Trainer Magazine

Trainer Magazine - the horse racing magazine for the training and development of the thoroughbred racehorse. Europe and North America.

The true cost of training

INDUSTRYWeb Master
  The FRBC French Annual Review 2016-2017 shows that in 2016, the total distributed prize money in Britain, Ireland, France, and Germany was €528,357,185. It’s interesting to note that in France (95%) in particular and in Ireland (65%), prize money is pretty much self-funded via racing organisations, which contribute only 48% to British prize money and as little as 4% to German prize money. The contribution from owners stands at 4% in France, 7% in Germany, 16% in Britain, and 23% in Ireland.         With prize money recognised as the lifeblood of racing, it’s interesting to see where it originates and even more interesting to see where it goes. In Issue 39 of European Trainer (Autumn/Winter 2012) we featured the distribution of prize money, jockey and trainer fees, and percentages. At that time there were 1,500 licensed trainers throughout Europe chasing 10% of winning prize money, from which further deductions in many cases brought that down to 7%.         The figures have changed little since, and it’s no surprise that the majority of trainers continue to survive largely on the trading of horses. Selling winning horses out of a stable can hardly be viewed as a sustainable business plan and it is never going to help trainers in the lower tier break through into the higher ranks when their best horses are sold and moved to other yards.         With so many relinquishing their licence each year due to rising costs and the inability to make training pay, there have been recent calls to put more in place to help trainers. Horse Racing Ireland (HRI) earlier this year launched a trainer marketing scheme to assist in attracting new owners, as well as the new “Experience It” campaign to provide potential owners with the experience of a day at the races as an owner. HRI also plans to assist in the collection of training fees to protect against non-payers.         Gaining new owners and ensuring that they pay is only half the battle, however, and the high-profile removal of Gigginstown Stud-owned horses from Willie Mullins has highlighted the problem of the fees themselves. Mullins is not alone in maintaining the same weekly fee for 10 years, and the example set by Gigginstown shows the dangers of increasing fees when that is no longer viable. Wages, insurance, utility bills, diesel, and feed and bedding prices have all increased during the past decade but most training fees have not, which means trainers have effectively reduced their fees each year.         An added problem faced by trainers in Britain and Ireland has been the changing of class on business rates payable. Training establishments in Britain have been reavaluated and as a result, Newmarket-based trainers will see an average increase of 53%. A similar increase will come into effect from 1st January 2018 for Irish trainers, where business rates have been reclassified. Some will face even more severe increases, with bills rising from €1,200 to €8,000 in some cases, due to the inclusion of unused barns and boxes within the rating.         Rates now apply to all square metres of covered areas in a yard, hay barns and empty boxes included, so a yard with 100 boxes will be rated for those 100 boxes, even if only 30 boxes are filled. For trainers who have already seen their numbers fall, this is a further bitter pill to swallow and will put many out of business.         One suggestion to alleviate this and other problems has been the setting of an agreed minimum training fee, but would that be of real benefit to the trainers struggling the most, and how could it realistically be agreed? One trainer I spoke to, with fewer than 10 horses in his care, was opposed to any minimum fee, which he felt would be detrimental to smaller trainers. He argued the case that large yards would benefit and small yards would be unable to compete.         Rightly or wrongly, this particular trainer does much of the work himself, is based on a farm, and produces his own hay and bedding. His costs are pared down to feed, routine veterinary and hoof care, and administrative running costs such as utilities and insurance. His insurance, with no staff and a small number of horses, is a fraction of the cost for a large trainer with perhaps 20 people in his or her employment.         A minimum fee would have to take all those factors into account and would double my friend’s current weekly fee, it could be argued. That’s if we could even agree a logical minimum fee. My friend’s selling point is his cheapness. He can attract owners who cannot afford to go elsewhere. With a minimum fee in place, why would they choose his small yard in favour of a better-known, more successful yard? Those at the bottom could simply be squeezed out altogether.         And so the question we must ask is, how much does it cost us, personally, to train a horse and what should our own minimum fee be in consequence? If every trainer set his or her own realistic minimum, an owner might be less able to shop around and make demands. Nor would it impose an unfair higher fee on the small trainer putting in his or her own work.         Where to begin? Weekly rent, mortgage or original purchase price or current value of the premises? There alone we have huge variations from one yard to the next. Then comes the prickly subject of rates, which can start as low as €60 a month and soar to €1,200 a month. They vary, too, not only from country to country, but by area in some countries.         With premises comes insurance, and that is another variable cost. Several companies can offer a trainer a wide choice of options and cost, allowing the trainer to shop around and save money. Individual trainers have a wide spectrum of requirements and value, meaning a basic ballpark figure could be anything from the cheapest offered policy of €40 a month to among the most expensive at €800 a month. I was told by one specialist broker that policies were available at double that €800 figure.         Electricity is essential, with many stables enjoying the benefits of heat lamps in addition to lighting. Treadmills, spas, and a greater reliance on the latest technology all add to the monthly energy bills. Air conditioning, too, may be necessary in some areas, all of which means a monthly utility bill could fluctuate from €60 to €100 or more, depending on the season.         Given the cheapest rates, lowest insurance policy, most economical use of energy, and a rent-free existence, already our monthly outgoings stand at €160. We have yet to employ staff or support a horse.         Not everything is done in-house, and although diesel to and from the races may be charged for in itemised bills, daily travel to the gallops would usually be part of a standard fee if the yard does not have its own local facilities. Even in training centres, it’s usual for trainers to take a car out onto the gallops to watch horses work. Once again, it’s down to location and local fuel prices. Poland has the current lowest average rate per litre of diesel at €1.12, while Norway has the highest average rate of €1.71. Fortunately most cars display average mileage and fuel consumption per trip, which are worth noting. The smallest incidentals can be the largest contributory factors to failing to make the books balance.         In that respect, Declan McEvoy, Head of Tax at IFAC Accountants, always provides valuable advice to the thoroughbred industry, and when it comes to business accounts, he feels that most trainers are not doing enough to utilise tax benefits. McEvoy points out that a good set of business accounts can provide valuable information for your business. “Business accounts are historic. Traditionally only for tax compliance, there is actually a lot of valuable information in there that’s not used,” he reminds us. Rather than be afraid of the business accounts, we should be using them in a more practical way.         “Be aware of your cash flow. Examine your accounts to see past trends. Look at the bigger costs. People often look at the electric bill or the phone bill, but they’re the little costs, you need to look at the bigger costs first. The profits from a business need to outweigh the expenses in order for the business to be sustainable. If you’re making a profit but have no available money, it could be that you are paying back loans too quickly, have large debtors, or high living costs.”         The biggest outgoing for a trainer is staff, and Eurofound (Dublin) shows in its Statutory Minimum Wages in the EU 2017 that Sweden and Italy have no minimum wage, while Poland has the lowest at €2.84 per hour. The Irish Stable Staff Association has agreed a minimum hourly rate of €10.75, the highest of the European racing nations, with France (€10.57), Germany (€8.84) and Britain (€8.80) next.         On top of this comes additional statutory contributions by an employer, varying from country to country but averaging 14.8% of the employee’s salary. This is comprised of national insurance and pension contributions, but newly introduced pension schemes have increased this figure in many cases. Overall, most European trainers will be looking at a monthly average of €1,780 per employee, based on a 40-hour week (35 in France).         Given minimum overheads and one staff member, our weekly outlay is already €487. It’s reasonable to expect a member of staff to take care of four horses, so each horse will need to be bringing in a minimum fee of just under €122 to cover the week’s expenses. However, the horse comes with its own set of further costs, of course.         Generally, prices may be averaged throughout Europe and there appears to be no cheap area for feed, bedding, or routine healthcare. Nylon headcollars are around €6, leather headcollars €30, and stable rugs €60, all of which are easily lost or damaged and regularly replaced. Bulk buying deals can be made, but the trainers at the most economic risk haven’t the number of horses to negotiate the better deals.         Routine farrier visits are usually around €50-€70 per visit per horse. Similarly, routine veterinary visits are around €125 per month per horse. In these areas, where we cannot skimp or shop around for value, we are adding €80 to our weekly outgoing and raising our minimum, non-profitable weekly fee to €177.         Food and bedding is something more negotiable and some trainers can even be self-sufficient. However, even when producing your own, it is not without cost. As to estimating an average, there are so many choices of bedding and the quantity involved can be determined by the presence of rubber matting, another cost. Providing a bed for each horse could fluctuate between €4 and €8 a week, with recycled paper being the cheapest option and 20kg of shavings averaging at €8.         That’s now €181 a week, without feeding the horse or covering rent or mortgage. If bedding is personal choice, then feed is even more vagarious. Proprietary brands offer large selections of balancers, coarse mix, and cube options, while many trainers still mix their own. On average, it can be said a horse will go through two proprietary bags of 14% protein feed a week, at generally around €15 (but up to €48). And don’t forget the hay or haylage. If you can buy in bulk and store it for the year ahead, you could be keeping weekly costs per horse down to €10.         So here we are at a weekly outlay of €206 per horse. That is a conservative minimum and each trainer would have to add on the difference in utility bills, rent or mortgage, and any extra in salaries, insurance, feed, and bedding. Not everyone can operate on the cheapest available options.         Michael Grassick, CEO of the Irish Racehorse Trainers’ Association, concludes, “I would say 85 percent of trainers are struggling, particularly in National Hunt. The horses just aren’t there. You see races being divided on the Flat in Dundalk but that doesn’t happen in National Hunt. There were something like 19 blank days in January, 17 in February, and 16 in March, when there was no National Hunt racing, yet there were very few balloted out and I don’t think there were any divides.”         An influx of horses is needed, but also on a better-structured fee. It’s clear that most trainers do need to increase their fees and the risks of doing so are just as obvious. The rate increase in Britain and Ireland represents a perfect time to step forward, announce increases, and explain why, enabling the rest of Europe to follow suit.         Instead of an agreed minimum fee, perhaps the various trainers’ associations could initiate an agreed date to annually revise fees? No one wants to be the first, but if fees increased in unison, and all owners prewarned, a united front could prove the most successful way of moving forward.

First published in European Trainer issue 58 - July - September 2017

Click here to order this back issue!

The FRBC French Annual Review 2016-2017 shows that in 2016, the total distributed prize money in Britain, Ireland, France, and Germany was €528,357,185.

It’s interesting to note that in France (95%) in particular and in Ireland (65%), prize money is pretty much self-funded via racing organisations, which contribute only 48% to British prize money and as little as 4% to German prize money. The contribution from owners stands at 4% in France, 7% in Germany, 16% in Britain, and 23% in Ireland.

 With prize money recognised as the lifeblood of racing, it’s interesting to see where it originates and even more interesting to see where it goes. In Issue 39 of European Trainer (Autumn/Winter 2012) we featured the distribution of prize money, jockey and trainer fees, and percentages. At that time there were 1,500 licensed trainers throughout Europe chasing 10% of winning prize money, from which further deductions in many cases brought that down to 7%.

 The figures have changed little since, and it’s no surprise that the majority of trainers continue to survive largely on the trading of horses. Selling winning horses out of a stable can hardly be viewed as a sustainable business plan and it is never going to help trainers in the lower tier break through into the higher ranks when their best horses are sold and moved to other yards.

 With so many relinquishing their licence each year due to rising costs and the inability to make training pay, there have been recent calls to put more in place to help trainers. Horse Racing Ireland (HRI) earlier this year launched a trainer marketing scheme to assist in attracting new owners, as well as the new “Experience It” campaign to provide potential owners with the experience of a day at the races as an owner. HRI also plans to assist in the collection of training fees to protect against non-payers.

 Gaining new owners and ensuring that they pay is only half the battle, however, and the high-profile removal of Gigginstown Stud-owned horses from Willie Mullins has highlighted the problem of the fees themselves. Mullins is not alone in maintaining the same weekly fee for 10 years, and the example set by Gigginstown shows the dangers of increasing fees when that is no longer viable. Wages, insurance, utility bills, diesel, and feed and bedding prices have all increased during the past decade but most training fees have not, which means trainers have effectively reduced their fees each year.

CLICK HERE TO SUBSCRIBE!