News Norths Strong Result

[Bojan KantKick]

There is no real financial requirement to continue to pay off the debt at this stage. It's more of an optics thing. We'd be paying around 100k per year in interest which is sfa.

We should only be paying off the debt if we can't use the money more effectively elsewhere.

 

[Luke72]

Good Stuff.
I like that he mentioned No Pokies twice.
That debt never seems to get smaller, like an optical illusion.
Great to have Arden St as the potential home of the AFLW but how about we get a women's team first please.

I get that feeling too, I thought it might have been lower than $1.2m. I keep kicking in the $40 with my membership renewal but if they are happy to sit on $1m worth of debt it seems a bit pointless, it might be better spent on merchandise or something.

 

[guapo]

For the eighth time in nine years, North Melbourne has recorded a profit.

The club recorded a net operating profit of $470,046, while again reducing the club’s overall debt by a further $400,000 in the last financial year.

Managing Director and CEO Carl Dilena said North Melbourne was in a strong financial position.

“We are very pleased to post yet another profit in the past financial year,” Dilena told NMFC.com.au.

“We are fully aware we operate in a really challenging financial environment, so our staff deserve a massive amount of gratitude for their hard work and dedication in helping us record this result.

“In 2016, we saw an increase in total revenue to $38 million, thanks to the growth in gate receipts, membership and merchandise sales.

“We’ve also continued to increase our investment in our football department, ensuring that we give our players every chance to succeed in the years ahead.”

North remains as the only Victorian-based AFL club to not rely on revenue from pokies and gambling.

Dilena also paid tribute to outgoing Chairman James Brayshaw, saying his leadership was pivotal to the club’s current financial position.

“During James’ chairmanship, we saw a turnaround in the club’s fortunes and we owe him a great deal for the work he put in behind the scenes during his nine years as Chairman of the Board,” Dilena said.

“Since James took over, we’ve doubled our membership from 22,000 to a record 45,000 plus, as well as doubling our sponsorship revenue, allowing us to invest heavily in growing our workforce. We of course played in five finals series in those nine years, including two Preliminary Finals in 2014 and 2015.”

Under Brayshaw, North built its elite training facilities at Arden St, returned the club to a ‘member-based club’, established The Huddle and its leading community programs, as well as the significant debt reduction seen under his watch.

Key points – 2015/16
- Net operating profit of $470,046
- Football Department expenditure increase of $496,000
- Reduction of debt by a further $400,000 to $1.25 million
- Revenue of $38m, an increase of $1.09 million on 2014/15
- Gambling and pokies revenue $0

Sure, there were many great north people involved, but I call this JB's legacy. Put his hand up to lead when we were all but packed off to the GC, and left us in a position that we have never been in before.

Thanks James!

 

[Dodecahedron]

I get that feeling too, I thought it might have been lower than $1.2m. I keep kicking in the $40 with my membership renewal but if they are happy to sit on $1m worth of debt it seems a bit pointless, it might be better spent on merchandise or something.

You know what? You're absolutely right. GN80 explained where the funds had been re-allocated and that's sort of OK because North hasn't squandered it. But I allow the "automatically deducted $40" to sail through because I think I am reducing the debt, not investing in the footy department or TPP. That could also be Ok but they should tell us up front what the funds could be allocated to.

 

[dus]

Giggity giggity.

 

[hilly]

Good Stuff.
I like that he mentioned No Pokies twice.
That debt never seems to get smaller, like an optical illusion.
Great to have Arden St as the potential home of the AFLW but how about we get a women's team first please.

Our debt was $8m nine years ago. That is a huge reduction (and I suspect a sustainable one).

 

[Royal Flush]

That's nothing, the doggies made a 4.5 million profit and wiped out 12 million debt in one year

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[Roogal]

Are we better off being debt free, or continue servicing and chipping away at the remaining $1.25m ?

The club has targeted being debt free as its goal because we still are opering on one of the lowest revenue bases of the Melbourne based clubs. I imagine that their thought process is that every cent that we can spend on ourselves is better than being paid in interest. One of James Brayshaw's stated goals was in maximising the football departments, and $100,000 not being paid in interest is $100,000 that can be paid toward a specialist trainer's wages. It's about using every dollar that they can generate as effectively and efficiently for the club as possible. Paying an interest bill is perhaps considered to not be using those dollars efficiently.

 

[Roogal]

That's nothing, the doggies made a 4.5 million profit and wiped out 12 million debt in one year

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They have had a similar campaign to North's Box On campaign going for quite a few years now, plus they also got prize money from the Grand Final as well as an estimated $3 million windfall from merchandise sales after the Grand Final. Additionally for them came bonusses from sponsors for winning the big one. So I'm not too excited about the Bulldogs and what they have reported.

I think that North are travelling well and I am proud of how we have turned our fortunes around as a club since 2008.

 

[RobZombie]

There is no real financial requirement to continue to pay off the debt at this stage. It's more of an optics thing. We'd be paying around 100k per year in interest which is sfa.

We should only be paying off the debt if we can't use the money more effectively elsewhere.

Yes, the cost of servicing debt is historically low at the moment, and the amount down to the point where interest payments don't impact their ability to fund football operations. It would be great to pay it all down but more important right now to make sure that with the state of the list for the next few years, player development is properly resourced.

The only real problem is taking on debt to fund recurrent expenses, which we haven't done since the bad old pre-Brayshaw years.

I'd like to know, and we won't until the detailed annual report is released - is the $400k of debt reduction part of the $470k operating profit (i.e., we only have $70k more in the bank than last year) or a separate line item?

 

[Donkey Chop]

Yes, the cost of servicing debt is historically low at the moment, and the amount down to the point where interest payments don't impact their ability to fund football operations. It would be great to pay it all down but more important right now to make sure that with the state of the list for the next few years, player development is properly resourced.

The only real problem is taking on debt to fund recurrent expenses, which we haven't done since the bad old pre-Brayshaw years.

I'd like to know, and we won't until the detailed annual report is released - is the $400k of debt reduction part of the $470k operating profit (i.e., we only have $70k more in the bank than last year) or a separate line item?

I was wondering the same thing. The way it was announced gave the impression it was profit after the 400k reduction, but with the spin coming out of footy clubs you never know for sure.

 

[RobZombie]

I was wondering the same thing. The way it was announced gave the impression it was profit after the 400k reduction, but with the spin coming out of footy clubs you never know for sure.

Well, last year they reported an operating profit of $529,507. There was then a non-operating loss (amortisation of the Arden St facilities) of $380,665 and a resulting profit before income tax of $148,852. That PBIT was the total change in the overall net assets, which makes sense. The non-current liabiilties (mainly that thing that is reported as "the debt") decreased by about 500,000.

So I guess the answer is neither. The debt reduction seems to be applied before the operating profit number, but the overall position is affected by non-operating items.

 

[Le Grille]

The balance sheet and the profit and loss are linked but not the same. Debt reduction does not appear on the profit and loss but the interest on the debt does.

A cash flow statement is different again, where it concentrates on cash in and outflows irrespective of effect on p and l or balance sheet.

I would also expect that the club would run on accrual basis. Where income and expenses are recognised when billed as opposed to actually paid


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[Tas]

There is no real financial requirement to continue to pay off the debt at this stage. It's more of an optics thing. We'd be paying around 100k per year in interest which is sfa.

We should only be paying off the debt if we can't use the money more effectively elsewhere.

I would imagine that we will be carrying a small amount of debt while we build up cash reserves, what you normally maintain as an overdraw facility you need to have as a cash reserve in order to operate without debt in terms of interest bearing debt, other types of debt you can't avoid while operating a business. Even Collingwood has debt despite having significant cash reserves.

As to where the money could be better off used, it is difficult to invest in significant investment without going back into debt in a meaningful way. It is part of the reason I wanted us to slowly chip off the debt and invest at the same time via a membership surcharge so we didn't develop a stigma about debt. We had bad debt, not good debt. Bad debt is associated with the cost of running at a loss in the past or having certain investments fail, it doesn't generate anything for you long-term. Good debt allows you to invest in significant assets, hopefully income producing assets.

My concern is that it would be challenging for the club to sell to the members to go back into debt after a crusade to eliminate debt.

 

[Bojan KantKick]

I would imagine that we will be carrying a small amount of debt while we build up cash reserves, what you normally maintain as an overdraw facility you need to have as a cash reserve in order to operate without debt in terms of interest bearing debt, other types of debt you can't avoid while operating a business. Even Collingwood has debt despite having significant cash reserves.

As to where the money could be better off used, it is difficult to invest in significant investment without going back into debt in a meaningful way. It is part of the reason I wanted us to slowly chip off the debt and invest at the same time via a membership surcharge so we didn't develop a stigma about debt. We had bad debt, not good debt. Bad debt is associated with the cost of running at a loss in the past or having certain investments fail, it doesn't generate anything for you long-term. Good debt allows you to invest in significant assets, hopefully income producing assets.

My concern is that it would be challenging for the club to sell to the members to go back into debt after a crusade to eliminate debt.

I'm not advocating increasing the debt level. If we could put the 400k allocated to debt repayment into a couple of new coaches and recruiting staff then I'd support that and I think the members would too.

 

[RobZombie]

The balance sheet and the profit and loss are linked but not the same. Debt reduction does not appear on the profit and loss but the interest on the debt does.

A cash flow statement is different again, where it concentrates on cash in and outflows irrespective of effect on p and l or balance sheet.

I would also expect that the club would run on accrual basis. Where income and expenses are recognised when billed as opposed to actually paid


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So by that you mean the debt reduction surcharge on the memberships is not an operating revenue item? That would make sense. I can't see where it is in the income, but there is a "cash flows from financing activities" item that is separate from the operating cash flows and matches the debt reduction. Cash flow statement is p9 of last year's report.

And yes, the accounts do separate out accrued payables/receivables, as well as things like accrued employee benefits.

 

[Le Grille]

NOTE 3 – REVENUE FROM OPERATING ACTIVITIES
AFL – Distributions 9,090,840 8,714,004
AFL – Prize Money 300,000 300,000
AFL – Future Funding 3,510,000 2,810,000
AFL – Stadium Bonus Money 200,000 200,000
AFL – Signage 400,000 450,000
Commercial Business, Events and Fundraising 3,310,822 3,576,059
Gate Receipts 1,995,298 1,614,141
Membership 6,511,612 5,830,321
Merchandise 1,421,461 1,376,827
Sales and Sponsorship 9,137,733 7,856,770
Other 1,581,375 1,662,233

this is from the note 3 to the financial statements the first lot of numbers are 2015, the second 2014. This is a breakdown of that operating revenue figure.

I would expect the Debt Reduction Surcharge $ would fall into the "fundraising" or "other" category as evidenced by this other note.

(k) Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably. Revenue for the following is recognised as follows:  AFL-sourced income including distributions, prize money and gate receipts, is recognised on an accruals basis. The AFL committed to supporting the Company with financial assistance for the period 2012 to 2016. A portion of the funding assistance is required to be spent on specific initiatives agreed between the AFL and the Company. This specific funding will be reviewed after 2015. AFL funding assistance of $3.51 million (2014: $2.81 million) was paid in the year ended 31 October 2015.  Revenue from the sale of memberships, corporate hospitality and sponsorships, is recognised in the relevant football year.  Revenue from the sale of goods is recognised upon delivery of goods to the customer.  Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.  Government Grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.  Donations are recognised upon receipt.

 

[big_e]

Exactly how many accountants are there on this board?

 

[Le Grille]

im 1

 

[ApplecrossWC]

Does this mean they will be building the cafe at Arden st?

 

[Tas]

I'd like to know, and we won't until the detailed annual report is released - is the $400k of debt reduction part of the $470k operating profit (i.e., we only have $70k more in the bank than last year) or a separate line item?

Yes.

That other $400k that was sitting in the bank was used to reduce our interested bearing loan of $1,650,000 last year, down to $1,250,000 this year according to that brief. The transfer of cash between assets and liabilities does not impact profit or loss, so taking money from our bank account and giving it to the financial institution that we have borrowed from doesn't impact profitability.

 

[Tas]

Does this mean they will be building the cafe at Arden st?

We have one.

 

[Donkey Chop]

I'm curious how much of that fundraising money was out of Peter Scanlons pocket?

 

[big_e]

im 1

Me too. I think Tas as well?

Going to the notes was the giveaway.

 

[Tas]

Me too. I think Tas as well?

Going to the notes was the giveaway.

Technically I am not a bean counter any longer.