HKJC turnover declines amid Covid-19 disruption in 2019-20

The Hong Kong Jockey Club (HKJC) has reported declines in revenue and turnover for its 2019-20 fiscal year, though management hailed the business’ resilience after it managed to avoid race cancellations over the period.

At a time when sporting events around the world were cancelled as as result of the novel coronavirus (Covid-19) pandemic, HKJC maintained a full race programme for the year, thanks to strict health and safety measures at its tracks.

“Racing is an important symbol of Hong Kong and its can-do-spirit, not to mention the vital support it provides through tax and charity funding. We were therefore determined to keep racing going,” HKJC chief executive Winfried Engelbrecht-Bresges said.

“This commitment was no less strong among horse owners, trainers and jockeys, backed up by the Club’s employees. I would especially like to thank our many employee heroes, who banded together to safeguard the wellbeing of our customers, members and the wider community.”

However, with its off track betting facilities shuttered in February and not reopened until late June, it still saw turnover decline for the year ended 30 June. This was mitigated in part by player activity shifting online; digital and mobile platforms accounted for 70% of wagering turnover, rising to 90% at the height of the pandemic.

Amounts wagered fell 11.6% year-on-year to HK$218.75bn, of which $195.47bn was staked by Hong Kong residents across all channels. Commingling agreements with international partners contributed the remaining $23.28bn, up 23.1%.

Looking at turnover by product, racing accounted for $121.00bn of the total, down 3.2%.

Betting on football, at a time when leagues and competitions were suspended as a result of the pandemic, was badly hit, however. HKJC estimated that up to 3,273 matches were either postponed or cancelled as a result of the Covid-19 shut-down, which resulted in turnover dropping 18.8% to $92.60bn.

The remaining $5.16bn came from the Mark Six lottery game, down 39.0% year-on-year, after draws were suspended in mid-February. However HKJC said that this vertical would have declined even without the pandemic, due to a lack of significant changes to the game format since its introduction.

After prizes were paid out to customers, this left revenue of $31.51bn, down 14.9%.

HKJC paid out $19.63bn in betting and lottery duties, a 13.8% drop on FY2018-19, with a further $88m paid out through commingling contracts, and $774m allocated to the Lottery Fund, which provides funding to charitable causes in Hong Kong.

This left net revenue and commission of $11.02bn, though total revenue was increased by $3.91bn from other sources, and a $57m gain from the sale of properties, to $14.99bn.

Operating costs for the year increased marginally to $11.82bn, while $2.57bn was granted to the Hong Kong Jockey Club’s Charities Trust. In 2019-20 the Trust made $4.5bn in donations, including a $346m commitment to tackling the impact of Covid-19.

This left HKJC with a $595m operating surplus (profit), down 35.0%. After interest on customer deposits, plus losses from investments and financial costs, as well as a share of joint venture profits, the operator’s pre-tax profit amounted to $599m. After $454m in income tax, this left the business with a net profit of $145m, down from $2.08bn in FY2018-19.

“I believe we have every reason to be proud of the Club,” HKJC chair Philip Chen said of the operator’s performance.

“We maintained our core racing, wagering and membership operations. We kept our customers, members, employees and licensed personnel safe and protected. Above all, we stayed true to our purpose.

“In short, we did what was right for the Club and what was best for Hong Kong.”

However, HKJC admitted that it faces an “extremely challenging” future, which has already seen the funding donations to its Charities Trust decline year-on-year. Nevertheless, it will continue to invest in strategic projects, such as the development of the Conghua Racecourse, and redevelopment of stables at its Sha Tin track.

Its online offering will be overhauled, with a new customer information and wagering system currently being built, while it aims to spur further growth through new commingling contacts and simulcasting deals.

“Ultimately everything comes back to the Club’s purpose – the betterment of our society – which must, and will, remain the same,” Chen added. “We will continue to enhance our much-admired position by doing the right things and doing them right. We will strive hard to improve our business results so that we can maintain our charity donations.”