Gerry Harvey's NZ Thoroughbred unit narrows annual loss as sales jump 35%

Wednesday 7th December 2016

Australian retailing billionaire Gerry Harvey's local bloodstock business, NZ Thoroughbred Holdings, narrowed its annual loss in 2016 as revenue rose 35 percent on sales of yearlings and demand for its stallions.

The owner of Westbury Stud posted a loss of $2.9 million in the year ended June 30, down from $6.1 million a year earlier, according to its financial statements. Total income rose to $10.1 million from $7.5 million, led by sales of yearlings, stud fees and an increase in foals.

The 2016 year heralds the final season for star stallion Makfi, which will stand next year in Japan following the sale by Qatar Bloodstock to the Japan Bloodhorse Breeders' Association. Makfi's stud fees jumped 43 percent to $25,000 plus GST in the past year, ahead of other top earners at Westbury such as Reliable Man at $15,000 and Swiss Ace at $13,500. Fees are set through a combination of performance - both the stallion's own racing and the success of its progeny and Westbury general manager Russell Warwick says any of those could become the next Makfi.

"Generally the stud is making really good progress, which probably isn't yet reflected in the accounts," Warwick said. Harvey "has continued to import more and more stock into New Zealand. The more horses you carry, the more it costs you but long-term they provide the stud with successful stallions and heighten income."

Harvey, who is chairman and major shareholder of listed retailer Harvey Norman, owns Australia's Baramul Stud, with more than 1,000 horses, and is also a major shareholder in the Hunter Valley-based Vinery Stud while the Harvey family own the Australian thoroughbred auction house Magic Millions, which has one of that country's richest competitions in the Magic Millions Race Series. He acquired Westbury Stud, which was established by businessman Eric Watson, in 2009 when he bought out property developer Michael Tololi.

The New Zealand operation will have up to 103 yearlings to sell this year, making it one of the nation's dominant breeders, alongside Waikato Stud. It owned 10 stallions as at June 30, up from nine a year earlier. Its biological assets including stallions, mares, foals and yearlings rose to $6.8 million from about $5 million a year earlier.

In the face of continuing losses, the company recorded net liabilities of $30.8 million in its latest year, up from $28.7 million a year earlier and said its ability to meet its obligations over the next 12 months was dependent on continued financial support from its owner, which had been pledged. NZ Thoroughbred's auditor again included an emphasis of matter in its report on the 2016 financial statements.

Still, the local losses are chump change for Harvey, who ranked 19th in the 2016 BRW Rich List with an estimated fortune of A$1.99 billion, built up through the Harvey Norman retail chain.

Westbury's Warwick said Harvey's continued investment in the business had a spillover effect to the wider rural economy. The stud boards its horses at eight-to-10 farms outside of its own two properties and employs services ranging from veterinarians to trainers and riders.

"Purely just the sheer number of horses that we gist and look after here for Gerry and clients doesn't make that side of the business cash positive," Warwick said. "The opportunity for the stud will come through the success of the stallions, their offspring, and the service fees," he said.

BusinessDesk.co.nz

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