Losses at TV joint venture push Arena into the red

Arena Leisure expects a massive increase in revenues from its horse racing TV joint venture after the business racked up large losses last year.

The company reported that its share of losses from attheraces, which has the media rights to British horse racing, was £11.1m. That pushed the group to a loss of £6.9m for 2002, despite a sharp rise in profits at the courses it owns.

Arena also announced plans for Europe's first "racino" – which will see a casino built at its Wolverhampton racecourse, in partnership with Gala. This would see customers combining a race outing with a visit to the casino, due to open at the end of next year. There is also a hotel at the course.

Ian Penrose, group managing director of Arena, said: "This ground-breaking venture will develop Wolverhampton racecourse into a more broadly-based leisure and gaming location. As Wolverhampton is the only UK racecourse with an all-weather track, floodlit racing and hotel, we are confident that the addition of a casino next year will make it an even more compelling proposition."

Arena said it may develop the same attraction at some of its other courses, once the laws are relaxed on the location of casinos, expected by early 2005. Wolverhampton can go ahead now because it is deemed a city-centre location.

Group operating profits came in at £4.0m, compared with a loss of £1.8m in 2001. The racecourses generated profits of £5.1m, up from £2.1m in 2001, as turnover grew by £4m. Attheraces, a joint venture with BSkyB and Channel 4, suffered from delays in the launch of its full service, with the interactive TV broadcast starting at the end of October. Analysts at Dresdner Kleinwort Wasserstein, said: "2002 was a difficult year for attheraces, resulting in betting revenues way below original expectations.... We continue to remain sceptical of the attheraces business model which leaves the group with poor earnings visibility."

Arena did not put figures on the increase in revenues for attheraces this year, but analysts said sales for the first 16 weeks would equal revenues for the whole of last year. Revenues for March 2003 are understood to have come in at nine times that for last year. Betting through interactive TV will be the dominant income stream for attheraces, though customers can also place bets through a phone line and a website.

Mr Penrose said attheraces is expected to break even in the second half of 2005, but losses would fall "steeply" this year.

Arena Leisure shares, which were 44.5p a year ago, remained unchanged yesterday at 22.25p.