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Post by Lee Harradine on Mon Dec 09, 2019 9:58 am

I thought I'd give some thoughts on our financial position, to help posters and readers understand where we're at.

Most of this I posted in my final Financial Director's Report earlier this year. I'm happy to answer any questions, although they should be put first to the current Finance Director.

In really broad terms only:

Overall, if we stopped trading and realised all our assets and paid off all our liabilities, we'd have plenty to spare, so we have a surplus of assets over liabilities. That has always been the case, but 4 or 5 years ago it was much less healthy.  This depends greatly on the value of our property, though.

We will make profits each year, forgetting trading, for 2 reasons: One, we receive about $275,000 a year from the SANFL from the sale of West Lakes and will do so for another 3 or 4 years. This goes to pay down debt. Our debt is mainly to the Wolfpack.

Two, we receive between $64K to $100K each year recently from the SANFL for 'equalisation' funding. THis comes with a large number of conditions, which effectively put us under the control of the SANFL in many ways.

So, we start $375K ahead, but wtrite off about $190,000 in depreciation each year, about $60K on the buildings. Therefore, our result starts at about $185,000 profit.

This is then impacted, one way or the other, by our 'trading' profit. Barring abnormal items, a result less than $185K would indicate a trading loss, more, a profit.

Because of the SANFL payments, I have always maintained that we will be debt free in a few years, if we don't make trading losses.

On our trading, the football side of things is fairly predictable: most income is relatively fixed, but is impacted by attendances, etc.
most expenditure is also relatively fixed and we have the lowest football spend in the league. This is partly mandated by the conditions of the equalisation funding.

So our result depends greatly on revenue and expenses from the venue - gaming, bistro, bar, etc.

The other important factor is sponsorship, which plummeted over the last year or two, but appears to have recovered well through the efforts of Nick Karasoulas. Without that, I'd think we'd be in deep trouble.

We have come from an insolvent position 5 years ago to, in my opinion, a reasonable position for a football club now. It's clear that we're trying to cut costs to the bone - reduced reception hours, reduced bistro menu and hours, staffing cuts, etc.

We'd all like to see increased revenue. The kitchen change was a decision of the previous Board, but the current Venue Director was the biggest proponent of the change, insisting we would be much better off. Hopefully so.

Murray earlier indicated bad debts should have been written off earlier. Large amounts had been written off over previous years, our gaming licences have been studiously written down to actual values each year (at least one club still has them valued at old inflated rates) and the results to be published soon will contain over $30,000 revenue from extra donations from members and supporters raised by the previous Board.

I hope the above helps a bit.

My view has always been different from the SANFL and many others. We have run our club for over 125 years without 'equalisation' funding with restrictions on recruiting and I feel that we could have continued to do so. I would even have happily run a deficit for two or three years to boost our football department, but knew that wouldn't be accepted.

I hope the reduced profit Murray has forecast isn't very big. Regardless, the previous Board knew that next year (2019/20) would produce a much improved result, given the debt reduction also reduces the interest payable, among other things, so we should still have reason to be optimistic.

Next (after a break) - budgets.
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Post by Oldfella on Tue Dec 10, 2019 9:27 am

Lee,

thanks for this explanation.

One question if I may in regards to writing off debts - I understand the need to write of debts due to the costs in maintaining such debts as you indicated (interest for example).

but if there is ongoing negotiations/legal activity to redeem moneys owed such that in the Board judgement potential exist to redeem the initial debt is then it normal for a business to carry the debt on the books for a period time to allow fulfillment of any potential resolution.

My understanding was that the previous Club Board was writing off those debts that had no negotiations/legal activity potential and carrying forward those debts that still had potential for negotiations/legal activity until such time as all restoration potential had been explored.

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Post by aldo russian on Tue Dec 10, 2019 9:43 am

Very instructive post Lee which should allow us to better gauge our financial results.

One question though. I'm one of those who believe our season, at 18 games, is too short. (What are passionate supporters supposed to do for the other two-thirds of the year?) But when I enquired about this I was told that clubs, including West, opposed extending the season because we lost money every time we played. Is that correct?
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Post by Oldfella on Tue Dec 10, 2019 9:48 am

aldo russian wrote:Very instructive post Lee which should allow us to better gauge our financial results.

One question though. I'm one of those who believe our season, at 18 games, is too short. (What are passionate supporters supposed to do for the other two-thirds of the year?) But when I enquired about this I was told that clubs, including West, opposed extending the season because we lost money every time we played. Is that correct?

Great post and question --- I have questioned a similar thing but slightly different.

Night games in the middle of winter are not great idea but how about a summer night series under lights after Christmas even if they need to be double headers.

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Post by Lee Harradine on Tue Dec 10, 2019 10:14 am

Thanks for the question, oldfella.

Each year, the club and the auditors look at what's owing and decide whether or not to write off any debts that may not be collected. It's important to understand there are two types of debts looked at. The first are normal debts - perhaps sponsorships that haven't been paid and possibly never will. Often they are kept on the books a little longer in the hope they may eventually be collected.

The others often include amounts that are put in the books at first source - eg: coaching clinic fees or junior registration fees, where many of the juniors presenting at the start of the year drop out of the system and will never pay. These items should probably be brought to account only when actually paid.

Before 2016, we hadn't written off much in bad debts and in that year we brought things up to date by writing off a large sum of about $60,000 in bad debts. Because that 'cleaned up' the books to that stage, we only had to write off about $5,000 in 2017.

Oldfella, you are correct in what you say.

I should add that the financial statements of the club were (shall we say) not in the best nick about 5 years ago in terms of matching costs and revenue between the two clubs (nothing untoward). A lot of work has been done over that time in changing the financials to properly recognise amounts and results.

As always, when new people come in, they have no understanding of what has been done before their time and therefore understandably see new things they can do. I certainly offered assistance to the new Finance Director very early to explain the process, but he hasn't found that necessary.

Bear in mind also that there are always abnormal amounts in and out each year.

The figures are audited each year, of course.

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Post by Lee Harradine on Tue Dec 10, 2019 10:26 am

aldo russian wrote:Very instructive post Lee which should allow us to better gauge our financial results.

One question though. I'm one of those who believe our season, at 18 games, is too short. (What are passionate supporters supposed to do for the other two-thirds of the year?) But when I enquired about this I was told that clubs, including West, opposed extending the season because we lost money every time we played. Is that correct?

A very interesting question, aldo, with no definitive answer.

I agree that 18 games is too short. That decision wouldn't be only because of finance, IMO, but would have coach input also.

As for the finances, we make more money on match days, IMO, due to gate takings, BBQ, kiosk and venue income, which exceeds the costs of oval maintenance, etc. The major cost would be player payments and they would make a big difference. For example, one league game would cost clubs about $8,000 to $12,000 or more, depending on the club and who is playing.

The interesting thing is that attendances are best on Sundays, last time I checked, but venue income is higher on Friday nights.

The decision on this was probably made by the club CEO's and the SANFL, I'd guess, not the Boards.

Could I also add, for readers as well as posters. that I've been asked by many people what I'm doing since being ousted as President. I have offered the club and the President my help on many occasions this year, but those offers have been either refused or not taken up, which is their prerogative, of course.

I'm therefore putting most of my time writing my book, which I hope will be a great read for all Bloods' supporters in celebrating our great club. I'll be supporting Gavin and the players along with all of us and hoping to see as much of our juniors play as I can.

Go the Bloods.
Lee Harradine
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Post by TAAARS on Tue Dec 10, 2019 4:52 pm

I'm no accountant so forgive me if I'm wrong but...If it was not for the $375K (best case) we receive from the SANFL each year would we not be stuffed? Is this par for the course for all the SANFL clubs or just us and maybe 1 or 2 others?
If so, and it is for all or most of the clubs, what happens to the league in 4 years when most of the money run's out?
As I say I'm not an accountant so might be reading things wrong here.
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Post by Lee Harradine on Tue Dec 10, 2019 5:14 pm

The last two years we were cash profitable or breakeven without the $375K, TAAARS.

I'll give more detail soon.
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Post by bruce cameron on Tue Dec 10, 2019 9:35 pm

I'm amazed at how little I would know about the club if I only relied on the club's website and Facebook page. Long live the Forum and its posters.
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Post by Lee Harradine on Wed Dec 11, 2019 11:45 am

Budgets.

They are merely targets or best predictions about future years. The budget prepared by the previous Board was certainly the most detailed ever prepared by the Club. It had input firstly from the Club's SANFL Finance Officer, then primarily from a Board member who is a senior banker, assisted by me as a Chartered Accountant, the Club Finance Committee checked it out and the SANFL checked it and raised some queries.

All projections were backed up by detailed calculations and assumptions.

Being a budget, there are items to be aimed at for revenue raising, etc that would take a lot of work, but the previous Board accepted the Budget as attainable. The current Board have said it was too ambitious. We didn't think so, but that is a matter of opinion.

The Budget was prepared for a three year period and regardless of quibbling about one or two figures, it showed a rapidly improving situation. This is partly due to the paying down of debt and the subsequent interest charge decreases. It should be borne in mind that because of this, each year's results should improve by about $20K bottom line, all else being equal. That is, a 2018 profit of (say) $10,000 should equate to a 2019 profit of $30,000 and a 2020 profit of $50,000.

Regardless of whether a budget is attainable or not, it is irrelevant compared to the actual result. It is an indicator for planning, not an actual result.

Financial results always need to be read in detail, not just looking at the bottom line. For example, if we don't spend $60,000 of salary cap this year, that's relevant when looking at costs being reduced by $60,000. (Hypothetical only).
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