Resource 2016 Annual Reports Thread - Club Comparisons post #002

[Muggs]

Clubs were getting finance long before the AFL started guaranteeing loans.

The difference is if the loan is far more likely to be about if the loan is at 6% or 3%.

Benny Gale was smiling because the club was debt free...Removing the guarantee was an incidental consequence of that, not least because, in effect, it's still there...As it is for all clubs. If a financially strong club like WCE went to the bank to help finance their new training facility, the AFL would guarantee it, and WCE would probably receive better terms as a result.

Yup, this is the point I was trying to make.

There are two reasons for a guarantee- the first is its the only way you can get finance, the second and far more common, is to reduce risk for the lender to result in a lower interest rate.

Take EFC for example their guarantee was signed before the ASADA thing erupted when they were financially quite healthy no other reason to get one other than reduce a interest rate at that point in time.

 

[Rob]

So if you have a loan you're 'cash strapped'?

I suppose that means most large companies in the world are struggling....BHP must be practically at deaths door.

Why the hell would BHP need an AFL guarantee on their debt?

Context dude.

 

[Kwality]

Clubs were getting finance long before the AFL started guaranteeing loans.

The difference is if the loan is far more likely to be about if the loan is at 6% or 3%.

Benny Gale was smiling because the club was debt free...Removing the guarantee was an incidental consequence of that, not least because, in effect, it's still there...As it is for all clubs. If a financially strong club like WCE went to the bank to help finance their new training facility, the AFL would guarantee it, and WCE would probably receive better terms as a result.

3%/6%- stick to legal advice, .

 

[Kwality]

Yup, this is the point I was trying to make.

There are two reasons for a guarantee- the first is its the only way you can get finance, the second and far more common, is to reduce risk for the lender to result in a lower interest rate.

Take EFC for example their guarantee was signed before the ASADA thing erupted when they were financially quite healthy no other reason to get one other than reduce a interest rate at that point in time.

It is the equivalent of needing your folks guarantee to buy a car, the credit provider isn't sure you can pay it back.

Be interesting to see you prove your assertion ' Take EFC for example their guarantee was signed before the ASADA thing erupted' - was not 2015 the first time Essendon needed an AFL guarantee?

http://www.heraldsun.com.au/sport/a...illion-for-clubs/story-fni5f22o-1226862624584

 

[The_Wookie]

http://www.saints.com.au/news/2016-11-29/st-kilda-announces-2016-financial-result

St Kilda Football Club has delivered an operating profit of $150,589 for the 2016 financial year before grant funding revenue, depreciation, amortisation and interest, and an overall accounting net profit of $1,107,311.

Included within the accounting net profit is Moorabbin Reserve grant funding and additional depreciation of the Seaford premises due to the expected relocation to Moorabbin.

Key highlights include:

• Record operating revenue of $34.5m, a $2.1m increase on 2015.
• Sponsorship and Events revenue up $0.65m from the continued expansion of our sponsorship portfolio.
• More than 7,500 new members joined the Saints during the year – the largest growth of all AFL clubs which resulted in a final membership tally of 38,101.
• The club recorded strong growth in match-day attendances in 2016 with over 685,000 people attending St Kilda games, a 16.2% increase on 2015.
• Revenue from match returns increased by $0.44m, due to strong attendances at home games and the shift of a home game to the MCG.
• The club continued to invest in its on-field program, investing $1.12m more in 2016 including a $0.67m increase in player related spending and a $0.45m increase in non-player spending.

Annual Report here

 

[The_Wookie]

Statements

• Brisbane Football Club
  
• Collingwood Football Club
  
• Essendon Football Club
• Geelong Football Club
  
• Hawthorn Football Club
  
• Melbourne Football Club
  
• Richmond Football Club
• St Kilda Football Club

Annual Reports

• Brisbane Football Club
  
• Essendon Football Club
• Geelong Football Club
  
• Hawthorn Football Club
  
• Melbourne Football Club
  
• Richmond Football Club
• St Kilda Football Club

Consolidated Profit/Loss

• Hawthorn - $4,660,824
• Geelong - $2,255,116
• St Kilda - $1,107,311
  
• Melbourne - $720,218
  
• Richmond - ($80,257)
• Brisbane - ($1,783,506)
• Essendon - ($9,825,37)

Revenue

• Hawthorn - $69,779,234
• Geelong - $54,650,813
  
• Essendon - $53,499, 545
• Brisbane - $48,707,494
• Melbourne - $47,552,639
• Richmond - $47,538,233
• St Kilda - $39,928,568

AFL Revenue

• St Kilda - $17,125,673 (shown as AFL distributions and "other" income)
  
• Brisbane - $16,753,407
• Melbourne - $12,758,742
• Richmond - $10,478,488
• Essendon - $9,824,470
• Hawthorn - $9,788,488
• Geelong - $9,512,533

Membership Revenue

• Geelong - $14,341,800 (includes gate reciepts)
  
• Hawthorn - $12,422,423
• Essendon - $10,100,110
• Melbourne - $7,578,057 (includes fundraising)
• St Kilda - $6,646,174/38,101
  
• Brisbane - $5,602,557 (includes Gate reciepts)

Membership Revenue per Member

• Geelong - $274.77 (includes gate reciepts)
  
• Brisbane - $240.59 (includes gate reciepts)
• Melbourne - $193.58 (includes fundraising)
  
• Essendon - $175.67
• st Kilda - $174.44
  
• Hawthorn - $164.86

Sponsorship Revenue

• Geelong - $16,079,494 (includes fundraising)
  
• Hawthorn - $14,947,662
• Essendon - $12 ,493 ,197
• Richmond - $10,575,059
• Brisbane - $9,599,634
• Melbourne - $8,916,023
• St Kilda - $5,838,157

Pokies and Hospitality Revenue

• Hawthorn - $18,338,797
• Brisbane - $15,192,965
• Essendon - $13,540,006
• Melbourne - $12,193,285
• Geelong - $9,060,375
  
• Richmond - $7,217,846
• St Kilda - $2,069,132

Pokies and Hospitality Profit

• Brisbane - $4,207,183
• Melbourne - $3,620,569
• Essendon - $2,456,768

Gate Reciepts and Match Returns

• Melbourne - $4,592,047
• Hawthorn - $4,372,640
• St Kilda - $1,623,290
  
• Essendon - $216 , 850

Merchandise

• Hawthorn - $4,020,932
• Essendon - $2,268,964
• Geelong - $1,742,436
  
• Merchandise - $986,269
• Brisbane - $817,849
• St Kilda - $791,796

Football Department Spend

• Geelong - $23,172,565
  
• Essendon - $22,981,249
• Richmond - $22,794,109
• Brisbane - $22,236,384
• Melbourne - $21,927,456
• St Kilda - $20,724,493
  
• Hawthorn - Not completely defined.

AFL Equalisation Levy

• Hawthorn - $1,301,588
• Geelong - $390,000
  
• Essendon - $350,004

Assets

• Hawthorn - $62,414,117
• Essendon - $47, 817, 356
• Geelong - $35,036,809
  
• Richmond - $29,521,323
• Melbourne - $17,484,015
• St Kilda - $14,160,615
  
• Brisbane - $8,195,809

Liabilities

• Geelong - $25,105,827
  
• Hawthorn - $20,814,863
• Essendon - $20,363,757
• Brisbane - $19,067,673
• St Kilda - $14,795,190
  
• Melbourne - $12,644,379
• Richmond - $5,430,252

Equity

• Hawthorn - $41,559,254
• Essendon - $27,453 , 599
• Richmond - $24,091,071
• Geelong - $9,930,982
  
• Melbourne - $4,839,636
• St Kilda - ($634,575)
  
• Brisbane - ($10,871,864)

 

[telsor]

Why the hell would BHP need an AFL guarantee on their debt?

Context dude.

Most clubs don't NEED the AFL to guarantee their debt either.

You're the one who equated taking a loan as being 'cash strapped'.

 

[telsor]

It is the equivalent of needing your folks guarantee to buy a car, the credit provider isn't sure you can pay it back.

Be interesting to see you prove your assertion ' Take EFC for example their guarantee was signed before the ASADA thing erupted' - was not 2015 the first time Essendon needed an AFL guarantee?

http://www.heraldsun.com.au/sport/a...illion-for-clubs/story-fni5f22o-1226862624584

No, it's the equivalent of the credit provider being willing to offer you a loan at one rate by yourself, but a lower one if your parents provide a guarantee.

As has been discussed many times, the rate charged is a reflection of the risk involved, and while a club might be deemed a relatively low risk, the AFL will always be considered safer, and thus warrant a lower rate of interest.

 

[telsor]

http://www.saints.com.au/news/2016-11-29/st-kilda-announces-2016-financial-result

St Kilda Football Club has delivered an operating profit of $150,589 for the 2016 financial year before grant funding revenue, depreciation, amortisation and interest, and an overall accounting net profit of $1,107,311.

The money they got from Moorabbin redevelopment seems to have been used to paper over some cracks and help the cash flow out (pay down a few debts, etc), which adjusts things a fair bit.

I'm sure they have plans to use it as intended, but in the shorter term it's making them look a hell of a lot better than last year. (as you'd expect from a ~$5.5M injection of funds)

 

[jatz14]

I

Why the hell would BHP need an AFL guarantee on their debt?

Context dude.

If the Australian government gave a guarantee on BHP debt, then BHP debt would be cheaper, and if BHP is safe, then it costs the government nothing.

 

[telsor]

I

If the Australian government gave a guarantee on BHP debt, then BHP debt would be cheaper, and if BHP is safe, then it costs the government nothing.

Exactly....Although I suspect BHPs debts are safer than the governments...

 

[Muggs]

It is the equivalent of needing your folks guarantee to buy a car, the credit provider isn't sure you can pay it back.

Be interesting to see you prove your assertion ' Take EFC for example their guarantee was signed before the ASADA thing erupted' - was not 2015 the first time Essendon needed an AFL guarantee?

http://www.heraldsun.com.au/sport/a...illion-for-clubs/story-fni5f22o-1226862624584

From the 2013 report AFL report

1. The Company has entered into an agreement with Westpac whereby the Company annually guarantees the obligations of the Essendon Football Club Limited to Westpac to a maximum of $5.0million. The guarantee expired on 31 October 2013. A new annual guarantee has commenced on 1 November 2013 for $5.0 million.

12 months (annually) expiring 31 Oct 2013 means signed 1 Nov 2012. The ASADA thing erupted Feb 2013.

Not sure why you would quote a newspaper article when it's just as easy to go and look up the annual reports..Particlaurly one written in 2014 (not 15) based on the 2013 reports which proves my point...

http://s.afl.com.au/staticfile/AFL Tenant/AFL/Files/Annual Report/2013 AFL Annual Report.pdf Page 158

 

[Muggs]

The money they got from Moorabbin redevelopment seems to have been used to paper over some cracks and help the cash flow out (pay down a few debts, etc), which adjusts things a fair bit.

I'm sure they have plans to use it as intended, but in the shorter term it's making them look a hell of a lot better than last year. (as you'd expect from a ~$5.5M injection of funds)

One little tidbit hidden away in the CEOs report.

Included within the net profit is Moorabbin Reserve grant funding revenue of $5,413,959, depreciation expenses of $4,076,688 which incorporates an additional depreciation charge due to the clubs expected relocation to Moorabbin of $2,910,722,

The increase is probably due to these assets now having a shorter useful life with the expected move, but it's a increase in expenses, that will decrease once the move happens.

Add in the 2.5 million increase in Administration & facilities management, which is a hell of a jump (just under 50%) which I think is at least partly related to the move you have pretty much accounted for all the 5.4mil grant.

Thus that profit figure is pretty much what it would be without the move, setting them up rather nicely.

Personally have no issue with using surplus cash to pay debt down in short term and reborrow later if needed, but I'm not sure the will need to reborrow,

 

[telsor]

One little tidbit hidden away in the CEOs report.

Included within the net profit is Moorabbin Reserve grant funding revenue of $5,413,959, depreciation expenses of $4,076,688 which incorporates an additional depreciation charge due to the clubs expected relocation to Moorabbin of $2,910,722,

The increase is probably due to these assets now having a shorter useful life with the expected move, but it's a increase in expenses, that will decrease once the move happens.

Add in the 2.5 million increase in Administration & facilities management, which is a hell of a jump (just under 50%) which I think is at least partly related to the move you have pretty much accounted for all the 5.4mil grant.

Thus that profit figure is pretty much what it would be without the move, setting them up rather nicely.

Personally have no issue with using surplus cash to pay debt down in short term and reborrow later if needed, but I'm not sure the will need to reborrow,

Agreed. Mostly I was just pointing out that the report had a few unusual elements related to that funding, and while I'm sure it's accurate, the results are probably a bit of an outlier in the overall trend of St Kilda reports, so I wouldn't put too much weight on it with respect to longer term predictions.

 

[Muggs]

Agreed. Mostly I was just pointing out that the report had a few unusual elements related to that funding, and while I'm sure it's accurate, the results are probably a bit of an outlier in the overall trend of St Kilda reports, so I wouldn't put too much weight on it with respect to longer term predictions.

Yeh, can see the next few years being a bit variable.

That increase in depreciation will hurt them until the move, and with the extra expenses they incurring in planning the move next year will hurt unless get more grant revenue.

Still I think they in a stronger position than they have been for a few years, but there is a strong correlation between onfield success and off field, due to extra revenue success brings. So things can turn around quickly if have a bad season.

 

[Kwality]

From the 2013 report AFL report

1. The Company has entered into an agreement with Westpac whereby the Company annually guarantees the obligations of the Essendon Football Club Limited to Westpac to a maximum of $5.0million. The guarantee expired on 31 October 2013. A new annual guarantee has commenced on 1 November 2013 for $5.0 million.

12 months (annually) expiring 31 Oct 2013 means signed 1 Nov 2012. The ASADA thing erupted Feb 2013.

Not sure why you would quote a newspaper article when it's just as easy to go and look up the annual reports..Particlaurly one written in 2014 (not 15) based on the 2013 reports which proves my point...

http://s.afl.com.au/staticfile/AFL Tenant/AFL/Files/Annual Report/2013 AFL Annual Report.pdf Page 158

From the 2013 report AFL report

1. The Company has entered into an agreement with Westpac whereby the Company annually guarantees the obligations of the Essendon Football Club Limited to Westpac to a maximum of $5.0million. The guarantee expired on 31 October 2013. A new annual guarantee has commenced on 1 November 2013 for $5.0 million.

12 months (annually) expiring 31 Oct 2013 means signed 1 Nov 2012. The ASADA thing erupted Feb 2013.

Not sure why you would quote a newspaper article when it's just as easy to go and look up the annual reports..Particlaurly one written in 2014 (not 15) based on the 2013 reports which proves my point...

http://s.afl.com.au/staticfile/AFL Tenant/AFL/Files/Annual Report/2013 AFL Annual Report.pdf Page 158

Muggs, thank you for correcting my recollection - only reason I didn't go Financials route was I was limited to use of my Phone where I was for a few days & a smartphone in the hands of notso smart tekhead failed me, the reason not an excuse.
Not sure I agree with your look back concluding Nov 1 2012, so I will go away & check - the AFL guarantee would be a material event since balance date IMHO.

 

[Kwality]

No, it's the equivalent of the credit provider being willing to offer you a loan at one rate by yourself, but a lower one if your parents provide a guarantee.

As has been discussed many times, the rate charged is a reflection of the risk involved, and while a club might be deemed a relatively low risk, the AFL will always be considered safer, and thus warrant a lower rate of interest.

& some clubs take advantage of this lower rate not others - that is your assertion?

 

[Muggs]

Not sure I agree with your look back concluding Nov 1 2012, so I will go away & check - the AFL guarantee would be a material event since balance date IMHO.

I'm either way on this, as does not affect the face of the statements being a contingent liability, and part of normal operations for the AFL.

Also the date of signing is not the issue, its the date drawn down from the AFL's perspective when the liability is incurred. ,

However from an EFC's perspective if was negotiated could be argued it should be disclosed in their 2012 report as being available (it's not), but again depends on commencement date as opposed to signing date.

There is a section in the finance directors report saying that all necessary arrangements have been put in place to cover any short fall in funding. Be far from the first company to structure a contract to avoid being reported until the next financial year.

To make matters more interesting the EFC 2013 report makes no mention of the AFL Guarantee despite it being in the AFL report.

Than add the issue of Concise reports and not a normal report...

So I take your point we cant be a 100% sure when it started, but we know it was sometime during the 12/13 year and that was not really that bad a year for EFC, a better year than 11 (2012 was a great year, but grant money for new training facility was recognised so distorts thing making 11 a better comparison year)

 

[telsor]

& some clubs take advantage of this lower rate not others - that is your assertion?

I would imagine that all clubs that borrow money use the AFL guarantee to lower their interest rate.

Not doing so would be very poor financial management.

 

[Muggs]

I would imagine that all clubs that borrow money use the AFL guarantee to lower their interest rate.

Not doing so would be very poor financial management.

Those that don't normally legally own rather than lease(hold) assets that can be used as security instead of the AFL guarantee, serving much the same purpose.

 

[telsor]

Those that don't normally legally own rather than lease(hold) assets that can be used as security instead of the AFL guarantee, serving much the same purpose.

Similar, but I think an AFL would trump that because it'd be easier/quicker to convert that to cash.

 

[Muggs]

Similar, but I think an AFL would trump that because it'd be easier/quicker to convert that to cash.

Agreed, sort of, but does help explain why not all 18 clubs have a guarantee.

Sort of because while the AFL may be quick to cough up the cash if needed not all guarantors are and sometimes legal action needs to be taken/threatened even with large corporations before cash comes across. Also coughing up for a guarantee can trigger a train reaction (as nearly happened to DFO a few years back). From a bank's perspective assets they can seize are sometimes better than a written guarantee

I can see this going both ways depending on the actual assessment process used in the banks.

 

[Kwality]

I would imagine that all clubs that borrow money use the AFL guarantee to lower their interest rate.

Not doing so would be very poor financial management.

Just had a look at Geelongs Financials, no AFL guarantee, lots of borrowings (no, that's not a criticism) in the course of running the club - are you guys (telsor & Muggs) seriously suggesting the club, the president, the CEO are somehow derelict in their duty not taking advantage of a lower interest rate?

e.g
The Club borrowed a total of $3,174,130 during 2013 to finance Club contributions to the Simonds Stadium Players Stand Redevelopmentwhich is subject to a variable rate of interest which is currently 4.90% (2015: 5.19%). At 31 October 2016, the balance remains at$3,174,130. Annual fixed principle repayments will commence on 31 March 2017 and continue for a period of four years after the initial
payment.
http://s.afl.com.au/staticfile/AFL Tenant/GeelongCats/PDFs/2017/2016 GFC-Consolidated Financial Statements - Signed_V2.pdf

AFL guarantees are for clubs that cant meet their debts as and when they fall due IMHO.

 

[Muggs]

Just had a look at Geelongs Financials, no AFL guarantee, lots of borrowings (no, that's not a criticism) in the course of running the club - are you guys (telsor & Muggs) seriously suggesting the club, the president, the CEO are somehow derelict in their duty not taking advantage of a lower interest rate?
...
AFL guarantees are for clubs that cant meet their debts as and when they fall due IMHO.

My argument is that the board of the clubs should always be seeking the lowest interest rate possible

So for clubs like Geelong that own assets this can be achieved via putting these assets up as security. As Geelong's financial report highlights

Note 11 (c) "Bank loans and overdraft facilities with Bendigo Bank are secured by a registered debenture mortgage over the assets of the Club."

For clubs like EFC whose main asset is leasehold improvements, thus don't have legal ownership of the underlying asset, that can be used as security than they should be seeking the AFL guarantee to reduce interest rates.

With a debt ratio of 42%, and over 27 Mil in net assets EFC is no real risk of not being able to meet their debts in the longer term. In the short term their cash flow is significantly strong enough (and projected to be stronger) to be able to ride out the short term issues they are having with the use of a credit facility. I cant see why a bank would refuse them a credit facility, thus they are in no danger of not being able to pay debts when they fall due.

However a credit facility with security is always going to have a lower interest rate than a unsecured credit facility and normally significantly lower. So why wouldn't they ask the AFL to guarantee it to reduce costs if it is available?

It's standard risk minimisation on behalf of the Club, the AFL and the lenders.

 

[Kwality]

My argument is that the board of the clubs should always be seeking the lowest interest rate possible

So for clubs like Geelong that own assets this can be achieved via putting these assets up as security. As Geelong's financial report highlights

Note 11 (c) "Bank loans and overdraft facilities with Bendigo Bank are secured by a registered debenture mortgage over the assets of the Club."

For clubs like EFC whose main asset is leasehold improvements, thus don't have legal ownership of the underlying asset, that can be used as security than they should be seeking the AFL guarantee to reduce interest rates.

With a debt ratio of 42%, and over 27 Mil in net assets EFC is no real risk of not being able to meet their debts in the longer term. In the short term their cash flow is significantly strong enough (and projected to be stronger) to be able to ride out the short term issues they are having with the use of a credit facility. I cant see why a bank would refuse them a credit facility, thus they are in no danger of not being able to pay debts when they fall due.

However a credit facility with security is always going to have a lower interest rate than a unsecured credit facility and normally significantly lower. So why wouldn't they ask the AFL to guarantee it to reduce costs if it is available?

It's standard risk minimisation on behalf of the Club, the AFL and the lenders.

That's why all 18 clubs don't have AFL guarantees?

Some have strong Balance Sheets that wont draw an auditors qualification without the AFL guarantee.

Asking the AFL to guarantee borrowings has a certain parallel with the folks guaranteeing a loan.