Melbourne Cup 2020: VRC forced to borrow $25m from ANZ with no crowd at Flemington
The Victoria Racing Club will miss out on up to $60m revenue from holding the Melbourne Cup at empty track on Tuesday.
The Victoria Racing Club has been forced to borrow $25m from ANZ in recent weeks as the cost of holding the biggest race of the year at an empty Flemington racecourse hits home.
With Tuesday’s Melbourne Cup taking place with no crowd in what is usually the centrepiece of a money-spinning week-long carnival of racing, the VRC will take a dramatic hit to its balance sheet and miss out on more than $60m in income.
The difficulties of operating during COVID-19 have been laid out in the VRC’s 2020 financial report, obtained by The Australian, exposing an operation usually reliant on having up to 100,000 spectators flock to Flemington for each of the four days of the Melbourne Cup Carnival.
The financial documents reveal the issues the VRC faces. The club’s current liabilities of $44.3m far exceed its current assets base of $16.2m, and the $5.7m profit it recorded for the 2020 financial year was achieved after a $22m sale of a parcel of land.
The profit figure was also boosted by $27m worth of sponsorship fees, membership subscriptions and “Melbourne Cup carnival product” sales paid in advance prior to the end of the VRC’s financial year, July 31.
With the Victorian government denying the VRC the ability to get any spectators, sponsors or horse owners on course, the VRC struck an additional loan with ANZ on September 18, when the prestigious spring racing carnival had already begun.
“Subsequent to year end, the club has entered into a revised facility agreement with ANZ Bank, with access to finance facilities of an additional $25m available until February 2022,” the accounts reveal. “In the event that Victorian thoroughbred racing is cancelled due to COVID-19 restrictions, an additional $10m facility will be made available.”
VRC chief executive Neil Wilson said the club’s board considered it prudent to have ready access to an additional facility in the uncertain times caused by the pandemic.
“The restrictions in crowds has impacted and will continue to impact our revenue streams, but also means that we haven’t engaged, and incurred the cost associated with the numerous suppliers and people that assist in delivering the Melbourne Cup Carnival,” Mr Wilson said.
“The biggest effect will be felt this week and will continue to be felt until we can welcome back meaningful crowds, like all other businesses in the event and entertainment industry.”
While no racing has been cancelled this spring, a “going concern” note from the VRC’s directors was inserted in the 2020 financial accounts.
“The club has undertaken a comprehensive analysis of its liquidity and going-concern position, by considering its financial forecast for the 31 July 2021 financial year, together with its debt facilities and proposed capital projects,” the note says.
“The analysis comfortably outlines that despite the COVID-19 impact on the club’s performance, it will be able to meet all its obligations as and when they fall due.”
The VRC now owes ANZ about $69m, including the new $25m facility, and also has a $10m debt to governing body Racing Victoria. The ANZ loan is secured by a mortgage over freehold land owned by the VRC.
“The new facility is interest-bearing, with interest charged on drawn funds at a variable interest rate plus a margin,” the accounts say.
Mr Wilson said he was grateful for ANZ’s support. “It is appropriate to have a facility in place that enables us to maintain a high level of confidence as thoroughbred racing in Victoria hopes to welcome crowds back to the track,” Mr Wilson said.
According to the accounts, the VRC has $314m of property, plant and equipment. It booked a $8.7m gain on the re-evaluation of its land in its accounts. The VRC also received $5.1m from the federal government’s JobKeeper wage subsidy program.
The VRC said it received about $58m from catering, dining, hospitality and events during the Melbourne Cup carnival and the small Autumn carnival last financial year, almost all of which it will not receive this spring due to having no crowds at Flemington or marquees in the Bird Cage and other corporate hospitality income.
This “will have a significant impact on the financial performance of the club in the next financial year,” the accounts said.
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