Jockey Club stays on course with high-stakes investment

Alan Shipman talks to Andrew Gould, finance and commercial director of Jockey Club Racecourses about the challenge of making money, particularly in the off-season

In 1964, threatened by the purchase of its Cheltenham racecourse by property developers, the Jockey Club formed a trust to acquire the course and save it from the diggers. Today Cheltenham’s annual four-day Festival is one of the biggest events on the racing calendar, and Jockey Club Racecourses (JCR) owns and runs 14 UK racecourses, acquired with the similar purpose of promoting the sport and reinvesting its proceeds in further course development.

For Andrew Gould, Finance and Commercial Director, JCR’s “ability to take a long term view and re-invest for the good of racing” is one of the advantages of its unusual commercial parentage. But while the Jockey Club began in 1750 as a retreat for gentleman amateur riders in London’s Pall Mall, it participates today in a fiercely competitive global industry, and must still get maximum returns from its unusual commercial portfolio to stop the excavators displacing the equestrianism. Last month one of its main rivals, Northern Racing, passed into the hands of NR Acquisitions, a Bahamas-registered takeover vehicle of Aldersgate Investments Ltd, ultimately owned by the property entrepreneurs Simon and David Reuben whose plans for the nine acquired courses are as yet unclear.

Racing upmarket

Upholding the Club’s commitment to reinvesting all profit in the sport, JCR has committed £95m in 2006-10 for upgrading and expanding its courses. Gould takes pride in the way that his courses have remained ahead of rising customer and health-and-safety requirements, in contrast to other mass-participation sports, which sometimes needed serious crowd control lapses or structural collapses before regulators forced modernising investment.

By investing in everything from the stands that people sit in to the weighing rooms and stables they never see, JCR has strengthened its position at the high-quality end of the racing market. It now stages most of the UK’s major events including Epsom’s Derby and Aintree’s Grand National, and accounts for 30% of the sport’s prize money even though its share of fixtures remains below the 25% staged by largest UK operator Arena Leisure.

Assistance for capital expenditures through grants and interest-free loans from the off-course Betting Levy Board is vital to allowing the club to invest £20-25m peer year in courses without being saddled with excessive debts. But the levy generally funds no more than 20-30% of larger projects. The rest must come from internal profit. One reason that courses continue to join JCR – Carlisle in 2001 and Exeter in April this year – is to tap into its ability to deepen financial resources and widen marketing opportunities.

Treatment of the horses has also improved, through investment in provision those that have retired or been injured, and a Liverpool University-based research programme to improve their experience on and off the course. As well as new grandstands, weighing rooms and stables, the tracks’ turf and jumps have been systematically relaid to prevent injury to the thoroughbreds at the centre of the enterprise. “We’ve worked on drainage, and landing sites, and now you’d never hear of the going being firm – good-to-firm is as hard as it gets,” says Gould. Other branches of the Club run post-retirement and healthcare schemes for jockeys and their support staff, but JCR is gearing up for an increasing call for welfare resources as more retire from the sport with higher expectations of what it will pay back to them.

Keeping projects on course

Another contrast to the football world is that recent course modernisations have been completed within budget and ahead of schedule, emulating Arsenal’s Emirates Stadium rather than the long-delayed Wembley complex. Gould admits there were problems on some of the earlier course modernisations, but performance has improved since the creation of a formal system under a central in-house project management team. “Most of the problems were upstream – in project design and cost control before we ever started to dig. We concentrated on the preparation of plans, and now require review and approval at each stage, from preparation and initial design to final design.”

In early signs of success for the new approach, Kempton Park reopened last year after being relaid as an all-weather track for less than £20m, and the new grandstand at Aintree – part of a £30m refurbishment – has been finished in time for the 2007 Grand National.

Riderless courses

In guiding this reinvestment, Gould and his team have had to steer gently away from the previous exclusive focus on race meetings, which take up only 25 days a year at a typical course. “Return on investment has to be raised through increased non-racing business, so we have more than half an eye on events and leisure uses.” Rival Arena provides a stern benchmark, its seven venues including two with golf courses, one with a major hotel and one soon to acquire a casino.

Race days still yield around 80% of JCR courses’ revenue, but other sports events, conferences and receptions are 20% and rising. When Epsom reopened for this year’s Derby, an office block had been fitted around the new entrance. One of its first occupants is Pegasus Venues, a new one-stop shop that coordinates hospitality uses across all 14 courses, and is designed to build up non-racing revenue with little demand on the capital budget.

Diversification of activities is also JCR’s main insulation against risks of cyclical downturn, given the limited geographical spread of its courses and the unlikelihood, given its history, of its acquiring any abroad. The Club can insure against major event risks, such as a major race being rained off or (as at the 1993 Grand National) suffering a false start that prevents any finish. But extending into other sports events, and forms of non-sports hospitality, are important to reducing the variability of revenue as well as raising its amount.

War in the airwaves

Revenue from sale of broadcasting rights has been especially volatile since the turn of the century, as the proliferation of TV channels and arrival of new media first damaged the Club’s revenue stream and then rose to its rescue. While live events are the focus of investment and remain the more stable source of income, the racing industry would not survive without relaying pictures at a fair price. “Television attracts sponsors who provide prize money that attracts top horses and riders so that people come to the courses; the deals we do are important for sustaining that virtuous circle,” says Gould.

Selling the pictures has never been easy, with concentrated networks traditionally exploiting their buying-power over competing racecourse networks. And broadcasting revenue reached a low point in 2001, as Britain’s bookmakers – who had previously purchased live race data and footage from the Club – switched to retransmitting it from the TV networks. “It’s our pictures that drive the footfall into the betting shops, but they announced they would no longer pay, which was a severe blow,” Gould recalls.

The JCR responded by setting up its own service, Turf TV, and encouraging its own and other courses to sign exclusive deals for their main races. Earlier this month Tote Bookmakers became the first of the ‘Big Four’ to sign up to the service, which is backed by the JCR’s courses and 17 others. With such calendar highlights as Royal Ascot and Goodwood now available only on Turf TV, there will be pressure on the other bookies’ chains to follow Tote’s lead. “New media channels opened up, and

While others, notably Coral, have protested at what they view as unacceptable control by race organisers, Gould is confident that the Club gains respect from its tough stance and will ultimately achieve a better relationship with the bookies through putting a price back on their horses’ heads.

With racing competing with other sports, as well as within itself, for the television audience, JCR’s market will continue to be turbulent. And rising land values around its edge-of-town courses mean that the battle it began at Cheltenham in 1964 is far from over. “The current battle over Sainsbury’s shows that it’s a property portfolio first and a retailer second. If that’s true of Sainsbury’s it’s equally true of racecourses,” Gould admits. But CEO Andrew Coppel’s twin-track mission – “to be the best racecourse operator in the world in terms of profitability and promotion of the best quality racing experience” has cleared the first jumps and looks to be running well.