Jockey Club Racecourses Limited
Strategic report (continued)
Principal risks and uncertainties (continued) The general performance of the UK economy and continued uncertainty following the COVID-19 pandemic may affect attendances and the levels of customer spend on racedays and conference and event income even after the spectator restrictions have been lifted. To mitigate this we continue to review rigorously the cost base of the business and assess growth initiatives such as expanding the scope and reach of our brand to grow new revenue streams, investment in a number of marketing-led initiatives such as new membership products, and investment in new customer-focused technology such as our new website and app. This also includes further investment to maximise value from our major festivals and we continue to maintain momentum around improvements to the quality of customer experience. With regards to credit risk the company's principal financial assets are bank balances and cash, trade and other receivables and investments. The company's credit risk is primarily attributable to its trade receivables. The amounts presented in the statement of financial position are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies and offset by loans from the same financial institutions. The company has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The company is continuing its policy of generating free cash flows to fund reinvestment back into racing and its racecourses. External net debt has decreased during the year from £79.3m to £50.9m. As at the year end, the company held cash of £20.0m (2020: £16.9m), drawn bank facilities of £70.0m (2020: £95.0m) and finance leases of £0.9m (2020: £1.2m). The company has loaned £6.3m (2020: £6.3m) to Epsom Racecourse Hotel Company Limited. The company has an intercompany loan from The Jockey Club Racecourse Bond Company Plc of £3.5m (2020: £8.9m). During the year, the company repaid £5.4m (2020: £0.7m) ofthe intercompany loan as part of the ongoing strategy to reduce gross debt. The company signed a revised banking facility in December 2018. The total facility is £92m (2020: £95m) and includes a £50m term loan and a £42m (2020: £45m) revolving credit facility. The facility is for a 12 year term with repayments commencing at the end of2021. During the year the company obtained a £20m Coronavirus Large Business Interruption Loan Scheme (CLBILS) facility from its existingbanking syndicate which was fully drawn down at 31 December 2021 (2020: £nil). The company has entered into interest rate swap arrangements in order to limit the exposure to interest rate fluctuations. These swaps are matched with the period of the facility on an amortising basis. One external risk factor that we are monitoring and working hard to mitigate is the UK regulatory environment for gambling. The UK Government is undertaking a `major and wide-ranging' review ofUK gambling laws, to update the 2005 Gambling Act. Online restrictions on amounts which can be staked, marketing collateral, sponsorships, advertising and promotional offers and extra protections for young adults may be examined by the Department for Digital, Culture, Media and Sport. Among the potential reforms are stringent affordability checks for bettors. Analysts at Regulus Partners consider such action could result in an "immediate" reduction oflevy income for British Racing, with a further impact on media rights income. British racing's finances could also be negatively impacted should the streaming of sports events by bookmakers be curbed, while any ban on sponsorship and advertising by gambling companies could jeopardise mainstream television coverage. The Jockey Club supports the objective ofthe Gambling Act Review seeking to reduce gambling-related harm and ensure relevant legislation is fit for the digital age. However, we are also asking the Government to ensure that any reforms are evidence-based and targeted at those most at risk, while resulting impacts on British Racing are fully considered and mitigated. Results, dividends and transfers from reserves The results of the year are set out in the income statement on page 14. The company's Articles of Association forbid the payment of dividends. Future developments In line with our mission to act for the long-term benefit of British Horseracing, we are supporting an industry stakeholder review of the current governance structure of the sport and specifically the role of the governing body and regulator, the British Horseracing Authority.
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