Corporate News

Club makes record HK$3.6 billion donations in 2013/14; total direct return to community exceeds HK$24.3 billion

09/11/2014

The Hong Kong Jockey Club announced today (11 September) that in the wake of a successful year 2013/14 in all aspects of its operations, the Club's Charities Trust had been able to donate a record HK$3.61 billion to charitable and community projects – an increase of almost 85% on the previous year's HK$1.95 billion.

The Club's strong financial performance also generated contributions to the public purse of HK$19.58 billion in betting duties and tax, an 11.1% increase and another new record. This is equivalent to 8.0% of all taxes collected by the Inland Revenue Department during the year.

Adding together betting and lottery duties, profits tax, contributions to the Lotteries Fund and charitable donations, the Club's total direct return to the community reached a remarkable HK$24.38 billion, an increase of 17.6% on the 2012/13 figure. Moreover, this does not include the many additional benefits the Club generates for Hong Kong through employment, tourism and related spending.

The Club's net margin on horse racing, football betting and the Mark Six, after payments of dividends to customers and betting duties to the Government, was HK$9.78 billion, an 11.4% increase on the previous year. This year, the Club donated about 74% of its net surplus to the Charities Trust.

Revealing the results for year ending 30 June 2014 at the Club's Annual General Meeting, retiring Chairman T. Brian Stevenson said the Trustees had taken a conscious decision to increase the donation amounts in recent years in view of the Club's charities strategy of proactively addressing issues of long-term concern in the community.

"We have especially looked these past few months for projects of long-term impact in areas of unmet demand like medical and health services, the needs of the middle-class and the elderly, support for the disabled and investment in education and youth development," he explained. "So this year's huge sum is not just a measure of the record number of projects supported, some 168 in all, but also a reflection of our commitment to supporting many larger and more impactful projects".

Examples cited by Mr Stevenson included a HK$1.3 billion donation to The Chinese University of Hong Kong to establish a teaching hospital on its Sha Tin campus, which in particular will help the city's sandwich-class and elderly residents; a HK$600 million donation to Hong Chi Association for the development of its Pinehill Village complex at Tai Po, which provides special needs education and residential homes for children with mental disabilities; and a HK$200 million donation to the Chu Hai College of Higher Education to support construction of its new college complex in Tuen Mun.

A further HK$271 million donation has gone to the Hong Kong Academy of Medicine to set up the Jockey Club Disaster Preparedness and Response Institute, with the support of two local medical schools and international experts from Oxford and Harvard Universities. This will strengthen the city's capabilities in disaster preparedness and response, and help Hong Kong become a regional centre of excellence in this field.

Mr Stevenson also emphasised that this high level of donations was not just a "one off" but a contribution that the Club believed it could maintain – "provided, of course, that we are given the opportunity to stay competitive against illegal and offshore operators, and barring major economic catastrophes".

Rounding up his four years as Chairman, Mr Stevenson said the Club had seen some excellent business results, "but what is more important, to my mind, is that the Club remains in great shape as a provider of world-class sporting entertainment, as well as as a major contributor to the Hong Kong community. Our financial position is very secure, while the soundness of our strategies is reflected in the material improvement in our operational results over recent years. This has enabled us to provide significantly increased returns to the community through tax payments and charitable donations.

"Nevertheless, we should not be complacent as our business continues to face challenges on a number of fronts, notably from illegal and unauthorised web gambling operators who never miss an opportunity to target Hong Kong people. Also of concern are the growing number of Asian countries and regions already operating or planning to legalise casinos. According to industry research, Hong Kong people lost 31 billion dollars in Macau casinos alone last year. We see the opening of the Hong Kong–Macau Bridge, scheduled for 2016, as posing a further significant challenge."

Mr Stevenson described the Club's not-for-profit business model as "a wonderful example of social innovation on Hong Kong's part" that brought enormous value to the community and commanded the envy of many other jurisdictions overseas. "Ensuring that our operations can remain sustainable in the long-term should be of paramount importance to everyone," he observed.

Commitment to global excellence at heart of Club's success

Outlining the performances of the HKJC's major operations in 2013/14, Chief Executive Officer Winfried Engelbrecht-Bresges emphasised that these exceptional results were not so much an outcome of the year itself but rather the successful coming together of the various strategies the Club's Stewards and management had formulated and implemented in the past few years – its strategy to revitalise racing based on a customer-centric approach; its major investments in world-class racecourse facilities and new technology platforms; and its development of football betting to meet growing public demand and channel it from illegal and offshore bookmakers to the legal operator, in line with Government policy and the Club's mission.

"Together these strategies have produced steadily increased revenue in market conditions that have not always been easy," he explained. "To keep our leadership position in racing, we need to continue to invest in facilities, including racecourse venues and training facilities like the Conghua Thoroughbred Training Centre. This in turn will enable us to make continued increases in our returns to the community through tax and duty payments and charitable donations."

Mr Engelbrecht-Bresges added that the record figures also reflected the Club's commitment to global excellence. Despite its relatively small horse population of 1,200, Hong Kong had 21 horses featured in the World's Best Racehorse Rankings, while home-trained horses won four of the city's six Group One Races open to international competition. Overseas, Hong Kong horses achieved unparalleled glory with a record four wins at International Group One level.

Racing turnover rose by almost 10% to reach HK$103.92 billion, including bets from overseas. This produced net margin for the Club of HK$4.42 billion, a 7.4% increase. More importantly, it generated some HK$12.01 billion for public funds through betting duties, continuing the upward trend that had now seen the Club's return to the public purse from racing grow by almost 54% since the Government agreed to reform the horse race betting duty structure in 2006. [Note to Editors: These figures differ slightly from the racing results released in July as they refer to the financial year, not the racing season. For convenience and comparison, both sets of figures are shown in the Appendix.]

This was also the year in which the Club was able to offer commingled betting pools at last, in line with rapidly-growing global trends – a strategy that the Club had first advocated in 2007 as the racing industry's response to the globalisation of sports betting, in particular to combat the efforts of illegal bookmakers who were taking advantage of the odds differences between different jurisdictions for arbitrage purposes. Hong Kong racing is now being broadcast into some 55 million homes in the USA.

"Partnerships with Australia, New Zealand, Singapore, Macau and parts of Europe will get under way in the new season," Mr Engelbrecht-Bresges revealed. "This will give hundreds of thousands of racing fans across the globe the opportunity to bet into Hong Kong pools, which have the world's highest liquidity and highest average turnover per race at over HK$132 million. Commingling will help further in positioning us as a global leader and preventing sizeable pools on Hong Kong racing from developing elsewhere in the world, which could result in a loss of public revenues."

Mr Engelbrecht-Bresges also emphasised the importance of technology in presenting racing in a more creative and dynamic way to connecting better with customers – for example, last season's introduction of the popular Racing Touch App.

On the football betting side, Mr Engelbrecht-Bresges reported excellent results once again with a 22.9% increase in turnover to HK$62.20 billion, generating HK$4.88 billion in tax payments and the same in net margin. An important contributor to this was the 2014 World Cup, for which 54 of the 64 matches fell into the financial year. However, he emphasised, this was far from the only factor, as the Club saw steady growth throughout the year after conducting a systematic analysis of how it could compete better with the illegal market and channel more of the growing local football betting demand to the legal operator.

"As in racing, we see technology as an essential element in connecting better with our football customers and offering them a unique service experience," he observed. "Going forward, we expect to face a technology war with illegal and offshore operators. For this reason, we have now started the development of a next-generation wagering and information system, which will be a five-year journey. To realise its full benefits, however, we need support from our regulators in ensuring that the Club can stay competitive. Imposing further restrictions on us will only benefit the illegal operators, as it will not stop those who wish to bet from doing so."

Turnover for the Mark Six lottery showed a 3.7% increase to HK$7.91 billion, generating HK$1.98 billion in lottery duty payments, commission of HK$475 million for the Club, and a HK$1.19 billion contribution to the Lotteries Fund. "While growth in the Mark Six has remained largely flat in recent years, it remains a favourite form of thrice-weekly entertainment for the population at large," Mr Engelbrecht-Bresges remarked. "It also continues to play an important role in supporting social welfare projects citywide through the Lotteries Fund.

"Looking ahead, I am cautiously optimistic of seeing continued positive growth in our racing and betting operations, but competition in the leisure and entertainment business is growing all the time," Mr Engelbrecht-Bresges said. "In the light of our significant investments and resulting increase in our cost base, we have to maintain steady growth to sustain and be able to increase our contributions to the community.

"This will be the Club's 130th Anniversary year and we intend to mark it with a series of special events and activities to raise public awareness of the unique role the Jockey Club has played in the city's development since 1884, and how it continues to add value to Hong Kong through providing world-class sporting entertainment, creating employment, generating significant tax revenues and giving back to the community through charitable donations. These multi-faceted contributions are aimed at further improving the quality of life of Hong Kong people."

The Hong Kong Jockey Club's 2013/14 Annual Report can be downloaded from the HKJC website at http://corporate.hkjc.com/corporate/operation/english/annual-report.aspx

The Hong Kong Jockey Club
Founded in 1884, The Hong Kong Jockey Club is a world-class horse racing operator and Hong Kong’s largest community benefactor, as well as one of Asia’s most prestigious membership clubs. Operating as a not-for-profit organisation, the Club allocates its surplus for charitable and community projects. In 2013/14, its donations reached a record $3.6 billion, and in the last decade alone it supported over 1,275 projects. The Club is also Hong Kong’s largest single taxpayer, contributing a record HK$19.58 billion in 2013/14. With about 70% of its revenue given back to society every year through donations and tax contributions, The Hong Kong Jockey Club delivers a significantly higher return to the community than any other racing and/or sports betting organisation in the world. As a socially responsible organisation, the Club helps Government combat illegal betting and advocates responsible gambling. The Club is also one of Hong Kong’s largest employers with over 24,800 full-time and part-time staff. Committed to global excellence and giving back to society, the Club is always “riding high together for a better future” with the people of Hong Kong.

(A) Business Figures

1a. Horse Racing – by Financial Year (1 July 2013 – 30 June 2014)

 

2013/14

2012/13

% Change

Total Turnover*

103,918

94,370

+10.1%

Betting Duty

12,012

11,108

+8.1%

Club's Net Margin

4,424

4,118

+7.4%

* 85 race meetings in 2013/14 vs 84 in 2012/13

1b. Simulcasts – by Financial Year (1 July 2013 – 30 June 2014) [included in 1a]

 

2013/14

2012/13

% Change

Turnover**

1,988

1,769

+12.4%

Betting Duty

265

241

+10.0%

Club's Net Margin

70

63

+11.1%

**  simulcast races 114 in 2013/14 vs 103 in 2012/13

1c. Horse Racing – by Racing Season
      (8 September 2013 – 12 July 2014; 8 September 2012 – 13 July 2013)

 

2013/14

2012/13

% Change

Total Turnover***

101,970

93,956

+8.5%

Betting Duty

11,783

11,045

+6.7%

Club's Net Margin

4,343

4,088

+6.2%

*** 83 race meetings in both racing seasons

1d. Simulcasts– by Racing Season [included in 1c]
      (8 September 2013 – 12 July 2014; 8 September 2012 – 13 July 2013)

 

2013/14

2012/13

% Change

Turnover****

2,009

1,788

+12.4%

Betting Duty

267

243

+9.8%

Club's Net Margin

71

64

+10.9%

**** simulcast races 116 in 2013/14 vs 103  in 2012/13

2. Football Betting – by Financial Year (1 July 2013 – 30 June 2014)

 

2013/14

2012/13

% Change

Turnover

62,197

50,606

+22.9%

Betting Duty

4,881

4,207

+16.0%

Club's Net Margin

4,881

4,206

+16.0%

3. Mark Six Lottery – by Financial Year (1 July 2013 – 30 June 2014)

 

2013/14

2012/13

% Change

Turnover

7,910

7,627

+3.7%

Lottery Duty

1,977

1,906

+3.7%

Payment to Lotteries Fund

1,187

1,144

+3.7%

Club's Commission

475

458

+3.7%


(B) Club's Contributions (by Financial Year)

1. Betting Duties and Profits Tax

 

2013/14

2012/13

% Change

Racing Betting Duty

12,012

11,108

+8.1%

Football Betting Duty

4,881

4,207

+16.0%

Lottery Duty

1,977

1,906

+3.7%

Profits Tax

713

412

+73.1%

Total

19,583

17,633

+11.1%

2. Donations by The Hong Kong Jockey Club Charities Trust

 

2013/14

2012/13

% Change

Total

3,606

1,950

+84.9%

(C) Impact of 2006 Betting Duty Reforms on Club and Government Revenues
(by Financial Year)

 

Total racing turnover

Club's net margin

Government's share
(betting duty)

2005/06 (pre-reform)

59,032

3,207

7,806

2006/07

63,860

2,902

8,031

2007/08

66,791

3,105

8,178

2008/09

67,653

3,126

8,228

2009/10

71,647

3,230

8,538

2010/11

81,924

3,663

9,735

2011/12

84,019

3,709

9,905

2012/13

94,370

4,118

11,108

2013/14

103,918

4,424

12,012

Overall growth since reforms

76.0%

37.9%

53.9%

Other Corporate News