rural communities centred around the horse, as a trip to Lambourn, Middleham or Malton will illustrate only too well. British racing produces over 18,000 full time jobs directly associated with the racing product, with a further 22,000 in ancillary jobs, and over 40,000 through betting shops. The total of around 80,000 makes racing the largest sports employer along with football. (see fig 3-employment)
An increasing international dimension
British Jump racing has had a long love affair with the Irish. For many years, English owners plundered the best bloodstock from Irish breeders, whose business was exporting top quality horses. Meanwhile the shrewd Irish would retain one or two animals of their own to beat the British on their own turf at Cheltenham, Kempton or Aintree. The rivalry is an integral part of the allure of the Sport.
As the Celtic Tiger roared, an affluent and growing genre of Irish owner strove to retain the best quality animals to race in Irish colours. Owners like Gigginstown Stud, Lawrence Byrne, Tony O’Reilly, Sean Mulryan and Conor Clarkson despatched horses to win in the UK under an Irish flag. British owners and their scouts spread their net further afield to acquire top bloodstock. The result has been an internationalization of Jump racing in the UK, as French bred horses, and even some from further east in Europe, have been purchased to compete in the UK.
Curiosity, and the lure of the big event, has also driven the market leaders in those countries to send horses to plunder races at the bigger courses in Britain too. Names like François Doumen, Guillaume Macaire and Christian Von der Recke offer examples of an international appeal. UK racing pictures are also broadcast abroad too, and individual British racecourses have accelerated the opportunity by sponsoring races in Ireland and on the continent. The BGC Cross Country Series during the 2007-8 season took in races at Cheltenham, Punchestown and Pau, whilst the popular 12 race Pertemps Series included a qualifier for the first time at Auteuil in November.
Back to top
Betting turnover is rising
Horse race betting is a big business, underpinning a substantial retail estate among fixed odds bookmakers on the high street, and telebet and online business that puts several British bookmakers into the FTSE100. Whilst bookmakers have diversified into other sports and sources of revenue, turnover from horseracing continues to rise, along with profitability. This profitability finds its way back into the sport directly through the Horserace Betting Levy, a statutory agreement between the sport and bookmakers. In 10 years, the Levy has doubled to an estimated £116.5m in 2007/8. A glance at the market valuations of Ladbrokes, William Hill or Paddy Power, some of the publicly quoted betting companies, will also reinforce this boom time for betting since fiscal changes to the 2002 budget (see fig 4-Levy T/o 2003-7)
This popularity for horse race betting drives revenue back to the sport, delivered via the Levy through increasing prize money and capital grants toward investment in facilities, veterinary care and improvements to the breed. It is a little known fact that each race run in the UK stimulates over £20,000 in Levy yield, and of course the iconic races of the calendar, like the John Smith’s Grand National and totesport Cheltenham Gold Cup, stimulate very much higher revenues and act as a shop window for the sport and other betting products.
Back to top
Racecourse profitability
There is overwhelming evidence that the increasing popularity of Jump racing is converting to bottom line profit as racecourses host larger and more successful events, leveraging revenue from current and new customers alike. Strong racecourses make for a strong sport.
The 41 courses staging Jumps events have largely clustered together into groups for maximum scale economies, although there are some notable independents, like Ascot, owned by the Queen. Jockey Club Racecourses, Northern Racing & Arena Leisure are the key players, operating substantial fixture lists and between them staging most of racing’s leading spectator events.
The ownership status of racecourses across the country makes a year on year comparison of profitability close to impossible to assemble. However, research by the British Horseracing Authority from 2007 indicates that Jump racecourses alone generated revenues from racing activity alone in excess of £100m, and profit from racing at around £44m. The same research indicates the average profit per fixture at £96,000 from any Jump fixture, although these figures mask the fact that the flagship fixtures that comprise the top 10% of fixtures generate over 40% of the total profitability.
Importantly, during a period when the value of media rights, such a key part of racing’s modern financing, have been diminishing, Jumps racecourses have increased their earnings before tax & depreciation (Ebitda) from £32,387m in 2003 to £41,876m in 2007, a rise of over 29%. Several of these courses also stage Flat racing, most notably Ascot (see fig 5).
The country’s largest racecourse ownership group, Jockey Club Racecourses, part of the Jockey Club, owns or leases 14 courses across the country, as well as owning and managing a significant commercial estate that includes training grounds at Newmarket, Lambourn and a recent acquisition of the National Stud. JCR’s portfolio is preponderantly in the Jumps sector, headed up by Cheltenham, Aintree and Sandown, although it also owns Newmarket and Epsom as Flat flagships. The racecourse division delivered earnings of £9.7m in 2007 (2005 £9.1m).
One of the major racecourse groups with 9 courses, both Flat & Jumps – Northern Racing – was sold to real estate group Reuben Bros for nearly £90m in April 2007. By comparison, Northern Racing’s Ebitda for 2007 was £6.2m.
The third group, Arena Leisure, in which Reuben Bros has amassed a substantial stake, returned Ebitda of £8.38m in 2007, albeit that the key drivers to Arena’s success are its All-Weather and Flat courses, headed by the newly re-opened Doncaster, and a 45% stake in broadcaster Attheraces.
Ascot, best known for its Royal Meeting each June, underpins the independent courses, with an Ebitda of £11,969m for 2007. (see fig 5 for Group profitability).
The autumn of 2008 has seen two racecourses placed on the market, with market valuations of around £9-10m each. Ayr and Towcester are among the 30 courses in the UK that are independently owned.
Strong performance by racecourses has helped drive spectator attendance and investment in bloodstock. It is no coincidence that ambitious growth plans implemented by larger courses have encouraged higher attendances and bottom line profitability. What’s more, investors have been able to see a return on capital expenditure both at existing courses and new venues. In early summer 2009, the first new Jumps course for 80 years will open when Ffos Llas in South Wales open to the public as the 42nd Jumps course in the UK.
Back to top
