Racing and the Recession - how has the industry been affected? | Trainer Magazine | European Trainer Article Index

Jun 26

Jun 26 Racing and the Recession - how has the industry been affected?

FOR many the joy of owning a racehorse is a luxury and not a necessity, so when money is tight it’s one of the first things to go. It is a different story for trainers though; this isn’t a hobby which can be put on the back burner until things pick up. These are challenging times. Leading flat trainer Mark Johnston has been affected by the recession; his Always Trying syndicate is not quite full and he has noticed the smaller private owners are cutting down on horses in training. Johnston said: “I am also more reluctant to buy yearlings on spec. I usually buy about 45 to 50 on spec, but for the first time in 20 years I have been left with horses I haven’t sold.” National Hunt trainer Oliver Sherwood said he has more horses going to the sales this spring than ever before. “The problem has come when syndicates and individuals have decided not to replace. With what is going on we can’t expect anything else”, Sherwood explained. “It’s not just syndicates. If some individuals were getting a five or six percent return, now they are getting zilch. Invested money which used to go on racehorses has now disappeared.” Tom Dascombe agrees. He is in his fourth season as a flat trainer and each year he has trained more winners than the last. But selling horses on has become a tricky business. “I have found one to two horses specifically have been difficult to move on. People feel quite rightly if a horse was worth £50,000 six months ago and it is not worth that now then it becomes difficult to sell”, he said. “We used to have a lot of partnerships and syndicates, but now it’s more sole owners. In my experience a working man who can spare three or four grand a year for a 10 per cent share all in probably can’t afford that now.” But it’s not all doom and gloom. Richard Gibson trains near Chantilly. He thinks France’s finances are in better shape as there is less of a credit culture in the country, which has had a positive effect on racing. “The surprising statistic is there have never been more horses in training in Chantilly for 25 years. I have more French owners making enquires and more first-time owners than in previous years. Marketing is based on the French premium, but if you take that away prize money remains exceptionally attractive.” Owners of French-bred horses receive a premium for all places which get prize money in races in France. According to the French Racing and Breeding Committee, France leads the way when it comes to prize money and cost recovery per horse, above the UK, Ireland, Germany and Spain. But breeders’ premiums offered in any country are not the preference of everyone; certainly not at the expense of open competition offering prize money which is lucrative in its own right. Eamonn Cullen from Irish Thoroughbred Marketing heartily believes if you strip away the French premium, Ireland’s prize money is just as attractive. This is despite it dropping by 6.5 percent this year. Cullen explained, “Look at the figures, look how much it rose in the last ten years, no one could s ee the downturn coming and the banks going bust. In the last five years prize money h as been on the up and that is a fact, it’s not as bad as everyone thinks.” In the UK after a two year slump, the Levy Board’s allocation to prize money has returned to 2006’s figure of £62.5 million. According to racing director David Bradshaw a further £900,000 is expected to be added for the 2009 calendar year. “Any effects which will result from the economic downturn will probably affect us in 2010; that is not impossible and we will have to look at prize money in that year. Beyond that we like anyone else are subject to the financial situation and the income of bookmakers, but it paints an uncertain picture.” If the UK wants to maintain its position as a leading racing nation then prize money has to improve. Mark Johnston believes the sort of money offered in the UK is akin to racing nations such as Austria. “You just have to look at the tables and see where we stand – it is pathetic. Prize money compared to running costs is hideous. If we are to be a leading nation in the world then we have to come out of the Forties.” It seems outside influences are a determining factor in racing’s fortunes. Norway is a small racing nation with only one racecourse, Ovrevoll, but their finances are buoyant. All prize money in Norway comes from the Norsk Rikstoto, Norway’s betting company which operates in a similar way to France’s PMU. Norsk Rikstoto has 1,300 betting shops around the country and last year turnover was up by 18 percent. Hans Petter Erickson from the Norwegian Jockey Club said, “Prize money has not been affected by the recession in Norway. It has in fact increased by five percent. Norway is a rich country from oil, it is the third biggest oil exporter in the UK – we just need owners to buy more horses. Our problem has been owners buying less horses due to lack of funds.” Nobody has been more affected in this recession than owners. As times get tough and investments dry up so does buying bloodstock. Even if horses in training across Europe have remained at a steady number, that’s not to say that many are not still owned or part-owned by their trainers who are struggling to sell even a share of a horse. With supply exceeding demand unwanted and unsold horses has become a welfare issue. The Free Lease Exchange, which is a joint initiative by the Racehorse Owners Association and Thoroughbred Breeders’ Association, matches up prospective owners with available two-year-olds; due to its popularity the scheme has been extended to include older horses. Jan Durepaire is a French trainer based in Madrid. So far he has been unaffected by the economic downturn. He has 60 horses in training with 22 owners, none of whom work in businesses which have been hit by the recession. But it has not been the case for some of his neighbours; there are 200 less horses in training in the region than a year ago. Durepaire said, “Some people are selling and not reinvesting or instead of buying five they will buy three. The results for my stable speak for t hemselves and if anything I have more horses this year than last so I am happy. Fuel prices are lower in Europe than they are in the UK. The price of diesel is not a problem in France or Spain.” But like many in Europe Durepaire did have a problem sourcing shavings. With the construction industry slowing down, the knock-on effect has been shavings in short supply. Durepaire was paying €5 a bale for shavings and €2.20 for straw so he switched to straw. Mark Johnston is trialling a wood chip alternative after his shavings went up by 27 per cent in less than a year. Tom Dascombe calculated his shavings rose by five percent then by another 12 percent on top of that. But given the success his yard has enjoyed he is reluctant to change a winning formula. “I would be loath to change as what we are doing is working for us. If I changed for the sake of cutting costs it could be a false economy, as if I went on straw which is far cheaper but they started getting beat that would not be helpful to us. We don’t give them less bedding, it’s just proportionally less profit, but we have continued success and that is the main thing.” From a supplier point of view raising prices during a recession is highly undesirable. Peter McQuaid, sales director at Brooklands Bedding in County Mayo, Ireland, said clients have cut down on their orders; deliveries have gone from every two to every three weeks. Cash flow has become an issue and credit is no longer an option. But Peter McQuaid readily admits refusing credit is a peril in itself. “We try and work with our clients, but extending their credit is now a thing of the past. It’s a Catch-22 situation; you are in trouble if you do and in trouble if you don’t. We have to try and find the middle ground as we need our clients so we remain in business.” The strength of the Euro has made life difficult for Republic businesses, and the exchange rate has had a massive effect on suppliers in the south. McQuaid said construction companies are being persuaded to manufacture shavings so they can make some money on the side and those involved in the bedding business can remain in work. “Prices have steadily increased and times were good, but now you would be nuts to increase the price. The price is not coming down though as there is not the supply. It is more expensive to bed an animal on shavings than feed it, but it is the easiest and cleanest option.” Cash flow is proving a problem for racehorse transport companies too. The current situation has bought back memories from the last UK recession in the early Nineties. Merrick Francis had just become managing director of Lambourn Racehorse Transport during that recession. He recalls, “People didn’t want to use their horseboxes so much so they would share our transport with others. For us it is a cash flow problem. We are not going to operate for customers who are very much behind; we are going to get tougher with them if we are not getting paid.” Normally at this time of year his firm is busy transporting mares to stud, but all is quiet at the moment, with mares being rested as s T ales of youngstock have slowed. HE sales rings across Europe have been experiencing differing fortunes. The ARQANA mixed sale at Deauville in February sold 144 horses, which was more than the 120 sold in 2008, but total turnover for the sale this year was €878,500, significantly less than the previous year’s €1,142,200. Incentive initiatives have certainly given the sales a boost. The Breeze-Up Bonus offers up to £10,000 for every winning breeze-up graduate. This, according to Goff’s chief Executive Henry Beeby, made a significant impact at the Goffs Breeze-Up sale in March at Kempton. Which was just as well, as the statistics were somewhat more sobering: 43 horses were sold at an average price of £16,770 compared to the same sale in 2008 where 64 horses were sold averaging £30,375. Top price at Kempton was a son of Danehill Dancer which sold for £58,000. He has gone into training with Tom Dascombe, who picked up two new owners and three horses from the sale. “It was more than I was expecting. We are lucky the business has developed a lot over the last couple of years and we are still getting new horses. I have also bought five fillies in France with the idea of running them in France to be eligible for the owners’ premiums. You’d be mad not to.” Richard Gibson also sees how it makes financial sense to carry on running his horses abroad. “The current financial climate would not stop me racing on the continent – a well-bred filly is worth more if she comes third in a Listed race in Italy – that black type is valuable.” There is no doubt the recession has been felt across Europe, in all quarters. Christopher Renaud runs an equine spa in Geneva and says clients are taking their time and waiting for horses to heal rather than paying for hydrotherapy. “There is certainly a recession in Switzerland and people have cut back on hydrotherapy since December. It is seen as complimentary therapy in addition to traditional recovery and is considered more of a luxury. It is a cause for concern and we would not be in this situation out of choice.” Oliver Sherwood thinks now is not the time to cut corners, but instead to see the opportunities and act on them. “We have got to be positive. We can’t go round with our heads down. If you have some money to spend it’s the time to buy a bargain. I am thinking of reducing my prices if I can for next season. We have got to do what we can to try and get everything up and running.” Owners and trainers alike dream of reaching the winners’ enclosure and regardless of the financial reality people still want to dream, if anything, to escape reality, but that’s only if you can afford it of course.

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(European Trainer - issue 26 - Summer 2009)

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