Record contributions underline Club's role as premier community benefactor

31 August 2010

The Hong Kong Jockey Club announced today (31 August) that its contribution to the public purse through tax and betting duty payments reached a record HK$13.62 billion in the 2009/10 financial year, while its donations to community and charitable projects through The Hong Kong Jockey Club Charities Trust also set a new record, totalling HK$1.52 billion.

The donations to charity represent a further 11.2% increase on the previous year's HK$1.37 billion, which itself took the Club's donations into a new realm after many years of averaging around HK$1 billion.  These major contributions underline the Club's core value to the community, built up over 125 years of service.

Speaking today at the Club's 2010 Annual General Meeting, retiring Chairman Dr John C C Chan said the recovering economy and the addition of extra simulcasts had helped the Club's core horse racing business achieve a 5.9% increase in turnover to HK$71.65 billion and a 3.3% increase in the Club's share of gross margin to HK$3.23 billion.  Gross margin is the amount with which the Club is able to cover operational costs and charitable donations, after payment of dividends to customers and betting duties to Government.

"While these figures may sound very positive, they do not tell the full story," Dr Chan observed.  "In reality, the Club's share of gross margin on horse racing has shown no overall growth of significance (Table C refers) since a package of betting duty reforms was introduced in 2006, while the Government's share has risen over the same period by some HK$730 million.

"In other words, while the reform package has been successful in its goal of luring back revenue from illegal operators, the benefits have not been shared equitably.  Yet over the same period, our operating costs have increased, especially through the cost of running more races.  This is an issue that needs to be addressed in the coming years through a comprehensive review of the existing taxation framework."

Dr Chan noted that the impact of the extra racedays on this year's figures was limited as they fell in July, after the financial year-end on 30 June.  For the full racing season, turnover grew 13.0% to HK$75.50 billion.

On the football side, the Club's gross margin for 2009/10 reached HK$3.21 billion, with the same amount going to Government in the form of betting duty payments.  Although the World Cup boosted turnover in the final month of the year, most of the knockout stages fell in July, likewise after the financial year-end.  Total football turnover for the World Cup over its full duration was HK$4.44 billion.

The Mark Six lottery showed a marginal 0.8% fall over the year, producing Club commission of HK$383 million.  In addition to generating HK$1.59 billion in Lottery Duty for the Government, the Mark Six contributed a HK$956 million payment to the Lotteries Fund, which supports social welfare projects.

Overall, the Club's total turnover on racing, football and the Mark Six rose 7.1% to HK$116.93 billion while its share of gross margin grew 6.4% to HK$6.82 billion.

Chief Executive Officer Winfried Engelbrecht-Bresges said that although the 2009/10 results were generally encouraging, the Club still faced many challenges.  "Sustaining revenue streams is becoming more and more challenging to us with the steady increase of gaming in the surrounding region, especially the new generation of integrated gaming resorts in Macau and Singapore and the growing number of internet gaming operations targeting our customers," he stressed.  "This challenge is exacerbated by Hong Kong's high taxation and very restrictive regulatory framework.  To remain sustainable and competitive, the Club needs to make substantial investments in its racecourse facilities and meet customers' ever-growing expectations."

Mr Engelbrecht-Bresges noted that the amount of money lost by Hong Kong people to Macau casinos alone had more than doubled in the past four years from HK$9 billion in 2005/06 to HK$22 billion in 2009/10.  "To put this into perspective, this is larger than Hong Kong's total gross margin on racing, football and the Mark Six, counting both the Government's and the Club's shares," he said.  "This challenge will be further exacerbated when Macau casinos start general sports betting in 2011.

This is not just about competition for the Club; it is about revenue being lost to Hong Kong's public purse and to the charitable and community projects that the Club's not-for-profit operations support," he emphasised.  "It is also about preserving and creating jobs for Hong Kong people."

It was important that the Government and legislators looked at the wider picture when considering gambling issues, Mr Engelbrecht-Bresges said.  Since the Club was authorised to offer off-course betting in 1973, its total charitable donations had exceeded HK$27 billion, and it had contributed a remarkable HK$261 billion to the public purse.  "If it were not for the Club's contributions to public funds, other revenue sources such as salaries tax would need to rise significantly.  To sustain these contributions to the community in the long term, we need to establish a new framework that can enable the Club to stay competitive, covering services, offerings, taxation and regulatory issues."

Mr Engelbrecht-Bresges also noted that the Club had sustained employment for tens of thousands of people, often creating jobs at times and places where they were most needed.  "A good example is the 4,000 new jobs we created during 2009, when many other organisations were still cutting back their staff levels after the financial downturn.  This includes 2,500 in Tin Shui Wai, as part of an innovative project that has won numerous awards during the past year."

To enhance its international competitiveness, Mr Engelbrecht-Bresges said, the Club was creating a major new training centre in Conghua, north-east of Guangzhou.  "As well as extending our training capabilities and overcoming current capacity constraints, this important project will enable us to put a comprehensive refurbishment of our 30-year-old Sha Tin stabling and training facilities under way, upgrading them to world-class standards," he said.

Complementing these hardware enhancements, he added, the Club was committed to making the Club more customer-centric, and to connecting its businesses and charity contributions more closely with the community it served.

"I hope that our new and more customer-centric organisation will help us connect better with our customers, with our charity partners and with the wider community we serve," Mr Engelbrecht-Bresges said.  "Our aim is to add greater value to Hong Kong in the years ahead."

The Hong Kong Jockey Club

Founded in 1884, The Hong Kong Jockey Club has become one of Hong Kong's best known and respected organisations, providing the public with world-class sporting entertainment as well as being the city's major non-Government community benefactor, now donating more than HK$1 billion a year to charitable and community projects.  It has been a part of Hong Kong through good times and bad, sharing the city's growth and development with its people, and is dedicated to enhancing the quality of life for future generations.

Season-end figures of The Hong Kong Jockey Club

(A) Business Figures

1a. Horse Racing ($million) - by Financial Year (1 July 2009 - 30 June 2010)

* 79 race meetings in 2009/10 vs 79 race meetings in 2008/09

1b. Simulcast racing ($million) - by Financial Year (1 July 2009 - 30 June 2010)

      (included in 1a)

** 76 simulcast races in 2009/10 vs 10 simulcast races in 2008/09

1c. Horse Racing ($million) - by Racing Season

      (13 September 2009 - 14 July 2010; 15 September 2008 - 1 July 2009)

***83 race meetings in 2009/10 vs 78 race meetings in 2008/09

1d. Simulcast racing ($million) - by Racing Season (included in 1c)

      (13 September 2009 - 14 July 2010; 15 September 2008 - 1 July 2009)

****80 simulcast races in 2009/10 vs 10 simulcast races in 2008/09

2a. Football Betting ($million) - by Financial Year (1 July 2009 - 30 June 2010)

2b. Football Betting - World Cup 2010 ($million)

      (11 June 2010 to 11 July 2010; 9 June 2006 to 9 July 2006)

3. Lottery ($million) - by Financial Year (1 July 2009 - 30 June 2010)

(B) Club's Contribution

1a. Betting Duties and Profits Tax ($million) - by Financial Year (1 July 2009 - 30 June 2010)

1b. Betting Duties and Profits Tax ($million) - by Racing Season

      (13 September 2009 - 14 July 2010; 15 September 2008 - 1 July 2009)

2. Appropriation to The Hong KongJockey Club Charities Trust ($million)

    by Financial Year (1 July 2009 - 30 June 2010)

3. Donations by The Hong KongJockey Club Charities Trust ($million)

    by Financial Year (1 July 2009 - 30 June 2010)

(C) Impact of 2006 Betting Duty Reforms on Club and Government revenues

1a. by Financial Year ($million) (1 July 2009 - 30 June 2010)

1b. by Racing Season ($million)

      (13 September 2009 - 14 July 2010; 15 September 2008 - 1 July 2009)