Magna Entertainment Corp (MEC), based in Aurora, Ontario, is North America’s largest owner and operator of horse tracks, based on revenue. The company yesterday announced first-quarter results for 2007 and MEC founder and chairman Frank Stronach likened the business to a global lottery with horses instead of balls. Horse racing in North America suffers the vagaries of public betting patterns and local legislative restrictions.

Many horse racing venues have lately been turned into racinos but, according to MEC’s new CEO Michael Neuman, the industry is limited by old regulations, and more slot machines and VLTs cannot in themselves fix horse racing. Racing audiences continue to decline and whilst slots operations may bring bigger racing purses they do not encourage public interest in the sport of kings. A new business model is needed and the company is planning to introduce new patented electronic products as well as mega million payouts to attract a new generation of bettors.

MEC reported that revenue from its racetracks, all of which are in the US, was US$2.5 million for the period to 31 March 2007, compared to US$2.2 million for the same period of 2006. The company is hopeful that the under-performing Gulfstream Park in Florida will get a boost from new proposed state legislation to increase operating hours and allow ATMs on the premises although not on the gaming floor. The company is seeking additional racing days in Florida and in California. Total revenue was up 2.4% to US$284.2 million compared to US$277.5 million in 2006.

In announcing these results Michael Neuman remarked, "Despite revenue growth in the first quarter of 2007, primarily as a result of Gulfstream Park's slot operations and the consolidation of AmTote, we are disappointed that the revenue growth did not materialize into improved EBITDA.” He added, “We also continued to make progress this quarter in selling non-core assets and paying down debt. In the first quarter of 2007, we sold three non-core real estate properties for total proceeds of $65.1 million and repaid long-term debt of $35.4 million. We are continuing to pursue other funding sources to further strengthen our balance sheet, which may include additional non-core asset sales, partnerships and raising equity." (E-05.10.07)

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