Friday 17th May 2019
On the basis of provisional submissions to date from most Levy-paying bookmakers, estimated Levy income for the year ended 31st March 2019 will be some £78m.
This figure is materially below expectations. It compares to yield of some £95m in 2017/18, the first year in which the reach of the Levy had extended to bookmakers beyond Great Britain.
Following the third quarter of 2018/19, to 31st December 2018, in the light of information provided voluntarily by major bookmakers to HBLB on actual performance to date, the Board envisaged that full-year income would be up to £89m.
However, the end of year submissions from bookmakers show that yield will fall well short of that level. Informal reports provided to the Board by bookmakers, and analysis conducted by HBLB, reflect that February and March 2019, the last two months of the Levy year, were very substantially less profitable than in 2018.
The Board is continuing to carry out its formal end of year processes with bookmakers and undertaking its own further review.
On the assumption that £78m is the final yield, the Board will have incurred a budget deficit on expenditure of some £5m in 2018/19, causing the Board’s reserves to stand at around £40m, the Board having expected them to be at around £50m.
With an agreed expenditure budget of around £99m for 2019, the Board decided this week that some reduction is necessary. Plans will be formulated in the coming weeks to cut grant expenditure by £5m during calendar year 2019 and there is the probability of a further reduction to take effect before the end of the 2019/20 Levy year.
The Board will keep the position under regular review. In the autumn, after it considers reports on the year to date, market information and forecasts for the rest of the year, it will decide on the scale of further expenditure reductions.
Levy Board Chairman Paul Lee said:
“Bookmaker profits in the fourth quarter, particularly in February and March, were reported to be very substantially down on estimates. This has led to a material undershooting of Levy income against forecast, even taking into account that yield was not expected to reach the £95m of 2017/18.
“This is only the second year of the extended Levy and the inherent uncertainty was recognised by the Board in 2017, which led to its policy of increasing reserves significantly over the past two years. The purpose of having these reserves is to be able to shield Racing against substantial fluctuation. However, the scale of the fall in income means that there is a strong probability of having to make further adjustments to expenditure during the Levy year in addition to the £5m reduction before the end of 2019.
“The variation in yield from £95m to £78m in the first two years of the extended Levy makes forecasting 2019/20 income more difficult and will create a challenge in setting a full-year expenditure budget for calendar year 2020 before the end of calendar year 2019.
“The Board will look to put in place additional reporting arrangements with major bookmakers, who are already helpfully providing significant data to the Board on a voluntary basis.”
For further information, please contact Levy Board Chief Executive Alan Delmonte on 07931 701536
The Board initially agreed, in autumn 2018, a £93m expenditure budget for calendar year 2019. It then agreed to draw on its reserves to make a further one-off £6.5m contribution to prize money expenditure for the period April 2019 to March 2020. The Board’s Executive will now discuss with Racing where the expenditure reduction of at least £5m will be made.