Analysis AFC finances - Rich Club, Poor Club?

[Geoffa32]

Sorry you are right, what has happened is the SANFL love Port so much they decided to give us a huge leg up in the Reserves thing at a cost to the Crows. I should have seen it all along, the $400k the Crows pay being identical to the $400k Port gave up was merely a co-incidence and One Club didn't happen years before the SANFL reserves either.

You paid it and got it back.

You guys were virtually insolvent then.


Anyway this is one example as to why our two clubs have different business models and direct comparison is moot.

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[Crows4Eva]

It's a good result. In simple terms it means we are performing well financially and can expect to be 'in the black' if things continue as they are.

Statutory profit/loss isn't an accurate representation of business performance, underlying profit/loss is the more important figure.

 

[hey shorty]

Been learning a bit about profit/loss in sporting organisations in my new uni degree, could be an interesting test case.

 

[Pdub]

I think this shows how much we need a home ground to host SANFL and AFLW games, it would be a real boost to the club. Since we paid $2.5m off our debt and look to be able to pay off all debt this year, we may have a 5 year plan to move home base.
Step 1: Pay off debt
Step 2: Spend a few years saving as much cash as possible
Step 3: Get large loan
Step 4: Buy property, build base.

 

[Sanders]

Haven't the Crows actually posted a statutory $1.3m loss.

By the looks of it yes.

We made a profit if you don't count all the costs, but it appears that when you take everything into account we lost quite a bit

At least that's my read of what the various articles seem to be saying.

 

[Sanders]

http://www.afl.com.au/news/2017-03-02/crows-post-13m-loss-despite-operating-profit

have requested a copy of the financials. Cash Profit of $1.46M, revenue of $48.3M - that's $3.8M up on last year or thereabouts, which is a great result.

If cash profit is all that matters why isn't that the final result?

 

[Deaneus!]

The key question that cuts through the AFL accounting: did we get handouts from the AFL to stay alive or did we hand over cash so other clubs could retain the right to play against us?

I looked in AASB 119 Employee Benefits but couldn't find anything about this

That's a key question though. Not the be-all & end-all, but a key one.

 

[Sanders]

Statutory profit/loss isn't an accurate representation of business performance, underlying profit/loss is the more important figure.

Why's that, what's the difference?

 

[dogs105]

So, did we make a profit or a loss?

 

[Jeffcrowe]

The increase in revenue is good. I posted a couple of years ago that the club should get around 10% increase in revenue per year for the next few years. This isnt anything crazy, as any decent CEO expects 10% growth. Well at least the corporations I worked for demanded it. Double diget growth was a must. A few people here that was a crazy expectation on Fages, but it wasnt.

Im not sure why we depreciated our HQ as I thought we had done that already. Maybe there is something happening with our venue that I dont know about.

The cost to play in the SANFL is a joke and whoever signed us up to that, considering that Port dont pay a cent, should get his head read.

Correct re the sanfl ... and the amount of angst that we cop from sanfl clubs when we are pumping that much cash in, we should ger outta there quick smart to VFL and also push AFL for some clubs from Vic and us to have AFL reserves comp

 

[Pdub]

Not an accountant, but my take on the depreciation of the west lakes complex every year is that before Adelaide Oval, when AAMI was where all AFL matches were played and would be played, our facilities were probably worth around $30m at a minimum (they spent $25mil on the new shed). When the lease expires that will be worth $0 and we get nothing back. My guess is the depreciation is reducing the value of the complex year by year until it will be worth nothing at the end of the lease.

 

[Elite Crow]

Whilst we pay the SANFL money, dont we also have a lease at AAMI where we dont pay any rent? Is it a case of swings and roundabouts?

 

[Jack is Back]

I haven't seen the report but the two key questions are;

1) Are we generating more "net" income than we are spending?

It is clear that the answer is yes. This is a good thing, you can't keep spending more than you are earning unless you are the Greek Government or the Poort Pear FC in which case you just get baled out.

2) In relation to 1), is our net debt rising or falling?

The answer is that it is falling and we are on track to be debt free within a year. This is a good thing.

The depreciation of the facilities at West Lakes means we can keep making cash profits and still record an accounting loss each year until the facilities are depreciated to zero. The reality is that we will soon be debt free and the question is what will we do with our cash surplus each year. I expect that the plan is to build up money in the bank so we are in a position to move from West Lakes whenever it suits us.

 

[Deaneus!]

If cash profit is all that matters why isn't that the final result?

Because of non-cash items like say, depreciation, which are part of the accounting standards.

If I simplify it a touch, say the AFC makes revenues of $48.5M from ticket sales, sponsorships, merchandise. Say also that it costs them $47M in wages, player payments, admin, to run the club. That leaves them with $1.5M in operating profit, so basically $1.5M extra cash comes in the door every year.

But, for example:

We have a thing called depreciation, where we take the value of an asset we paid for - say a $20M training centre - and spread the apparent cost of using that asset over it's useful life, say 20 years. If we straight-line it, after 10 years it's only worth $10M, after 15 years it's only worth $5M (ignoring what we'd actually get for it on the market).

This depreciation is counted against our operating profit, so suddenly cash profit is still $1.5M (i.e., we've $1.5M more cash in the bank) but operating profit is $0.5M (because we took off $1M in depreciation).

The real trick, is making sure you take in enough cash, to be able to buy a new training centre in the future. That's why stat accounts are important - it's great to be making more cash, but if you're bringing in cash but don't make enough to replace the assets you're using to generate that cash, you're going to run into trouble when those assets fail.

I've emailed the club for a copy of the financials, I'll go through them when they turn up. In the meantime,

http://www.michaelwest.com.au/how-goldman-sachs-and-australias-biggest-brewer-sab-pay-no-tax/

I suppose the final word on it is a little saying an old boss of mine used to have:

"Profit is vanity, Balance Sheet is sanity, Cashflow is king"

A P&L can say anything you want it to, but a Balance Sheet will always* tell you how a company is doing, and without positive cashflow you're in trouble.

*usually

 

[Sanders]

Because of non-cash items like say, depreciation, which are part of the accounting standards.

If I simplify it a touch, say the AFC makes revenues of $48.5M from ticket sales, sponsorships, merchandise. Say also that it costs them $47M in wages, player payments, admin, to run the club. That leaves them with $1.5M in operating profit, so basically $1.5M extra cash comes in the door every year.

But, for example:

We have a thing called depreciation, where we take the value of an asset we paid for - say a $20M training centre - and spread the apparent cost of using that asset over it's useful life, say 20 years. If we straight-line it, after 10 years it's only worth $10M, after 15 years it's only worth $5M (ignoring what we'd actually get for it on the market).

This depreciation is counted against our operating profit, so suddenly cash profit is still $1.5M (i.e., we've $1.5M more cash in the bank) but operating profit is $0.5M (because we took off $1M in depreciation).

The real trick, is making sure you take in enough cash, to be able to buy a new training centre in the future. That's why stat accounts are important - it's great to be making more cash, but if you're bringing in cash but don't make enough to replace the assets you're using to generate that cash, you're going to run into trouble when those assets fail.

I've emailed the club for a copy of the financials, I'll go through them when they turn up. In the meantime,

http://www.michaelwest.com.au/how-goldman-sachs-and-australias-biggest-brewer-sab-pay-no-tax/

I suppose the final word on it is a little saying an old boss of mine used to have:

"Profit is vanity, Balance Sheet is sanity, Cashflow is king"

A P&L can say anything you want it to, but a Balance Sheet will always* tell you how a company is doing, and without positive cashflow you're in trouble.

*usually

If the other stuff doesn't matter why worry about it all?

 

[Geoffa32]

If the other stuff doesn't matter why worry about it all?

To keep accountants employed.....

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[Untouchables22]

I think this shows how much we need a home ground to host SANFL and AFLW games, it would be a real boost to the club. Since we paid $2.5m off our debt and look to be able to pay off all debt this year, we may have a 5 year plan to move home base.
Step 1: Pay off debt
Step 2: Spend a few years saving as much cash as possible
Step 3: Get large loan
Step 4: Buy property, build base.

 

[Deaneus!]

So, a poster with tagline THE BEAST is up to post #666

How apt for this thread

also, i think the ? in your post may be replaced by "put in vending machine in Japan"

 

[Jeffcrowe]

I haven't seen the report but the two key questions are;

1) Are we generating more "net" income than we are spending?

It is clear that the answer is yes. This is a good thing, you can't keep spending more than you are earning unless you are the Greek Government or the Poort Pear FC in which case you just get baled out.

2) In relation to 1), is our net debt rising or falling?

The answer is that it is falling and we are on track to be debt free within a year. This is a good thing.

The depreciation of the facilities at West Lakes means we can keep making cash profits and still record an accounting loss each year until the facilities are depreciated to zero. The reality is that we will soon be debt free and the question is what will we do with our cash surplus each year. I expect that the plan is to build up money in the bank so we are in a position to move from West Lakes whenever it suits us.

I'd rather we put it into luring coaches and research and medical etc etc

Teams are building bases in the suburbs eg freo and hawks . I don't see the problem with base being in west lakes

City base doesn't justify the cost , what are the benefits ?

 

[Pdub]

I'd rather we put it into luring coaches and research and medical etc etc

Teams are building bases in the suburbs eg freo and hawks . I don't see the problem with base being in west lakes

City base doesn't justify the cost , what are the benefits ?

Near city base would justify the cost since we would be able to put a tavern on it, play home SANFL & AFLW games that bring people to that tavern as well as catering income and gate ticket sales. As well as a place for AFC fans to go to watch away games.

 

[1970crow]

Not an accountant, but my take on the depreciation of the west lakes complex every year is that before Adelaide Oval, when AAMI was where all AFL matches were played and would be played, our facilities were probably worth around $30m at a minimum (they spent $25mil on the new shed). When the lease expires that will be worth $0 and we get nothing back. My guess is the depreciation is reducing the value of the complex year by year until it will be worth nothing at the end of the lease.

Buildings depreciate over 40 years anyway, not a particularly meaningful difference.

 

[GreyCrow]

View attachment 341974

So, a poster with tagline THE BEAST is up to post #666

How apt for this thread

also, i think the ? in your post may be replaced by "put in vending machine in Japan"

That's' a sitewide thing

Apparently

Oh and no idea on p&l apart from money in wallet v bills

 

[1970crow]

Because of non-cash items like say, depreciation, which are part of the accounting standards.

If I simplify it a touch, say the AFC makes revenues of $48.5M from ticket sales, sponsorships, merchandise. Say also that it costs them $47M in wages, player payments, admin, to run the club. That leaves them with $1.5M in operating profit, so basically $1.5M extra cash comes in the door every year.

But, for example:

We have a thing called depreciation, where we take the value of an asset we paid for - say a $20M training centre - and spread the apparent cost of using that asset over it's useful life, say 20 years. If we straight-line it, after 10 years it's only worth $10M, after 15 years it's only worth $5M (ignoring what we'd actually get for it on the market).

This depreciation is counted against our operating profit, so suddenly cash profit is still $1.5M (i.e., we've $1.5M more cash in the bank) but operating profit is $0.5M (because we took off $1M in depreciation).

The real trick, is making sure you take in enough cash, to be able to buy a new training centre in the future. That's why stat accounts are important - it's great to be making more cash, but if you're bringing in cash but don't make enough to replace the assets you're using to generate that cash, you're going to run into trouble when those assets fail.

I've emailed the club for a copy of the financials, I'll go through them when they turn up. In the meantime,

http://www.michaelwest.com.au/how-goldman-sachs-and-australias-biggest-brewer-sab-pay-no-tax/

I suppose the final word on it is a little saying an old boss of mine used to have:

"Profit is vanity, Balance Sheet is sanity, Cashflow is king"

A P&L can say anything you want it to, but a Balance Sheet will always* tell you how a company is doing, and without positive cashflow you're in trouble.

*usually

You've described exactly why depreciation is a legitimate expense line in a P&L. It can't be taken out, especially in our case where our building seems to have an actual defined useful life.

 

[Deaneus!]

You've described exactly why depreciation is a legitimate expense line in a P&L.

Thank you.

Thug Life!

 

[Jack is Back]

I'd rather we put it into luring coaches and research and medical etc etc

Teams are building bases in the suburbs eg freo and hawks . I don't see the problem with base being in west lakes

City base doesn't justify the cost , what are the benefits ?

The problems with staying at West Lakes will increase when every training session becomes an open training session. I believe this is one of the reasons that Hawthorn want to move to a new training facility. In the short term we have never been better off regarding training facilities. Great facilities and a great oval (rather than a part-time carpark) to train on. Once the West lakes land is fully developed, I believe that our oval will become open space and possibly covered in dog s**t.

I do however agree that there is no urgency for us to move since we will save heaps of money by remaining at West Lakes.