“Icebergs Ahoy!”, but are the Officers on the Bridge of the Titanic Looking Through the Wrong End of the Telescope? More Views on the Ownership Strategy.

Just back from a super, relaxing holiday in the relatively isolated north-west of Tenerife. If you like golf, do go and stay at the Hacienda del Conde and play golf at the Seve Ballesteros course at Buenavista. While there, I read a bit about the island and I certainly wasn’t aware that Horatio Nelson didn’t just lose a sea battle off Santa Cruz, but it is also where he lost his arm. Apparently it was a battle he should never have lost – it was all down to complacency, not marshalling his resources properly, incomplete information and the wrong analysis of the situation. A bit like British racing, as you’ll see in this blog.

I kept my eye on a number of racing topics (I know, I should get out on the golf course more), and once again the strategic snail of the ownership strategy caught my attention, largely through an article in the Racing Post written by Jonathan Harding. For over a year I’ve been frustrated about the lack of clarity and progress on this strategy even though, apparently, the budget for it is now £1.66m, with the Levy Board alone contributing £790,000. The only way to gauge whether we’re getting value for money from this substantial investment will be the outputs from the study, and its impact on the attraction of new owners into the sport while retaining current ones. A coherent strategic plan still hasn’t been issued, and it does look as though the ROA is just tinkering around with the Titanic’s deckchairs. Where is the over-arching strategic vision? What are the major strategic priorities being addressed? What are the strategic goals and specific objectives that can be measured over a 1 / 3 / 5 / 10-year time horizon? What are the detailed and targeted initiatives to be deployed, and what are the resource implications for the industry? None of these questions have been properly addressed. Apparently there will be a communication exercise in the autumn and nothing would give me greater pleasure than putting ticks in all the boxes, and seeing the Titanic steer away from the icebergs unscathed.

Most worryingly, the Racing Post article stated that the strategy is all about “evolution not revolution”. The ROA has prioritised retaining owners over actively recruiting them, and that sort of one-eyed strategy appears to be gross neglect. Also, they have chosen to treat prize-money as a separate issue, and again that is flabbergasting. Just keep moving those deckchairs around …..

It’s not as though the icebergs aren’t big, prominent, ugly and frightening:

• Sole owners are in significant decline, down from around 7,000 to 5,000 in the last ten years.
• There are now more owners aged over 80 than under 40.
• The returns to owners are dreadful, with 73% of those owners receiving less than £2,500 per year, due to both the quantum of prize-money and its allocation. It is far too concentrated at the top tier of the sport, which benefits hugely anyway from ongoing stud value.
• The betting industry is hurting. For example, William Hill’s profits are down 33% with 700 betting shops likely to close by the end of the year.
• Racecourses are increasingly forecasting “significant risk of falling income” and almost inevitably reduced prize-money as a result. Newbury, which already has woeful prize-money for the quality of its racing, issued a note to that effect.
• While Logician put in a superb performance in the St Leger (for a £700,000 pot, the second-most valuable British Classic after the Derby), throughout the festival there were many under-subscribed races, which wasn’t surprising in view of the poor prize-money. Day 1 had a meagre £149k and the last two races on Leger day were 0-110 handicaps with prize-money between £12,450 and £15,562, whereas similar races at the York Ebor festival were worth £70k. Owners and trainers are voting with their feet / hooves. Those two races at Doncaster had three and two runners respectively.

And yet the ownership strategy isn’t examining initiatives to bring new owners into the game, nor to boost the prize-money to sustain it. This beggars belief.

Meanwhile, of course, it is very different elsewhere in the world. The new Saudi Cup, to be staged on 29th February 2020 at the King Abdulaziz Racetrack in Riyadh will be the richest ever race, at US$20m. Even the undercard has US$7m of prize-money. The Times has a view that we are now going to see a “high-rollers’ triple crown”, with trainers targeting this race along with the Pegasus in the US, worth £7.4m, and the Dubai World Cup at £9.9m.

Oh, to be a high-roller operating at the platinum end of racing, whether globally or in the UK. For them, life is rich and rosy, and indeed the ROA’s magazine, Thoroughbred Owner & Breeder, reinforces that view with all the top trainers, horses breeders and owners being feted and now has pages of over-priced “fashion” drivel as well. It would be a nice magazine to read in the lounges of the Titanic, maybe alongside a copy of the ROA’s ownership strategy, when it finally makes its appearance.

Icebergs ahoy! Do we have any lifeboats?

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Welcome to Annamarie Phelps, New Chair of the BHA. Top of the In-Tray – Finances, Funding and the Levy. Oh Yes, and Racing’s Leadership Behaviour and the Need to Curtail the In-Fighting.

Annamarie Phelps commences her new role today as Chair of the BHA. I’m sure everyone in British Racing wishes her well and is hoping for a really successful new phase for British Racing under her stewardship. She is a former Olympic rower, current Vice-Chair of the British Olympic Association, and replaces the temporary incumbent, Athol Duncan. She is a recognised UK sports figurehead and, when she was appointed, the BHA underlined her main expertise “in dealing with complex political, regulatory and multi-stakeholder projects and initiatives” through her “impressive leadership skills and astute grasp of the issues facing major sports, including their engagement with government”.

I’m sure she doesn’t need me to teach her anything about leadership, but I’ve never forgotten the chairman of a major pharmaceutical company who raised his left hand in front of me one day in my consulting career and explained that you never need more than five fingers to prioritise the key strategies for any business. His view was that the challenge in a new chair’s first 100 days was to identify the three critical strategies that would really make a difference to the organisation, and then to drive them forward through the two main enablers of leadership and any necessary changes to the operating model. Rather menacingly, he then raised his right hand and said that over the 100 days you always discover the five leaders who are the blockers, robber barons and doom merchants. Indeed, I can still remember one hapless individual at this chairman’s leadership conference who, during a plenary discussion, announced that there was no way he was going to support a particular initiative: “over my dead body”. The chairman gave him a withering look and proclaimed, “It can be arranged!”

So I’ll be very interested indeed to follow the impact of the new chair during this initial 100-day period. I’ll be even more interested to find out whether any changes occur in the leadership of our sport. Unfortunately over the last 12 months there has been a shocking outbreak of in-fighting and negative behaviour within the top echelons. Although the chair of the BHA has limited authority over most of the stakeholder groups, there is certainly a need to knock a number of heads together and focus on the key priorities and opportunities.

Two very interesting articles appeared recently in the Racing Post, one by the former chairman of the BHA, Steve Harman, entitled Time to talk up racing’s future and kick on with levy development, and the second from trainer Jamie Osborne, Funding farce underlines urgent need for racing to conduct a radical re-think. Steve’s article was both optimistic and a notable call for action with regard to the next stage of levy development, while Jamie advocated the need to “stop the blame game and start thinking radically”. I’m sure both were designed to coincide with the arrival of the new BHA chair.

Steve’s article was persuasive and compelling. While some pundits in racing have dwelt on the “black hole” of the cut in FOBT stakes and its impact on media rights, his focus was on the need for racing to concentrate on £115m of funding that can readily be secured through self-help opportunities exceeding £50m per year and levy development worth a further £65m+. It certainly convinced me, and is definitely one of the fingers on the strategy hand. It is worth examining in more detail.

Without doubt, one of Steve’s most important contributions as BHA chair was the development of excellent relationships with the many politicians who are now key advocates of racing, both inside and close to Westminster. These include prime ministerial candidate Matt Hancock; Jeremy Wright, his successor as culture secretary; Mims Davies, Sports Minister; former Sports Minister Tracy Crouch; Helen Grant, Vice-Chair of the Conservative Party; and George Freeman, ex-Head of the Prime Minister’s Policy Unit. In particular, Matt Hancock had assured Steve that racing would not suffer as a result of FOBT changes, and gave a strong commitment to examine further levy development once the FOBT changes had bedded in. However, and crucially, to trigger the next stage of that development there were conditions that had to be met. In particular racing had to show self-help in a number of designated areas: building a strong global Tote, making further progress in industry recruitment and retention, further developing the equine welfare and staff welfare agenda, improving the balance of British-bred horses, pooling media rights, growing participation in the sport and meeting good governance standards.

Throughout Steve’s piece there was frustration that racing isn’t delivering on what is required to trigger further developments to the levy. It is almost as if racing doesn’t believe that Westminster will keep its word and ensure that racing doesn’t suffer financially from the changes made to FOBT stakes. The need for speed and leadership came through strongly if racing is not to stumble into a crisis of its own creation: “ …. we should be talking opportunities and growth. This industry has proved what it can do regarding levy reform. Racing needs to articulate a compelling message about growth and jobs, with great campaigning supported by quiet lobbying with our influencers.” Furthermore, “The clock has been ticking. Jobs in this industry depend on this. Anyone doubting the promises, prospects or scale of levy development needs to be corrected.”

Jamie Osborne’s concern was the lack of transparency and finger-pointing between racecourses, bookmakers, owners, horsemen and regulators. Without any doubt the financials of racing are far too opaque, and opening them up to scrutiny in a more coherent manner would be one heading in the operating model of a new racing strategy. Jamie also argued for “a radical re-think on the balance of commercial power”, which is code, I’m assuming, for scrutiny of the amount of money taken out of the sport by bookmakers and racecourses, leaving so many at the grass roots of the industry impoverished. The key message was that our funding model isn’t working well and there is a tremendous need to make the “revenue pie” bigger - another initiative for the strategy hand.

In the next blog I’ll examine a number of other priorities for British Racing, as well as the constraints that may severely limit the new chair’s freedom to act. This will also examine how the commercial value of racing is created, and the tensions that now exist in the way in which it is apportioned – definitely subjects for the left hand of strategy.

So as one former rower (indeed, having won the Mays bumping races at Cambridge and rowed for the Varsity) to another, I wish Annamarie well.

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Harold Macmillan Said that Governments were Brought Down by “Events, dear boy, events”. Racing has had Two Big Events in February – Fast and Furious Response to Equine Flu and Now The Beckett Boycott Against ARC. Are They Appropriate Responses or Over-Reactions?

If I ever take part in a pub quiz on racing (which is extremely unlikely), at least I’d be able to ask the question which was “Which National Hunt horse won the first race back after the great equine flu epidemic – which didn’t happen – of February 2019?” Easy, really – it was our horse Acey Milan, who won over an inadequate trip at Plumpton on 13th February. Well done, Ace!

Either side of the weekend of 9th and 10th February, British racing had introduced a six-day lockdown of 174 yards following the discovery of a US strain of equine flu at the yard of Donald McCain in Cheshire. A fast and furious wave of biosecurity activity took place as thousands of horses were tested for this highly contagious virus. No racing took place in the UK; yards were disinfected, either through low-tech spraying or high-tech fogging machines; horse movements were curtailed; and an enormous range of views expressed. A number of trainers, such as Charlie Mann, Nigel Twiston-Davies and Nick Williams, became very hot under the collar, saying that it was a “massive over-reaction” by the BHA and not even the vets seemed able to agree on the appropriateness of the lockdown and various measures. The Veterinary Committee of the BHA played a straight bat and were highly supportive, whereas some of the grass-roots practitioners such as Peter Ramzan of Rossdales in Newmarket and Ben Brain, the UK’s foremost wind surgeon, were very sceptical. After six days and a huge amount of coverage in the media, racing resumed and fortunately only a total of ten racehorses tested positive. Normal service was resumed – other than for the trainers who had not had their animals vaccinated in the past six months. This caused some resentment, as it meant that some top-class horses missed their Cheltenham preparatory races, and because there was no grace period, the BHA had in effect changed the vaccination rule overnight. In their defence, they had issued an “advisory” notice about vaccination earlier.

My personal view is that one of the BHA’s primary objectives is properly to protect racing’s future, and one key element of that has to be equine welfare. The horse must genuinely come first. Without the extensive testing of horses in the lockdown period, it would have been impossible to gauge whether the UK was on the verge of an epidemic; fortunately that was not the case, but imagine the public outcry if we had been. It may well be that a very small number of horses always get equine flu, but it goes undetected or unreported. The whole episode certainly demonstrated that “racing matters” in the eyes of the public, and not just for racegoers and punters. A lot of column inches were dedicated to the equine flu cases in all the newspapers, as well as extensive reporting on TV. The general consensus seemed to be that temporary inconvenience through the lockdown was far better than having an epidemic on your hands. The BHA took the right steps to contain it even if, with hindsight, it might have contained itself.

And then at the end of February another “event” broke out, this time a major row over prize-money as a result of ARC’s precipitate decision to cut its prize-money allocation by £2.7m while, through its actions, excluding itself from accessing a further £4.5m from the Levy Board through the Appearance Money Scheme. The last time there had been a boycott of racing was at Worcester a few years ago, when trainers withdrew all their horses with the exception of one, who had a walk-over for Nigel Twiston-Davies who then allocated the prize-money between all other trainers in the “race”. This time the President-Elect of the National Trainers’ Federation, Ralph Beckett, orchestrated an aggressive response to ARC with the withdrawal of horses in a couple of novice races at Lingfield before proposing a second wave attack with trainers being persuaded not to make entries at Fontwell, Lingfield, Newcastle and Southwell next week. Anyone who saw Ralph being interviewed by Nick Luck last Sunday could not have failed to be impressed by his cogent attack on ARC and his barely concealed anger. It was definitely a case of Bombardier Beckett in the trenches with the pins out of the grenades, ready, willing and able to go over the top on behalf of racing, and particularly the grass-roots owner.

I have every sympathy with the stance being taken by the NTF and indeed had instructed all the Owners for Owners trainers not to enter our horses in any races where the total prize-money is less than £4,000, unless there is a compelling reason to do so. I’ve just ensured that our horse Sojourn is withdrawn from Fontwell next week and will race at Wincanton instead, while Melekhov also won’t go to Fontwell but be switched to Taunton. When these decisions were made, the prize-money was over 50% higher at the non-ARC tracks. Since then, ARC has made what appears to be a “concession” by temporarily reassigning prize-money from more valuable races to those of lower grade, thereby unlocking levy funding. This doesn’t strike me as much of a concession, as no new money is being found; it’s just a different way of slicing the prize-money cake.

Direct action, boycotts, aggressive attacks on fellow stakeholders isn’t really the way to manage British Racing, and it’s really necessary for the current tripartite structure to contain the aggression and re-channel it on to problem-solving and solutions. The macro-economic reality is that while no-one knows the precise figures, the government’s decision to reduce the stakes on fixed-odds betting terminals to £2 is guaranteed to lead to the closure of a substantial number of betting shops thereby significantly reducing levy yields and media rights payments. Some commentators believe that £40-60m of annual income could be lost, which puts the ARC reductions into perspective. Racing, as a matter of urgency, needs to create a strategic plan of how it is going to boost income from the middle of this year onwards, or a lot more grenades are going to be thrown around.

Harold Macmillan would surely have identified with the way that “events” can blow up in your face, just like grenades.

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Some Quiet Reflection on Royal Ascot, Timeless Art and Brexit Independence Day …. if Possible

Although I’ve been involved in Flat horses with seven trainers including the likes of William Haggas and Richard Hannon, in Owners for Owners we only have one Flat trainer and that is Karl Burke. I’ve had horses with Karl for 11 years now, ever since I came into ownership, and it says everything that we’ve never once had a disagreement. Even when Karl was harshly forced into exile for a short period, we stayed with the yard to support Elaine and the family. We got off to a great start through David Redvers (pre-Qatar Racing days) with a lovely, fast filly called Swift Princess who won for us, was sold for more than we paid for her and is now a successful broodmare in New Zealand. I’ve had double the winners with Karl of any other trainer and only a week or so ago we had our latest when Timeless Art won a valuable £15k handicap up at one of my favourite racecourses, Ayr.

Yet at the start of this Flat season nothing seemed to be going right. Our horses all disappointed when they came out, and March and April were a tough time for Karl and all his owners. As always with racing patience has paid handsome rewards and the yard has been flying through May and June, not least at Royal Ascot where the magnificent Gr.1-winning performance of Quiet Reflection in the Commonwealth Cup was the highlight of the week. It was Karl’s first Royal Ascot winner, first Gr.1 in the UK, first Ascot-winning ride for new stable jockey Dougie Costello in his first season on the Flat and first winner at the Royal meeting for the syndicate that part-owns the horse, Ontoawinner. As one of them said afterwards, “We’re proud to be Yorkshire. Proud and loud!” The joyous scenes after the race were wonderful to behold, and sum up every owner’s aspirations. It now looks as though Quiet Reflection may head for the Darley July Cup at Newmarket on 9th July, and then onwards throughout the year to Champions’ Day back at Ascot.

I’m sure that Karl’s yard will be over-subscribed in the autumn. We’re definitely buying another yearling, so if you fancy getting involved, do let me know as soon as possible. One of Karl’s many accomplishments is the rare ability to spot good-value talent at the sales, and I would never consider buying a horse for the Flat without him being there. If you’d like to come to the sales with us in the autumn, you’re more than welcome.

Among many highlights of Royal Ascot, Lady Aurelia was simply outstanding in the Queen Mary, winning in a time 3 seconds faster than Profitable in the King’s Stand. She simply blew the field away, and I doubt if I’ve ever seen a more impressive 2yo performance. Indeed the only other similarly stunning performance I can recall is Frankel winning the 2000 Guineas. Delighted to see Order Of St George win the Gold Cup and give Aidan O’Brien his 7th victory in 11 runnings. He may go to the King George, but I’m actually more interested to see whether he can do what Ardross, Westerner and Yeats failed to do – win the Arc as well as the Gold Cup. Thinking of the sire of this horse – Nigel Twiston Davies made me laugh after his son Willie won one of the handicaps for Alan King and then the other son, Sam, won two at Ffos Las that evening. He said: “I’m the new Galileo!”

Another trainer who I always find amusing, Sir Mark Prescott, shared his view on the Brexit vote with his comment on Farage: “I wouldn’t follow him down a footpath!” Having said that, clearly a really momentous decision was made by the British electorate. Maybe a small but nevertheless a clear margin voted for exit from the EU on a strong turnout of 72%. It was amazing that the bookmakers got it so wrong, with 1/10 for remain. As expected there was immediate market mayhem with the Pound plummeting to its lowest value since 1985, a big drop in equities and then the political fall-out with Prime Minster Cameron resigning, and as I write this blog, half the Shadow Cabinet doing likewise.

Superficially it seems to be a seismic vote against elites and the establishment, with deep divides between the old and the young, rural and metropolitan; London, Scotland and Northern Ireland vs. the rest of the country. It doubtless has the potential to put 70 years of European integration into reverse, and there are profound implications particularly if it triggers other countries to vote against the dead hand of Brussels bureaucratic centralisation. Personally I’ve felt for a long time that the EU fails to provide any real competitive advantage for Europe and that their operating model is no longer fit for purpose. Here’s hoping that the politicians can provide the leadership, both in the UK and across Europe, to drive a new arrangement fit for the 21st Century.

And finally of course this decision is bound to have an effect on British racing. One of the big gains of the BHA in recent years has been the development of strong contacts with government and in securing their commitment to the replacement of the Levy. Hopefully the strength of cross-party backing will ensure that this continues. It may be that the exit vote may make it easier to reform the Levy and also offshore bookmaking. It was noticeable that shares in Ladbrokes and William Hill dropped like a stone in early trading after the result was announced.

It's too early to say what the effect is going to be on employment law, immigration policy and recruitment of stable staff from overseas, the breeding industry that currently receives payment under the European Common Agricultural Policy, the movement of horses and trade at the sales with a weaker pound.

Doubtless after some quiet reflection over the next few months we’ll find that the advantages for British racing are greater than the disadvantages. Here’s hoping, anyway.

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