Now horse racing’s dire times come to Hong Kong

While Sunday’s Cricket World Cup was being hailed as “an iconic moment in English sport”, horseracing finds itself in dire times with detractors doubting there is any light at the end of the tunnel.

After the worrying JSE announcement from Phumelela last Friday, Hong Kong is the latest country to feel the sport’s downturn with the Hong Kong Jockey Club stating betting turnover had plunged $200m from March 1 to June 30.

Club CEO, Wilfried Engelbrecht-Bresges commented: “We are facing difficult challenges. You need turnover for the long-term sustainability of the sport. We knew when we did our budget for the season that there would likely be a correction.”

This correction has come after a decade of sustained growth in turnover with the former British colony the envy of many other racing countries.

Phumelela’s stock exchange announcement last Friday said it remains “under cautionary” as engagements with the Gauteng MEC for economic development, environment, agriculture and rural development and the Gambling Board are still in progress: “Shareholders are advised to continue exercising caution when dealing in the company’s securities until a further announcement is made.”

At 11am on Monday, Phumelela’s share price stood at R3.80 — a decline of 17.39% on Friday's close of R4.60.

Similar to the Hong Kong Jockey Club statement, Phumelela said it found itself “in a challenging position” and is in breach of its loan covenants.

“An accrued amount of R26m is necessary in the 2019 financial year due to the income from the bookmaker levy not being paid from April 1 2019 with an annual impact of approximately R75m.”

Phumelela’s position has resulted in a large number of comments on social media. One post in Sporting Post said: “The announcement is confirmation that Phumelela is in crisis. The executives and the board are well-positioned (or ought to be) to make a call whether business rescue is imminent and whether they want to be around when this announcement is made.”

So where has it gone so wrong for Phumelela? Leading bloodstock consultant John Freeman, with 40 years experience in the racing industry, writes in his weekly newsletter that while he is full of praise for Gold Circle’s staging of the recent Durban July meeting, “we lament the fact that the media and government in other provinces ignore the value of racing”.

Freeman, who purchased Vodacom July winner Do It Again for R1.1m at the 2016 National Yearling Sale and has managed top horses such as Futura, Legislate and In The Fast Lane, wrote that he believes the success of the July meeting had a lot to do with the KwaZulu-Natal provincial government, the city administration of Durban and provincial newspapers taking it seriously.

This is important “not just for the betting revenue it generates, but for the tens of thousands of tourists that flock to Durban for the event and for the thousand of jobs that it creates”, Freeman wrote.