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www.tab.co.nz

The vision of The nZ Racing BoaRd is To Be The BesT enTeRTainmenT Business foR new Zealand

NZ RACING BOARD ANNUAL REPORT 2013

TABLE OF CONTENTSNZ raciNg board treNd summary 4

about the NZ raciNg board 6

Key eveNts iN our history 8

board members 10

report from the board 12

report from the executive leadership 16

our busiNess, iNdustry aNd category 23

2012/13 reboot: positioNiNg for growth 28

corporate strategy: what gets measured gets doNe 30

strategy 32

corporate affairs aNd commuNity 35

tab 38

iNterNatioNalisatioN 40

taleNt 42

techNology 44

the comiNg year: beiNg the chaNge we waNt to see 46

goverNaNce statemeNt 48

respoNsible gambliNg 54

code champioNs 56

fiNaNcial statemeNts 58

fiNaNcial commeNtary 59

directory 98


4


NZ rACiNg BOArd TrENd SummAry

FuLL yEAr ($m) 2008/09 2009/10 2010/11 2011/12 2012/13

StAtemeNt Of PROfIt OR LOSS

total turnover 1,513.1 1,582.0 1,531.6 1,814.0 1,956.8

Net betting margin 15.0% 14.8% 14.7% 14.4% 14.2%

total income 259.0 268.3 268.3 293.1 304.5

turnover related expenses 47.2 47.4 43.9 42.6 44.7

Operating expenses 92.7 92.5 100.5 123.2 115.7

Operating expenses/total income 35.8% 34.5% 37.5% 42.0% 38.0%

Net profit before distributions 119.1 128.4 123.8 127.3 144.1

Betting net profit before distributions 119.1 128.4 123.8 120.4 135.3

Gaming net profit before distributions - - - 6.8 8.8

Distributions and industry payments - Racing 137.5 123.7 126.4 135.5 142.0

Sporting grants and distributions to sporting bodies 2.3 3.4 3.0 4.2 4.2

StAtemeNt Of fINANCIAL POSItION

Total assets 128.6 131.8 128.4 125.5 121.7

Current assets 58.7 62.4 52.1 66.6 70.9

Current liabilities 46.4 46.1 46.7 53.6 50.0

Current assets to current liabilities ratio 1.3 1.4 1.1 1.2 1.4

Equity 81.5 84.8 80.8 69.3 69.5

Return on average equity 129% 154% 150% 170% 208%

NZ RACING BOARD tReND SummARy

FIVE yEAR FINANCIAL sUmmARy

2008/09 2009/10 2010/11 2011/12 2012/13

greyhound 4,149 4,271 4,879 5,024 5,288

harness 2,822 2,767 2,715 2,675 2,745

thoroughbred 3,088 3,068 3,052 3,061 3,007

TOTAL 10,059 10,106 10,646 10,760 11,040

imported 25,506 35,323 42,280 48,405 58,141

exported 4,807 6,790 10,509 10,561 10,467

FIVE yEAR RACEs sUmmARy


5NZ RACING BOARD tReND SummARy

Num

BEr

OF

TiCK

ETS

(miL

LiO

NS)

diSTriBuTiON ANd iNduSTry pAymENTS – rACiNg

2008/09115

120

125

130

135

140

145

2009/10 2010/11 2011/12 2012/13

yEAr

$ (

miL

LiO

NS)

SpOrTS LEviES diSTriBuTEd

2008/090.0

0.5

1.01.52.02.5

3.03.5

4.04.5

2009/10 2010/11 2011/12 2012/13

yEAr

$ (

miL

LiO

NS)

TiCKETS iSSuEd

2008/09158

160

162164166168170

172174176

2009/10 2010/11 2011/12 2012/13

yEAr

SpOrTS FiXEd OddS BETTiNg

2008/090

50

100

150

200

250

300

2009/10 2010/11 2011/12 2012/13

yEAr

$ (

miL

LiO

NS)

rACiNg TOTE

2008/091120

1140

1160118012001220

12401260

12801300

2009/10 2010/11 2011/12 2012/13

yEAr

$ (

miL

LiO

NS)

rACiNg FiXEd OddS BETTiNg

2008/090

50

100

150

200

250

300

2009/10 2010/11 2011/12 2012/13

yEAr

$ (

miL

LiO

NS)



6 ABOut uS

ABOuT ThE NZ rACiNg BOArdThe New Zealand Racing Board is a statutory body that exists to lead, promote and enhance our industry; in doing so we support the communities of New Zealand. Our industry partners are:

• thethreeRacingCodes

• theCombinedRacingIndustryGroup(CRIG),whichcomprisestheChiefExecutivesandChairpersonsoftheBoardsoftheNZRacingBoard,NZThoroughbredRacing,HarnessRacingNZandGreyhoundRacingNZ

• theRacingIntegrityUnitandtheJudicialControlAuthority

• recognisedracingindustryorganisationsincludingNZThoroughbredRacehorseOwnersFederation,NZThoroughbredBreedersAssociation,NZTrainersAssociation,NZJockeysAssociation,NZStandardbredBreedersAssociation,NZTrottingOwnersAssociation,NZHarnessRacingTrainersAssociationandeveryRacingClubregisteredwitharespectiveRacingCode

• centralandlocalGovernment

TheNZRacingBoardalsoconsultswiththe33NationalSportsOrganisationsthatderiveincomefromthebetsNewZealandersplaceondomesticandinternationalsports.

The NZ Racing Board has a proud legacy, stretching back to 1951 when the Totalisator Agency Board (TAB) was established as the sole betting operator in New Zealand. This was an internationally significant development as the TAB was the first off-course totalisator service in the world. Throughout that decade the TAB became the fastest growing business in New Zealand’s history and, over 60 years later, its early growth record remains unbeaten. Aswellasleadingandpromotingtheindustrydomestically,theNZRacingBoardplaysasignificantroleinpromotingNewZealandracingtooverseasmarkets.Inthepast12monthstheNZRacingBoardhasexportedbroadcastcoverageofNewZealandracestoAustralia,UK,France,Singapore,NorthAmerica,SouthAfricaandtheMiddleEast.Thisyear,broadcastingrightsfor‘KiwiBred’,aseriesproducedandbroadcastbyTracksidetoprofiletheNewZealandThoroughbredindustry,weresoldtoAustralia,DubaiandSingapore.Importonracingandsportisalsonowasignificantpartofourbusiness, withincreasingnumbersofNewZealandersbettingoninternationalracingandsports.

SportsbettingwasintroducedbytheTABin1996andisnowabigpartofourbusiness.GrassrootssportsaresupportedthroughthebetsNewZealandersplaceondomesticandinternationalsportsevents.TheTABisonlypermittedtotakebetsonsportsthatarerepresentedbyNationalSportsOrganisationsapprovedbySportNZ.Wecurrentlydistributeapercentageofourturnoverandmargininleviesto33NationalSportingOrganisationseachyear.ThesportthatbenefitedmostfromthebetsNewZealandersplacedin2012/13wasBasketball,whichovertookRugbyasthenumberonebettingsportforNewZealanders.

aT a glance

TheNZRacingBoardexiststobenefitNewZealanders

BenefiT

suRplusesTheNZRacingBoardreturnsallsurplusestotheindustryviathethreeRacingCodesand33NationalSportsOrganisations

Wedistributed$142.0milliontotheracingindustryin2012/13

$142.0 million

TheNZRacingBoardcontributes 0.9%ofGDP

0.9%

WeareoneofthelargestretailersinNewZealandwithmorethan690outlets

690

AndoneofthelargestlivebroadcastersinNewZealandthroughTracksideTVand tab tv

laRgesT


7ABOut uS

WeknowfromextensiveresearchcarriedoutthisyearthattheTABisoneofthemostrecognisedbrandsinNewZealand,withover99%recallamongstmembersofthepublic.Thefactthattheirassociationsarenotalwayspositivepresentsuswithachallengeandanopportunitytomoderniseandgrowthebrand’sappealtonewcustomers.

Over50yearsafterthecreationoftheTAB,theNZRacingBoardwasestablishedbytheRacingAct2003.TheAct,whichgovernsustoday,statesthattheprimarypurposeoftheNZRacingBoardistoprovideeffectivegovernancefortheracingindustry,runaprofitablebettingbusiness,promoteandenhancetheindustryandgeneratelongtermprofitforthebenefitofracing.

TodaytheNZRacingBoardsupportsbettingonmorethan69,000domesticandimportedracingeventseachseason,andthenumberofdomesticandinternationalsportingeventsonwhichKiwiscanbetisrapidlygrowing.In2012/13theNZRacingBoardreturned83centsofeverydollarbetinNewZealandtoourcustomers.

Throughourbettingarm,theTAB,wealsooperate341gamingmachinesin31sitesacrossNewZealand.Around91centsofeverydollarspentongamingisreturnedtothecustomer.Followingthepaymentofduties,taxes,leviesandoperatingexpensesapproximately40%ofgrossprofitisdistributedtothecommunityviaourAuthorisedPurposes.AlthoughtheNZRacingBoardisarelativelysmallgamingmachineoperator,withresponsibilityfor341outofthetotal17,500gamingmachinesinNewZealand,weprideourselvesonbeingoneofthemostresponsibleoperators.

Aswellaspromotingtheexcitementofracingandbetting,theNZRacingBoardisconcernedabouttheminorityofpeopleforwhomthisactivitybecomesaproblemandengagesinarangeofharmminimisationinitiatives.OneoftheNZRacingBoard’smostimportantstatutoryfunctionsistopreventandminimiseharmfromgambling.Thisisachievedthroughensuringrobustmeasuresandproceduresareinplace,providinginformationandadviceonproblemgamblingandprovidingexperttrainingtoallstaffwhosellbettingproductsandoverseethegamingmachineareasofthebusiness.WeworkcloselywiththeProblemGamblingFoundationtoensureourpolicies,proceduresandcompliancearebestinclass.

Inadditionweofferproblemgamblingworkshopstoourindustrypartnerstopromoteresponsiblebetting.

TheroleoftheNZRacingBoardtolead,supportandpromotetheracingindustryisnotonlyastatutoryobligation;itisaprivilege.Oursuccessdependsuponcollaboration,cooperationandcommitmenttosharedgoalsacrosstheindustry.

TheTABisthebettingarmoftheNZRacingBoardandthesoleproviderofracingandsportsbettinginNewZealand

TaB

99%ofNewZealandersrecognisethetab brand

99%

TABhas134,000accountholders134,000

0.83ofeverydollarbetthroughtheTABwasreturnedtocustomersin2012/13

0.83

Runs341outofthetotal17,500gamingmachinesinNewZealand

2%

WorkscloselywithProblemGamblingAssociationstominimiseharmfromgambling

minimise

aT a glance


8

KEy EvENTS iN Our hiSTOry

Key eveNtS IN OuR hIStORy

First legalised off course tote betting agency

TAB takes betting on the Melbourne Cup for the first time

Computer betting introduced

Off-course Greyhound betting starts

Trifecta launched - only one per meeting!

1951 1974 1981 1983

2009

2004

1967

2007

Christmas at the Races launched. Commingling introduced with Tabcorp

2009

NZ Racing Board entered into a responsible gambling training partnership with the Problem Gambling Foundation

2010

Self service terminals launched

2003

Multi and % Betting starts

2010

mtab.co.nz launched for mobile betting

2003

Regular imports of Australian Greyhounds commenceNZ Racing Board

granted its Class 4 venue licenses at some TABs

TAB TV launched


9Key eveNtS IN OuR hIStORy

The nZ Racing BoaRd has a pRoud legacy, sTReTching Back To 1951 when The ToTalisaToR agency BoaRd (TaB) was esTaBlished as The

sole BeTTing opeRaToR in new Zealand

2003

Fixed Odds betting introduced

1996

NZ Racing calendar coordinated with Australian calendar

1999

First temporary facility - Claudelands Raceway on Tuesday 14 January 1986

1986

TAB began broadcasting via Action TV

1992

Sports betting introduced

1996

JETBET installed & TIMS 360’s introduced

1984

Internet betting introduced

1998

2013

New Zealand Racing Board formed under the Racing Act 2003

2011

Retail display screens launched to replace Teletext screens

2000

Touch Tone phone betting introduced

2012

Highest Melbourne Cup Day turnover in history with just over $20m. Watch & Bet launched for some sports. Expansion of Racing Fixed Odds betting with Final Field Place

2011

TAB mobile touch site launched. Class 4 operators license obtained. Rugby World Cup turnover was the record for any event at $30 million

$10m achieved for Right Track and Alexandra Park. Record turnover in the history of the NZ Racing Board


10 BOARD memBeRS

BOArd mEmBErSGLENdA HUGHEsINdEPENdENT CHAIRPERsON | ba

GlendaHugheshas25yearsexperienceinmanagement,leadershipandcorporategovernance.Sheisownerandmanagingdirectorofacommunicationsandmediastrategycompany,GlendaHughesCommunication,whichspecialisesinstrategicmanagement,publicchangeprogrammes,governmentrelations,medialiaison,marketing,promotionsandlaunches.MsHugheshassignificantboardandsportingexperiencethroughherserviceontheboardsofcharitabletrustsandtheParoleBoard.SheisamemberoftheInstituteofDirectorsandhasrepresentedanumberofsportsteams,includingNewZealandattheCommonwealthGamesin1982.InadditiontoherBachelorofArtsdegree,sheholdsapostgraduatepaperincreativenon-fictionwriting,acertificateinathleticcareermanagementandhascompletedpapersforaDiplomainbusinessadministration,communicationsanddisputeresolution.

LIZ dAwsONINdEPENdENT mEmBER | bcom

LizDawsonhasextensiveexperienceinprofessionalsportsadministrationandmarketingwiththeNewZealandRugbyUnionandthesuccessfulRugbyWorldCup2011bid,aswellaswiththeWarriorsrugbyleaguefranchiseandHurricanesSuperrugbyorganisation.LizwasappointedtotheBoardinAugust2007andbringsawealthofretailmarketingandcorporatemanagementexperience.

mAURO BARsIGREyHOUNd COdE NOmINEE | LLM(HONS),BA

Hehasspentthelast3yearsleadingabusinesstransformationprojectincludingresculptingtherecruitmentandretentionfunctionsofthebusiness,reinvigoratingtheproductoffering,andmanagingtheEMA’sriskprofile.HecurrentlyleadsoneofthemajorbusinessunitswithintheEMAandisalsoinvolvedinhelpingshapetheEMA’sEmploymentLawactivity,lobbyingandpolicywork.HeregularlyrepresentstheEMAinavarietyofactivitiesandisoftenrequestedasaspeakerforindustryeventsandconferences.

PrevioustothisMaurogainedsubstantialexperienceinbusinessmanagement,corporaterestructuringandlitigation.Hehassuccessfullyledteamsinvariousindustrysectors,includinginevents,thepublicsector,employmentrelationsfieldandincorporatelitigation.HehasmanagedanumberofsuccessfulbusinesstransactionsandhelpedshapethestrategyfornumberofsuccessfulNewZealandentities.

ALIsTAIR RyANINdEPENdENT mEmBER | mcom, ca

AlistairRyanhasextensivedirectorexperienceinbothpublicandprivatecompaniesinNewZealandandAustralia.Duringa16-yearcareerwithSkyCityEntertainmentGroupLimitedthroughto2011,hehasbeenamemberoftheseniorexecutiveteam,holdingthepositionsofGeneralManagerCorporate,CompanySecretaryandChiefFinancialOfficer.HehasalsoservedasadirectorofvariousSkyCitysubsidiariesandassociatedcompanies.PriortoSkyCity,AlistairwasaCorporateServicesPartnerwithinternationalaccountingfirmErnst&Young,basedinAuckland.AlistairholdsaMasterofCommerce(Honours)degreefromCanterburyUniversityandisamemberoftheInstituteofCharteredAccountantsofNewZealandandtheNewZealandInstituteofCompanySecretaries.

GREG mCCARTHyTHOROUGHBREd COdE NOmINEE | bca, ca

FromtheracingheartlandofCambridge,GregMcCarthyisadirectorofSuttonMcCarthyLimited,aconsultancythatprovidesstrategic,financialandtreasuryadvicetocorporateandotherclients.ACharteredAccountant,GregisadirectorofInnovaProductsLimitedandRangatiraForestsLimited.Greghasbeenactiveinthethoroughbredindustryformorethan20yearsasabreederandracehorseowner.GreghasaBCAinAccounting,EconomicsandCommercialLaw.HealsoholdsaGraduateDiplomainRuralStudies.

GRAHAm COONEyINdEPENdENT mEmBER

GrahamCooneyisanexperienceddirectoracrossanumberofsportingbusinessandeducationinstitutions.HeisafoundingdirectorandnowChairmanofBlueSkyMeatsNZLimited(since2008)andhasbeenaboardmemberoftheNewZealandRugbyUnionsince2010.Grahamparticipatesintheracingindustrythroughhisbreedingandracingofafewstandardbredhorses.

ROd CROONHARNEss COdE NOmINEE

RodwastheownerofECMMusic(1995-05)andLifestyleSports(1991-94)andwasappointedtotheBoardinAugust2012asHarnessCodenominee.Astandardbredbreederandowner,hehasservedasChairmanofNorthernHarnessRacing(2008-12)andisimmediatepastPresidentoftheAucklandTrottingClub.HehasalsoservedasChairmanandDirectoroftheNewZealandSireStakesBoard.


11BOARD memBeRS

BOArd mEmBErS’ iNTErESTS rEgiSTErBoard Members, as at 1 August 2013

GLENdA HUGHEsClubsNewZealandIncorporated,ClientofGlendaHughes

LIZ dAwsONHurricanesLimited,Director

WellingtonRegionalStadiumTrust,Trustee

NewZealandOlympicCommittee,BoardMember

HurricanesInvestmentLimitedPartnership,Director

ForsythMorisonLimited,Director

ALIsTAIR RyANKingfishLimited,Chair

BarramundiLimited,Chair

MarlinGlobalLimited,Chair

MetlifecareLimited,Director

MoaGroupLimited,Director

ChristchurchCasinosLimited,Director

AuditorRegulationAdvisoryGroup,Member

GREG mcCARTHyNewZealandThoroughbredRacingIncorporated,board member

Thoroughbredownershipinterests

NewZealandThoroughbredBreeders’Association,member

NewZealandThoroughbredRacehorseOwners’Federation,Member

InnovaProductsLimited,Director

RangatiraForestsLimited,Director

SpringCreekEstateLimited,Director

SuttonMcCarthyLimited,Director

GRAHAm COONEyBlueSkyMeats(NZ)Ltd,Chairman

NewZealandRugbyUnion,BoardMember

PrestonRussellLaw,IndependentChair

Gen-ISouthland,BayofPlenty,Auckland,Director

SouthlandStandardbredBreedersAssociation,CommitteeMember

Standardbredownershipandbreedinginterests

mAURO BARsIGreyhoundRacingNewZealand,BoardMember

Membership&MarketingManager/CorporateLegalCounsel

ema

ROd CROONCroonBloodstockLimited,ManagingDirector

Standardbredownershipandbreedinginterests

LifememberAucklandTrottingClub

NorthIslandStandardbredBreedersAssociationmember

Departing Members, as at 31 July 2013

dR ALAN JACKsON (CHAIRmAN)BroadwayRacingBreedingPartnership,Director

BroadwayTrust,Director

BroadwayOperations,Director

BurnetJacksonPartnership,Partner

FROm LEFT: Alistair Ryan, Independent Member, Graham Cooney, Independent Member, Greg mcCarthy, Thoroughbred Code nominee , Glenda Hughes, Independent Chair, Rod Croon, Harness Code nominee, Liz dawson, Independent Member, mauro Barsi, Greyhound Code nominee.


12 RePORt fROm the BOARD

rEpOrT FrOm ThE BOArd OnAugust1,2013–thestartofGlenda’stermasChairoftheNewZealandRacingBoard–anationaltelevisioncurrentaffairsprogrammescreenedastorycelebratinghorses’birthday.

Init,trainerFrankRitchiewasaskedwhyhislegendarygalloperBonecrusher,whohadjustturned31,wassospecial–eventoday.

Frank’sresponsewasmatter-of-fact.

“Hehadthefightingquality,hejustnevergavein.Therewasmanyatimehewasprettymuchbeatenandhejustkickedback.”

It’sasentimentthatembodiesthespiritofracinginNewZealand,bothintermsofwherewehavecomefromandwherewemustseektotaketheindustry.

Today,racingstillholdsaspecialplaceintheheartsandmindsofNewZealanders.However,we’reworkinginatoughenvironmentandfacingmajoranduniquechallenges.

We’refarfrombeatenasanindustry,butwe’vebeenoffthepacefortoolong.Weneedtokickbackandmakeourrunnow.

We have to change to capitalise on the opportunities we have to grow the racing industry in New Zealand, promote betting on racing and sport and increase returns to our stakeholders – the organisations and participants that depend on the NZ Racing Board to deliver success and prosperity for the thousands of Kiwis involved nationwide.Butwe’vegotsomeseriousissuestodealwith,andwemusttacklethemnoworwatchourindustryfallfurtherbehind.

TheBoard’sprimaryfocusin2012/13wastoworkcloselyalongsidethemanagementteam,ledbyChiefExecutiveChrisBayliss,intakinganin-depthlookateveryaspectofthebusinesswithaviewtounderstandingexactlywhatweneedtodotodeliverthesubstantialstrategicchangeneededtoliftpotentialreturnsforstakeholders.

Ourroadmapforthewayforward–the2013–16StatementofIntent–representstheclearestunderstandingyetofwhatwemustdotoleadthegrowthoftheindustry.

It’sbeenahugeundertakingtorethinkandrebuildthebusinesswithaviewtothefuture,allthewhileensuringwewereoptimisingbusinessperformanceduringtheyear.

Ourresultsin2012/13showwehavethemomentumandtrajectoryneededtoachieveourambitions.

Asabusinessandanindustryin2012/13wekickedback.Ourrunhasstarted.

As a business and an industry in 2012/13 we kicked back. Our run has started


13RePORt fROm the BOARD

iT’s Been a huge undeRTaking To ReThink and ReBuild The Business wiTh a view To The fuTuRe

sTRONG yEAR, sTRONGER FOUNdATIONsTheNZRacingBoard’sperformancewaspositivein2012/13,withstrongresultsacrossthebusinessachievingorexceedingexpectations.Recordturnoverof$1.957billionwas$142.8million,or7.9%,uponthepreviousyear.Thisresultedinatotaldistributionof$142.0milliontothecountry’sthreeRacingCodesandracingindustry.

Thiswasapleasingresult,reflectinganupliftofdistributiontostakeholdersof$6.5millionontheyearbefore.ItwasalsoaclearendorsementofthedecisionoftheBoardandmanagementinDecembertoreforecastthree-yearprofitdistributiongoalsinourrevised2012–15StatementofIntent,firstincreasingthetargetfrom$134.0millionto$135.0millionfrombettingoperationsin2012/13.

Asaresult,2012/13sawtheNZRacingBoardgeneratearecorddistributionforracingandsportinNewZealand,aswellasafurther$3.8millionpaidinfeestothecountry’sNationalSportingOrganisations.

Thebusinessanditsstakeholdersshouldbeproudoftheseachievements.

CHECKs ANd BALANCEsWhiletheyearwassuccessful,2012/13alsohelditsfairshareofchallenges.

Broadlyspeaking,economicconditionsdomesticallycontinuedtobeuncertain.Wealsosawadistinctsofteningofsentimentinourkeyoverseasmarkets,notablyAustralia.

Wecontinuetoseepressureonthedomestictote,ourmostimportantandvaluableproduct,thoughthishasbeenoffsetbygoodgainsinoffshoretotebetting.AmarkedcustomerpreferencetowardFixedOddsbettingonracinghasalsobeensignificant.Whilethishasdrivenincreasedturnover,itcomesatalowermarginthantotebetting.

Insports,wesawjusthowimportanttheRugbyWorldCup2011wastolastyear’sresults.Turnoverof$30.0milliononthetournamentcontributed$3.3millioninnetbettingrevenuein

2011/12,showingthevalueofmajorsportingevents.Todeliverthe2012/13resultintheabsenceofamajoreventwaspleasing,aswasarecordturnoverresultof$20.1milliononwhatistraditionallyourbiggestdayoftheyear–thefirstTuesdayinNovember,MelbourneCupDay.

AlthoughweoperateastatutorymonopolyinNewZealand,wefaceincreasingandaggressivecompetitionnotonlyfordiscretionaryspendacrossallentertainment-relatedsectorsbutfromotheroperatorsinthegamblingandbettingsectorathomeandoffshore.

Inparticular,offshoreleakage–thesituationwhichhasresultedfromtheincreaseduseoftechnologyandtheincreasedpresenceofoverseasoperatorsintheNewZealandinternetspace–continuestobeamajorissueforthebusiness,industryandgovernment.TheseoperatorsuseourproductsbutdonotcontributeinanywaytotheNewZealandcommunity,theydonotpayanythingtotheprovidersoftheNewZealandproductstheyofferwageringon.Ourracingcodesandsportsmissoutonfairreturns,problemgamblingreceivesnolevyandthegovernmentmissesoutonitstaxes.Themodernandfast-changingglobaltradingenvironmentthatrecognisesnoboundarieswiththegrowthoftheInternet,needstobeaddressedasamatterofhighestpriority.

It is estimated these overseas operators are taking more than $300 million out of the New Zealand market annually.Furthermore,offshoreprovidersofferbettingonourproductstotheirinternationalcustomers,whichtranslatestoadditionallossestotheKiwiRacingandsportingcodes.Theyareliterallyprofitingfromanindustryandpayingnothinginreturn.

Asanindustrythatmustfightforeverydollaritearns,wewillnotletthissituationcontinueuncheckedandunchallenged.

Ontopofallofthis,weevenhadtheweathergodstocontendwithinthesecondhalfoftheyear,firstwithdroughtandthenfloodconditions.Thiswasakeycontributortowardstheabandonmentof12racemeetingsacrossthethreeCodesnationwide.


14

Despitethesechallenges,thebusinesshasdeliveredgrowth.Butthebiggesthighlightof2012/13wastheformulationandintroductionofanambitiousandachievableplanforthebusinessandtheindustrythatwillbeagame-changer.

GETTING UP TO sPEEdChangingthefortunesoftheindustryrequiresustomakechangestothewaywedobusiness.WiththefullsupportoftheBoard,ChrisBaylisshasledasweepingreviewandrealignmentofcurrentoperationstosetthestagefordeliveringthesustainablegrowththeindustryneeds.

Keytothishasbeenliftingthemetabolicrateofthebusiness,thepaceatwhichwe’reabletosortissuesoutandtakeadvantageofopportunities.

InthissensetheNZRacingBoardneedstobefitter,fasterandstronger.Weneedtohaveasolidtrainingplan,thebestequipment,experiencedandknowledgeablecoaches.Weneedgoalsthatchallengeusandinspireustoachieve.

With our 2013–16 Statement of Intent we have the plan. The match-fitness of the business improved in leaps and bounds in 2012/13 and we’re ready to get the results.Thiswillrequirethebuy-inofeveryoneinvolvedinthebusinessandtheindustry.Asanyathletewhostrivesforexcellenceknows,gettingresultsmeanssacrifice,commitmentandoftenafairamountofpainalongtheway.

Thisiswherewefindourselvestoday.Together,wehavemuchtodoandchangestomake.Quitesimply,wemustgetthingsdone.InthepasttherehavebeenmanyfalsestartsforNewZealandracingbutwe’renowreadyandabletoruntheraceofourlives.

HANds ON THE REINsIamdelightedtotakeupakeygovernancerolewithinabusinessandindustryIhavelonghadapersonalandprofessionalinterestin.

AlthoughIhaveonlyjustcommencedmytermasChair,IamimpressedbythecalibreofthemembersoftheBoardandmanagementteam,especiallytheirappreciationoftheneedforconsensusandcollaborationfoundedonbest-practicegovernanceandleadership.

MauroBarsi,GrahamCooney,RodCroon,LizDawson,GregMcCarthyandAlistairRyanallhaveexceptionalprofessionalbackgrounds,aswellasanabsolutecommitmenttogrowingtheindustry.

Lizdeservesspecialacknowledgmentformorethansixyears’serviceontheBoard.Liz,whowillstepdownsoon,hasbeenaninvaluablemember,providingcrucialgovernancecontinuityin2012/13,inparticular,whensixnewadditionsweremadetotheseven-memberBoard.

IwouldalsoliketoacknowledgetheworkofAlistairRyan,whosteppedupadmirablytoleadtheBoardasDeputyChairmanfollowingthedepartureofDrAlanJacksonasChairmaninMarch2013.

Critically,ourfocusonconsensusandcollaborationextendstoourrelationshipswithstakeholders.Withouttheinvolvementandconsensusoftheentireindustry,wecannotachievethesustainablegrowthweallneedtodeliveronbehalfofthethousandsofKiwisinvolvedinthisincrediblyimportantsector.

WemustunderstandthatracinginNewZealandismorethanthesumofitsparts–we’reallinittogetherandonlybyworkingtogetherwillwegetresults.

TheBoardandIarelookingforwardtoanothersuccessfulyearforthebusinessandforracing.We’vegotsomegroundtomakeupbutit’sclearwe’realreadyhittingourstride.

Todescribewhereourindustryisandwherewemusttakeit,IrecallwhatwasarguablyNewZealand’sgreatestracingmoment–Kiwi’swininthe1983MelbourneCup.

AtthetailofthefieldonthefinalturnatFlemington,SnowLupton’sstockhorsefromWaverleycamefromalmostnowheretoblitzthefield.

Thecaller’swordsthatdayembodytheambitionsofallofusinvolvedintheNewZealandracingindustry:“Kiwi’sflying–mightbeatthemall!”

Indeed.

Glenda HughesChair,NZRacingBoard

RePORt fROm the BOARD

iT’s Been a huge undeRTaking To ReThink and ReBuild The Business wiTh a view To The fuTuRe

15



16

rEpOrT FrOm ThE EXECuTivE LEAdErShipOftentheword‘change’elicitsfear,resistanceandresentment.Tome,changerepresentsopportunity.

TosaythattheNewZealandRacingBoardandthecountry’sracingandbettingindustryrequireschangeisanunderstatement.Putsimply,wehavetochange.Thereisnootherwayforward.

Inthisrespectthereiscauseforoptimism.

Thefocusofmyfirst12monthsasChiefExecutivehasbeentoclearlyunderstandandagree,intandemwithwhatwasessentiallyanewBoard,exactlywhatthebusinessneededtoachievetodeliverbetteroutcomesforourstakeholders–thethreeCodesofThoroughbred,HarnessandGreyhoundracing,andthetensofthousandsofKiwiswhodependontheindustryfortheirlivelihoods.

Change for the sake of change will never create success. Rather, change requires planning and purpose – a clear understanding of where we are now, where we need to go and how we’ll get there. PreparingtheNZRacingBoardforrealchangeinvolvedanin-depthexaminationofeveryfacetofwhatisacomplexbusinessandsubjecttoawiderangeofinfluencesinternallyandexternally.Thefirstphaseofthisexaminationwas‘PositioningforGrowth’–essentiallypausingcurrentandplannedactivitytodrilldownonallareasoftheoperationandexpenditureacrosstheorganisationtoallowustomakebetterdecisionsregardingfutureinvestment,directionandvisionfortheindustry.

Bynecessity,whatresultedin2012/13wasatransitionalphasefortheNZRacingBoardaswesetthestagetofundamentally‘reboot’thebusinessby‘PlanningforGrowth’,focusingonsettingtherequisitefoundationstoensurewecanaffectthechangerequiredbyracinginNewZealand.

NostonehasbeenleftunturnedateverylevelofthebusinessindevelopingourplantorevitaliseracinginNewZealand.Our2013–16StatementofIntentrepresentsaboldbutrealisticandachievableplantodeliveroutcomesthatwillrestoreprideandprosperity.

RePORt fROm the exeCutIve LeADeRShIP

Our overarching strategy is both evolutionary and revolutionary and shows we have the momentum and trajectory to achieve sustainable growth


17

FROm LEFT: Glenn Patrick, Executive GM TAB, monique Cairns, Executive GM Strategy and Transformation, Colin Philp, Chief Information Officer, stewart mcRobie, Chief Financial Officer, Emma scott, Chief Talent Officer, martin saunders, Chief Operating Officer, Chris Bayliss, Chief Executive.

no sTone has Been lefT unTuRned aT eveRy level of The Business in developing ouR plan To ReviTalise Racing in new Zealand



18 RePORt fROm the exeCutIve LeADeRShIP

Ouroverarchingstrategyisbothevolutionaryandrevolutionaryandshowswehavethemomentumandtrajectorytoachievesustainablegrowth.

Lockinginthiswide-rangingplanhasdemandedtimeandastronglycommercialapproachtothewaywerunthebusinessonbehalfofourstakeholders.MyfirstclearobservationoftheNZRacingBoardwasthatasabusinessitlackedaclearcorporatedirectionfocusedondeliveringoutcomesandresults–acommercialedge.

ItistruethatweoperateinamonopolysituationinNewZealandwithregardstosportsandracebetting.Buttherehasbeenlittlerecognitionoftheneedforaclearlydefinedandmeasurablestrategytochangeandgrowinwhatisanincreasinglycompetitiveenvironment.

For too long the industry has been held back by underinvestment and factionalism. Its ability to capitalise on opportunities for growth has been stymied by decades of conservatism and a lack of desire and commitment to make change.Issueshavebeendebated,strategiesplanned,tacticsdefinedandoutcomesset.However,thehindrancehasbeenalackofappetite,agreementandconsensustodeliver.Plansforchangehave,asresult,beenfiledawayinthe‘toohardbasket’,nevertoseethelightofday.Asaresult,we’vefallenbehindwherethebusinessandindustryneedtobe.

Thatchangesnow.Iamafirmbelieverinwhatgetsmeasuredgetsdone.

Establishingexactlywhatweneedtodoinvolvedclearrecognitionoftheconstraintsweface–inareassuchasIT,capabilitiesandtheenvironmentinwhichweoperate.ThisrecognitionhascausedmetorecalibrateandresettimelinesaroundthegoalsIsetouttoachieve.Butmyexpectationremainsunchanged–todeliversustainableprosperityforthecountry’sracingindustry.

Oneofmyfirstdecisionswastoreforecastprofitdistributiontargets.Asaresult,theoriginal2012/13targetof$134.0millionfrombettingoperationswasreforecastinJanuary2013to$135.0million.

I’mdelightedthatthebusinessrosetothatchallenge.

Recordturnoverof$1.957billionresultedinasurplusfordistributiontothethreeRacingCodesandRacingindustryof$142.0million.

Butitisjustthebeginning.Wemust–andwill–continuetosetthebareverhigherforthebusinessandourstakeholderstoreturnracingtoitsrightfulplaceintheNewZealandpsyche.

sETTING THE FOUNdATIONsKeytothedevelopmentofournewcorporatestrategyhasbeentheneedtoensurethebusinesshasthe‘match-fitness’toleadthewayinthedevelopmentofastrategicplanforNewZealandracing.

Asaresult,ourtoppriorityin2012/13wastogetourownhouseinorder.Thathasmeantcreatinganabilitytorun‘today’betterwhileplanningfor‘tomorrow’,underpinnedbyhighperformanceexpectationsandaccountability.

Wesetoutfivepillarsthatwouldbenecessarytoprovidethefoundationsforachangeprogrammethroughaninternalandexternalfocus.

These‘FiveCs’–Culture,Capabilities,Customer,CommunityandConvergence–arethebaseforeveryaspectofchangethebusinesshasundertaken.

CULTURE – THE dEsIRE TO wINThefuturesuccessoftheNZRacingBoardand,ultimately,theracingindustryiscontingentontheengagementofourpeople.

AsChiefExecutive,creatingawinningcultureattheNZRacingBoardismoreimportanttomethananythingelse.Withouttherightculture,ourambitiontogrowthebusinessandtheracingindustrywillnotsucceed.

InSeptember2012weundertookthefirstsurveyofstaffsentimentinmorethanadecadetobetterunderstandwhatneedstobedonetoimprovestaffengagementandperformance.Theresultsweresobering,withthetotalengagementscoreof66.5%wellbelowtherecognisedbenchmarkof76.4%.

TogaugeprogressthesurveywasagainconductedinJuly2013,showingsignificantprogressinthiskeyarea.Injust10monthsthegapbetweenwherewewereandwhereweneedtobehasclosedmarkedly.Inwhatwasexpectedtobeathree-yearprocesstoshiftourengagementscoretothebenchmark,wehalvedthegapinunderayear,with70.9%ofstaffnowengaged.

CAPABILITIEs – INVEsTING IN sUCCEssCloselyalignedtoresettingourculturehasbeentherebuildingoftheinternalcapabilitiesofthebusinesstoensureourstrategycansucceed.

‘Upskilling’everyfacetofthebusinessisintegraltothelong-termstrategicobjectivesbecausewithouttherightpeople,processesandsystemsinplacewecannotachieveourlonger-termambitionsfortheindustry.


19

Therehasbeentheneedforconsiderableinvestmentinthisareagiventhatthebusinesshas,historically,underspentondevelopingitsowncapabilitiesfordecades.Restructuringcostsin2012/13were$2.6million–asignificantinvestmentbutonewhichisabsolutelyvitalifwe’retobesuccessful.

Duringtheyearwecompletelyrebuiltourfinanceandreportingfunctionfromthegroundup,puttinginplaceaneffectivesystemofpeopleandprocessestomonitorandcontrolcostsacrossthebusinessandallowforinvestmentbasedonincreasedrevenueandreturnstotheindustryalongsideleveragingwhatisastrongbalancesheet.

TheprofitabilityoftheTABbettingoperationhasincreaseddespitechangingcustomerpreferences,primarilytowardFixedOddsbetting,whilewehavealsoidentifiedandimplementedexcitingnewinitiativesandproductstodelivergrowthandexpansion.

OurInformationTechnologyoperations,onwhichwearesoincrediblydependentinthisdigitalagebutwhichhavebeenneglectedforsolong,havebeenvastlyimproved,thoughmuchmoreworkandinvestmentisrequiredtopositionthebusinessevenmorecompetitivelyinamodernenvironment.

OurBroadcastingbusinessunit,whichcontinuestodelivertop-notchracingcoverageandinformationviaourextensivenetwork,isdevelopinganexcitingnewstrategytoenhanceviewerexperienceandincreasereturnstotheindustry.

OurSalesandDistributionfunction,encompassingahugeandvariednetworkofsaleschannels,hasbeenstreamlinedandenhancedinresponsetowhatisadynamicretailmarketplace.

WehaveputinplacegovernanceprocedurestodeliverthebestpossibleinterfacebetweenmanagementandtheBoard,aswellaswithindustrystakeholderstoensureourfunctionsandprojectsarealigned,agreedandhavethebestshotatsuccess.

Therehasbeenunprecedentedchangeinternally.Theupshotisacorporatestrategyforthebusinesswhichisbothboldandachievable.

Iamincrediblyproudofourpeople.ChangecanoftenbedifficultbutI’mheartenedbythepositivityofthisdedicatedgroupandthecommitmenttogettingresults.

Thebusinessnowhasthecapabilitiesandexpertiserequiredtodrivesuccess.Itisaninvestmentthatwilldeliverthepaybacktheindustryneeds.

CUsTOmER – REsPONsIVE ANd INNOVATIVEAsinanybusinessthatcompetesfordiscretionaryspend,wemustalwaysseektoimprovethewayweinteractandengagewithcustomerstoensurewe’reprovidingthebestservicepossible.

Our channel mix continues to shift markedly to digital channels (online plus mobile), more than doubling their turnover share to 29% since 2008. Clearly, digital is the future of our offering to customers.Thisshiftledustoreviewoursaleschannelsin2012/13,notablyresultinginourdecisiontoconsolidateourPhonebetoperationsintotwocentres.Phonebetisourhighestcost-to-servechannelbuthasexperienceddecliningyear-on-yearusage–approximately10%eachyearsince2007.

WiththedecisiontosellourEllersliebuilding,itwasdecidedtoclosetheAucklandPhonebetcentreandconsolidateservicesatexistingcentresinWellingtonandChristchurch,effective1October2013.Thepurposeofthiswasthree-fold:first,torespondtoclearchangesincustomerpreference;second,toreducecostsandallowforinvestmentingrowthchannelssuchasdigitalwithonlineenhancements,includingmobileappsandself-service;andthird,tomaximisereturnstotheindustrybyreducingoperationalexpenditure.

Ourcommitmenttocustomerserviceisunwaveringandtheinvestmentmadewillallowustobettertransactwiththemusingchannelsthatbestsuitthemnowandintothefuture.

COmmUNITy – KNOwING wHO wE sERVENobusinessofoursizeandscopecansucceedwithoutunderstandingthecommunitiesweserve.

RacingandsportdefineusasNewZealandersandtheindustrymakesamassiveeconomicandsocialcontributiontothecountry.

These ‘five cs’ – culTuRe, capaBiliTies, cusTomeR, communiTy and conveRgence – aRe The Base foR eveRy aspecT of change The

Business has undeRTaken



20 RePORt fROm the exeCutIve LeADeRShIP

In2012/13wehaveworkedhardtoenhancethereputationofthebusinessasabettingproviderandhighlightthevalueandimportanceoftheindustry.WeexistforNewZealandandthat’sajobwe’vetakentoheart.

BeitinthemajorregionsofAuckland,Waikato,Wellington,CanterburyandOtago,orthesmallerregionsandtownselsewhere,racingtoucheseveryKiwicommunityinsomeway.TheNZRacingBoardrecognisesitsresponsibilitytothesecommunitiestoleadthewayinensuringracingcontinuestomakeapositivecontribution.

CONVERGENCE – HEAdING IN THE sAmE dIRECTIONInmyfirstyearasChiefExecutiveIhavehadtheopportunitytotalkatlengthwithindustrystakeholdersandparticipants.

BeitatourseriesofnationwideroadshowswithMinisterforRacingNathanGuyinOctober2012,ourfirstAnnualGeneralMeetinginsevenyearsinDecemberlastyear,inregularmeetingswiththeChiefExecutivesandChairsoftheracingCodesandattheCodes’annualmeetings,thereisacommonrefrain–theindustryhasseriousproblems.

The reasons why are many, varied and complex. However, we all agree the industry requires increased investment and returns to grow.ThatistheprimedirectiveoftheNZRacingBoard.Butwecannotdoitalone.

Growingtheindustryrequiresallstakeholderstobeonthesamepage,tobeheadinginthesamedirection.Thisdemandsclearunderstandingofourrolesandresponsibilities,anagreedandalignedwayforwardand,importantly,recognitionthattherewillbenosubstantivegainwithoutsomepain.

Positivechangeforthebetterwillrequireadegreeofsacrificefromallofus,butalwayswithaviewtothegreatergoodifwearetoshapetheindustryintosomethingbiggerandbetter.Itdemandstime,consultation,considerationandconvergenceofthinking.Wemustputasidepre-conceivednotionsandagendasandgetonwiththetaskofgrowingtheindustrytogether.

Ihavebeenhugelyimpressedbythedesireofallstakeholderstoworktowardthis.

ThefirstmajorstepinthisprocesswasthedevelopmentoftheNZRacingBoard’scorporatestrategy.Withthisnowinplaceandagreedbyindustrystakeholders,wecanworktowardaligningourplanstogetresults.

Therefore,ourfocusnowshiftstoleadingthedevelopmentofacohesiveplanfortheindustryasawhole,withrecognitionandunderstandingofoursharedchallengesandopportunitiesandanagreedsetofimperatives,initiativesandoutcomes.

IN FOR THE LONG RUNOurfive-yearstrategicframeworkhasbeendevisedtomitigatecurrentthreatsandconstraintswhileensuringwearecapableofcapitalisingonouropportunities.

Thedetailofthisframeworkisfullyexplainedinour2013–16StatementofIntent.Everyoneacrossthebusinesshasplayedapartinitsdevelopment;theindustryhasworkedcloselywithusinbringingittolife.ItisaplanwefirmlybelievewilldeliverthechangeracinginNewZealandneeds.Itisambitiousbutachievable.

Atitshighestlevel,the2013–16StatementofIntentdefineshowwewillgrowreturnsacrosstheindustrybyrunningourbusinessevenbetterandmoreinnovatively.

Withcleartimelines,measuresandoutcomes,itisaplanthatwillformthebasisofaneweraforracinginNewZealand.

Alreadywehavemadeincredibleprogressandthereissomuchmoretocome.

ON THE RIGHT TRACKIamextremelyproudofourachievementsoverthepast12monthsasabusinessandasanindustry.

IwouldliketothankourtalentedandcommittedmembersoftheBoard,whohavebeenextraordinarilysupportiveandunderstandingoftheneedforchange.Wearefortunatetohaveagroupofsuchinfluentialpeoplewhounderstandtheneedsoftheindustryandwhohavebroughttheirconsiderablecommercialacumentothetable.

Iamthankfultohaveagreatteamofseniorexecutivesandstaffleadingthecharge.ThepassionandcommitmentofthesetalentedpeopleneverceasestoamazemeandI’mcertainwehavetherightpeopleintherightplacetogettherightresults.

IamalsogratefultotheCodesandthemanypeopleinvolvedinracing.I’vecertainlyneverlackedforadviceonwhatweneedtodoandIwillcontinuetoseekoutandwelcomethatadvice.

Thereisstillalongwaytotravelbutwe’reclearlyontherighttrack.

Chris BaylissChiefExecutive,NZRacingBoard

ofTen The woRd ‘change’ eliciTs feaR, ResisTance and ResenTmenT. To me, change RepResenTs oppoRTuniTy

21


Racing and spoRTs define us as new ZealandeRs


22


23

Our BuSiNESS, iNduSTry ANd CATEgOryTheracingindustryhasbeenattheheartofNewZealandsincecolonialtimesandhastouchedthelivesofvirtuallyeveryNewZealanderinsomeway.TheNZRacingBoardheadofficeinPetoneisbasedonlyakilometrefromthefirsteverThoroughbredmeetingrecordedinNewZealand,whichtookplaceonPetonebeachin1862.

Today,theNewZealandracingindustryisamajorcontributortotheeconomyoflocalcommunitiesacrossNewZealandandtothenationaleconomyoverall.Racingcreatestheequivalentofmorethan17,000full-timejobs,nottomentionaccommodation,travel,fashionandentertainmentproviderswhoallbenefitfromtheindustry’seconomicwellbeing.ThebloodstockindustryisalsoofinternationalimportancetoNewZealand,withtheexportsaleofhorses–mainlytoAustraliaandAsia–generatingmanymillionsofdollarseachyear.

Inadditiontothedirect,economicbenefitstheindustrydelivers,racingevokesapassionandcommitmentamongstitsfansthatistheenvyofothersectors.

TheindustryandouroperatingenvironmenthavechangeddramaticallysincetheNZRacingBoardandRacingAct2003cameintoexistence.Sadlyourdaysofexponentialgrowthseemveryfarbehindus.Todaytheindustryiscaughtina‘downwardspiral’.Inorderforustochangeourfortunesandreturntoagrowthspiralweneedtounderstandthechallengeswefaceanddevisestrategiestotacklethemtogether.

Intheabsenceofarobuststrategy,theNZRacingBoardandtheindustryhavebeensubjecttoanumberoftrendsforseveralyears.Todaywefacechallengesonthreelevels:asabusiness,asanindustryandasacategoryofspend(anoperatorinthegamblingsector).

OUR BUsINEssAsabusinessweneededtoaskourselveswhatitwouldtaketobegreatagain.ForthepastfiveyearstheNZRacingBoardbettingprofithasshownlittlegrowth.

Onceourcorebusiness,domesticTotebettinghasbeenindecline,reflectingtheglobaltrend.ImportTotehowever,isincreasing,asweimportmoreraceofferingsforourcustomers.In2012/13,theNZRacingBoardimported20%moreinternationalracesthaninthepreviousyear.ImportToteturnoverisexpectedtoexceeddomesticsalesbytheendofthecomingfinancialyear.

WhilstFixedOddsbettinghasbeenflatglobally,theFixedOddsracingmarketisstillmaturinginNewZealandandweareexperiencinggrowth;albeitsomeofthisgrowthisfromcustomersswitchingtheirspendfromtheTote.TheNZRacingBoardhassomewaytogobeforethecontributionofracingFixedOddsapproachestheglobalaverageof20%shareoftheracingbettingwallet;atpresentitis12%.

ThechallengethatthemigrationofturnovertoFixedOddspresentsistheTotedeliversattractivemarginstotheindustry,whereasFixedOddsbettingdeliversmuchlowermarginsandcanbealoss-leaderifresultsgoagainstourbookmakers’odds.Weplantomitigatethisbyintroducingnewproductsincludinga‘jackpot’bettypethatwillcontinuetobuildourproductportfolio.

FixedOddsbettingonsportholdsgrowinginterestforourcustomersandtheNZRacingBoardiscommittedtosatisfyingcustomerexpectationthroughthedeliveryofanextendedrangeofbettingopportunitiesonawiderrangeofsportingevents.

OuR BuSINeSS, INDuStRy AND CAteGORy

NewZealandracinggeneratesabout0.9%ofGDP,around$1.6billion

$1.6 Billion

52,000Involvesmorethan52,000NewZealanders

Createsabout17,000fulltimejobsthatgeneratemorethan$679millioninsalariesandwages

17,000

Providesfacilitiestomorethan400communitygroups

400

Wasdominatedbydomesticracing20yearsagobuttodayonly40%ofourbettingbusinesscomesfromdomesticracing

domesTic Racing

Thoroughbredracehorsesownersreceiveanannualreturnof$24forevery$100theyinvestintheiranimals

annual ReTuRn

In1985theTABhad95%shareofthegamblingmarketinNewZealand;todayithasa14%shareofthemarket

gamBling maRkeT

Turnovershareindigitalchannels–onlineandmobile–hasdoubledto29%since2008

douBled

aT a glance


24

Theglobalincreaseinbroadcastingoflivesportshasledtosignificantgrowthinlivebettingduringthegameandweexpectthistrendtocontinue.Aswellasdeliveringsignificantreturns,majorsportingeventsgiveustheopportunitytoimproveourpresenceinthemarketplaceandappealtonewcustomers.TheFIFAWorldCupin2014presentsapowerfulopportunityfortheTABtowinnewbettors.

AlthoughtheNZRacingBoardisoneofNewZealand’slargestlivebroadcasters,ourtwochannelsarestillbroadcastinStandardDefinitionanduntilrecentlywehadnostrategyfortheinevitabletransitiontoHighDefinition.OurITinfrastructureis30yearsoldandcannotcurrentlysupportthedevelopmentofnewtechnologies,productsandinnovationsthatourcustomersexpect,includingamobileapp.Ourretailnetworkdoesnotreflectthebrandexperienceourcurrentandfuturecustomersexpect.Therehasalsobeenunderinvestmentinourownstaff.Clearlychangeisneeded.

TURNOVER By PROdUCT – 10 yEAR TRENd

10 yr CAGR

-1.5%

5.6%

8.9%

53.6%

domestic tote Import tote sportsRacing FOB

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

100

200

300

400

500

600

700

800

900

$(m

illio

ns)

TheNZRacingBoard’sbrandandbrandarchitectureisalsoconfusing.WearerepresentedbyanumberofbrandsincludingtheNZRacingBoard,TAB,TABSport,TheRaces,TABTV,TracksideandRadioTrackside.AlthoughtheTABbrandisrecognisedby99%ofNewZealanders,theirassociationsarenotalwayspositive.Furthermore,thereislittleunderstandingthattheTABisonlyonepartofthemuchbroaderroletheNZRacingBoardplaysinNewZealand.

TheNZRacingBoardhasawidebaseofcustomersbutweknewverylittleaboutthemuntilthisyearwhenamajorresearchexerciseinvolvingmorethan2,000NewZealanderswasconducted.Thesewereacombinationofcustomers,non-customersandmembersofthepublic.Theinvaluableinsightsthatcamefromtheresearchwillinformourfuturestrategies.ThereisaclearneedtotellthestoryofwhatNZRacingBoardandTABdofortheindustryandcommunityatlarge,includingmakingcustomersmoreawareofhowmuchwecontributetograssroots.


wHICH OF THE FOLLOwING dO yOU KNOw THAT THE NZ RACING BOARd dO?

Dontknow 21%

other 2%

Promotetheracingindustry 70% 83%

run the tab 44%26%

Returnprofitsonracebettingtotheracingindustry 50%32%

Maximisebettingprofitsforthelong-termgoodofNZracing 37%24%

Returnprofitstosportingbodies 24%15%

General population

TAB customers


25

OneofthechallengestheNZRacingBoardfacesiswestillknowverylittleaboutaroundhalfofourcurrentcustomers,whospent$900millionincashtransactionslastyear.Withoutaccountinformationonthesecustomers,wefacesignificantbarrierstoourabilitytobuildorganisationalrelationshipswiththem,communicatewiththemdirectlyorseektheirfeedbackonourproductsandservices.Meanwhile,ouroverallcustomerbaseiscontractingasthenumberofcustomerswhobetregularlyisdecreasing.Thecorebaseofknowncustomershasshrunkto100,000regularbettors–halftheleveloveradecadeago.

ThepaceofchangesincetheNZRacingBoardwasformedtenyearsagohasbeenincrediblyfastandcontinuestoaccelerate.Wenowoperateinadynamic,digitalenvironmentthatdifferssignificantlyfromtheworldof2003.Thishasledtosignificantchangesincustomerbehaviourandexpectationsandwehaveworktodotocatchup.

TAB CUsTOmERs - “BET LAsT 7 dAys”

50k

0k

100k

150k

200k

250k

4 Q

uart

er m

ovin

g av

erag

e

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

TheNZRacingBoardislaggingfarbehindinonlinecompetitiveness.Ourgrowthopportunitiesareinhibitedandourcustomersfrustratedbyatechnologyplatformthatlagsbehindthenormin21stcenturyNewZealand.WedonothaveaTABmobileapp,areunabletostreamliveracingeventsthroughtheInternetanddonotprovideWi-FifacilitiesatTABretailoutletsandindustryeventvenues.Untilthisyearwedidnotroutinelyengagewithourcustomersonline,wherethemajorityofNewZealandersareactive.Priorityprojectsarenowunderwaytoaddresstheselimitations.ThisyearweagreedonasocialmediastrategyandlaunchedTABFacebookandTwitter,throughwhichwearenowactivelyengagingwith20,000fans.

CUsTOmERs GOING dIGITAL

0%fy08 fy12

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

14%

15%

10%

6%

30%

25%

1%

28%

9%

8%4%

28%

22%

Internet

mobile

PhoneTouch Tone

OncoursePubs/Clubs

Retail/Branch



26

OUR INdUsTRyAnecdotallyithasbeensaidformanyyearsthatthestakesaretoolowinNewZealandandthereturnoninvestmentforownersisunsustainablylow.ThisyeartheNZRacingBoardcarriedoutacostingexercisetoquantifytheproblemsowecanleadtheindustryindevelopingsolutions.

OurresearchestablishedthattheownerofaracinganimalinNewZealandtodaywill,onaweightedaverageacrosstheracingcodes,recoveronly24%oftheirrelatedexpenses(excludingtheinitialinvestment/purchasecosts).Inotherwords,theracingindustryownersasatotalgrouphavea76%lossannually.

Whilstthesefiguressoundalarmingtheyarerepresentativeofaglobalrealityforowners.

Garneringdifferentresults,aninternationalcasestudycanbefoundinHongKong,SingaporeandSouthKoreawheretheThoroughbredindustryinfrastructureissetupandgovernedverydifferentlytoNewZealand.Theyareusuallyfocusedaroundoneortworaceclubsandracingownersmakeaprofitontheirinvestment.

Wearerelyingonadecreasingnumberofcommittedhobbyists,whosustainpersonallosses,tokeeptheracingindustryalive.Wemustdoeverythingwecantoincreasetheirreturnssoownershipbecomesamoreattractivepropositiontonewcomers.

Racedayattendancehasfallenconsiderablyinthepastdecadeascustomers’entertainmentchoiceshaveincreasedand,withthat,competitionforthediscretionarydollar.AlthoughmostClubscancountonthesupportofacoreofcustomerswhoarecommittedtothedomesticindustry,theyarealsoincreasinglydependentonindustryfunding,whichisearnedbytheNZRacingBoardthroughanincreasinglydiversebasethatincludesbroadcasting,sportsandgaming.Despitethedeclineincustomernumbers,theindustrycontinuestosupportracingat65venueshostedby62Thoroughbred,47Harnessand10GreyhoundClubs.

AnumberofClubsdoanexcellentjobofattractingcustomersthroughspecial,promotedeventssuchasChristmasattheRaces,MidwinterChristmasattheRacesandtheInterislanderSummerFestival.TheNZRacingBoardhasadedicatedteamthatsupportsthecoordination,promotionandmanagementoftheseeventsalongsidetheClubs.52,000peopleattendedthefirstChristmasattheRaceseventin2007.By2012attendancehadnearlydoubledto103,000.

THE GAmBLING CATEGORyNearly30yearsagoTABhad95%marketshareforthegamblingcategoryinNewZealand.In2002,gamblingexpenditurewas $1.6billionand14%ofthatturnoverwasgoingthroughtheTAB.Today,expenditurehasincreasedto$2.1billionbuttheTABsharehasremainedflatat14%.TheNZRacingBoarddidn’tdoanythingtoprecipitatethisdecline;itjustfailedtoreinventitselfasthecategorygrewoverthepastyears.

yEAR ENdING (June/July)

Casinos machines Lotteries Betting

NZ GAmBLING mARKET ANNUAL ExPENdITURE

ExPE

NdI

TURE

(m

illio

ns)

$0

$500

$1,000

$1,500

$2,000

$2,500

2002 2004 2006 2008 2010 2012

2012share

14%

20%

42%

24%

5 yrChange

1.3%

4.8%

-2.1%

1.7%



27

Whilstthecategoryitselfisrelativelyflat,weknowfromourcustomerresearchthereisgreatpotentialtogrowifwecanattractcustomerswhowanttoenjoysocial,funbetting.Non-customers,especiallysportsfans,wereextremelypositiveaboutwhattheTABhastooffer.

AsthesoleproviderofbettinginNewZealand,oneofthebiggestchallengesfortheNZRacingBoardisthethreatfromoffshoreleakage.TheNZRacingBoardconservativelyestimatesthatmorethan$300millionisbetoffshoreeveryyearbyNewZealanders.Thissignificantrevenuelossisestimatedtocostthelocalracingindustryupto$35millioninannualdistributions,whiletheestimatedcosttotheGovernmentis$30millionperyearinlostrevenue.

Withtheexpansionofdigitisation,NewZealandersareaccessingafullrangeofinternationalbettingproductsandservicesonline,includingsportsbetting,racebetting,poker,bingoandcasino-stylegames.LegislationprecludesusfromofferingmanyofthebetsNewZealanderswanttoplace,includingnon-racingorsportrelatedeventssuchasTVtalentshowsandaswesawearlierthisyear,thenameoftheRoyalbaby.

Inaddition,offshoreleakageoccurswithoffshoreprovidersandinternetgamblingwebsiteswhoofferbetsonourproductstotheircustomers.Theseprovidersdonotre-investinNewZealandbypayingproductfees,bettingdutiesorNewZealandtaxes–nordotheycontributetoharmminimisationinitiativesasrequiredoftheNZRacingBoard.

Asanindustryweneedastrategytotacklethisleakageandworkonlegislativechangetocorrectthisandcontinuetosupportourracingandsportingcodeswiththecontributionstheydeservefromthesupportoftheirfans.

InacountrythesizeofNewZealand,withapopulationofaroundfourmillion,thereislimitedopportunitytogrowthedomesticmarket,sowealsoneedtogrowouroverseasmarkets.TheNewZealandracingindustryhasaworldclassreputation;approximatelyhalfofthehorsesracinginSingaporeareNewZealand-bred.Ourracingproductishighlyexportableandwebenefitfromatimezonethatcanbeleveragedtoexportliveracingcontenttointernationalaudienceswhentheyarenotrunningtheirownraces.Inthelastyear,TracksideTVexportedNewZealandracestoAustralia,UK,France,Singapore,NorthAmerica,SouthAfricaandtheMiddleEast.OurKiwiBredseries,profilingtheNewZealandbreedingindustry,wasbroadcastinAustralia,DubaiandSingapore.

COsT OF LEAKAGE TO INdUsTRy ($m) – 2012 EsTImATE

NZRB Funding to Industry 2012 Estimated Leakage Cost to Industry

COsT OF LEAKAGE



28

2012/13 rEBOOT: pOSiTiONiNg FOr grOwThThepastyearhasbeenaboutpositioningtheNZRacingBoardforgrowthfollowingtheintroductionofanewCEO,newChair,newBoardandnewRacingBoardLeadershipTeam(RBLT).ThedetaileddeepdivesandlearningsfromtheTyphoonprojectweretakenonboardforwhatadaptationswererequiredforthebusinessmovingforward.

Underthenewleadershipstructure,theNZRacingBoardexpresseditscommitmenttoestablishingearlymomentumwhenittooktheunprecedentedstepofrevisingandreissuingtheNZRacingBoard’s2012–15StatementofIntent.Theresubmissionidentifiedefficiencysavingsandreflectedamoreaggressivebettingprofittargetofanadditional$6.0millionculminatingoverthethreeyearperiod,with$1.0milliontobedeliveredin2012/13.Therevised2012/13targetwassuccessfullyachievedandthestrongfinancialresultisthefirsttangibleoutcomeofthisbusinessreboot.

Having examined every part of the business with robust consistency, through a series of ‘deep dives’, we can be confident our IT, distribution, broadcasting, betting, marketing, corporate affairs, procurement and supplier strategies are all heading in the same direction and aligned to our overall Strategy. Thisyearsawthedevelopment,approvalandcommunicationoftheNZRacingBoard’snewfiveyearcorporatestrategy,outliningourvisiontobethebestentertainmentbusinessforNewZealand.Thestrategycontainsrobust,measurablegoalsdesignedtoprovideanappropriatecommerciallevelofreturntotheindustry.Thestrategywasdevelopedinconjunctionwithstaffandindustrypartnersandispublishedinthe2013–16StatementofIntent.

Drivenbyadesiretoestablishearlyengagementwiththeindustryandsetanewprecedentfortransparency,November2012sawtheNZRacingBoardhostitsfirstAnnualGeneralMeetinginsevenyearsandmadeafullvideorecordingavailableviaourbroadcastchannels.Lastyear’sAGMwasprecededbyaheartlandtouroftheNewZealandracingindustrybytheMinisterofRacing,alongwiththeChairmanandCEOoftheNZRacingBoard.

Inthepastyeartheindustryhasshowngreatcommitmenttoincreasedcollaboration.AllindustryCEOsnowattendregularCombinedRacingIndustryGroup(CRIG)meetings,monthlyCodeCEOForumsaswellaseachother’srespectiveAGMs.ItisbycontinuingcollaborationthattheNZRacingBoardwillearnthecredibilityandrespecttoleadtheindustryagendaforlongterm,sustainablegrowth.ThisyearCRIGexpressedavoteofconfidenceintheNZRacingBoardwhenithandedovermanagementofjointindustryprojectstothenewlyestablishedNZRacingBoardProjectManagementOffice.

ItistheroleoftheNZRacingBoardtoleadanddeliverastrategicplanfortheindustry.Theindustrystrategicplanisseparateto,butdependentupon,theNZRacingBoardcorporatestrategyasitwasessentialtogetourownhouseinorderbeforeleadingtheindustry.NowthatthecorporatestrategyhasbeenproducedandsocialisedwiththeindustryandGovernment,theNZRacingBoardwillfocusontheproductionofanindustrystrategy.Giventhecomplexityoftheindustryandthechallengesitfaces,aswellasthenumberofstakeholdersinvolved,theindustrystrategyhasmanyhorizonsoveranumberofyears.Inthecomingyearwewillembark

2012/13 ReBOOt: POSItIONING fOR GROwth

SubstantialchangestotheBoardandExecutiveleadership,withthestartofanewChair,CEOandCFO

changes

seven yeaRsTheNZRacingBoardhelditsfirstAGMinsevenyears

NZRacingBoardresubmittedits2012–15StatementofIntenttotargetanextra$6.0millionnetbettingprofitcumulativelyoverthethreeyearperiod

$6.0 million

FiveyearCorporateStrategyandPlandevelopedandembeddedinthe2013–16StatementofIntent

sTRaTegy

LearningthelessonsofTyphoon,the$11.1milliontechnologyprojectwrittenoffthepreviousyear

$11.1 million

‘Deepdives’carriedoutineveryareaofthebusinesstoprovidearobust,factbasedassessmentofeachbusinessunit

‘deep dives’

Significantinvestmentinbuildingthecommercialcapabilityofourpeopletopositionforgrowth

invesTmenT

Largestcustomerresearchundertaken

cusTomeR

aT a glance


29

onHorizon1oftheIndustryPlan–producingaplanforaplan.Wewilldothisbybuildingonthepositiveengagementthathasbeenestablishedwiththeindustryandcontinuingourpolicyofopendialogue,transparencyandcollaborationtoachievefurtherconvergenceofthinkingandthedevelopmentofaplanthatwilldrivechangeandsustainablegrowth.

Inordertoobtainrobustdataandintelligencetoinformthecreationofastrategicplanforthebusiness,theNZRacingBoardcommissionedthelargestresearchexerciseintheNZRacingBoard’shistory.Aswellasgivingaclearpictureofcustomerandnon-customerperceptions,theresearchprovidedrichdatathatwillinformdecision-makingandprioritisationforseveralyears.

Theresearchhasshownwehaveamassiveopportunitytomaximisethevalueofourexistingcustomersbyimprovingourofferingtothem.Wealsoneedtoreachnewcustomersandcapturefuturemarkets,usingthechannelsoftheirchoiceandproductsthatappealtothem.

In2009thebusinessundertookacomprehensiveITre-engineeringexerciseknownastheTyphoonproject,toaddressthechallengesofoperatingon30yearoldITinfrastructure.Aswasdocumentedinthe2012NZRacingBoardAnnualReport,Typhoonwasultimatelynotsuccessfulandthe$11.1millionassociatedcostswerewrittenoffinthepreviousfinancialyear.

AnewChiefInformationOfficer,ColinPhilp,wasappointedin2012.BasedonthelessonslearnedfromTyphoon,heinstigatedandoversawtheevaluationoftheexistingtechnologyinfrastructureandthedevelopmentofanewtechnologyframeworkandroadmap.ThenewfiveyearframeworkhasbeensignedoffbytheBoardandrepresentsthebeginningsofastep-changeincapabilitythatwilldeliverimprovedcustomerchannels,retailcustomerexperienceandbettingcapabilities.ToensurerobustgovernanceofallNZRacingBoardprojects,aprojectmanagementofficewassetupthisyeartooverseethemanagementanddeliveryofallkeyNZRacingBoardprojectsaswellasCRIGinitiatives.Robustprojectmanagementwillensureallbusinessactivitiesdeliverthebenefitsoutlinedinrespectivebusinesscasesandsupportachievementofourstrategicgoals.

ToachievesustainablegrowththeNZRacingBoardhastobecomeacustomer-obsessedorganisationandmakecustomerexperienceourtoppriority.ThisyearsawtheintroductionofthefirstNZRacingBoardCustomerCouncil,whichnowmeetsregularlytodiscussandaddresscustomerissues.Wealsosuccessfullyresolvedanumberofissuesthathadfrustratedcustomersandweachievedthisbysimplygivingthemthefocustheydeserved.RemovaloftheneedforcustomerstorepeatedlyentertheirPINontheTABwebsite,followingseveralyearsofcomplaints,wasparticularlywellreceived.Forthefirsttimewearealsoengagingwithcustomersonthedevelopmentofnewproducts,toensurewetakeonboardtheirfeedbackandmeettheirbettingneeds.

ThisyearthepriorityoftheNZRacingBoardwastoestablishsolidfoundationsandpositionthebusinessforgrowth.WehavesuccessfullyachievedthisaimandarenowwellpositionedtoachievethegrowthoutlinedinourCorporateStrategy.

2012/13 ReBOOt: POSItIONING fOR GROwth

Taking the lessons learnt from the Typhoon project, a new five year technology roadmap has been developed


30

COrpOrATE STrATEgy: whAT gETS mEASurEd gETS dONEThe2012/13positioningforgrowthagendademonstratedtheNZRacingBoard’scommitmenttogettingitsownhouseinorder,withagoalofincreasingreturnstotheindustryasquicklyaspossible.PositioningforgrowthwasseenbytheRBLTandBoardasacriticalsteptowardscreatingtheagendaforsustainableindustrygrowth.AsthenewRBLTandBoardconsolidatedadeepunderstandingofthebusinessandoperatingenvironment,theybegantoformulateacorporatestrategy.

InAugust2013,theNZRacingBoard2013–16StatementofIntent(SOI)wasformallytabledinParliament.ThetwokeycomponentsoftheSOIareanoverviewofourfiveyearcorporatestrategyandour2013/14budget.Thedocumentalsooutlinedspecifictargetsandmeasuresofsuccessforthebusinessthatwillbemanagedthroughthestrategymonitoringandevaluationprocess.ProgresswillbereportedtotheBoardandtheMinisterforRacingthroughquarterlyupdates.

TheNZRacingBoard’snewfiveyearstrategywasdevelopedoverninemonthsandinvolvedextensiveconsultationwithstaffandindustrystakeholders.ThestrategyoutlinesourgoalsandisunderpinnedbytheNZRacingBoard’spurpose,asstatedintheRacingAct2003.

ThevisionoftheNZRacingBoardistobethebestentertainmentbusinessforNewZealand.

OUR PURPOsE, As dEFINEd By THE RACING ACT 2003 Is TO:

• Runaprofitablebettingbusiness

• Promoteandenhancetheracingindustry

• Generatelongtermprofitforthebenefitoftheracingindustry

OUR sTRATEGIC GOALs OVER THE NExT FIVE yEARs ARE TO:

• Generateasurplusof$160million-$180million

• Growstakesby50%

• Growreturnstoownersby50%

• Generate30%turnoverfromnewmarketsandproducts

• Reducecost-to-incomeratiotobelow30%

THE sEVEN sTRATEGIC ImPERATIVEs THAT dRIVE THE sTRATEGy ARE:

• Runtodaybetter–bydrivingimprovementsinproducts,technology,digitalchannels,peopleandprocessesandtransformingthewaytheNZRacingBoardrunsitsbusiness

• Winnewcustomers–andretainthembyimprovingbettingoptions,introducingloyaltyinitiativesandalignproductandchanneldeliverytomeettheneedsandwantsofourcustomers

• Changethegamedomestically–bycapitalisingonopportunitiestoreshapeourbusinessandaddmorevaluethroughtoteproductinnovations,newhighjackpotproducts,developtheNSOrelationshipsandoptimisecontentanddeliveryofourbroadcastingservices

• Increaseexport–bymaximisingthepotentialofemergingmarkets,increasesupplytoAustralia(currentlyweare4%oftheirtotebettingdollar)andimproveourofferingforoverseascustomers

• Reducelongtermcostbase–byimprovedefficiency,leveragingassets,improvedchannelcostingstrategiesasrelatedtocustomerpreferences

• Stopoffshoreleakage–byengagingwithGovernmentandgovernmentagenciestoexamineviableoptionstoaddresstheissue

• Implementtheindustryplan–totransformracing,improveitsrelevance,increaseengagementanddriveinnovationtomaximiserevenueandminimisecosts

OUR 5 C’s ARE THE FOUNdATION FOR OUR sTRATEGy:

• Culture–thedesiretowin

• Capabilities–investinginsuccess

• Customer–responsiveandinnovative

• Community–knowingwhoweserve

• Convergence–headinginthesamedirection

CORPORAte StRAteGy: whAt GetS meASuReD GetS DONe


31CORPORAte StRAteGy: whAt GetS meASuReD GetS DONe

NZRB sTRATEGIC FRAmEwORKOurstrategyisbasedontheframeworkillustratedbelow,ledbyourpurposeandunderpinnedbyourfoundation-theFiveCs.

VIsION

PURPOsE

sTRATEGIC GOALs

sTRATEGIC ImPERATIVEs

FOUNdATION: THE FIVE C’s

KEy INITIATIVEs

Run a profitable betting businessPromote and enhance the racing industry

Generate long-term profit for the benefit of the racing industry

surplus of $160-180mGrow stakes by 50%

Grow return to owners by 50%30% turnover from new markets and products

Operational cost: income ratio below 30%

To be the best entertainment business for New Zealand

Run today better

win customers

Increase export

stop leakage

Change the game

domesticallyImplement

industryplan

Reduce long-termcostbase

Refreshed annually on internal and external context

Culture, Capabilities, Customer, Community, Convergence

1. digiTise The BusinessDelivertargetedprojects(racestreaming,developamobileappandprovideonlineverification)toimprovethedigitalofferingforourcustomers–forboththeaccountandcashareasofthebusiness–andensuretheNZRacingBoardhastheappropriateproductofferingmixtoleveragegrowthindigitalsales.

2. gaming/c4Growgamingresponsiblyasabest-in-classoperatorandincreaserevenuecontributionfromthisstreamofthebusiness.

3. pRoducT innovaTionIntroducenewproductstomeetchangingcustomerdemandsandattractnewnon-TABcustomersbyprovidingalternative,superiorbettingentertainmentproductsincludinghighjackpotproducts.

4. BRoadcasTingAddressandresolveplatform,studioandageinginfrastructurechallengestoallowahighqualitycomprehensivecontentandchannelstrategytobedeliveredin2014.

key iniTiaTives20 key initiatives were prioritised for delivery over the next five years. Out of the 20, seven were prioritised for implementation in 2013/14:

5. vips (foRmeRly vhvcs)FinalisecontractualarrangementswithcurrentVIPcustomersandprogresstheacquisitionofnewcustomersinthiscategory.

6. legislaTive updaTeEngagethegovernmentforchangestotheRacingAct2003andtheGamblingAct2003,whichareoutdatedandnolongermeettheincreasingchallengesandthreatsposedbythemodern,globalbettingenvironment.Changesarenecessaryforthelongterm,sustainableviabilityofbettinginNewZealand.

7. Re-aRchiTecT iTImprovetechnologyarchitecturetoenablethedeliveryofnewrevenuestreamsandtobuildasolidfoundationforbetterday-to-dayoperations,whilealsocreatingaplatformforfutureinitiatives,incorporatinglessonsfromprojectTyphoon.

Thereisarobustgovernanceadmonitoringprogrammeinplacetoprovideoversightofstrategyimplementation.


32

STrATEgyThisyearsawthedevelopment,approvalandcommunicationoftheNZRacingBoard’snewfiveyearcorporatestrategy.Thestrategycontainsrobust,measurablegoalsdesignedtodeliveranaspirationallevelofreturntotheindustry.Thestrategywasdevelopedinconjunctionwithstaffandindustrypartners.Anoverviewofthisispublishedinthe2013-2016StatementofIntentandoutlinedintheCorporateStrategysectionofthisreport.

• Ourfiveyearcorporatestrategyrepresentsambitiousgoalsthataimtodeliveranewlevelofreturnforstakeholders.TransformationoftheindustryandNZRacingBoardiscriticaltorealisethesegoals.

• Thestrategyarticulatessevenstrategicimperativesthatoutlineourareasoffocus.

• Supportingthefinancialgoalsisaportfolioof20KeyInitiativesthatwillberolledoutoverthefiveyearhorizon.

• AbusinessplanforFY14hasbeendevelopedthatrepresentsyearoneofthefiveyearprogramme.

• Followingarigorousprioritisationprocess,sevenKeyInitiativeswereselectedforimplementationinyearone.ThesesevenareexpectedtodeliverincrementalprofitinFY14whilebuildingafoundationfortherolloutofinitiativesinfutureyears.

• ThereisacomprehensivegovernanceprocessinplacetomonitortheimplementationofthesevenKeyInitiatives.Aprogrammeofongoingreviewswillfacilitatedevelopmentofanyremedialactions.QuarterlyreviewswithManagementandBoardwillbecarriedoutaspartofthestrategygovernance.

FollowingdevelopmentoftheNZRacingBoardcorporatestrategy,thenextstrategicpriorityistoleadcollaborationwiththeindustrytodevelopHorizon1oftheIndustryStrategicPlan.TheIndustryStrategicPlanisacriticalundertaking.Stakeholdersarelookingtoittoshapethefutureoftheindustrybyensuringtheindustryanditsgovernancemodelaresustainableandcommerciallyviable.DevelopmentoftheIndustryStrategicPlanwillinvolveworkingcloselywiththeCodesandawiderangeofstakeholderstoagreeonaplantodrivemuchneededindustrytransformation.ThenewframeworkwillalsoincorporateSportNZandtheNationalSportsOrganisationsaskeystakeholders.

Variousreportshavebeenconductedintotheracingindustryinrecenttimesandtheyhaveallcalledforboldandtransformationalaction.Somerecommendationshavebeenimplementedbutmostremainoutstanding.TheindustryandNZRacingBoardareatacriticaljuncturegiventhepressureonbettingearningsandcontinueddeclineinreallevelsofreturntostakeholders.TheIndustryStrategicPlanwilldrawontheworkofhistoricalreportsaswellascomprehensiveresearchandanalysis,includinginternationalbenchmarkingoftheracingindustry’scurrentstate,todevelopcredibleoptionsforstakeholderstoconsider.

ThelargestcustomerresearchexerciseundertakenbyNZRacingBoardwascompletedthisyearinvolvinginterviewswithalmost2,000customersandnon-customers.Theresearchprovidedvaluableinsightsintobrandperception,broadcasting,gaming,newproductsanddistribution.Theseinsightswillinformourstrategicbusinessdecisions.BuildingonNZRacingBoard’smajorresearchexercisethisyear,wewillestablishacentreofexcellenceforresearchandanalyticsthatwillsupportanevidence-baseddecisionmakingdisciplinewithintheorganisation.

StRAteGy

monique Cairns, Executive GM Strategy and Transformation

AnewfiveyearcorporatestrategydevelopedandincludedourStatement ofIntent

five yeaR

RoadmapDevelopmentofa‘planforaplan’outliningtheroadmapfortheIndustryStrategicPlan

LargestconsumerresearchprojecteverundertakenfortheNZRacingBoard

ReseaRch

aT a glance

ouR five yeaR coRpoRaTe sTRaTegy RepResenTs amBiTious goals ThaT aim To deliveR a new level of ReTuRn foR sTakeholdeRs


33

eveRy BeT placed on a spoRTs evenT aT The TaB helps To gRow and suppoRT spoRT in new Zealand

34



35CORPORAte AffAIRS AND COmmuNIty

COrpOrATE AFFAirS ANd COmmuNiTyGivenitsremittoleadandpromotetheracingindustryinNewZealand,theNZRacingBoardhasawideCorporateAffairsandCommunityagenda.ActivitiesincludeGovernmentrelations,industryliaison,sportpartnerships,communityengagement,socialmedia,mediarelations,internalcommunicationsandpartneringwithClubstoofferpremiumon-courseevents.

ContinuingtobuildstrongrelationshipswithGovernmentandallpoliticalpartieswillbeamajorfocusforthecomingyear.LegislativesupportisrequiredtoaddressthechallengesofoffshoreleakageandtoenabletheNZRacingBoardtocompeteintoday’senvironment.

Inthepastyeartheindustryhasshowngreatcommitmenttoincreasedcollaboration.Asmentionedearlier,allindustryCEOsnowattendregularCombinedRacingIndustryGroup(CRIG)meetings,monthlyCodeCEOForumsaswellaseachother’srespectiveAGMs.Aswellassupportingtoday’sindustryinpracticalways,theNZRacingBoardwillcontinuetoleadindustrycollaborationandconvergenceofthinkingwithaviewtodevelopinganIndustryStrategicPlan.

TheNZRacingBoard’sfirststakeholderperceptionssurveywassenttoCodes,Clubsandindustrybodies,askingthemtoratetheirconfidenceintheNZRacingBoard.Whilst67%ofrespondentsbelievemanagementandleadershipattheNZRacingBoardhasimprovedintheprevious12months,only1%feltthepromotionofracinghadimprovedinthesameperiod.Althoughthesurveyshowsweareheadingintherightdirection,thereisstillmuchworktobedoneandthedatawillassistusinprioritisingouractivities.

Thisyeartheon-coursemarketingandeventsteamworkedwithRacingClubstosuccessfullydeliver20%morefranchisebrandedevents.Theevents,includingtheInterislanderSummerFestival,ChristmasattheRacesandMidwinterChristmasattheRaces,areexcellentproductsspecificallydesignedtoattractnewcustomers.Basedonthesuccessofthisseason,thethreeCodeshaveenteredintoathree-yearbusinessplanwiththeNZRacingBoardforthecontinuedprovisionandexpansionofon-coursemarketingandeventssupport.

TheindustryhasmanygreatstoriestotelltoenableNewZealanderstofeelproudofitssignificantcontributiontotheeconomyandcultureofthecountry.Progresswasmadethisyearaspositivemediacoveragedoubledoverlast,showingTABhadimproveditsprofileasanorganisationthatactswithintegrity,andthiswastheleadingmessageassociatedwithTAB’smediaprofile.

ImprovedinternalcommunicationsandincreasedeffortsbytheExecutivemanagementteamtoengagedirectlywithemployeescontributedtoa13%jumpincommunicationsandcooperationscoresintheannualstaffengagementsurvey.Wewillcontinuetobuildonthisachievementinthecomingyear.

TheNZRacingBoardalsoplaysasignificantpartinthecommunitiesofNewZealandthroughitssupportoftheracingindustry,professionalandgrassrootssportsbodiesandcommunityprojects.

Improvedcommunicationandrelationshipswithindustrystakeholders,includingthethreeracingCodes,Clubs,industrybodies,CentralandLocalgovernment,DepartmentofInternalAffairs,SportNZandNationalSportsOrganisations

impRoved

agmFirstAnnualGeneralMeetingheldin sevenyears

Firstindustrystakeholdersurveyconducted

indusTRy

20%morefranchisedon-courseeventsdeliveredinpartnershipwithClubs

on couRse evenTs

Communicationandcooperationscoresincreasedby13%instaff‘YourSay’survey

communicaTion

TheNZRacingBoardincreasedmediacoverageby30%thisyearwiththemessagemostfrequentlyassociatedwasthatitactsinthebestinterestofallracingCodesandthefutureoftheracingindustry

media coveRage

aT a glance


36

sUPPORTING COmmUNITIEs: sPORTs LEVIEsAswellasdirectlysupportingtheracingindustrythroughdistributionstotheCodes,TheNZRacingBoardplaysamajorroleinsupportinggrassrootssportsandcommunityinitiatives.

EverybetplacedonasportseventattheTABhelpstogrowandsupportsportinNewZealand.TheNZRacingBoardcontinuestoprovidevitalfinancialassistanceto33NationalSportsOrganisationsthroughtheleviesitpaystoallowbettingonindividualsportingevents.

Totalleviespaidandaccruedfortheseorganisationsin2012/13were$3.8million.Thelevyisbasedonapercentageofbettingturnoverandprofitonbetsplacedoneachsportingdiscipline.

Thisyear,thenumberoneNewZealandsportbybettingturnoverwasBasketball,partlyareflectionofthesuccessoftheNewZealandBreakers,whowontheAustralianNationalBasketballLeagueforarecordthirdtime.

AlthoughRugbyUnionremainsthenumberonesportbybettingvolume,withmorethan50,000TABaccountholdersplacingabetduringthefinancialyear,highervaluebetswereplacedonBasketballbythesport’s17,000fans.

AllBlacklegendColinMeadsplacedthefirsteversportsbetinNewZealand,followinglegislationenactedin1996.TheoccasionwastheAllBlacksvWallabiesRugbymatchatWellington’sAthleticPark.

TotalbettingturnoverforBasketballfortheyearwas$46.8million,justaheadofRugbyUnionat$45.4million.Thetop10sports,rankedbybettingturnoverattheTABfor2012/13are:

CORPORAte AffAIRS AND COmmuNIty

ThE TOp 10 SpOrTS, rANKEd By BETTiNg TurNOvEr

1 BASKeTBAll 6 CRICKeT

2 RugBy uNION 7 BASeBAll

3 RugBy leAgue 8 AMeRICAN FOOTBAll

4 FOOTBAll 9 gOlF

5 TeNNIS 10 ICe HOCKey

TheNZRacingBoardplaysanimportantpartinthefundingofsportsinthiscountry.SomeNationalSportsOrganisationscouldnotsurvivefinanciallywithoutthedisbursementsreceivedfromtheTAB.BaseballNewZealand,forinstance,isoneofthecountry’sfastestgrowingsportsandisalmostentirelyreliantonthefundingitreceivesfromKiwisbettingonUSMajorLeagueBaseballgames.

ThisisanexampleofhowtheNZRacingBoardhasbroadeneditsofferingtoincludeinternationaleventsforthebettermentofdomesticsportingorganisations.ThechangeshavealsoallowedtheTABtoappealtoawidercustomerbasebeyondthethreeRacingCodesandforgecloserpartnershipsacrossthesportsindustryformutualbenefit.

Total betting turnover for Basketball for the year was $46.8 million, just ahead of Rugby union at $45.4 million


37

TheNZRacingBoardhasmademeaningfulcontributionstocommunitiesaroundNewZealand,including:

• FinancialassistanceforNewZealandRugbyLeaguetoputtogetherjuniorandseniornationalcompetitionsforitsZoneCommunityCarnivalsandZoneHighPerformancecamps

• FundingforBasketballNewZealand’sNationalAgeGrouptournamentsthroughoutthecountry

• FinancialassistancefortheNewZealandDartsCounciltosendteamstoallWorldDartsFoundationtournamentsinNewZealandandabroad,whilehostassociationswithinNewZealandreceivedfundingtoholdsenior,juniorandyouth tournaments

The NZ Racing Board continues to expand its involvement with community sports TheNZRacingBoardhasalsoprovidedfinancialassistancetocommunitysportingorganisationsthatarenotdirectlyrelatedtosportseventsbeton,throughdistributionsaspartofitsClass4GamingLicence.Theseinclude:

• $100,000toSpecialOlympicsNewZealand&regionalSpecialOlympicsclubsthatwillallowhundredsofSpecialOlympicclub-membersandstafftogettotheNewZealandSpecialOlympicsSummerGamesinDecember.

• $57,000toParemataPlimmertonRugbyFootballClubprovidedtheannualoperatingexpensesoftheParemataPlimmertonRugbyFootballClubforthe2013/14season.Itallowedtheclubtopurchasekeyequipmentsuchasmouth-guards,uniforms,drinkbottles,trainingtracksuits,andmatch-balls.

UnderitsSportsAuthorisedPurpose,theNZRacingBoardpaidatotalof$1.0million,toanumberofamateurclubsacrossmanysportingcodes.ThesegrantshelpedfacilitatetheparticipationinsportforasignificantnumberofNewZealandersthroughoutthecountry.

TheNZRacingBoardalsoprovidedwrittenadvocacytoinsurersonbehalfoftheCanterburyRugbyUnion,supportingtheirclaimforlossofgatetakingsasaresultoftheearthquakes.TheNZRacingBoardispleasedtoreportthatthismatterwasresolvedintheUnion’sfavour.

sUPPORTING COmmUNITIEs: sPONsORsHIPThisyearthesponsorshipportfoliocomprisedoftheVodafoneWarriorsandtheWellingtonPhoenix.Itwasthethirdyearofpartnershipwiththecapital’sfootballteam,whilethe2012NationalRugbyLeagueseasonwasthefirsttimetheNZRacingBoardhadaligneditselfwiththeWarriors.Whileneitherteamprogressedtotheirrespectiveplayoffsthisyear,thepartnershipsenabledTABSporttoactivateavarietyofcampaignstobroadenitscommunityengagement.Theseinclude:

• TheTABSportCelebrityCashKick

• WeeklyTABSportPhoenixUpdates

• TABLovesLeaguecampaign

• TABFacebookPage

ThesponsorshippartnershipsalsoallowedtheTABtoengagedirectlywithfansofsuccessfulNewZealandsportsteamsthatarenotpresentlyalignedviaabettingcontractwiththeagency.ThecurrentsponsorshiparrangementsareunderreviewaspartoftheNZRacingBoard’sassessmentofitsstrategicsponsorshiprequirements.

TheNZRacingBoard’snewcorporatestrategyprovidesthefoundationforanewsponsorshipstrategy,whichalignsexpendituremorecloselywiththehighgrowthareaofsportsbetting.Thegrowthopportunitiesareself-evidentinfive-yearbettingtrends,withsportsfixedoddsbettingincreasing74%duringthatperiod.

TheNZRacingBoardwillcontinuetoengagewithsportscommunitiesthroughsponsorshiparrangementsandotherinitiatives,particularlybyusingdigitalchannels.Futureinitiativeswillbecloselyalignedtokeystrategicgoalsandinvolvedirectaccesstofans,engagementwithsportingcommunitiesandcontentcreationasthefundamentalsponsorshipbenefits.

CORPORAte AffAIRS AND COmmuNIty


38

TABTheTABbusinesscomprisesBetting,Broadcasting,Gaming,Marketing&DigitalandSales&Distribution.TosupportthevisionoftheNZRacingBoardtobethebestentertainmentbusinessforNewZealandthekeystrategicimperativesoftheNZRacingBoardaretoruntodaybetter,wincustomersandreduceourlongtermcostbase.

BETTINGTheconstantchallengethroughouttheyearwasthecontinueddeclineinTotebettingondomesticracing.InbettingturnovertermsthiswasmorethanoffsetbythegrowthindomesticFixedOddsbettingascustomersmovefromTotetoFixedOdds.Inanefforttoprotectourmargins,welaunchedthenewproduct‘Place6’,madechangestodeductionsandintroducedfinancialincentivesforTABretailerstosellhigher-marginproducts.Workisalsounderwaytodevelopajackpotstyleproductwithbroadappealthatwillofferbiggeropportunitiesforcustomers.

Livesportsbettinggrowthisexpectedtocontinue.In2012/13,theTABWatchandBetservicewasexpandedtoofferlivestreamingofNBABasketballmatches,withtheresultthatBasketballovertookRugbyasthenumberonebettingsportinNewZealand,achievingaturnoverof$46.8million.

Ourchallengeistobecapableofdeliveringthevarietyofliveproductsthatcustomerswant,throughthechannelstheychoosetouse,sotechnologywillcontinuetoplayamajorroleinthesuccessofsportsBettingaswemakeourwaytothe2014FootballWorldCupinBrazil.

BROAdCAsTINGWiththeevolutionoftechnologyandthenumberofmediaviewingoptionsnowavailable,thebusinessisplanningtheinevitablemigrationfromStandardDefinition(SD)toHighDefinition(HD)broadcastingforstudio,broadcasttrucksandnetworklinking.ThetransitiontoHDformspartofawiderbroadcastingstrategythatwillincludeareviewofprogrammingcontentandfuturebroadcastplatforms–freetoview,payandnewmedia.

Acontentstrategyisalsobeingdevelopedtoaddressthechallengesofdeliveringracingcoverageacrossourtwochannels,TracksideandTABTV.Themajorityofourcustomerscurrentlyhaveaccesstobothchannelsandcomplainabouttheduplicationandlackofpreandpost-racecoverage.Ultimatelywewillsplitliveracingcontentacrossbothchannels,ratherthanduplicating,thusgivinggreaterviewerchoiceandincreasedprogrammingflexibility.Thisapproachwillmaximisebettingopportunities,leadtogreatercustomersatisfactionanddifferentiatethetwochannels.

GAmINGTheTABiscurrentlyarelativelysmallGamingoperatorinNewZealand.At31March2013weoperated341gamingmachinesoutoftheNewZealandtotalof17,500gamingmachines.Inthecomingyearwewilllookforopportunitiestoresponsiblygrowthegamingsideofourbusiness.

tAB

Glenn Patrick, Executive GM TAB

TABFixedOddsRaceBettingturnovergrewby$64.7million(34%)lastyear

$64.7 million

$46.8 millionBasketballovertookRugbyasthetopbettingsportinNewZealandwithtotalbettingturnoverof$46.8million

CallstoPhoneBetservicesaredecliningby10%eachyear

10%

Morethan11,040racesfrom1,055domesticracemeetingswerefilmedandbroadcasted

11,040 Races

165,000regularviewerswatchedTracksideandTABTVeachweek

165,000

Revenueof$775,000wasraisedthroughtelevisionandradioadvertising

$775,000

Directmarketingledtothereactivationofnearly16,000TABaccountsanddelivered$3.8minincreasedturnover

16,000

aT a glance


39

sALEs & dIsTRIBUTIONWhilstTABagencies,branches,pubsandclubsnationwidecontinuetobeourshopwindow,customersareincreasinglybettingon-lineandviamobile,whilecallstoourPhoneBetservicearedecliningby10%eachyear.In2013thePhoneBetminimumbetwasincreasedforthefirsttimesince2007,from$5to$10.Toenablecustomerstocontinuetoplacebetsunder$10,openinghoursfortheEarlyBirdPhoneBetservice–wherecustomerscanplacea$2minimumbet–wereextended.

Inrecognitionofthesignificantcontributiontheymaketoourbusiness,weareintheprocessofreviewingandextendingthepackages,productsandaccountmanagementservicesweoffertoourElitecustomersandplantorolltheseoutinearly2014.

BoostingthesalescapabilityofourstaffisamajorfocusfortheTAB.Thisyearanewincentiveschemewasintroducedacrossourretailnetworktoencourageasalesandmarginperformanceculture.Plansareunderwaytosupportthiswiththeintroductionofatalentdevelopmentprogrammeforsalesstaff.

AnnualsalesattwoTABretailoutlets–AlexandraParkTABandRightTrackSportsbarandCaféincentralAuckland–topped$10millionthisfinancialyear.TheseoutstandingresultsfollowthesuccessofChancesSportsBarinAuckland,which,inthepreviousyear,wasthefirstTABstoretohit$10millioninsales.

tAB


40

iNTErNATiONALiSATiON NewZealand’spopulationofaroundfourmillionmeansthereislimitedscopetogrowthedomesticmarket.Growingouroverseasmarketsisanimperative.Inparticular,wewanttodeliveranextendedprogrammeofNewZealandracingintoAustralia.ItisacredittothequalityofourracingproductthatAustralianbettorscurrentlybetmoreonNewZealandRacingthanNewZealanders.GiventhesizeablepopulationofAustralia,andthefactthatthespendonNewZealandracingrepresentsonly4%oftotebettinginAustralia,themarketrepresentsamassiveopportunityforexpansion.

KeytoourincreasedinternationalpresenceisourmutuallybeneficialrelationshipwithourAustralianbettingandbroadcastingcounterpart,Tabcorp.Thankstothispartnership,morethan58,000mainlyAustralianracesinthe2012/13seasonwerepresentedtoourcustomers.Thisgreatlyboostedourcustomerofferingof11,000racesthatwerehostedbythethreeCodesinNewZealand.OurcurrentagreementswithTabcorpwillexpirein2015and,giventheirstrategicsignificance,arealreadyunderrenegotiation.

As a member of the SuperTAB Totalisator Pool, the NZ Racing Board jointly shares its betting turnovers with certain States of Australia. This means we can offer our customers access to greater betting returns from highly liquid pools. Ourfocusoninternationalisationwillseeusexpandourcomminglingpoolbettingopportunitiesworldwide.ThewholeracingworldisexcitedbytheHongKongJockeyClub'splantoallowtotegueststocommingleintotheirbettingpools.TogetherwithourAustralianpartner,Tabcorp,theNZRacingBoardhasdevelopedthetechnologytoenableourcustomerstoparticipateinthisinitiative.ThenewTripleTrioTotebet,tobeintroducedinNewZealandinearly2014,isdesignedtobecommingledwithHongKong,wheretheTripleTriohasverylargepoolsanddeliversjackpot-styledividends.

Wearealsoseekingtoextendourreachgloballybyleveragingourtimezone,whichisclearlyveryattractivetotheAustralianmarket.Beyondthis,underourinternationalmarketingarrangementswithTabcorp,ourracingisdeliveredintotheMiddleEast,Asia,SouthAfrica,NorthandSouthAmerica,andtheUKandotherEuropeancountries.Weseethesemarketsasemergingbutgrowingandexpectrevenuestoincreasesignificantlyoverthecomingyears.

INteRNAtIONALISAtION

AustraliansbetmoreonNZracingthanNewZealandersdo

ausTRalian

58,000OurrelationshipwithAustralia’sTabcorpdeliveredmorethan58,000racesfromoutsideNewZealand

OurcustomersgetaccesstomorestablebettingreturnsthroughourstatusasaSuperTABTotalisatorPoolmember

superTaB

Wewillofferevenmoreinternationalopportunitiestoourcustomersthisyear

oppoRTuniTies

martin saunders, Chief Operating Officer

aT a glance

we aRe seeking To exTend ouR Reach gloBally By leveRaging ouR Time Zone

41



42

TALENTTransformationoftheNZRacingBoardstartedwithitsleadership.Significantstructuralchangehasalreadytakenplaceandwearecontinuingtoworktoensurewehavetherightskillsandcompetenciesinplacethroughouttheorganisationtosupportourgoalsandtomeetthechallengesahead.

In2012theNZRacingBoardcarriedoutthefirstemployeeengagementsurveyfortenyears.The2013‘YourSay’resultsshowedasignificantimprovementinengagementscoresacrosstheNZRacingBoardcomparedtothepreviousyear.Participationratesincreasedfrom66%tomorethan80%andthenumberofengagedemployeesincreasedfrom66.5%to70.9%.Communicationandcooperationscoressawthebiggestincrease,up13%.

Tosupportthecontinuedfocusonleadershipdevelopment,theLSIleadership360o surveywasalsorolledouttoleadersthisyear.Sincetheexercisewaslastcompletedin2010therehasbeenasignificantimprovement,withpositivemovementin10outof12behavioursassociatedwithgreatleadership.ThisrobustmeasureofleadershipcapabilitiesandbehaviourswillinformthefutureTalentDevelopmentprogrammeforleaders.

Havinganaccurateunderstandingofstaffcapabilitieswillinformourfuturetalentdevelopmentprogramme,soamajorchallengeforthisyearhasbeentheresettingofexpectationsaroundperformancemanagement.PerformancebenchmarkingwithintheNZRacingBoardhasnowbeenbroughtintolinewithNewZealandmarketnorms.

Tosupportthefocusondrivinguprevenueandcontinuedimprovementofleadershipcapability,theimmediatepriorityfortheteamwillbeinstitutingatalentdevelopmentprogrammefortheleadersintheretailnetwork,followedbyanequivalentprogrammeforleadersacrossthebusiness.

Amajorobjectiveforthebusinessinthecomingyearwillbealigningemployees’careerambitionstotheNZRacingBoardstrategicgoals.Thiswillallowustodevelopourstaffandseekfuturetalentfromwithintheorganisation.

tALeNt

Emma scott, Chief Talent Officer

Engagementratesforstaffimprovedfrom66.5%to70.9%

70.9%

66%Enablementscorewas66%for2012-13andweareaimingfor70%nextyear

Positiveimprovementin10outof12behavioursassociatedwithleadership

impRovemenT

PerformancebenchmarkingbroughtinlinewithNewZealandnorms

BenchmaRking

aT a glance

a majoR oBjecTive foR The Business in The coming yeaR will Be aligning employees’ caReeR amBiTions To The nZ

Racing BoaRd sTRaTegic goals


43


44

TEChNOLOgyAshasbeenwelldocumented,theNZRacingBoardisoperatingon30year-oldITinfrastructurethatcannotsupportthedevelopmentofnewtechnologies,productsorthekindofinnovationourcustomersexpect.In2009thebusinessundertookacomprehensiveITre-engineeringexercisewecalledtheTyphoonproject.ForanumberofreasonsTyphoonwasnotsuccessful,butitprovidedvaluableunderstandingofourchallengesandpotentialsolutions.

Basedonthisknowledge,ournewChiefInformationOfficerinstigatedandoversawtheevaluationoftheexistingtechnologyinfrastructureandthedevelopmentofanewtechnologyframework.Thenewframeworkrepresentsthebeginningsofastep-changeincapabilitythatwilldeliverimprovedcustomerchannels,retailcustomerexperienceandbettingcapabilities.Thiswillinvolvethebuildingofanew,serviceorientatedarchitecturethatwillbetheunderlyingenablerforasignificantnumberoftheNZRacingBoard’sbroaderbusinessstrategies.Aswellassupportingmorerapidandefficienttechnologychangesandenhancementsinthefuture,thenewarchitecturewillultimatelymakeiteasierforcustomerstoplacebetswiththeTAB.

Thenewtechnologystrategyisbuiltonastagedinvestmentcyclemodeltominimiseriskandensureallspendwilldeliverthebenefitsoutlinedinthebusinesscase.ItiscriticalthatallstagedinvestmentssupportNZRacingBoardprioritiesandenableongoingtacticalinvestmentsincurrentsystemsaswemigratetothenew.

AprojectmanagementofficewassetupthisyeartooverseethemanagementanddeliveryofallkeyNZRacingBoardprojectsaswellasCRIGinitiatives.Robustprojectmanagementwillensureallbusinessactivitiesdeliverthebenefitsoutlinedinrespectivebusinesscasesandsupportachievementofourstrategicgoals.

Anumberofsoftwaredevelopmentstohelpdriverevenueandprovidebetterservicestocustomersweredelivered.RemovaloftherequirementforcustomerstorepeatedlyentertheirPINwhenbettingontheinternetwasparticularlywellreceived.

Thebettingsystemwasimpressivelyresilientthroughouttheyear,withavailabilityat99.995%.Thisenabledthecorebettingsystemtoprocess1.8millionbetsonMelbourneCupDayin2012,peakingat174accountbetspersecondanddeliveringturnoverof$20.1million.

Business Continuity Plans worked well throughout the year, with minimal disruption to service following a number of major weather events and earthquakes. BroadeningandenhancingpaymentoptionsforcustomerswillbeamajorfocusfortechnologyandtheTABinthecomingyear.Forthefirsttime,andinresponsetopublicdemand,customerswillbeabletousecreditcardsintheTABagencyandbranchnetwork.

Deliveryprioritiesforthecomingyearincludedevelopingtechnologytosupportthenewbettingproduct,TripleTrio,livestreamingofeventsandamobilebettingapp.

teChNOLOGy

Colin Philp, Chief Information Officer

OnMelbourneCupDay1.8millionbetswereprocessedinoneday

1.8 million

99.995%Bettingsystemavailabilitywas99.995%fortheyear

Nosignificantdisruptiontoservicefollowingmajorstormsandearthquakes

no disRupTion

CIOMagazinelistsNZRacingBoardasthe49thlargestITshopinNZ

49Th laRgesT

aT a glance

a numBeR of sofTwaRe developmenTs To help dRive Revenue and pRovide BeTTeR seRvices To cusTomeRs weRe deliveRed


45


46

ThE COmiNg yEAr: BEiNg ThE ChANgE wE wANT TO SEE2012/13wasaboutgettingourownhouseinorderandpositioningtheNZRacingBoardforgrowth.Thenext12monthswillbeabouttheindustry.

TheNZRacingBoardtakesitsresponsibilitiestolead,promoteandenhancetheindustryextremelyseriously.Themostcrediblewaytoleadisbyexampleandthepast12monthsshowswearewalkingthetalk.Thisyear,ourimmediateprioritiesweretosortoutourgovernance,getourfinancesinorder,deliverquickrevenuewinsandproduceacorporateplan.Wehavesuccessfullyachievedalloftheseprioritiesandarenowbeingthechangewewanttoseehappenacrosstheindustry.

Asanorganisation,theNZRacingBoardhasbeenthroughaprocessofdeep,andattimespainful,self-examination.Wehadtobreakfreeofoldparadigmsandestablishedpatternssowecouldmakebolddecisionstodeliversustainablegrowthforourbusiness.Wewillnowleadtheindustrythroughasimilarprocess.Increaseddistributionsandreturnstoownersareessentialinthemediumterm,butstructuralchangesviaanIndustryStrategicPlanareneededtodeliverthelongtermsolutionsrequired.

ItistheroleoftheNZRacingBoardtoleadanddeliverastrategicplanfortheindustry.Butitwouldbepresumptuoustothinkwecouldintroduceanindustryplanbeforetakingthetimetoengageextensivelywithourpartnerstogetadeeperunderstandingofwhatourstakeholderswanttoachieve.

2014

-17

NZR

B sO

I

2013

-16

NZR

B sO

I

Add

endu

m t

o 20

12-1

5 sO

I

o N2012 2013 2014 2015

N Nd d dJ JJ J JJ Jf f fm m m mma aa as so o

Provisional Roadmap “Five C’s”

Positioning For

GrowthNZRB

strategic Imperatives Formation of an industry

strategic plan (horizon one)NZRB

strategic Plan

NZRB P&E Report

* Current agreements expire 30 June 2015

Formation of an industry

strategic plan (horizon two)

strategy Implementation and measurement

Assessment and negotiation of international broadcasting and wagering rights agreements*

Eight Key Industry Challenges

Plan for a Plan

the COmING yeAR: BeING the ChANGe we wANt tO See

Chris Bayliss, Chief Executive


47

Thereasonsfortheindustry’sdeclineoverrecentdecadesarecomplex.Therearenosilverbulletsandthesolutionsareunlikelytobeagreeduponinthespaceofayear.Theproductionofanindustryplanisalongtermprojectandallelementswillrequireextensiveandinformeddialoguewithindustrystakeholders.Thefirststagewillbeaboutunderstandinghowsuchaplanwouldevolve.InthecomingyearwewillembarkonwhatwehavetermedHorizon1oftheIndustryPlan–producingaplanforaplan.Wewilldothisbybuildingonthepositiveengagementwehaveestablishedwiththeindustryandcontinuingourpolicyofopendialogue,transparencyandcollaborationtoachievefurtherconvergenceofthinking.

Through consultative dialogue, the NZ Racing Board will provide leadership and the strategic vision to shape the change the industry must embrace. Our overriding objective is to consult, plan, commit to and lead meaningful change that will provide future sports and racing participants with an economically successful, sustainable and vibrant industry.Twoofourmajorpartnershipcontractswillexpireinthenexttwoyearsandworkisalreadyunderwaytorenegotiatethese.ThefirstiswithTabcorp,ourcounterpartinAustraliaandthevehiclethroughwhichwewillseektofurtherexpandourimportandexportopportunities.ThesecondisourfundingdistributionmodelwiththeCodes,whichexpiresinJuly2015.AnychangestothebusinessmustresultinimproveddistributionstoalltheCodes.

Anumberofchallengesfacedbyourbusinesscanonlybeaddressedbylegislativechange,offshoreleakagebeingthemostpressing.TheNZRacingBoardwillcontinuetodeveloprelationshipswithGovernmentandallpoliticalpartiesintheleaduptothenextgeneralelectionandbeyond.ItisvitaltheelectedrepresentativesofNewZealandersunderstand

theimpactthaterosionofourindustrybyoffshoreleakageishavingonthecountry.Legislativechangewillsignificantlycontributetothefutureofourindustry.

SportsbettingpresentsasignificantgrowthopportunityfortheNZRacingBoard,and,throughitscontributions,fortheentireracingsector.ItalsobenefitsthousandsofNewZealandsportspeoplethroughtheleviespaidtothe33NewZealandSportsOrganisations.Theracingindustrybenefitsfrombetsplacedbythegrowingnumberofparticipatingsportsfans,throughthefinancialdistributiontotheCodes.

Internally,ourfocusthisyearwillbeondeliveringthesevenkeystrategicinitiativesthathavebeenprioritisedfor2012/13,althoughall20keyinitiativesoutlinedinourcorporatestrategywillbeprogressedtosomedegree.

WewillmakerealprogresstowardsachievingourvisiontobethebestentertainmentbusinessforNewZealand.

Deliveringmeasurableresultswillsupportourfiveyearstrategicgoalsto:

• Deliversurplusof$160million-$180million

• Growstakesby50%

• Growreturnstoownersby50%

• Derive30%turnoverfromnewmarketsandproducts

• Reducecost-to-incomeratiotobelow30%

Forexample,BroadcastingStrategyisoneofourstrategicinitiatives.AswellaspreparingforthemovetoHighDefinition,wewillagreecontentandchannelstrategiestoaddressthechallengesofdeliveringracingcoverageacrossourtwochannels,TracksideandTABTV.Themajorityofourcustomerscurrentlyhaveaccesstobothchannelsandcomplainabouttheduplicationandlackofpreandpost-racecoverage.Ultimatelywewillsplitliveracingcontentacrossbothchannels,ratherthanduplicating,thusgivinggreaterviewerchoiceandincreasedprogrammingflexibility.Thisapproachwillmaximisebettingopportunities,leadtogreatercustomersatisfactionanddifferentiatethetwochannels.

the COmING yeAR: BeING the ChANGe we wANt tO See


48 GOveRNANCe StAtemeNt

gOvErNANCE STATEmENTTheRacingAct2003setsouttheauthority,responsibilities,membershipandoperationoftheNZRacingBoard.

BOARd sTRUCTURE ANd COmPOsITIONThemanagementofthebusinessandaffairsoftheNZRacingBoardtakesplaceunderthedirectionofitsgoverningbody,theBoard.UnderSection11oftheRacingAct2003,theMinisterforRacingappointsaBoardofsevenmembers,consistingof:

• AnindependentChair;

• ThreemembersnominatedbyeachofthethreeRacingCodes:NewZealandThoroughbredRacingInc;HarnessRacingNewZealandInc;andtheNewZealandGreyhoundRacingAssociationInc;and

• Threemembersrecommendedbyanominationadvisorypanel,comprisingtheMinisterforRacing,theNZRacingBoardChairpersonandtheChairpersonsofthethreeRacingCodes.

Boardmembersareappointedfortermsnotexceedingthreeyears,butmaybeeligibleforreappointment.

AtthestartofthefinancialyearfivenewBoardmemberswereappointedfollowingtheexpiryofthetenureoftheirpredecessors.AtthesametimeChrisBaylisstookuppositionasChiefExecutive,anewChiefFinancialOfficer,StewartMcRobie,wasappointed.HighlyqualifiedandhavingpreviouslybeenCFOforASB,Stewartbringsextensivefinancialleadershipandcommercialacumentotherole.PreviousBoardmemberLizDawsonreturnedtotheBoardandAlanJackson,whowasalsoonthepreviousBoard,wasappointedChairbytheMinister.Aswaswidelyreportedinthemedia,Alan’stenureasChairceasedinFebruary2013,followingaHighCourtchallengetohisappointment.AlistairRyanwasappointedasDeputyChairandfilledtheChairrolefortheremainderofthefinancialyear.

DuringtheirbrieftenuresbothAlanJacksonandAlistairRyanprovidedexcellentleadershipandsupporttotheNZRacingBoard.FollowinganextensivesearchforanewChair,GlendaHugheswasappointedandtookupthepositionon1August2013.

The full Board currently consists of:

• GlendaHughes(IndependentChair)

• MauroBarsi(GreyhoundRacingNZNominee)

• GrahamCooney(IndependentDirector)

• RodCroon(HarnessRacingNZNominee)

• LizDawson(IndependentDirector)

• GregMcCarthy(NZThoroughbredRacingNominee)

• AlistairRyan(IndependentDirector)

The Executive Leadership Team of the NZ Racing Board is:

• ChrisBayliss,ChiefExecutive

• StewartMcRobie,ChiefFinancialOfficer

• MoniqueCairns,ExecutiveGeneralManagerStrategyandTransformation

• GlennPatrick,ExecutiveGeneralManagerTAB

• MartinSaunders,ChiefOperatingOfficer (withresponsibilityforInternationalgrowth)

• EmmaScott,ChiefTalentOfficer

• ColinPhilp,ChiefInformationOfficer

During their brief tenures both Alan Jackson and Alistair Ryan provided excellent leadership and support to the NZ Racing Board. Following an extensive search for a new Chair, glenda Hughes was appointed and took up the position on 1 August 2013


49GOveRNANCe StAtemeNt

BOARd REsPONsIBILITIEsTheNZRacingBoardmeetsregularly.TheChiefExecutive,whoseresponsibilityistheday-to-dayoperations,alsoattendsallmeetings.TheNZRacingBoard’skeyresponsibilitiesare:

• Establishoverallstrategy,goalsandassociatedbusinessplans;

• Monitorperformanceagainstbudgetandotherperformanceindicators;

• Ensureintegrityandtransparencyinreporting;

• CommunicatetostakeholdersviatheCombinedRacingIndustryGroup(CRIG)meetings,annualStatementofIntent,AnnualReportandotherrelevantreporting;

• ImplementpoliciestoenhancetheNZRacingBoard’sperformance;

• Identifyandmanagebusinessrisks,includingstatutorycompliance;

• Ensureappropriateinternalcontrolsareinplaceandenforced,andthequalityandindependenceoftheexternalauditfunctionismaintained;

• Monitormanagementandperformance,includingresponsibilityfortheappointmentoftheChiefExecutive,reviewofoperations,successionplanninganddelegations;and,

• FosteranorganisationalculturethatensuresallBoardmembers,managementandstaffadheretohighstandardsofethicsandcorporatebehaviour.

InaccordancewithSection19oftheRacingAct2003,theNZRacingBoardsubmitsaStatementofIntentfortheupcomingthreefinancialyears,settingoutitsoverallobjectives,intentionsandfinancialandperformancetargets.Afterdueconsultationwithracingstakeholders,theStatementofIntentistabledatParliament.

BOARd PROCEssEsTheNZRacingBoardmet12timesduringtheyearto31July2013.Everymeetingissubjecttoaformalagendaandreportingprocedures.AgendasarepreparedbytheChiefExecutive,inconjunctionwiththeChairperson.

TheNZRacingBoardmaintainsanInterestsRegisterinwhichtheinterests,includingfinancial,ofitsmembersarerecorded.BoardMembersareexpectedtomanageanyconflictsofinterestresponsiblyandethically,andtoactinamannerconsistentwiththevaluesoftheNZRacingBoardanditsobjectives.

Theseobjectives,assetoutinSection8oftheRacingAct 2003, are:

• Topromotetheracingindustry;

• Tofacilitateandpromoteracebettingandsportsbetting;and

• Tomaximiseprofitsforthelong-termbenefitofNewZealandracing.


50

BOARd COmmITTEEsTheNZRacingBoardformallyconstitutedfourcommitteesin2012/13:theDatesCommittee,theAuditandRiskCommittee,theCompensationandDevelopmentCommitteeandtheNetProceedsCommittee.

ThesecommitteessupporttheNZRacingBoardbyconsideringrelevantissuesatadetailedlevelandreportbacktotheNZRacingBoard.

Allcommitteesaregovernedbycharterssettingouttheirrolesandresponsibilities,membership,functions,reportingproceduresandthemannerinwhichtheyoperate.CommitteesreportbacktotheNZRacingBoardbymakingrecommendations,exceptwherespecificdecision-makingauthorityhasbeendelegatedbytheNZRacingBoard.

Thepurpose,structureandmembershipofeachcommitteeisreviewedannually.

dATEs COmmITTEETheDatesCommitteeisestablishedinaccordancewithSection42oftheRacingAct2003,whichrequiresthecommitteetodetermine,inconsultationwitheachoftherecognisedindustryorganisations:

• Allthedatesintheracingyearonwhichdomesticbettingraceswilloccur;

• TheallocationofthosedatesamongRacingClubs;and,

• anyconditionsofallocation.

MembersoftheDatesCommitteeare:GrahamCooney(Chair),GregMcCarthy,RodCroonandMauroBarsi.

AUdIT ANd RIsK COmmITTEETheAuditandRiskCommitteeassiststheNZRacingBoardwithrespecttotheintegrityoftheBoard’sfinancialreportingsystems,annualandhalfyearlyfinancialstatementsanddisclosuresandIFRScomplianceandauditconfirmation,internalcontrolenvironment,riskmanagementpracticesandprocedures.TheCommitteeoperateswithinthetermsofitsCharterwhichissubjecttoannualreviewandconfirmation.TheCommitteemeetsregularlywiththeexternalauditor,PricewaterhouseCoopers,toensurethatappropriatetesting,rigourandindependencearebeingappliedtothefinancialprocesseswithintheorganisation.

TheAuditandRiskCommitteemeetsfourtimesayearonascheduledbasisandmoreoftenif/asrequired.Asat31July2013,thecommitteecomprisedAlistairRyan(Chair),GrahamCooney,GregMcCarthyandRodCroon.

COmPENsATION ANd dEVELOPmENT COmmITTEETheCompensationandDevelopmentCommitteemonitorsissuesanddeterminespoliciesandpracticesrelatingtotheremunerationoftheChiefExecutiveandtheRacingBoardLeadershipTeam.Italsooverseesmanagementdevelopmentandsuccessionplanningprocesses.TheCompensationandDevelopmentCommittee’smemberswere:RodCroon(Chair),LizDawson,MauroBarsiandAlistairRyan.

NET PROCEEds COmmITTEETheNetProceedsCommitteewasestablishedtoallocatetheproceedsoftheClass4gamingactivitytoracingandamateursportsbodiesforauthorisedpurposes.Attheendofthefinancialyear,itsmemberswere:LizDawson(Chair),AlistairRyanandGrahamCooney.

GOveRNANCe StAtemeNt


51

BOARd mEmBERs ANd REmUNERATION

NumBEr OF mEETiNgS

MEMBER’SremuNeratioN

NZ$

board meetiNgs

AUDIT&RISKcommittee

compeNsatioN &DEVELOPMENT

committee

dates committee

Net proceeds

committee

AlanJackson 42,625 6 - 1 - 1

AlistairRyan 47,083 12 7 - - 5

MauroBarsi 42,250 12 - 2 2 -

GregMcCarthy 42,250 10 7 - 2 -

rod croon 47,250 11 7 2 1 -

graham cooney 47,250 12 7 - 2 5

LizDawson 42,250 10 - 1 - 4

NUmBER OF mEETINGs 12 7 2 2 5

EmPLOyEE REmUNERATION BANdING EQUAL TO OR OVER $100KThetablebelowshowsthenumberofemployeesandformeremployeesoftheNZRacingBoard,notbeingdirectors,who,intheircapacityasemployees,receivedremunerationandotherbenefitsduringFY12/13ofatleastNZ$100,000.

Theremunerationfiguresshownincludeallmonetarypaymentsactuallymadeduringtheyear,excludingredundanciesandincludingincentives.Thetabledoesnotincludeamountspaidpost31July2013thatrelatedtoFY12/13.

NZ$000 2013 2012*

100-110 10 13

110-120 5 17

120-130 13 15

130-140 14 7

140-150 4 1

150-160 5 4

160-170 3 2

170-180 3 -

180-190 1 1

190-200 1 1

200-210 1 -

230-240 2 2

NZ$000 2013 2012*

250-260 1 -

260-270 - 1

280-290 2 -

300-310 2 -

350-360 1 2

360-370 - 1

400-410 - -

410-420 - 1

430-440 1 -

640-650 1 -

GRANd TOTAL 72 69


*The 2012 remuneration figures have been updated to reflect the remuneration received during FY12/13 excluding redundancies.


52

CLAss 4 GAmINGThefollowingtablesshowtheapplicationanddistributionofnetproceedsfromtheNZRacingBoard’sClass4Gamblingoperation.Weareveryproudtohavebeenabletodistributeatouchunder$10milliontooursportsandracingauthorisedpurposes.

RACING AUTHORIsEd PURPOsE Amount PaidNZ$

ThoroughbredRacing 3,140,000

HarnessRacing 1,708,000

GreyhoundRacing 891,449

RacingIntegrityUnit 2,235,094

RacingLab 552,000

JCA 541,665

TOTAL dIsTRIBUTEd TO RACING AUTHORIsEd PURPOsE 9,068,208

sPORTs AUTHORIsEd PURPOsE Amount PaidNZ$

afc fury 11,731

afc fury 52,000

AucklandRugbyLeague 20,000

AvalonRugbyFootballClub 5,340

BadmintonCanterbury 1,451

BadmintonCanterbury 2,948

BayRoskillSportsClub 1,203

CarltonNetballClub 10,000

DunedinIceSkatingClub 2,000

DunedinRugbyFootballClub 9,697

EasternSuburbsCricketClub 4,000

ForrestHillMilfordUnitedFootballClub 9,949

GlendowieTennisClub 12,886

HawkesBayTenpinBowlingFoundation 2,000

HibernianAFC 5,000

HuttValleyBasketballAssociation 5,555

HuttValleyBasketballAssociation 9,450

JohnWalkerFindYourFieldofDreamsFoundation

30,000

LyallBaySurfLifeSavingClub 5,000

MainlandIceRacingClub 2,967

ManawatuIndoorBowlsCentre 2,548

MartinboroughGolfClub 35,000

NaenaeSoccerClub 14,819

NetballManawatuCentre 7,147

NewZealandGrandPrixHydroplaneDriversClub

17,000

NewZealandIceHockeyLeague 15,094

NewZealandInlineHockeyAssociation 36,000

NewZealandMountedGamesAssociation 10,035

No.4DistrictFederationofNZSoccer 9,783

NorthShoreCanoeandYouthClub 1,170

NorthShoreRowingClub 4,300

OceanBeachKiwiSurfLifesavingClub 3,990

OratiaUnitedAFC 23,812

ParafedManawatu 2,000

ParafedWellington 12,911

ParemataPlimmertonNetballClub 7,528




53

GRANTs RETURNEd Amount ReturnedNZ$

ThoroughbredRacing -32,428

GreyhoundRacing -16,449

RacingLab -161,000

JCA -43,332

BadmintonCanterbury -194

HuttValleyBasketballAssociation -380

MillenniumInstitute -1,250

ParafedManawatu -2,000

SpecialOlympics -1,504

WaikatoBasketballCouncil -1,377

TOTAL RETURNEd -259,914

ParemataPlimmertonRugbyFootballClub 57,533

PioneerBasketballClub 2,000

PoriruaRowingClub 22,000

PoriruaSyntheticSportsFieldTrust 200,000

RimutakaInlineHockeyClub 31,000

SouthernCrossTaekwon-doClub 13,504

SpecialOlympicsKapiti 8,000

SpecialOlympicsNewZealand 30,000

SpecialOlympicsNewZealand 35,000

SpecialOlympicsNorthHarbour 10,993

SpecialOlympicsTauranga 12,154

SpecialOlympicsTeAwamutu 8,690

SpecialOlympicsWellington 5,000

StClairSurfLifeSavingClub 6,000

TuNuiaTeIkaOutriggerCanoeClub 15,000

UniversityMt.WellingtonAFC 14,276

UpperHuttRollerSkatingClub 9,755

ValleyInlineSpeedSkating 15,450

VolleyballBayofPlenty 8,580

WaikatoBasketballCouncil 10,630

WaikatoBasketballCouncil 12,362

WainuiomataAFC 3,750

WainuiomataGolfClub 8,000

WainuiomataRugbyFootballClub 26,287

WatersideKaroriAFC 9,500

WellingtonRugbyFootballUnion 30,000

TOTAL dIsTRIBUTEd TO RACING AUTHORIsEd PURPOsE 1,011,778


TheapplicationanddistributionofnetproceedsrepresentamountspaidandincludesamountsaccruedforinFY2012andpaidinFY2013.TheamountdistributedtosportsauthorisedpurposesdisclosedinthefinancialstatementsisbasedonNZIFRSaccountingpoliciesandthereforediffersfromthatshowninthetableabove.




54 ReSPONSIBLe GAmBLING

rESpONSiBLE gAmBLiNgOneoftheNZRacingBoard’smostimportantstatutoryfunctionsistopreventandminimiseharmfromgambling.Thisisachievedthroughensuringrobustmeasuresandproceduresareinplace,providinginformationandadviceonproblemgamblingandprovidingexperttrainingtoallstaffwhosellbettingproductsandoverseetheClass4gamingmachineareas.

FOCUs ON HARm PREVENTION ANd mINImIsATIONFormostcustomers,bettingonracingandsportsisafun,safeandexcitingpastime.However,somepeopleareatriskfromtheimpactofproblemgamblingandtheNZRacingBoardiscommittedtothehighestandmostrobuststandardsinaddressingtheissuebyprovidingindustry-leadingprogrammesinpartnershipwiththeMinistryofHealth,DepartmentofInternalAffairsandproblemgamblingsupportproviders.

UndertheGamblingAct2003,theTABcanonlyacceptbetsonracingandsportseventsandmayalsooperategamingmachines.Thelegislationsetsoutstrictharmpreventionandminimisationobligations.TheGambling(GamblingHarmReduction)AmendmentAct2013waspassedinSeptemberandimposesfurtherobligations,particularlyaroundtheprovisionsofcommunitygrants.TheNZRacingBoardbelievesitstrainingprogrammesandharmminimisationproceduresgoaboveandbeyondthestatutoryrequirementssetoutinbothActs.

Duringthe2012/13year,theNZRacingBoard’sinvestmentinresponsiblegamblingmeasureswas$1.98million($1.94millionin2011/12).Ofthis,approximately$1.86million($1.82millionin2011/12)waspaidtotheCrowntorecoverthecostsoftheMinistryofHealth’sproblemgamblingmanagementservices.

TheNZRacingBoardendorsestheMinistryofHealth’sstrategiesandprogrammes,asevidencedbyNZRacingBoardandindustryrepresentationintheStakeholderReferenceGroupco-ordinatedbytheDepartmentofInternalAffairs,withparticipationbytheMinistryofHealth.

The NZ Racing Board also maintains strong relationships with government officials, as well as working alongside problem gambling support agencies to better understand customer needs.In2012/13approximately$117,200($117,400in2011/12)wasinvestedinprovidingtraininginharmminimisationandpreventionproceduresforstaffincustomer-contactroleswithinthewiderindustry.Thiswillassistintheidentificationofproblemgamblingbehaviourandprovidestaffwiththeappropriateprocedurestomitigatetheeffects.

Face-to-faceclassroom-basedtrainingofstaffisconductedatregionalcentresbyappropriateexternalfacilitatorsonaregularbasis.Duringthe2012/13year,578TABoperatorsreceivedandpassedproblemgamblingtraining.

Inaddition,theNZRacingBoardprovidedacomplementarytrainingprogramme,developedinconjunctionwithClubsNZandtheProblemGamblingFoundation,allowingstafftoundertakeintensiveproblemgamblingawarenesstrainingonline.

TheNZRacingBoardalsoconductedthreeproblemgamblingworkshopswithsportsleadersandsportsteams,whichwereverywellreceivedandresultedinproblemgamblinginformationbeingrelayedtootherathletes,familyandthewidercommunity.

The NZ Racing Board also conducted three problem gambling workshops with sports leaders and sports teams, which were very well received and resulted in problem gambling information being relayed to other athletes, family and the wider community


55

IdENTIFICATION ANd mANAGEmENTTheNZRacingBoardhasdevelopedbothproactiveandreactiveapproachestotheidentificationandinvestigationofpotentialproblemgamblingsituations.

InadditiontosituationswherecustomersdirectlycontactstafftorequestanexclusionfromholdingandusingaTABaccountorplacingabetataTABretailoutlet,TABoperatorsaretrainedtoidentifyandreportmattersrequiringfurtherinvestigationwithregardtoproblemgamblingbehaviour.Furthermore,theNZRacingBoardconductsexceptionreporting,aimedatidentifyinganysignificantchangesorconcernsaroundthebettingbehaviourofaccountcustomers.

Inthe2012/13year,226customerswereissuedwithexclusionnotices(includingself-exclusion),while16accountcustomerswereplacedintheSetYourLimitsbettingrestrictionprogramme.Thesenumbersrepresentanextremelysmallpercentageofourcustomerbase.

sET yOUR LImITs PROGRAmmETheSetYourLimitsprogrammeisavailabletoallTABaccountcustomers,allowingthemtorequesttheplacementofalimitorcaponaccountbettingactivity.

Thelimitationsonbettingactivitycanbeeitherarequesttolimittheamountofmoneyspentthroughtheaccounteachweek,orarequesttolimittheleveloflossesthroughtheaccount.Oncetheagreedlimithasbeenreached,nofurtherbetscanbeacceptedonthenominatedaccountforthatweek.

Changestotheagreedlimitscanonlybemadeafterconsultationwiththecustomer.Todate,64accountcustomershavetakenadvantageoftheprogramme.Feedbackfromthesecustomershasbeenoverwhelminglypositive.TheSetYourLimitsprogrammehasprovidedcustomerswithapracticalwayofhelpingthemcontroltheirbettingbehaviourwhilestillallowingthemtheenjoymentofracingandsportsbets.

ReSPONSIBLe GAmBLING


56

THOROUGHBREd – OCEAN PARKThe2012-13fivetimeGroup1winner,OceanPark,wastheThoroughbredHorseoftheYear.Thefive-year-oldwon5ofhis8startsand$3,433,272inprizemoney.ThreewinswereatthehighestlevelinAustralia,theCoxPlate,CaulfieldStakes,andtheUnderwood.AndhistwowinsagainstNewZealand’sbest,wereintheMakfiChallengeStakesandtheLindauerNewZealandStakes.Retiredfromracing,OceanParkisnowstandinginhisfirstseasonasasireatWaikatoStud.

OwNERs: mr a wong, mr s yan and mr g hennessy

TRAINER: gary hennessy

BREEdING: ThornPark(Aus)/Sayyida(NZ)

BREEdER: TrelawneyThoroughbredLtd–Brentand CherryTaylor

HARNEss – TERROR TO LOVELeadingpacerTerrortoLovecaptured8winsfrom14startsasa5yearold.ForthesecondtimeinarowTerrortoLoveclaimedtheNewZealandTrottingCupandisontargettoclaimhisthirdthisNovember.HealsocompetedintheprestigiousHarnessJewelsandwonthe5YOEmeraldcategoryaswellaswinningtheGroup1EasterCup.WelookforwardtowatchingTerrortoLove’sperformanceoverthenextyearandaresurehewillamazeagain.

OwNERs: McDonaldBloodstockLimited

TRAINER: graham court

BREEdING: WesternTerror(USA)/LovetoLive(NZ)

BREEdER: TMcDonald

GREyHOUNds – THRILLING BRAT Despitebeingplaguedbyinjuries,superstarstayerThrillingBratwentonaGroup1winningspreewhenheemphaticallywonthreestayingracesattheelitelevellastseason.IncludedwashispotentvictoryintheprestigiousDukeOfEdinburghSilverCollar.Heracedon15occasions,whichnettedhim11winsandaminorplacing,resultingin$93,516instakes.

OwNER: GaryHarding

TRAINER: KarenWalsh

BREEdING: Hallucinate(Aus)/ThrillingFaith(NZ)

BREEdER: GaryHarding

COdE ChAmpiONS

CODe ChAmPIONS


57


5858

FiNANCiAL STATEmENTS FOr ThE yEAr ENdEd 2013FinancialCommentary 59

StatementofProfitorLossandComprehensiveIncome 60

StatementofChangesinEquity 61

StatementofFinancialPosition 62

StatementofCashFlows 63

NotestotheFinancialStatements 64

BasisofPreparation 64

1 Operatingsegments 2 Revenue 3 Otherincome 4 Turnoverrelatedexpenses 5 Operatingexpenses 6 Cashandcashequivalents 7 Tradeandotherreceivables 8 Otherfinancialassets 9 Property,plantandequipment 10 Intangibleassets 11 Tradeandotherpayables 12 Otherfinancialliabilities 13 Customerbettingaccountdepositsandvouchers 14 Provisions 15 Distributions 16 Financialinstruments 17 Relatedparties 18 Commitments 19 Contingentliabilities 20 Reconciliationofnetsurplustonetcashflowsfromoperatingactivities 21 Groupentities 22 Budgetinformation

23 Subsequentevents

Auditors’Report 93


fINANCIAL StAtemeNtS fOR the yeAR eNDeD 2013


5959

FiNANCiAL COmmENTAryFollowingtheappointmentofnewChiefFinancialOfficer,StewartMcRobie,areviewoftheFinancefunctionwascarriedoutthisfinancialyear.New,strengthenedfinancialcontrolprocessesandframeworks

wereintroduced.CapabilitywithintheFinanceteamwasincreasedandanumberofkeyspecialistfunctionswereestablishedtosupportcommercialisationofthebusiness;theseincludedTax&Treasury,FinancialReporting,PropertyandProcurement.

TheFinanceteamhasdeliveredanumberofsuccessesthisyear.Qualityofinformationhasimproved,the2012/13financialstatementswereproducedandauditedinrecordtimeandthisyear’sAnnualReportispublishedwellaheadoflastyears.

Theoverallfinancialresultsfortheyearwerevery pleasing,withrecordturnoverandprofitdeliveredacrossbothBettingandGaming.Theseresultswereachieveddespiteanumberofsignificantchallengesfacedbythebusiness,includinganenvironmentofintensifyingoffshorecompetition,acontinuingdeclineindomesticToterevenue,theabsenceofamajorsportingeventwhichboostedrevenueintheprioryear(theRugbyWorldCupincreasedprioryearturnoverby$30.0million)and12racecancellationsduetoextremeweather.

TheNZRacingBoardhasachievedatotalNetProfitof$144.1millionforthe2013yearwhichwas$16.9millionor13%abovethe2012equivalent.Theresultwascomprisedofa$135.3millionNetBettingProfitandan$8.8millionNetGamingProfit.Aswellasbeingabovethe2012netprofit,theseresultsalsoexceededtherevisedandincreased2012–15StatementofIntentnetprofittargetsforeachofBetting(at$135.0million)andGaming(at$7.5million),whichwerereleasedinDecember2012.

Theresultfor2012wasimpactedbythewriteoffoftheTyphoonproject,withacostof$11.1million.AfterexcludingboththisandthehigherincomeasaresultoftheRugbyWorldCupin2012,2013netprofitwas$8.8millionor6%upontheprioryear.Althoughrestructuringcostshavebeenincurredtorepositionthebusinessin2013,thesehavebeenlargelyoffsetbyadjustmentsarisingfromareviewofNZRacingBoardassetsandliabilitieswhichtookplaceoverthecourseof2013.

Thisyear’sfinancialresultsincludedisclosureofGamingturnoverforthefirsttime,whichinpreviousyears,wasnotreported.

Key features of the 2013 results were as follows:

TURNOVER Bettingturnoverabovelastyearby$97.2millionor6%despite2012turnoverbeingboostedby$30.0millionasaresultoftheRugbyWorldCup.Afterexcludingthis,turnoverwas8%abovetheprioryear.

Gamingturnoverwas23%aheadoftheprioryearreflectingthefullyearimpactofincreasedGamingsites.

INCOmENetBettingRevenuewas$9.9millionor4%abovetheprioryearandthisrateofincreaseisbelowthegrowthinturnoverasaresultoftheincreasedproportionoflowermarginfixedoddsbusinessandadecliningrelativeshareofhighermargintotebusiness.

NetGamingRevenuewas$2.9millionor25%abovetheprioryearasaresultofthefullyearimpactofincreasedGamingsitesboostingrevenue.

Otherincomewas$1.3millionor3%belowtheprioryearasdecliningmiscellaneousrevenue,interestincomeandforeignexchangegainsallimpactedtheresultthisyear.

Asaresultoftheabove,totalincomewas$11.4millionor4%abovetheprioryear.

ExPENsEsTurnoverrelatedexpenseswere$2.1millionor5%abovetheprioryearandthelevelofincreasecloselyapproximatestheincreaseinBettingandGamingturnover.

Operatingexpenseswere$7.5millionor6%belowtheprioryear.Thisdecreasewasmainlytheresultofthe$11.1millionimpairmenttakenin2012,offsetbythefollowingitems;impactin2013ofrestructuringcostsincurredtorepositionthebusinesstoincreasecapabilityandtogrowgoingforward,abalancesheetaccountreconciliationthattookplaceduringtheyearandabaseincreaseinstaffexpenses.

Totalexpenseswere$5.4millionor3%belowtheprioryearasaresultoftheabove.

Totaldistributionsmadefromcurrentyearprofitfortheyearat$142.4millionwereabovetheprioryearby$6.6millionor5%withincreaseddistributionstoboththeracingindustryandsportingcodes.

THE COmING yEARAsoutlinedintheStatementofIntent2013–16,theNZRacingBoardhassetitselfanambitioustargetof$149.1millionnetprofitbeforedistributions.Whilstthistargetischallenginggiventhecontinuingchangeagendaandchallengingoperatingenvironment,itisalsoviewedasachievablebasedontheintroductionofanumberofinitiativesthatwillincreaseturnoverandmargin.

stewart mcRobie, Chief Financial Officer


fINANCIAL COmmeNtARy


fINANCIAL StAtemeNtS60

STATEmENT OF prOFiT Or LOSS ANd COmprEhENSivE iNCOmE FOr ThE yEAr ENdEd 31 JuLy 2013 2013 2012 Note NZ$000 NZ$000

Bettingandgamingturnover 2a 1,956,824 1,814,012

INCOmE Netbettingrevenue 2b 243,515 233,600 Netgamingrevenue 2c 14,169 11,310 Otherincome 3 46,829 48,159

TOTAL INCOmE 304,513 293,069 TURNOVER RELATEd ExPENsEs 4 44,736 42,602

OPERATING ExPENsEs Premisesandequipmentexpenses 5 27,515 27,086 Staffexpenses 5 54,979 47,857other expenses 5 33,174 48,265

TOTAL OPERATING ExPENsEs 115,668 123,208

TOTAL ExPENsEs 160,404 165,810

NET PROFIT BEFORE dIsTRIBUTIONs 144,109 127,259

Distributions 15 142,390 135,777 ProvisionforundistributedGamingsurplus 14 1,514 3,037

NET PROFIT/(LOss) AFTER dIsTRIBUTIONs 205 (11,555)

TOTAL COmPREHENsIVE INCOmE FOR THE yEAR 205 (11,555)

Total comprehensive income attributable to: NZRacingBoardreserves 205 (11,555)

The accompanying accounting policies and notes form part of these financial statements.


fINANCIAL StAtemeNtS 61

STATEmENT OF ChANgES iN EquiTy FOr ThE yEAr ENdEd 31 JuLy 2013 general reserve NZ$000

Balance as at 1 August 2011 80,809

Netlossafterdistributions (11,555)

Balance as at 31 July 2012 69,254

Netprofitafterdistributions 205

Balance as at 31 July 2013 69,459




STATEmENT OF FiNANCiAL pOSiTiON AS AT 31 JuLy 2013 2013 2012 Note NZ$000 NZ$000

CURRENT AssETsCashandcashequivalents 6 26,262 11,562 Tradeandotherreceivables 7 11,960 8,888 Otherfinancialassets 8 32,000 44,120 Othercurrentassets 678 2,024

TOTAL CURRENT AssETs 70,900 66,594

NON-CURRENT AssETsProperty,plantandequipment 9 40,412 45,192 Intangibleassets 10 7,469 8,949 Otherfinancialassets 8 2,951 4,741

TOTAL NON-CURRENT AssETs 50,832 58,882

TOTAL AssETs 121,732 125,476

CURRENT LIABILITIEsTradeandotherpayables 11 21,817 20,474 Customerbettingaccountdepositsandvouchers 13 16,649 16,594 Otherfinancialliabilities 12 5,368 6,176 Taxationpayable 2,889 7,117Provisions 14 3,253 3,263

TOTAL CURRENT LIABILITIEs 49,976 53,624

NON-CURRENT LIABILITIEsOtherfinancialliabilities 12 1,565 1,597 Provisions 14 732 1,001

TOTAL NON-CURRENT LIABILITIEs 2,297 2,598

TOTAL LIABILITIEs 52,273 56,222

NET AssETs 69,459 69,254

EQUITy

GENERAL REsERVE 69,459 69,254

The members of the New Zealand Racing Board Board authorised these financial statements for issue on 27 September 2013.

GlendaHughes AlistairRyanChairoftheNewZealandRacingBoard ChairoftheAuditandFinanceCommittee oftheNewZealandRacingBoard




STATEmENT OF CASh FLOwS FOr ThE yEAr ENdEd 31 JuLy 2013 2013 2012 NZ$000 NZ$000CAsH FLOws FROm OPERATING ACTIVITIEs INFLOws Bettingandgamingturnover 1,957,127 1,813,843Internationalracingfeesandotherincome 30,454 32,063Racingservicesincome 15,140 14,518Jackpotretentionsandaccountdeposits(net) 33 999

2,002,754 1,861,423

OUTFLOws BettingandGamingdividendspaid (1,641,463) (1,513,671)Goodsandservicestax(net) (41,692) (38,367)BettingandGamingdutypaid (19,033) (16,150)Nationalsportingorganisationsgrants (4,009) (3,686)Paymentstosuppliers (90,813) (90,344)Paymentsforemployeebenefitsincludingterminationpayments (53,392) (46,544)DistributionstotheRacingCodes (132,124) (125,281)Racingindustryinitiatives (1,835) (1,879)PaymentsforRacingindustrycosts (9,370) (5,693)Gamingdistributiontoexternalbodies (1,008) (699)

(1,994,739) (1,842,314)

NET CAsH PROVIdEd By OPERATING ACTIVITIEs 8,015 19,109

CAsH FLOws FROm INVEsTING ACTIVITIEs INFLOws Repaymentofshort-termdepositsonmaturity 8,004 31Interestreceived 2,117 2,184Proceedsfromsaleofproperty,plantandequipment 468 1,061Repaymentsofclubloans 6,116 616

16,705 3,892 OUTFLOws Investmentofshort-termdeposits - (8,004)Purchasesofproperty,plantandequipment (8,504) (10,978)Purchaseofintangibleassets (1,147) (3,821)

(9,651) (22,803)

NET CAsH PROVIdEd By / (UsEd IN) INVEsTING ACTIVITIEs 7,054 (18,911)

CAsH FLOws FROm FINANCING ACTIVITIEs INFLOws Drawdownonsecuredloan - 1,500

OUTFLOws Interestpaid (137) (157)

NET CAsH (UsEd IN) / PROVIdEd By FINANCING ACTIVITIEs (137) 1,343

NET INCREAsE IN CAsH ANd CAsH EQUIVALENTs 14,932 1,541

Cashandcashequivalentsasatthebeginningoftheyear 11,562 10,002Foreignexchange(loss)/gainoncashandcashequivalents (232) 19

CAsH ANd CAsH EQUIVALENTs As AT THE ENd OF THE yEAR 26,262 11,562

The movements in Jackpot retentions and in GST have been shown on a net basis in the Statement of Cash Flows as the transactions are settled within a short period of time.

The movements in Account Betting Deposits have been shown on a net basis in the Statement of Cash Flows as these movements represent customer account balances rather than transactions of the New Zealand Racing Board.




NOTES TO ThE FiNANCiAL STATEmENTSFOr ThE yEAr ENdEd 31 JuLy 2013

BASiS OF prEpArATiON

Reporting entity and statutory base

TheNewZealandRacingBoard(“NZRacingBoard”)isastatutorybodyestablishedbytheRacingAct2003.CustomerbettingaccountsandbettingvouchersofferedaredebtsecuritieswithinthemeaningoftheSecuritiesAct1978andtheNZRacingBoardisthereforean‘issuer’forthepurposesoftheFinancialReportingAct1993.TheNZRacingBoardisdomiciledinNewZealand.

TheprincipleobjectivesoftheNZRacingBoardasoutlinedintheRacingAct2003,are:

(a) topromotetheracingindustry;and

(b) tofacilitateandpromoteracingbettingandsportsbetting;and

(c) tomaximiseitsprofitsforthelong-termbenefitofNewZealandracing.

statement of compliance

ThesefinancialstatementsarepreparedinaccordancewithgenerallyacceptedaccountingpracticeinNewZealand,asrequiredundertheRacingAct2003andtheFinancialReportingAct1993.TheycomplywithNewZealandequivalentstoInternationalFinancialReportingStandards(NZIFRS)asappropriateforprofit-orientedentities.TheycomplywithInternationalFinancialReportingStandards.

Basis of measurement

Thesefinancialstatementshavebeenpreparedonthehistoricalcostbasis.Costisbasedonthefairvalueoftheconsiderationgiveninexchange.

ThefinancialstatementsareParentandGroupfinancialstatements.TheGroupcomprisestheNZRacingBoardandtheBettingAccountsandBettingVouchersTrust.ThefinancialstatementsoftheGrouparethesameasthoseoftheParentasallassetsandliabilitiesoftheTrustareheldbytheNZRacingBoardasTrustee.

Changes in accounting policies

Therehavebeennochangesinaccountingpoliciesduringtheyear.Theaccountingpolicieshavebeenadoptedconsistentlythroughouttheperiodpresentedinthefinancialstatements.

Prior period comparatives

Certainpriorperiodcomparativeshavebeenreclassifiedtoconformtothecurrentperiodpresentation.

New standards and interpretations issued

ThefinancialstatementshavebeendrawnuponthebasisofaccountingStandards,InterpretationsandAmendmentseffectiveatthebeginningoftheaccountingperiodon1August2012.

TheNZRacingBoardhasconcludedthattherearenorelevantStandardsorInterpretationsinissuethatarenotyetadoptedthatwillhaveamaterialimpactontheNZRacingBoard’sfinancialstatements,otherthanNZIFRS9FinancialInstruments.NZIFRS9replacespartsofIAS39FinancialInstruments:RecognitionandMeasurementthatrelatetotheclassificationandmeasurmentoffinancialinstruments.AdoptionofthisstandardwillmeanthattheNZRacingBoardwillnolongerhaveassetsclassifiedasheldtomaturity.

Critical accounting estimates and assumptions

TheNZRacingBoardhasdeterminedthattherearenocriticaljudgementsinapplyingaccountingpoliciesthathaveasignificanteffectontheamountsrecognisedinthefinancialstatements.

ThepreparationofthefinancialstatementsinconformitywithNZIFRSrequiresmanagementtomakejudgements,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.Estimatesandassumptionsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Informationaboutassumptionsandestimationuncertaintiesthathaveasignificantriskofresultinginamaterialadjustmentwithinthenextfinancialyearareincludedinthefollowingnotes.



NOTES TO ThE FiNANCiAL STATEmENTS (CONT)

FOr ThE yEAr ENdEd 31 JuLy 2013

Intangibles and Property, Plant and Equipment

AssessingtheappropriatenessofusefullifeandresidualvalueestimatesofnetworkassetsrequiresanumberoffactorstobeconsideredsuchasthephysicalconditionoftheassetandexpectedperiodofuseoftheassetbytheNZRacingBoard.

Provisions and contingent liabilities

PreparationoffinancialstatementsrequirestheNZRacingBoardtomakeassessmentsovertheexistenceofprovisionsandcontingentliabilities.Keyjudgementsincludetheprobabilityofanobligatingeventoccurringandestimatingfuturecashoutflows.Actualresultsmaydifferfromestimates.

Consolidation

TheconsolidatedfinancialstatementsincorporatetheassetsandliabilitiesofallmaterialentitiescontrolledbytheNZRacingBoardasat31July2013andtheresultsoftheoperationsofsuchentitiesfortheyearthenended.TheNZRacingBoardandsuchentitiesaretogetherreferredtointhesefinancialstatementsastheNZRacingBoard.

ControlledentitiesarethoseentitiesoverwhichtheNZRacingBoardhasthepowertogoverntheentity’sfinancialandoperatingpoliciesof thatentity.

ControlledentitiesareconsolidatedfromthedateonwhichcontrolistransferredtotheNZRacingBoard.

Balancesbetweencontrolledentities,includinginter-entitytransactions,areeliminated.

Taxes

TheNZRacingBoardisexemptfromNewZealandincometaxpursuanttosectionCW47oftheIncomeTaxAct2007.

Thefollowingtaxes,duties,leviesandsimilarchargesarepaidbytheNZRacingBoard:

• Bettingdutyof4centsinthedollaronGrossBettingRevenue

• Gamingmachinedutyof20centsinthedollaronGrossGamingRevenue

• ProblemGamblinglevyof0.6[1]centsinthedollaronGrossBettingRevenueand1.31[1]centsinthedollaronGrossGamingRevenue

• Goodsandservicestax(GST)chargedonGST-inclusiveGrossBettingRevenueandGrossGamingRevenue

• Broadcastinglevyof0.00051centsinthedollarofrevenuefrombroadcastinginNewZealand

• Fringebenefittax(FBT)

• AccidentCompensationCommission(ACC)levies

• CompulsoryKiwiSaveremployercontributions

• PropertyTaxesincludinglocalbodyrates

[1] TheGambling(ProblemGamblingLevy)Regulations2013amendedtherateofProblemGamblingLevywitheffectfrom1July2013.Priorto1July2013theapplicablerateswere0.51centsand1.48centsrespectively.

TheNZRacingBoardmaybesubjecttoforeignincometaxoncertainincomeearnedoverseas.



1. OpErATiNg SEgmENTS TheNZRacingBoardhastwooperatingsegments:

• Betting operations–operationsrelatingtoprovidingtotalisatorandfixedoddsbettingforracingandsports.BettingoperationsincludesbroadcastingandracingservicesprovidedtotheRacingCodes.

• Gaming operations-operationsrelatingtotheprovisionofGamingactivities.

CostsspecificallyassociatedwithGaminghavebeenallocatedtotheGamingoperatingsegment.Thosecostsassociatedwithcorporateservices,thatarenotdirectlyattributabletotheGamingoperationssuchascommunications,legal,financeandhumanresourcesareincludedwithintheBettingoperations.

TheNZRacingBoard’sChiefExecutivehasbeenidentifiedastheNZRacingBoard’schiefdecisionmakerforthepurposeofapplyingsegmentreporting.ThesegmentresultsdisclosedarebasedonthosesegmentsreportedtotheChiefExecutiveandusedbytheNZRacingBoardtoanalyseitsbusiness.Additionstonon-currentassetsarenotreportedtotheChiefExecutiveandarethereforenotseparatelydisclosedwithinthesegmentreporting.FurthergeographicalinformationinrelationtoSportandGamingturnoverisnotreportedtotheChiefExecutiveandisthereforealsoexcludedfromthegeographicalrevenueinformationbelow.

year ended 31 July 2013 Betting gaming Total NZ$000 NZ$000 NZ$000

Totalturnover 1,716,504 240,320 1,956,824Interestincome 2,050 85 2,135Interestexpense (88) (49) (137)Depreciation&amortisation (11,689) (1,167) (12,856)Impairmentexpense (928) - (928)Netprofitbeforedistributions 135,346 8,763 144,109Totalassets 116,609 5,123 121,732Totalliabilities 47,150 5,123 52,273

Geographical revenue information: RacingturnovergeneratedinNZ 799,927RacingturnoverrevenuegeneratedinAustralia 630,106Racingturnoverrevenuegeneratedinotheroverseascountries 40,380

TOTAL BETTING TURNOVER - RACING 1,470,413

year ended 31 July 2012 Betting gaming Total NZ$000 NZ$000 NZ$000

Totalturnover 1,619,339 194,673 1,814,012Interestincome 2,009 54 2,063Interestexpense (117) (40) (157)Depreciation&amortisation (12,554) (839) (13,393)Impairmentexpense (11,054) - (11,054)Netprofitbeforedistributions 120,425 6,834 127,259Totalassets 119,044 6,432 125,476Totalliabilities 49,790 6,432 56,222

Geographical revenue information: RacingturnovergeneratedinNZ 782,740RacingturnoverrevenuegeneratedinAustralia 554,788Racingturnoverrevenuegeneratedinotheroverseascountries 36,154

TOTAL BETTING TURNOVER - RACING 1,373,682







2. rEvENuE Totalisatorturnoverisrecognisedoncetheoutcomeofthebettingeventisconfirmed.

Fixedoddsturnoverisrecognisedonthosebetsthatareplacedwithafixedreturn,oncetheoutcomeofthebettingeventisknownandtheresultconfirmed.Formultifixedoddsbets,turnoverisonlyrecognisedwhenthelastlegisresulted.

Gamingturnoveristhegrossproceedsderivedfromgamingmachines.TheNZRacingBoardholdsalicencetooperategamingmachinesissuedbytheDepartmentofInternalAffairsundertheGambling(Class4NetProceeds)Regulations2004.

BettingandGamingturnoverismeasuredatthefairvalueoftheconsiderationreceived,netofanyrefundsandrebates,andinclusiveofGST.

DividendspayableonBettingandGamingoperationsarerecognisedoncetheeventhasresulted,atthefairvalueoftheconsiderationtobepaid.Anyunclaimeddividendsontotalisatorandfixedoddsrevenuearerecognisedasunpaiddividendswithinotherfinancialliabilities.DividendspaidonGamingturnoverrepresentspayoutstocustomersfromthegamingmachines,includingjackpotpayouts.

NetBettingandGamingrevenuerepresentthenetwinorlosstotheNZRacingBoard.NetBettingandGamingrevenueiscomprisedofturnoverlessdividendspaidorpayable,lessdutiesandGST.

ProblemgamblingleviesandBettingandGamingmachinedutiesareconsideredsalestaxes,andarethereforeincludedwithinNetBettingandGamingrevenue,consistentwithGST. 2013 2012 NZ$000 NZ$0002a. TURNOVER (including GsT) Bettingturnover-racingtotalisator 1,216,192 1,184,152Bettingturnover-racingfixedodds 254,221 189,530

Total betting turnover - Racing 1,470,413 1,373,682

Bettingturnover-sportstotalisator 2,605 1,475Bettingturnover-sportsfixedodds 243,486 244,182

Total betting turnover - sports 246,091 245,657

Total betting turnover 1,716,504 1,619,339

Gamingturnover 240,320 194,673

TOTAL BETTING ANd GAmING TURNOVER 1,956,824 1,814,012

2b. NET BETTING REVENUE Totalbettingturnover 1,716,504 1,619,339Less:dividendspayable (1,422,219) (1,336,388)

Grossbettingrevenue 294,285 282,951Bettingduty(4%) (10,873) (11,243)GST(15%) (38,356) (36,541)Problemgamblinglevy (1,541) (1,567)

NET BETTING REVENUE 243,515 233,600

2c. NET GAmING REVENUE Gamingturnover 240,320 194,673Less:dividendspaid (218,685) (177,399)

Grossgamingrevenue 21,635 17,274

Gamingmachineduty(20%) (4,327) (3,455)GST(15%) (2,822) (2,253)Problemgamblinglevy (317) (256)

NET GAmING REVENUE 14,169 11,310





3. OThEr iNCOmE Foreignexchangegainsrepresentthenetrealisedandunrealisedgainsandlossesarisingontransactionsandbalancesheldinforeigncurrency.

IncomesubjecttobroadcastingleviesisadvertisingincomeearnedontheNZRacingBoard’sTracksideTVchannelandRadioTracksideandissubjecttoleviesundertheBroadcastingAct1989.

Interestincomeisearnedoncashandcashequivalents,short-termdeposits,corporatebondsandClubloans.Interestincomeisrecognisedusingtheeffectiveinterestmethodwhenitisearned.

IncomeearnedonracingshownoverseasrepresentsfeesreceivedfrominternationalbettingagenciesontheexportofNewZealandracingevents.Thisincomeisrecognisedbasedontheturnovertakenbytheinternationalbettingagenciesonexportedracingeventsandisrecognisedatthetimethattheracingeventtakesplace.

RacingservicesincomerepresentsincomeearnedbytheNZRacingBoardfromprovidingon-courseracedayservicestoRacingClubs.Racingservicesincomeisrecognisedatthetimethattheracingeventtakesplace.

Allotherincomeismeasuredatthefairvalueoftheconsiderationgiven. 2013 2012 NZ$000 NZ$000

Foreignexchangegains 397 614Incomesubjecttobroadcastinglevies 775 996Interestincome 2,135 2,063NZracingshownoverseasrevenue 23,587 22,952Racingservicesincome 15,140 14,518Otherincome 4,795 7,016

TOTAL OTHER INCOmE 46,829 48,159

4. TurNOvEr rELATEd EXpENSESComminglingfeesarefeespaidtooverseasbettingagenciesoncommingledpools.Thefeesarebasedonapercentageofthecommingledturnover.

NationalsportingorganisationgrantsarefeespaidtoNewZealandsportingbodiesbasedonacombinationofapercentageofturnoverandbettingmarginearnedonbettingonthespecificsport.

Outletandagencyfeesarecommissionspaidtonon-NZRacingBoardownedoutletsforprovidingTABservices.Thefeesarebasedonapercentageoftheturnoverearnedbytheoutlet,includingcertainincentivepayments.

Overseasracingrightsarefeespaidtooverseasbroadcastersandbettingagenciesfortakingbetsonimportracing.Thesefeesarebasedonapercentageofturnoverearnedfromtheindividualimportrace. 2013 2012 NZ$000 NZ$000 Comminglingfee 2,378 2,045Nationalsportingorganisationsgrants 3,816 3,982Outletandagencyfees 15,346 15,850Overseasracingrights 20,716 18,145Thermalpaperandbettingslips 1,394 1,462Otherturnoverrelatedexpenses 1,086 1,118

TOTAL TURNOVER RELATEd ExPENsEs 44,736 42,602





5. OpErATiNg EXpENSES 2013 2012 NZ$000 NZ$000

Salariesandwages 49,016 44,097Terminationpayments 2,582 759Otherstaffexpenses 3,381 3,001

TOTAL sTAFF ExPENsEs 54,979 47,857

Depreciationandamortisation 12,856 13,393rent 6,341 4,963 Repairsandmaintenance 4,152 4,746Otherpremisesandequipmentexpenses 4,166 3,984

TOTAL PREmIsEs ANd EQUIPmENT ExPENsEs 27,515 27,086

Advertising 4,544 5,169Auditorsremuneration –Auditandotherassurancefees1 117 84 –Otherservices 2 4 1,023 Broadcastingcosts 6,701 7,833Consultancy 2,663 2,201Dataandtelecommunications 4,339 5,361Gainondisposalofproperty,plantandequipmentandintangibles (787) (281)Impairmentonproperty,plantandequipmentandintangibles 928 11,054Insurance 1,661 1,676interest 137 157Printingandstationery 914 1,025Publications 3,696 3,959Travelandaccommodation 2,018 1,858Venuecosts 143 139Otheroperatingexpenses 6,096 7,007

TOTAL OTHER ExPENsEs 33,174 48,265

1 Audit and other assurance services in the current year includes fees for review of the half-year financial statements.

2 In 2012, other services paid to Auditors related to a review of the wagering system covering programme management, business process documentation, identification of project risks and issues, and consideration of options with regard to feasbility of the project.



6. CASh ANd CASh EquivALENTS Cashandcashequivalentscomprisecashonhand,cashatbankandcalldepositswithamaturityoflessthanthreemonths.TherearenocashorcalldepositbalancesheldbytheNZRacingBoardthatarenotavailableforuse.Thecarryingvaluesofcashandcashequivalentsapproximatetheirfairvalues.Themaximumcreditexposureislimitedtothecarryingvalueofcashandcalldeposits.CashdenominatedinforeigncurrenciesistranslatedintoNewZealanddollarsatthespotrateatthereportingdate.Alldifferencesarisingonsettlementortranslationofmonetaryitemsaretakentotheprofitorlossandincludedwithinotherincome.

2013 2012 NZ$000 NZ$000

Cashandcashequivalents-NewZealandcurrency 25,352 9,667Cashandcashequivalents-Foreigncurrencies 910 1,895

TOTAL CAsH ANd CAsH EQUIVALENTs 26,262 11,562

7. TrAdE ANd OThEr rECEivABLESTradeandotherreceivablesareinitiallyrecognisedatthefairvalueoftheamountstobereceived.Theyaresubsequentlymeasuredatamortisedcost,usingtheeffectiveinterestmethod,lessanyprovisionforimpairmentlossduetodoubtfuldebts.

IncludedwithintradeandotherreceivablesaretheamountsowedtotheNZRacingBoardfromretailoutlets.Theretailoutletsarerequiredtosettleonaweeklybasis.TheNZRacingBoard’spracticeistorequireeitherbankguaranteesorcashbondsfromretailoutletsofavaluegenerallygreaterthanaweek’ssettlement.

Tradeandotherreceivablesarenon-interestbearingandaregenerallyontermsof30daysorless.

TheNZRacingBoardmaintainsaprovisionforimpairmentlosseswhenthereisobjectiveevidenceofretailoutletsbeingunabletomakerequiredpayments.Anyimpairmentprovisionfordoubtfuldebtsiscalculatedontheindividualdebtorlevel.Inassessingtheprovision,factorssuchasaretailoutlet’spastcollectionhistory,theageofreceivablebalancesandthelevelofactivityinretailoutletaccountsaretakenintoaccount.Baddebtsarewritten-offagainsttheprovisionfordoubtfuldebtsintheperiodinwhichitisdeterminedthatthedebtsareuncollectible.Ifthosedebtsaresubsequentlycollectedthenagainisrecognisedintheprofitorloss.

2013 2012 NZ$000 NZ$000

Tradeandotherreceivables 12,053 8,926Provisionfordoubtfuldebts (93) (38)

TOTAL TRAdE ANd OTHER RECEIVABLEs 11,960 8,888







7. TrAdE ANd OThEr rECEivABLES (CONT)

Trade receivables Theaverageperiodoutstandingonsalesofgoodsandservicesis47days(2012:49days).Nointerestischargedontradereceivablespastduedate.

Ananalysisoftheageingofpastduetradedebtorsisoutlinedbelow:

1 - 29 days 30 - 59 days 60 - 89 days 90+ days Total NZ$000 NZ$000 NZ$000 NZ$000 NZ$0002013Notpastduenorimpaired 11,587 - - - 11,587Pastdueandnotimpaired - 78 42 346 466Provisionfordoubtfuldebtallowance - - - (93) (93)

TOTAL TRAdE ANd OTHER RECEIVABLEs 11,587 78 42 253 11,960

1 - 29 days 30 - 59 days 60 - 89 days 90+ days Total NZ$000 NZ$000 NZ$000 NZ$000 NZ$0002012Notpastduenorimpaired 8,083 - - - 8,083Pastdueandnotimpaired - 362 130 351 843Provisionfordoubtfuldebtallowance - - - (38) (38)

TOTAL TRAdE ANd OTHER RECEIVABLEs 8,083 362 130 313 8,888

8. OThEr FiNANCiAL ASSETSOtherfinancialassetsareinitiallyrecognisedattheirfairvaluewhentheNZRacingBoardbecomesapartytothecontractualprovisionsofafinancialinstrument.Initialfairvalueisconsideredtobethecostpriceoftheinstrument,exceptforloanstoRacingClubs.

WhereRacingClubloansareadvancedataninterestratethatisbelowthemarketrateforaninvestmentonsimilartermsandofsimilarcreditquality,theloan’sfairvalueislessthanitscost.Consequently,theseloansareinitiallyrecognisedattheirfairvalueratherthancost.Fairvalueisdeterminedbyreferencetobanklendingratesforloansonsimilartermsandofequivalentcreditquality.

Short-termdepositsandcorporatebondsareclassifiedasheld-to-maturityastheseareconsideredtohavefixedordeterminablepaymentsandfixedmaturityandtheNZRacingBoardhastheintentionofholdingtomaturity.

BettingAccountsandBettingVouchersTrustshort-termdepositsarefundsheldintrusttocoverthebalancesofthecustomerbettingaccountdepositsandvouchersliability.Thetotalowedtocustomersofbettingaccountdepositsandvouchersat31July2013is$16.6million(2012:$16.6million).Refertonote13forfurtherinformationregardingtheNZRacingBoard’sobligationfortheseamounts.ThedepositsheldintrustarenotavailableforusebytheNZRacingBoardintheordinarycourseofbusiness.

Subsequenttoinitialmeasurement,allfinancialassetsaremeasuredatamortisedcost,usingtheeffectiveinterestratemethod.

Attheendofeachreportingperiodandwhenevercircumstanceswarrant,otherfinancialassetsareassessedforobjectiveevidenceofimpairment.Afinancialassetisimpairedifthereisobjectiveevidenceofimpairmentasaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionoftheasset,andthatthelosseventhadanimpactontheestimatedfuturecashflowsofthatassetthatcanbeestimatedreliably.Anyfinancialassetimpairmentlossisrecognisedwithinotherexpensesintheprofitorloss.





8. OThEr FiNANCiAL ASSETS (CONT) 2013 2012 NZ$000 NZ$000corporate bonds 2,000 2,000 LoanstoRacingClubs 2,951 8,857Short-termdeposits-BettingAccountsandVouchersTrust 20,000 20,004Short-termdeposits 10,000 18,000

TOTAL OTHER FINANCIAL AssETs 34,951 48,861 Disclosedas: current 32,000 44,120 Non-current 2,951 4,741

TOTAL OTHER FINANCIAL AssETs 34,951 48,861

2013 2012 NZ$000 NZ$000Loans to Racing ClubsNewZealandMetropolitanTrottingClub(Inc) - 6,003RACEInc 2,931 2,813WanganuiGreyhoundRacingClub - 22WhangareiRacingClubInc 20 19

LOANs TO CLUBs ANd COdEs 2,951 8,857

Reconciliation of loan carrying values to loan amounts outstanding

Thefollowingtableprovidesareconciliationoftheloancarryingvaluetotheactualloanamountsoutstanding.Thenetfairvalueadjustmentscomprisetheoriginatingadjustmentslessaccumulatedamortisation. Loan Net Loan carrying fair value balance value adjustment outstanding NZ$000 NZ$000 NZ$0002013RACEInc 2,931 67 2,998WhangareiRacingClubInc 20 - 20

LOANs TO RACING CLUBs 2,951 67 3,018

2012NewZealandMetropolitanTrottingClubInc 6,003 91 6,094RACEInc 2,813 178 2,991WanganuiGreyhoundRacingClub 22 - 22WhangareiRacingClubInc 19 1 20

LOANs TO RACING CLUBs 8,857 270 9,127

Theinterestratesonoutstandingloansatthereportingdateareasfollows: interest rate rate type 2013 2012 RACEInc 3.50% 3.50% VariableWhangareiRacingClubInc 2.88% 2.88% Variable





8. OThEr FiNANCiAL ASSETS (CONT)

Collateral

TheoutstandingbalancesoftheloansgrantedbytheNZRacingBoardaresecuredandarerepayableincash.

TheNZRacingBoardhasasecond-rankingchargeovertheassetsofRacingatAwapuni,OtakiandTrenthamCombinedEnterpriseIncorporated(RACEInc)anditssubsidiaryRacingClubs.BankofNewZealand(“BNZ”)hasthefirst-rankingchargeovertheseassetstoapriorityof$9.2millionplusinterestandcosts.ThecombinedvalueoftheRACEIncassetssubjecttotheBNZandNZRacingBoardchargesasat31July2013was$31.5million(31July2012:$33.1million).

NewZealandThoroughbredRacingIncorporatedguaranteestocoveranyshortfallforRACEIncofupto$1.0millionfromdistributionsowingfromtheNZRacingBoard.Ifashortfallweretoexceed$1.0million,NewZealandThoroughbredRacingIncorporatedwillpayonethirdoftheshortfallamountannuallyfromdistributionstobemadetoitbytheNZRacingBoarduntilrepaid.

WhilethecontractualtermsoftheloanagreementwithRACEIncstatesrepaymentoftheloanonFebruary2014,itisexpectedtherepaymentwillnotoccuronthisdateandaloanextensionwillbesoughtbyRACEInc.Accordingly,theNZRacingBoardconsidersitappropriatetocontinuetorecognisetheloanasanon-currentreceivable.

TheNewZealandMetropolitanTrottingClubandWanganuiGreyhoundRacingClubloanswererepaidinfullduringthe2013year.

9. prOpErTy, pLANT ANd EquipmENTProperty,plantandequipmentismeasuredatcostlessaccumulateddepreciationandaccumulatedimpairmentlosses.

AtinceptionoftheNZRacingBoardin2003,thedeemedcostoflandandbuildingswasthevaluationoftheseassetsatthattime.

Depreciationiscalculatedonastraight-linebasissoastoallocatethecostofeachassetoveritsexpectedusefullifetoitsestimatedresidualvalue.Depreciationisrecognisedwithin‘premisesandequipmentexpenses’intheprofitorloss.Leaseholdimprovementsaredepreciatedovertheperiodoftheleaseorestimatedusefullife,whicheveristheshorter.Landisnotdepreciated.Theestimatedusefullives,residualvaluesanddepreciationmethodsarereviewedattheendofeachperiod.

Thecurrentannualdepreciationratesareasfollows:

Buildings (at deemed cost) 2.5% - 10.0%

Leasehold improvements 6.7% - 20.0%

Computer hardware 14.3% - 33.3%

motor vehicles 14.3% - 33.3%

Operations and trackside equipment 14.3% - 20.0%

Gaming machines 33.0%

Other (mainly consists of laboratory equipment, furniture and office equipment) 10.0% - 20.0%

Anygainorlossondisposal,whichiscalculatedasthedifferencebetweenthenetproceedsfromdisposalandthecarryingamountoftheitem,isrecognisedinprofitorlosswithin‘otherexpenses’.

Thecarryingamountsofproperty,plantandequipmentarereviewedateachreportingdatetodeterminewhetherthereisanyindicationofimpairment.Ifanysuchindicationexists,thentheasset’srecoverableamountisestimatedtodeterminetheextent,ifany,oftheimpairmentlossrecognisedintheprofitorloss.





9. prOpErTy, pLANT ANd EquipmENT (CONT) Operations Total property, Land and Leasehold Computer motor and trackside gaming work in plant and buildings improvements hardware vehicles equipment machines Other progress equipment NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 As AT 1 AUGUsT 2011 Atcost 16,494 21,661 41,134 3,045 38,463 - 4,828 6,380 132,005Accumulateddepreciation (5,218) (13,009) (33,759) (2,521) (26,384) - (3,077) - (83,968)

CARRyING AmOUNT 11,276 8,652 7,375 524 12,079 - 1,751 6,380 48,037 Additions 150 4,239 2,851 816 1,144 2,860 158 - 12,218Disposals (575) (141) (17) (33) (18) - - - (784)Netchangetoworkinprogress - - - - - - - (3,260) (3,260)Depreciationfortheyear (493) (2,385) (3,061) (364) (3,655) (725) (336) - (11,019)

CARRyING AmOUNT AT 31 JULy 2012 10,358 10,365 7,148 943 9,550 2,135 1,573 3,120 45,192 Atcost 15,771 25,172 40,353 3,359 36,341 2,860 4,847 3,120 131,823Accumulateddepreciation (5,413) (14,807) (33,205) (2,416) (26,791) (725) (3,274) - (86,631)

CARRyING AmOUNT 10,358 10,365 7,148 943 9,550 2,135 1,573 3,120 45,192 Additions 27 576 9 521 129 1,209 17 6,042 8,530Disposals (2,294) (1) (23) - - (70) - - (2,388)Nettransfersbetweenassetclasses - 19 2 - (19) - (2) 292 292Transferredfromworkinprogress 173 669 2,214 507 727 - 147 (4,437) -Depreciationfortheyear (480) (2,530) (2,730) (356) (3,481) (994) (318) - (10,889)Impairmentlosses - (85) (34) - - - (95) (111) (325)

CARRyING AmOUNT AT 31 JULy 2013 7,784 9,013 6,586 1,615 6,906 2,280 1,322 4,906 40,412

Atcost 13,047 26,038 42,302 3,993 37,152 3,876 4,666 4,906 135,980Accumulateddepreciation (5,263) (17,025) (35,716) (2,378) (30,246) (1,596) (3,344) - (95,568)

CARRyING AmOUNT 7,784 9,013 6,586 1,615 6,906 2,280 1,322 4,906 40,412

At 31 July 2013 the contractual commitment for acquisition of property, plant and equipment was $0.1 million (2012: nil).There are no restrictions on property, plant and equipment assets or any assets pledged as securities for liabilities.





9. prOpErTy, pLANT ANd EquipmENT (CONT) Operations Total property, Land and Leasehold Computer motor and trackside gaming work in plant and buildings improvements hardware vehicles equipment machines Other progress equipment NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 As AT 1 AUGUsT 2011 Atcost 16,494 21,661 41,134 3,045 38,463 - 4,828 6,380 132,005Accumulateddepreciation (5,218) (13,009) (33,759) (2,521) (26,384) - (3,077) - (83,968)

CARRyING AmOUNT 11,276 8,652 7,375 524 12,079 - 1,751 6,380 48,037 Additions 150 4,239 2,851 816 1,144 2,860 158 - 12,218Disposals (575) (141) (17) (33) (18) - - - (784)Netchangetoworkinprogress - - - - - - - (3,260) (3,260)Depreciationfortheyear (493) (2,385) (3,061) (364) (3,655) (725) (336) - (11,019)

CARRyING AmOUNT AT 31 JULy 2012 10,358 10,365 7,148 943 9,550 2,135 1,573 3,120 45,192 Atcost 15,771 25,172 40,353 3,359 36,341 2,860 4,847 3,120 131,823Accumulateddepreciation (5,413) (14,807) (33,205) (2,416) (26,791) (725) (3,274) - (86,631)

CARRyING AmOUNT 10,358 10,365 7,148 943 9,550 2,135 1,573 3,120 45,192 Additions 27 576 9 521 129 1,209 17 6,042 8,530Disposals (2,294) (1) (23) - - (70) - - (2,388)Nettransfersbetweenassetclasses - 19 2 - (19) - (2) 292 292Transferredfromworkinprogress 173 669 2,214 507 727 - 147 (4,437) -Depreciationfortheyear (480) (2,530) (2,730) (356) (3,481) (994) (318) - (10,889)Impairmentlosses - (85) (34) - - - (95) (111) (325)

CARRyING AmOUNT AT 31 JULy 2013 7,784 9,013 6,586 1,615 6,906 2,280 1,322 4,906 40,412

Atcost 13,047 26,038 42,302 3,993 37,152 3,876 4,666 4,906 135,980Accumulateddepreciation (5,263) (17,025) (35,716) (2,378) (30,246) (1,596) (3,344) - (95,568)

CARRyING AmOUNT 7,784 9,013 6,586 1,615 6,906 2,280 1,322 4,906 40,412

At 31 July 2013 the contractual commitment for acquisition of property, plant and equipment was $0.1 million (2012: nil).There are no restrictions on property, plant and equipment assets or any assets pledged as securities for liabilities.





10. iNTANgiBLE ASSETSBroadcastinglicences,softwareandotherintangibleassetsarecarriedatcostlessaccumulatedamortisationandaccumulatedimpairmentlosses.

TheNZRacingBoarddevelopsspecialisedsoftwareforitsownuseinthebusiness.Thecostofinternallygeneratedsoftwarecomprisesalldirectlyattributablecostsnecessarytocreateandpreparetheassettobecapableofoperatinginthemannerintendedbymanagement,includingdirectlabourcosts.Noborrowingcostsarecapitalised.

Amortisationischargedonastraight-linebasisovertheestimatedusefullivesoftheassetandisrecognisedwithin‘premisesandequipmentexpenses’intheprofitorloss.Theestimatedusefullifeandamortisationmethodisreviewedattheendofeachannualreportingperiod.

Thecurrentannualamortisationratesareasfollows:

Software 14.3% - 33.3%

Broadcasting licences 5.0% - 20.0%

Anygainsorlossesondisposal,whichiscalculatedasthedifferencebetweenthenetproceedsfromdisposalandthecarryingamountoftheitem,isrecognisedintheprofitorlosswithin‘otherincome’or‘otherexpenses’asappropriate.

Thecarryingamountsofintangibleassetsarereviewedateachreportingdatetodeterminewhetherthereisanyindicationofimpairment.Ifanysuchindicationexists,thentheasset’srecoverableamountisestimatedtodeterminetheextent,ifany,oftheimpairmentlossrecognisedintheprofitorloss.





10. iNTANgiBLE ASSETS (CONT)

Other Total Broadcasting intangible work in intangible Software licences assets progress assets NZ$000 NZ$000 NZ$000 NZ$000 NZ$000As AT 1 AUGUsT 2011Atcost 44,594 2,530 4,844 11,249 63,217Accumulatedamortisation (40,067) (1,270) (4,550) - (45,887)

CARRyING AmOUNT 4,527 1,260 294 11,249 17,330

Additions 2,908 913 - - 3,821Disposals (1) - - - (1)Netchangetoworkinprogress - - - 1,228 1,228Amortisationfortheyear (2,196) (179) - - (2,375)Impairmentlosses - - - (11,054) (11,054)

CARRyING AmOUNT AT 31 JULy 2012 5,238 1,994 294 1,423 8,949

Atcost 47,454 3,441 4,844 1,423 57,162Accumulatedamortisation (42,216) (1,447) (4,550) - (48,213)

CARRyING AmOUNT 5,238 1,994 294 1,423 8,949

Additions 6 - - 1,433 1,439Disposals - - - - -Nettransfersbetweenassetclasses - - - (292) (292)Transferredfromworkinprogress 1,490 - - (1,490) -Amortisationfortheyear (1,847) (178) - - (2,025)Impairmentlosses (89) - (294) (219) (602)

CARRyING AmOUNT AT 31 JULy 2013 4,798 1,816 - 855 7,469

Atcost 48,448 3,441 4,844 855 57,588Accumulatedamortisation (43,650) (1,625) (4,844) - (50,119)

CARRyING AmOUNT 4,798 1,816 - 855 7,469

Work in progress relates mainly to internally generated software. At 31 July 2013 the contractual commitment for acquisition of software and other intangibles was nil (2012: $0.2 million). There are no restrictions on intangible assets or any assets pledged as securities for liabilities.





11. TrAdE ANd OThEr pAyABLES TradeandotherpayablesarerecognisedwhentheNZRacingBoardbecomesobligedtomakefuturepaymentsresultingfromthepurchaseofgoodsandservices.Thesefinancialliabilitiesareinitiallyrecognisedatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.Alltradeandotherpayablesarenon-interestbearingotherthantheRacingCodedistributionspayable.

Employeeentitlementliabilitiesforwagesandsalaries,annualleaveandothercontractualpaymentsexpectedtobesettledwithin12monthsofthereportingdatearerecognisedinotherpayables,inrespectofemployees’servicesuptothereportingdateandaremeasuredattheamountsexpectedtobepaidwhentheliabilitiesaresettled. 2013 2012 NZ$000 NZ$000

Accruals 6,410 7,218AmountspayabletoBoardmembers 22 33Employeeentitlements 3,123 3,579RacingCodedistributionspayable 6,206 4,403Tradepayables 6,056 5,241

TOTAL TRAdE ANd OTHER PAyABLEs 21,817 20,474

Nointerestisincurredontradepayablesunlesstheamountspayablefalloverdue.Interestischargedatthediscretionofthevendor.TheNZRacingBoardhasfinancialriskmanagementpoliciesinplacetoensurethatallpayablesarepaidwithinthecredittimeframe.

12. OThEr FiNANCiAL LiABiLiTiES JackpotretentionsareestablishedinaccordancewiththeRacingRulespursuanttosection52oftheRacingAct2003.Thesecompriseamountssetasidefromthedividendpoolsofcertainspecifiedbettypes.ThefundsaccumulatedareusedsolelyforsupplementingcertainfuturedividendpoolsfortheoriginatingracingorsportsCode.

Unpaiddividendsrepresenttheliabilitytowinningcustomersonbettingactivitiesthathaveyettobeclaimed.Unpaiddividendsarerecognisedatthetimetherelatedrevenueisrecognisedwhichiswhentheoutcomeofthebettingeventisknown.Thisliabilityincludesunpaiddividendsthatarelessthansixmonthsold.Unpaiddividendsequaltoorgreaterthansixmonthsarederecognisedandrecordedasareductionindividendsintheprofitorloss.

Unresultedturnoverrepresentsopentotalisatorandfixedoddbettingpositions.Openbettingpositionsarethosewherecustomershaveplacedbetsandwhereatbalancedatetheeventtowhichthebetrelateshasnotoccurred.Theseopenbettingpositionsareconsideredderivativefinancialinstrumentsforfinancialreportingpurposes.Unresultedturnoverisinitiallymeasuredatfairvalueonthedatethebetisplaced.Fairvalueistheamountplacedonthebet.Subsequently,derivativefinancialinstrumentsarere-valuedtotheirfairvalueateachreportingdate.TheNZRacingBoardhasdeterminedthatthevalueofthebalanceuponinitialrecognitionapproximatesfairvalueat31July2013.

2013 2012 NZ$000 NZ$000

ContributionstoassetsbyRacingCodes 97 129Jackpotretentions 1,578 2,147Securedbankloan 1,500 1,500Unpaiddividends 2,879 2,892Unresultedturnover 879 1,105

TOTAL OTHER FINANCIAL LIABILITIEs 6,933 7,773

Disclosedas: current 5,368 6,176 Non-current 1,565 1,597

TOTAL OTHER FINANCIAL LIABILITIEs 6,933 7,773





13. CuSTOmEr BETTiNg ACCOuNT dEpOSiTS ANd vOuChErSThecustomerbettingaccountdepositsandvouchersbalancerepresentstheamountheldincustomers’TABbettingaccountsandoutstandingbettingvouchers.Abettingvoucherisavoucher(includinggiftvouchers)purchasedbycustomersthatcanbeusedtoplaceabetorcanbeexchangedforcash.Aliabilityisrecognisedwhenacustomerdepositscashintotheirbettingaccountsorwhenabettingvoucherispurchased.Theresultingliabilityisinitiallymeasuredatfairvalueandsubsequentlyatamortisedcostusingtheeffectiveinterestmethod.

Thecustomerbettingaccountdepositsandvouchersliabilityisnon-interestbearing.

Theliabilityisderecognisedwheneitheradepositorvoucherisredeemedorusedtoplaceabet,orinaccordancewiththeBettingRulesthebettingaccountorvoucherisdeemedinactive.

14. prOviSiONSProvisionsarerecognisedwhenthefollowingthreeconditionsaremet:

• theNZRacingBoardhasapresentobligation(legalorconstructive)asaresultofapastevent;

• itisprobablethatanoutflowofresourceswitheconomicbenefitswillberequiredtosettletheobligation;and

• areliableestimatecanbemadeoftheamountoftheobligation.

Theamountofaprovisionrepresentsthebestestimateoftheexpenditurerequiredtosettletheobligationattheendofthereportingperiod.Thediscountratesusedaregovernmentstockratesconsistentwiththetermoftheobligation.

undistributed Employee gaming Total make good benefit redundancy surplus provisions NZ$000 NZ$000 NZ$000 NZ$000 NZ$000

BALANCE 1 AUGUsT 2011 481 700 - - 1,181

Additionalprovisions 123 53 - 3,037 3,213Provisionsreleased (11) (35) - - (46)Amountsused (6) (78) - - (84)

BALANCE AT 31 JULy 2012 587 640 - 3,037 4,264

Additionalprovisions 133 73 1,211 1,514 2,931Provisionsreleased (7) (46) - - (53)Amountsused (56) (64) - (3,037) (3,157)

BALANCE AT 31 JULy 2013 657 603 1,211 1,514 3,985

2013 2012 NZ$000 NZ$000

disclosed as: current 3,253 3,263 Non-current 732 1,001

TOTAL PROVIsIONs 3,985 4,264





14. prOviSiONS (CONT)

(a) Provision for make good

Aprovisionhasbeenestablishedforanticipatedfuturecostsassociatedwithrestoringleasedpremisestotheiroriginalconditionattheendoftheleaseterm.Theleaseshavevaryingexpirydatesupto2018.Theactualpaymentdatesandcostswillbeknownonceeachleasereachesitsexpirydateandtheextentofthecorrespondingmakegoodisascertained.

(b) Provision for employee benefits

Theprovisionforemployeebenefitsincludeslong-termemployeebenefitsandsickleaveprovision.

TheNZRacingBoardhasagroupoflegacyemploymentcontractscontaininglongserviceleaveentitlementsandafurthergroupoflegacyemploymentcontractscontainingretirementgratuityentitlements.Aprovisionhasbeenestablishedtorecognisetheprobableamountstovesttoemployeesinthefuturebasedonestimatedfuturesalaries,paymentdatesandachievementofservicemilestones.Theprovisionincludesamountsforbothlongserviceleaveandretirementgratuity.

Aprovisionforsickleavehasbeenestablishedforaccumulatingsickleavetotheextentthatitisprobablethatemployeeswilltakemoredaysthantheirannualentitlementinanyyear.Anemployeeisentitledto10daysperannum.Theprovisionhasbeencalculatedonanaverageofsickdaystakenthroughoutthefinancialyeardividedbytheannualentitlementperemployeetogetadollarvalue.

(c) Redundancy provision

DuringthecurrentyeartheNZRacingBoardcommittedtoaplantorestructurethePhonebetoperationslocatedinAuckland.Followingtheannouncementoftheplan,theNZRacingBoardrecognisedaprovisionforexpectedredundancycosts,representingemployeeterminationbenefits.Estimatedcostswerebasedonthetermsoftherelevantcontracts.Theprovisionisexpectedtobeutilisedwithinthenext12months.

(d) Undistributed Gaming surplus

Asat31July2013,undistributedsurplusrelatingtotheGamingoperationstotalled$1.514million(2012:$3.037million).AsallClass4Gamingsurplusesmustbedistributedforauthorisedpurposesandcannotberetainedwithinthebusiness,aprovisionhasbeenmadeforfuturedistribution.

15. diSTriBuTiONSTheNZRacingBoard’snetprofitfromBettingoperationsisdistributedtotheRacingIndustryinaccordancewiththeRacingAct2003.

Distributionsarerecognisedintheprofitorloss,afternetprofit.

DistributionpaymentsincludeabasefundingcomponentwhichismadedirectlytotheRacingCodes.ThesebasefundingdistributionsarebasedonfundingagreementsanddeterminedbyRacingCodemarketshareoftheindividualRacingCodesracesrunfortheprevioustwoseasons.

Additionally,distributionpaymentsaremadetocoverspecificracingindustrycosts,suchasJudicialControlAuthority,RacingIntegrityUnit,RacingLaboratoryServices,research,trainingandeducation.TheseindustryservicesareforthebenefitoftheRacingCodes.

TheNZRacingBoardalsoprovidesfundingforcertainotherracingindustryinitiativeswhicharemadeatthediscretionoftheNZRacingBoard.

Ifthecurrentyear’sprofitisnotsufficienttocovertotaldistributions,thegeneralreserveisused.

DistributionsofGamingoperatingprofitsaredeterminedseparatelyfromdistributionsfromBettingoperationsprofits.DistributionsfromtheGamingoperatingprofitsaremadetobothexternalsportingbodiesandtotheRacingCodes.AlldistributionsfromGamingoperatingprofitsareapprovedbytheNZRacingBoard’sNetProceedsCommitteeunderagrantspolicythatensuresthattheauthorisedpurposeisconsistentwiththepurposespecifiedintheNZRacingBoard’sClass4Gaminglicence.TheRacingCodedistributionsfromGamingoperatingprofitsaremadeupofdirectdistributionstotheRacingCodesanddistributionstocoverspecificindustrycostswhichareconsideredtobeforRacingauthorisedpurposes.

TheGambling(Class4NetProceeds)Regulations2004requiresanyGamingsurplustobedistributedforauthorisedpurposesandcannotberetainedbythebusiness.Consequently,anyundistributedsurplusatyearendisrecordedasaprovisionintheStatementofFinancialPosition.





15. diSTriBuTiONS (CONT) 2013 2012 NZ$000 NZ$000

NET PROFIT BEFORE dIsTRIBUTIONs 144,109 127,259

distributions and Industry Payments - RacingBasecodefunding 128,829 124,302DistributionsfromGaming 3,261 2,936Industryinitiatives 1,631 1,491Racinglaboratoryservices 1,110 1,082RacingIntegrityUnit 5,529 4,049Research,trainingandeducation 186 263OtherRacingindustryexpenses 1,443 1,415

TOTAL dIsTRIBUTIONs ANd INdUsTRy PAymENTs - RACING 141,989 135,538Other distributions and National sporting Organisation Grants (paid and payable)DistributionsfromGamingtoSportsAuthorisedPurposes 401 239

TOTAL dIsTRIBUTIONs mAdE FROm CURRENT yEAR PROFIT 142,390 135,777

DistributionsfromGamingtoSportsAuthorisedPurposes 401 239DistributionsfromGamingnotyetmadebutprovidedfor(note14) 1,514 3,037DistributionsmadetoNationalSportingOrganisations*(note4) 3,816 3,982

TOTAL OTHER dIsTRIBUTIONs ANd NATIONAL sPORTING ORGANIsATION GRANTs (PAId ANd PAyABLE) 5,731 7,258

* Distributions made to National Sporting Organisations are included within turnover related expenses in note 4.

16. FiNANCiAL iNSTrumENTS(a) Capital risk management

TheNZRacingBoardmanagesitscapitalconsideringstakeholders’interests,inparticulardistributionstotheRacingCodes,thevalueofNZRacingBoardassetsandfunding/retentionsrequiredforapprovedinitiatives.

TheNZRacingBoard’sequitycomprisesthegeneralreserve,consistingofaccumulatedbalancesofprioryear’sretainedsurplusnetofanylosses,plusthecurrentyearnetprofitorloss.TheNZRacingBoard’scapitalmanagementpoliciesaredesignedtoensurethatagreeddistributionstotheRacingCodesaremaintainedwhilealsoallowingforapprovedinitiativestobefundedfromeitherretainedsurplusesordebt.





16. FiNANCiAL iNSTrumENTS (CONT)

(b) Categories of financial instruments Financial held-to- Loans and liabilities at maturity receivables amortised cost Total

2013 NZ$000 NZ$000 NZ$000 NZ$000AssETs Cashandcashequivalents - 26,262 - 26,262Tradeandotherreceivables - 11,960 - 11,960Otherfinancialassets 32,000 2,951 - 34,951

TOTAL FINANCIAL AssETs 32,000 41,173 - 73,173

Totalnon-financialassets 48,559

TOTAL AssETs 121,732

LIABILITIEs Tradeandotherpayables - - 21,817 21,817Accountbettingdepositsandvouchers - - 16,649 16,649Unpaiddividends - - 2,879 2,879Unresultedturnover - - 879 879Securedbankloan - - 1,500 1,500

TOTAL FINANCIAL LIABILITIEs - - 43,724 43,724

Totalnon-financialliabilities 8,549

TOTAL LIABILITIEs 52,273

Financial held-to- Loans and liabilities at maturity receivables amortised cost Total2012 NZ$000 NZ$000 NZ$000 NZ$000AssETs Cashandcashequivalents - 11,562 - 11,562Tradeandotherreceivables - 8,888 - 8,888Otherfinancialassets 40,004 8,857 - 48,861

TOTAL FINANCIAL AssETs 40,004 29,307 - 69,311

Totalnon-financialassets 56,165

TOTAL AssETs 125,476

LIABILITIEs Tradeandotherpayables - - 20,474 20,474Accountbettingdepositsandvouchers - - 16,594 16,594Unpaiddividends - - 2,892 2,892Unresultedturnover - - 1,105 1,105Securedbankloan - - 1,500 1,500

TOTAL FINANCIAL LIABILITIEs - - 42,565 42,565

Totalnon-financialliabilities 13,657

TOTAL LIABILITIEs 56,222






(c) Financial risk management

TheTreasuryfunctionco-ordinatestheinvestmentofcash,surplustocurrentoperationalrequirements,aswellasmonitoringandmanagingallfinancialrisksrelatingtotheoperationsoftheNZRacingBoard.Theserisksincludecreditrisk,liquidityrisk,interestrateriskandforeignexchangerisk.

TheuseoffinancialinstrumentsisgovernedbytheTreasurypolicyapprovedbytheBoardoftheNZRacingBoard.Thepolicyprovideswrittenprinciplesonforeignexchangerisk,interestraterisk,creditrisk,theuseoffinancialderivativesandnon-derivativefinancialinstruments.Thepolicyalsooutlinestheprinciplesforliquidityriskmanagement.

CompliancewiththeTreasurypolicyandtheexposurelimitsthereinisreviewedbytheinternalauditfunctionoftheNZRacingBoard.TheNZRacingBoarddoesnotenterintoortradefinancialinstruments,includingderivativefinancialinstruments,forspeculativepurposes.

TheNZRacingBoardusesrecognisedbookmakingtoolsandstrategiestoappropriatelymanageriskandexposure.Theseincludecustomerprofiling,pricingmanagementandusingaspreadofoptionstotakeaportfolioapproach.Inadditiontothis,thebookmakersarealsoabletolayoffexposureswithotherbettingagencies.

(d) Liquidity risk management

LiquidityriskistheriskthattheNZRacingBoardwillencounterdifficultiesinmeetingitspaymentsobligationsastheyfalldue.

AstheNZRacingBoard’srevenuesareprincipallytransactionsinvolvingimmediatecashreceipts,short-termliquidityiscoveredbytradingreceiptsandhighlyliquidbankdeposits.TheNZRacingBoardmanageslongerdatedliquidityriskbymaintainingadequatecashreservesofliquidshort-termdepositstosatisfyanticipatedcapitalexpenditureanddistributionrequirements.

ThefollowingtableoutlinestheNZRacingBoard’sremainingcontractualmaturitiesforitsfinancialliabilities.

Thetablecomprisesthenotionalundiscountedcashflowsforfinancialliabilities,includingbothinterestandprincipal,basedontheearliestdateonwhichtheNZRacingBoardcanberequiredtopay.

TheundiscountedcashflowsdifferfromtheamountsrecognisedintheStatementofFinancialPositionfortherelevantfinancialliabilitiesbecausetheamountsrecognisedinthatstatementarebasedonthenotionalcashflowsdiscountedtotheirpresentvalue.Wheretheamountpayableisvariablebecauseitisbasedonvariableinterestratesorotherfactors,theamountinthetablehasbeendeterminedbasedontheconditionsexistingattheendofthereportingperiod.





16. FiNANCiAL iNSTrumENTS (CONT) Total Carrying Less than 3 3 months to contractual amount On demand months 1 year 1-5 years cash flowsFiNANCiAL LiABiLiTiES NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$0002013Tradeandotherpayables 21,817 - 21,904 - - 21,904Accountbettingdepositsandvouchers 16,649 16,649 - - - 16,649Unpaiddividends 2,879 2,879 - - - 2,879Unresultedturnover 879 - 879 - - 879Securedbankloan 1,500 - 13 37 1,518 1,568

Total notional cash outflows for 43,724 19,528 22,796 37 1,518 43,879recognised liabilities

Financial guarantees (maximum amount payable) Clubloanguarantees - 8,820 - - - 8,820

TOTAL NOTIONAL CAsH OUTFLOws 43,724 28,348 22,796 37 1,518 52,699

Total Carrying Less than 3 3 months to contractual amount On demand months 1 year 1-5 years cash flowsFiNANCiAL LiABiLiTiES NZ$000 NZ$000 NZ$000 NZ$000 NZ$000 NZ$0002012Tradeandotherpayables 20,474 - 20,591 - - 20,591Accountbettingdepositsandvouchers 16,594 16,594 - - - 16,594Unpaiddividends 2,892 2,892 - - - 2,892Unresultedturnover 1,105 - 1,105 - - 1,105Securedbankloan 1,500 - - - 1,500 1,500

Total notional cash outflows for 42,565 19,486 21,696 - 1,500 42,682recognised liabilities

Financial guarantees (maximum amount payable) Clubloanguarantees - 8,820 - - - 8,820

TOTAL NOTIONAL CAsH OUTFLOws 42,565 28,306 21,696 - 1,500 51,502

It is not expected that the Club loan guarantees will be called.





(e) Credit risk

CreditriskreferstotheriskthatacounterpartywilldefaultonitscontractualobligationsresultinginfinanciallosstotheNZRacingBoard.Themaximumexposureisequaltothecarryingamountofthefinancialassets,asfollows:

2013 2012 NZ$000 NZ$000mAXimum EXpOSurE TO CrEdiT riSK Cashandcashequivalents 26,262 11,562Short-termdeposits 30,000 38,004

TOTAL LIQUId INVEsTmENTs 56,262 49,566

corporate bonds 2,000 2,000 LoanstoRacingClubs 2,951 8,857Tradeandotherreceivables(netofdoubtfuldebtprovision) 11,960 8,888

TOTAL FINANCIAL AssETs 73,173 69,311

TOTAL UNRECOGNIsEd CREdIT ExPOsUREs Guaranteeissued 8,820 8,820

TOTAL CREdIT ExPOsUREs 81,993 78,131

AllloanstoRacingClubsarefullysecured.TheNZRacingBoardhasissuedaguaranteetotheBNZrelatingtotheRACEIncloan. Refertonote8forfurtherdisclosureonthesecurityandguarantee.

Concentrations of credit risk

TheNZRacingBoardisexposedtothefollowingindustryandgeographicalconcentrationsofcreditriskfortradeandotherreceivables:

2013%

2013NZ$000

2012%

2012NZ$000

Trade and other receivables (industry & geographical concentrations)

Australianbettingagencies 20.8% 2,486 36.7% 3,261

NewZealandretailTABoutlets 6.8% 814 14.3% 1,272

OtherNewZealandtradeandotherreceivables

72.4% 8,660 49.0% 4,355

TOTAL TrAdE ANd OThEr rECEivABLES 100.0% 11,960 100.0% 8,888

TheNZRacingBoardhasaconcentrationofcreditriskwithitsliquidinvestments,whichareheldwiththreeNewZealandregisteredbanks.AlltheNewZealandregisteredbankswithwhichtheliquidinvestmentsareheldhaveacreditratingofAA-.ThecorporatebondsareheldwithaNewZealandregisteredbankwithacreditratingofA+.

Tomitigatethecreditriskofcertainreceivables,theNZRacingBoard’spracticeistorequireeitherbankguaranteesorcashbondsfromretailoutletsofavaluegenerallygreaterthanaweek’ssettlement.






(f) Foreign currency exchange rate risk

TheNZRacingBoardisexposedtoexchangeratefluctuationsfromcertainforeigncurrencydenominatedtransactionsitundertakes.Exchangerateexposuresmaybemanagedwithinapprovedpolicyparameterswhichmayincludetheuseofforwardforeignexchangecontracts.

TheNZRacingBoard’ssignificantforeigncurrencydenominatedmonetaryassetsandmonetaryliabilitiesatthereportingdateareasfollows: Assets Liabilities

Foreign Foreign currency NZd currency NZd ‘000 NZ$000 ‘000 NZ$0002013Australiandollars AUD 2,909 3,352 915 1,055

2012Australiandollars AUD 4,487 5,789 2,566 3,303

Foreign currency sensitivity analysis

Asat31July2013,iftheNewZealanddollarhadstrengthened/weakenedagainsttheAustraliandollarby10%(2012:10%),withallothervariablesheldconstant,thenetprofitbeforedistributionswouldhavebeen$232,003(2012:$251,000)lower/higherasaresultoflower/higherforeignexchangegains.Therewouldalsobeacorrespondingdecrease/increaseinequity.

Forward foreign exchange contracts

TheNZRacingBoard’sTreasurypolicyallowsmanagementtoenterintoforwardforeignexchangecontractstocoverforeigncurrencypaymentswheretheNewZealanddollarequivalentexposureisgreaterthanNZD50,000.

Therearenoforwardforeignexchangecontractsoutstandingasat31July2013(2012:nil).

(g) Interest rate risk

TheNZRacingBoardisexposedtointerestrateriskthroughitsClubloans,cashandcallaccountbalances,short-termdepositsandcorporatebondsheld.Thecarryingvaluesoftheseexposuresaredetailedinthecreditrisksectionofthisnoteat16(e)above.

Asat31July2013,iftheinterestrateshadincreased/decreasedby0.5%,withallothervariablesheldconstant,thenetprofitbeforedistributionswouldhavebeen$302,627(2012:$296,813)higher/lowerasaresultofhigher/lowernetinterestreceipts.Therewouldalsobeacorrespondingincrease/decreaseinequity.





17. rELATEd pArTiES

Transactions with Racing Codes, Clubs and other related parties

Inadditiontodistributions,theNZRacingBoardhasnumeroustransactionswiththeRacingCodes,Clubsandotherrelatedpartieswhichareoutlinedbelow:

Transaction value Balance outstanding

ENTiTy TrANSACTiON2013

NZ$0002012

NZ$0002013

NZ$0002012

NZ$000

New Zealand greyhound racing Association

Distributionspaidandpayable(inclinterest) (20,674) (19,917) (1,552) (1,517)

On-coursevenueservices,tracksideoperationsandradioservices

2,739 2,807 - -

OtherservicesprovidedbytheNZRacingBoard 635 638 48 50

Harness Racing New Zealand



4,716 4,513 - -


New Zealand Thoroughbred Racing



7,713 7,199 - -


Racing Integrity Unit

Funding (5,529) (4,049) (260) (170)


Refertonote21forfurtherinformationregardingRacingIntegrityUnit(“RIU”).ThebalanceoutstandingwithRIUrelatestocertainpaymentsmadetoRIUemployees,forwhichRIUwillreimbursetoNZRacingBoard.

Additionally,NZRacingBoardhasprovidedloanstocertainRacingClubs.DetailsrelatingtotheoutstandingRacingClubloansaredisclosedinnote8.

Transactions with entities in which key management personnel have an interest

CertainkeymanagementpersonnelhaverelevantinterestsinanumberofentitieswithwhichtheNZRacingBoardhastransactionsinthenormalcourseofbusiness.AdditionallycertainkeymanagementpersonneloftheNZRacingBoardaredirectorsofotherorganisationswithwhichtheNZRacingBoardtransacts.





17. rELATEd pArTiES (CONT)

Outlinedbelowarethesignificanttransactionswithentitiesinwhichkeymanagementpersonnelhaveaninterest:

Transaction value Balance outstanding

Entity Transaction 2013NZ$000

2012NZ$000

2013NZ$000

2012NZ$000

relationship

New Zealand Rugby Union

Nationalsportsorganisationsgrants

(957) (1,311) - - graham cooney, a board memberoftheNZRacingBoardisalsoaBoardmemberoftheNewZealandRugbyUnion.

New Zealand Equine Research Foundation

Funding (10) - (5) - MartinSaunders,amemberoftheNZRacingBoardLeadershipTeamisaBoardmemberoftheNewZealandEquineResearchFoundation.

Compensation of key management personnel

TheremunerationofBoardmembersandotherkeymanagementpersonnelduringtheyearwasasfollows: 2013 2012 NZ$000 NZ$000

directors’ fees 307 329Chief Executive and Leadership team Salariesandothershort-termemployeebenefits 4,301 3,066Terminationpayments 613 -

TOTAL KEy mANAGEmENT PERsONNEL 5,221 3,395

TheNZRacingBoardconsiderskeymanagementpersonnelastheBoardmembers,theChiefExecutiveandtheLeadershipteam.TherehasbeenanumberofchangesintheLeadershipteamduringtheyear.Asat31July2013,theLeadershipteamincluded10members(2012:8members).Thesalariesandothershort-termemployeebenefitsincludethesalariesreceivedandaccruedbonusesforthe10membersoftheLeadershipteam.Italsoincludessixemployeesthatwereeitherterminated,resignedorheld‘acting’positions.

18. COmmiTmENTS(a) Operating lease commitments

Atinceptionofalease,aleaseclassificationtestisperformedtodeterminewhethertheleaseisafinanceoroperatinglease.AnoperatingleaseisaleasethatdoesnottransferalltherisksandrewardsofownershiptotheNZRacingBoard.Operatingleasepaymentsarerecognisedintheprofitorlossonastraight-linebasisovertheleaseterm,withinpremisesandequipmentexpenses,netofanysubleaseincome.

Commitmentsforminimumleasepaymentsinrelationtonon-cancellableoperatingleasesarepayableasfollows:

2013 2012 NZ$000 NZ$000

Withinoneyear 5,767 6,089Laterthanoneyearbutnolaterthanfiveyears 6,468 10,023Laterthanfiveyears 83 464

TOTAL OPERATING LEAsE COmmITmENTs 12,318 16,576





18. COmmiTmENTS (CONT)

The2012operatingleasecommitmentscomparativeshavebeenincreasedbyatotalof$2.6millionduetosomeleasesbeingexcludedfromthenumberdisclosedinprioryearfinancialstatements.In2012,theseleaseswereincludedintheothernon-cancellableoperatingcommitmentsbelow.

TheNZRacingBoardleasesbuildingsunderoperatingleasesforitsTABoperations,aswellascertainbuildingsforofficefunctions.Theleaseshavevaryingtermsandrenewaloptions.Uponrenewal,thetermsoftheleasesarenegotiated.

TwooftheleasedpropertieshavebeensubletbytheNZRacingBoard.Theleasesandsubleasesexpirein2016.Totalfutureminimumsubleasepaymentsof$0.4million(2012:$0.5million)areexpectedtobereceived.

Fortheyearended31July2013,$6.3millionwasrecognisedasanexpensewithinpremisesandequipmentexpensesintheprofitorlossinrespectofoperatingleases(2012:$5.0million).RentreceivedonpropertiesownedbytheNZRacingBoardwasrecognisedasrentincomeduringtheyearwas$0.2million(2012:$0.2million).

(b) Other non-cancellable operating commitments

TheNZRacingBoardhasanumberofnon-cancellableoperatingcommitmentsthatrelatetoservicesotherthantheleaseoflandandbuildings.

Acontractisconsiderednon-cancellableforanyperiodwhereeithernocancellationprovisionexistsinthecontractorwheretherequirementsorcostsofcancellationaresosignificantthatcancellationofthecontractisremote.

Non-cancellablecontractsheldbytheNZRacingBoardpredominantlycomprisetechnicalservicesassociatedwiththebroadcastingofracingplustelecommunicationservices.

Non-cancellableoperatingcommitmentsarepayableasfollows: 2013 2012 NZ$000 NZ$000

Withinoneyear 12,698 10,866Laterthanoneyearbutnolaterthanfiveyears 20,157 33,721

TOTAL OTHER NON-CANCELLABLE OPERATING COmmITmENTs 32,855 44,587

19. CONTiNgENT LiABiLiTiES

Guarantee

On5February2009,theNZRacingBoardprovidedaguaranteetotheBNZinrelationtoRacingatAwapuni,OtakiandTrenthamCombinedEnterprisesIncorporated(RACEInc)tothevalueof$8.8million.NewZealandThoroughbredRacingIncorporatedhaveprovidedaback-to-backguaranteetotheNZRacingBoardcoveringtheamountsguaranteedtoBNZ.





20. rECONCiLiATiON OF NET prOFiT TO NET CASh FLOwS FrOm OpErATiNg ACTiviTiES 2013 2012 NZ$000 NZ$000

sURPLUs / (dEFICIT) ATTRIBUTABLE TO NZ RACING BOARd REsERVEs 205 (11,555)

NON-CAsH ITEms Depreciationexpense 10,832 11,019Amortisationexpense 2,024 2,375Unrealisedforeignexchangeloss/(gain) 103 (102)Increaseinprovisionfordoubtfuldebts 55 30Impairment 928 11,054Othernon-cashitems (156) 108

TOTAL NON-CAsH ITEms 13,786 24,484

ITEms CLAssIFIEd As INVEsTING / FINANCING ACTIVITIEs Netgainonsaleofproperty,plantandequipment (787) (281)Netfinanceincome (1,998) (1,906)

TOTAL ITEms CLAssIFIEd As INVEsTING / FINANCING ACTIVITIEs (2,785) (2,187)

mOVEmENT IN CURRENT AssETs (Increase)/decreaseintradeandotherreceivables (297) 144Decrease/(increase)inotherassets 1,346 (220)

TOTAL mOVEmENT IN CURRENT AssETs 1,049 (76)

mOVEmENT IN LIABILITIEs Increaseintradeandotherpayables 1,020 2,930Increaseincustomerbettingaccountdeposits 55 1,513Decreaseinotherfinancialliabilities (808) (465)(Decrease)/increaseintaxespayable (4,228) 1,382(Decrease)/increaseinprovisions (279) 3,083

TOTAL mOVEmENT IN LIABILITIEs (4,240) 8,443

NET CAsH PROVIdEd By OPERATING ACTIVITIEs 8,015 19,109





21. grOup ENTiTiES(a) Betting Accounts and Vouchers Trust

TheBettingAccountsandVouchersTrust(the‘Trust’)wasestablishedbytheNZRacingBoardin2004tosetasidefundsforthepurposetocoveramountsowedtocustomersonTABbettingaccountsandunpresentedvouchers.TheNZRacingBoardaretheTrusteesoftheTrust.TheNZRacingBoardcontrolstheTrustwhichisthereforeconsolidatedwiththesefinancialstatements.ThefinancialstatementsoftheGrouparethesameasthoseoftheparentasallassetsandliabilitiesoftheTrustareheldbytheNZRacingBoardasTrustee.

(b) Racing Integrity Unit

TheNZRacingBoardholdsa25%interestintheRIU.ThethreeRacingCodeseachhold25%.RIUischargedwithmanagingtheintegrityissuesthatspecificallyarisefromracesoccurringwithinthethreeRacingCodes.

The25%ownershipinterestinRIUandthefactthattheNZRacingBoardprovidesallofthefundingtoRIUmeansthatforfinancialreportingpurposestheNZRacingBoardcontrolsRIU.TheNZRacingBoarddoesnotconsolidateRIUastheimpactontheNZRacingBoardfinancialstatementsisnotmaterial.ThetotalfundingtoRIUwas$5.5million(2012:$4.0million)isincludedwithindistributionsintheprofitorloss.Refertonote15.

IftheNZRacingBoardhadconsolidatedRIU,theimpactontotalassetswouldbeanincreaseof$1.3million(2012:$1.0million),$1.4million(2012:$0.1million)onturnoverrelatedexpenses,$2.9million(2012:$2.9million)onstaffexpenses,$0.2million(2012:$0.1million)onpremisesandequipmentexpensesand$1.0million(2012:$1.0million)onotherexpenses.Totaldistributionswoulddecreaseby$5.5million(2012:$4.0million).

22. BudgET iNFOrmATiON unaudited unaudited Budget variance 2013 2013 2013 NZ$000 NZ$000 NZ$000INCOmE Netbettingrevenue 243,515 245,119 (1,604)Netgamingrevenue 14,169 14,003 166Otherincome 46,829 46,617 212

TOTAL INCOmE 304,513 305,739 (1,226)

TURNOVER RELATEd ExPENsEs 44,736 46,308 1,572

OPERATING ExPENsEs Staffexpenses 54,979 51,358 (3,621)Premisesandequipmentexpenses 27,515 26,135 (1,380)other expenses 33,174 39,442 6,268

TOTAL OPERATING ExPENsEs 115,668 116,935 1,267

TOTAL ExPENsEs 160,404 163,243 2,839

NET PROFIT BEFORE dIsTRIBUTIONs 144,109 142,496 1,613



22. BudgET iNFOrmATiON (CONT)

Budget comparative information (unaudited)

NetBettingrevenuewasbelowbudgetby$1.6million.ThenumberoflicensedgamingmachinesheldbytheNZRacingBoardwashigherthanexpected,resultinginnetGamingrevenuebeingaheadofbudgetby$0.2million.

Staffexpenseswerehigherthanbudgetby$3.6million.Costsrelatingtorestructuringthebusinesstotalled$3.4millionwiththeremainderofthevarianceduetonewhiresandreplacementstobuildcapabilityintheorganisation.

Premisesandequipmentexpenseswereabovebudgetby$1.4million.Thiswasduetothetransferofcertaincosts($1.4million)frombroadcastingexpenses(includedwithinotherexpensesbelow)torentexpenses.

Otherexpenseswerebelowbudgetby$6.3million.Otherexpenseswereimpactedbythereclassificationofbroadcastingcostsof$1.4million(seeabove).Advertisingwasbelowforecastby$1.7millionandothercostswerealsobelowbudgetacrossanumberofexpenselinesduetobudgetedinitiativesbeingdelayedornotoccurring.

23. SuBSEquENT EvENTSTherewerenosubsequentevents.

92 fINANCIAL StAtemeNtS


AuDIt RePORt 93


AudiTOrS’ rEpOrT

AudiTOrS’ rEpOrT


AuDIt RePORt94


95

NOTES

NOteS


96

NOTES

NOteS


97

NOTES

NOteS


98 DIReCtORy

wELLINGTON (HEAd OFFICE)106-110JacksonStreetpetoneLowerHutt5012po box 38899WellingtonMainCentreLowerHutt5045Phone:+6445766999Fax:+6445766942Web:www.nzracingboard.co.nz

NORTHERN REGIONLevel3,Suite3GeyserBuilding100ParnellRoadParnellAuckland1052po box 37649ParnellAuckland1151Phone:+6493472600

wAIKATO/BAy OF PLENTy391 te rapa roadHamilton3200po box 10501te rapaHamilton3241Phone:+6478388800

CENTRAL REGION690TremaineAvenuePalmerstonNorthpo box 637PalmerstonNorth4440Phone:+6463572054Fax:+6463572845

CANTERBURy/wEsT COAsT/ mARLBOROUGH REGION5MouleStreetAddingtonChristchurch8024PrivateBag4746Christchurch8140Phone:+6433381420Fax:+6433381424

OTAGO/sOUTHLANd REGION30TeviotStreetDunedin9012po box 600Dunedin9054Phone:+6434559710Fax:+6434559715

sOLICITORsMinterEllisonRuddWattsWellington

AUdITORsPwCWellington

BANKANZLimitedWellington

dirECTOry



100

New zealaNd RaciNg boaRd customer Service Team 0800 102 106

Phonebet Racing Freephone 0800 10 20 30

Phonebet Sport Freephone 0800 10 20 31

Touch Tone Freephone 0800 10 20 33

Touch Tone Telecom Mobile Plan * 40 50 63

Touch Tone Vodafone/Telecom Prepaid 04 472 7888

australia Racing – 1800 140 840

australian Sport – 1800 140 841

other countries, racing and sports - +64 4 576 8490

[email protected]

www.tab.co.nz

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