Harvey Norman CEO Gerry Harvey at the Magic Millions
Anyone with enough disposable income to invest in horse racing beyond the occasional punt at the track will tell you that being a horse owner is more an indulgence or recreation than a means of income.
Certainly, billionaire retailer and prominent race horse owner Gerry Harvey, who has upped the stakes in the sport throughout the years, is testament to this philosophy. After buying out former shareholders John Singleton and Rob Ferguson at the start of 2011, Harvey now owns 100 per cent of the Magic Millions horse auction business, which is holding its big sale event of the year on the Gold Coast this weekend.
While the business is earning half of the revenue it was in the heady years leading up to the global financial crisis – financial controller Stuart Aikman says last year the five-day Gold Coast carnival had a turnover of $62.57 million, compared to around the $130 million it generated in 2006/07 – the Magic Millions remains a sure thing in an industry built largely on luck.
Between the entry fees, percentage of sales and financing arrangements, Magic Millions takes enough clips of the ticket to make the event a serious enterprise befitting one of Australia’s most prominent entrepreneurs.
Horse sellers at The Millions pay $2,300 plus GST to have a horse included in the sale, and the company takes a 10 per cent commission on every horse sold (6.5 per cent on sales more than $150,0000). While earnings generated by the Magic Millions are down, the number of horses being sold remains fairly static, Aikman says. Throughout the year, Magic Millions puts forward about 6000 horses for sale at events in Queensland, Tasmania, South Australia and Western Australia, with the marquee Gold Coast event in January accounting for the majority of the overall revenue.
In addition to fees and sale commissions, Magic Millions is set up to extend financing to buyers at a cost of 1.25 per cent per month, or 15 per cent per annum. The company agrees to pay sellers within 42 days and has individual arrangements with buyers whereby new buyers are required to stump up the cash on the day of purchase or be subject to financing terms, and regular customers given a 30-day leeway.
As Aikman puts it: “Buyers are welcome to go to a bank and ask for a loan on a horse, and if they can get that then good luck to them, but if they can’t then we have our terms.”
Beyond financing, fees and commission on sales, new horse owners who want to see their recent acquisitions in full flight can pay a non-refundable $3,000 for the opportunity to nominate their horse for inclusions in the Magic Millions race day on the Saturday of the Gold Coast Carnival. More than 500 horses will be nominated each year to run in the eight-race program, in which 16 horses run in each race, this year vying for an aggregate of $4.8 million in prize money.
Of course, running the Magic Millions required some investment – the company will cover travel and accommodation to bring big buyers to the table, along with promotions, catalogues and everything else that comes with it.
The carnival appears to be on track this year to potentially outdo the historically lacklustre revenue figure from last year. The acquisition of champion sire Fastnet Rock by stalwart trainer Gai Waterhouse for $1.35 million bumped Thursday’s gross sales above $36 million, an increase of about $3 million on the previous year’s gross sales figures. In the first two days the Magic Millions 2013 carnival has grossed about $50 million in sales.