Carlton declares $2.6m profit despite poor on field year

Tushay

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Tushay

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Don't give a **** about membership numbers and profit, would like to see a more competitive and passionate on-filed performance.
Assume you're being silly. There'd be no club without members and good financial management.
 

Thrawn

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#7
Assume you're being silly. There'd be no club without members and good financial management.
No, I'm not being silly. Even if we didn't have record members, we'd still be here. Bragging about it amounts to nothing when you keep on being extremely poor on the field.

Remember when Richmond were poor? How many times did we point fun at them when they were citing their membership numbers because that's really the only thing they had going for them?
 
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telsor

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#10
Carlton Football Club is pleased to declare a net operating profit of $2,611,638 before depreciation and amortisation, with a final statutory net profit of $699,206 for the year ending 31 October 2018.

http://www.carltonfc.com.au/news/2018-12-19/carlton-achieves-fourth-year-of-growth

Impressive performance by the club. Record membership and a strong profit despite its terrible on field year.
It's not a 2.6M profit...it's 700K.

'before depreciation and amortisation' is a meaningless figure, because those are basic/standard business expenses that must be taken into account.

700K is still a pretty decent figure considering Carlton's year, but lets use the real number rather than buy into the misleading PR spin figure.
 

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Arwib

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#14
It's not a 2.6M profit...it's 700K.

'before depreciation and amortisation' is a meaningless figure, because those are basic/standard business expenses that must be taken into account.

700K is still a pretty decent figure considering Carlton's year, but lets use the real number rather than buy into the misleading PR spin figure.
Usually this is true, and you're correct to point it out, but it can also be misleading as well because of the asset life assumptions being key to apportioning the expenses

When St Kilda decided to move from their recently completed grant-funded facility at Seaford to an even newer grant-funded one at Moorabbin, they changed the assumed asset life of their leasehold at Seaford from like 50 years down to I think 7 or 10 or thereabouts. This shifted annual depreciation and amortisation from under 1m per year, to I think about 4m per year, putting them substantially in the red for their statutory profit figure (excluding grant revenue). But it's pretty clearly just an on-paper change in profitability, and not really an impactful loss, since they didn't really pay for either the asset being depreciated more rapidly, nor the replacement. So the shift in statutory profit, while entirely correct and in keeping with accounting standards, also looks a bit meaningless if the question is profitability or viability, which are more difficult questions than just looking at the statutory line item.

Carlton, for their part have assumed a 26 year lifetime on buildings and leasehold improvements, and given they've got several pokies venues you'd think a lot of their capital is tied up in those. So there's no reason to think the assumptions are inaccurate. However if their next headquarters upgrade is government funded, they'll never really have to pay to replace that particular part of their depreciation...

You're also correct that nearly 1m is generally a good underlying figure for most clubs. They're comfortably a footy finance middleweight even when they've struggled for well over a decade, and sporting clubs usually aren't hugely profitable enterprises at the best of times.
 
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#15
The profit isn't huge because the club spent $2m re-surfacing the ground in the past year.

The club is 5k up on memberships this year but gave out free membership tier upgrades this season which the CEO said 'cost' the club around $1.5m worth of value/revenue. So it'll probably remain low again for this year, but if enough people stick with the higher membership tier for the 2020 season it will pay off.

Pokies suck yes, which is why the club has launched a sports degree with latrobe, which should bring in some decent cash as well.
 
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#16
They're comfortably a footy finance middleweight even when they've struggled for well over a decade, and sporting clubs usually aren't hugely profitable enterprises at the best of times.
The rest of your post I agree with but this sentence is a really poor finish that undid a lot of the good work.

Sporting clubs are not for profit businesses. While they should be run in a business like manner, and a small surpus does make sense.

They are not fish and chip shops with an aim to maximize profit though. A significant profit would mean they lack the imagination to find useful things to spend the money on, or have ran out of options to improve the club.
 
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#17
Quite so, that's what I was getting at, along with the related point that clubs are small/medium businesses, not big ones, with little capacity for things like capital investment.

Plus financial equalisation is extensive enough in the last cople of years that if a club expands or contracts its football-related revenues, the AFL distribution tends to adjust to keep them around breakeven anyway.

I would however make the point that at the extremes, a few clubs around the world make so much money in a hard salary capped environment they do probably have too much to effectively use. West Coast here are an example and basically they just build up an enormous stock of savings and investments which they should probably have reduced via an increased royalty fee from the WAFC. The Toronto Maple Leafs are potentially another example, I understand that with the salary cap constraint in the NHL their ownership group basically uses the Leafs enormous revenues to cross-subsidise spending by other teams they own, like the soft-capped Raptors and Toronto FC.
 
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telsor

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#18
The profit isn't huge because the club spent $2m re-surfacing the ground in the past year.
See my previous comment about why depreciation is a real thing.

How $2M spent on ground re-surfacing would go down...

2018, $2M is spent..this affects their cash flow (which is important), and on their balance sheet, it's really just a transfer between cash (the money they spent for it) and a longer term asset (something like 'ground improvements'), so it makes no difference to their bottom line/profits.

Over the next several years, as the value of those improvements declines, the 'lost value' gets approximated and deducted from profits as depreciation (generally via fairly simple maths ...a percentage each year). Or in other words, it's a very real thing.


So when clubs report the 'before depreciation' figure, they're really just kidding themselves (or more likely, trying to fool those media and fans who don't understand this stuff).
 

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#19
See my previous comment about why depreciation is a real thing.

How $2M spent on ground re-surfacing would go down...

2018, $2M is spent..this affects their cash flow (which is important), and on their balance sheet, it's really just a transfer between cash (the money they spent for it) and a longer term asset (something like 'ground improvements'), so it makes no difference to their bottom line/profits.

Over the next several years, as the value of those improvements declines, the 'lost value' gets approximated and deducted from profits as depreciation (generally via fairly simple maths ...a percentage each year). Or in other words, it's a very real thing.


So when clubs report the 'before depreciation' figure, they're really just kidding themselves (or more likely, trying to fool those media and fans who don't understand this stuff).
I suggest rereading Arwib's response to you above. Did you understand it?

If a club's depreciation is of assets wholly or largely gifted to it, or represents accelerated depreciation of an asset no longer needed for its operations, than its earnings before depreciation figure is likely more meaningful to its financial position

AFL clubs capital investments are often substantially supported by government and AFL grants. They also often come with community obligations that can increase operating and maintenance costs.

Most reports seem to include both which seems appropriate
 
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#20
Bear in mind a big chunk of Carlton's depreciating capital is going to be tied up in their social clubs, rather than being just the footy related Princes Park stuff. I'm inclined to think it's not an exceptional set of circumstances but bog standard business expense.
 

telsor

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#21
I suggest rereading Arwib's response to you above. Did you understand it?

If a club's depreciation is of assets wholly or largely gifted to it, or represents accelerated depreciation of an asset no longer needed for its operations, than its earnings before depreciation figure is likely more meaningful to its financial position

AFL clubs capital investments are often substantially supported by government and AFL grants. They also often come with community obligations that can increase operating and maintenance costs.

Most reports seem to include both which seems appropriate
Yes, you write off the cost of different things at different rates.

How you acquire them is irrelevant to depreciation.

Yes, you adjust under special circumstances (e.g. disposing of the asset such as with Seaford/St Kilda).

None of this changes the fact that depreciation is a real expense and publishing profit before depreciation is a largely meaningless figure designed to make things look better than they are.
 

NoobPie

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#22
Yes, you write off the cost of different things at different rates.

How you acquire them is irrelevant to depreciation.

Yes, you adjust under special circumstances (e.g. disposing of the asset such as with Seaford/St Kilda).

None of this changes the fact that depreciation is a real expense and publishing profit before depreciation is a largely meaningless figure designed to make things look better than they are.

No, how you acquire them is irrelevant to the accounting treatment of depreciation.

Depreciation is the expending of a capital investment generally over its useful life. Where a club finances an asset through grant funding, the depreciation is conceptually not a real expense to that club because they didn't outlay those monies from accumulated profits of borrowings

In 2017 St Kilda had an accounting profit of $5,267,414. But on the website they still headlined with the operating profit

http://www.saints.com.au/news/2017-11-29/members-underpin-strong-financial-result

St Kilda CEO Matt Finnis has heaped praise on St Kilda’s growing membership base after the Saints announced an operating profit of $796,001.

The operating profit, which is calculated before grant funding revenue, depreciation, amortisation and interest, increased from $150,589 in 2016.

Several paragraphs further down they explained

St Kilda’s overall accounting net profit was $5,267,414 (2016: $1,107,311). the net profit is Moorabbin Reserve grant funding revenue of $8,855,565, depreciation expenses of $4,032,350, which incorporates an additional depreciation charge due to the clubs expected relocation to Park.
Surely if it was purely about spin, they would have gone with the accounting profit?
 
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