Debt

[Its Time for Another 4,088]

When you are a club that at best is barely breaking in an environment where the costs of the competition are always increasing, having a millstone of debt around your necks is the last thing you want.

Debt is not necessarily a bad thing in a business when that debt is undertaken in a planned manner in respect of the investing in assets that will provide a return in the future that will provide a satisfactory return and mitigating the risk of the debt. Sadly this is not the case here.

Any debt taken on is a consequence of the BAU outcomes of the previous admin where attendances/membership fell/ penalties occurred and significant senior contracts paid out.

The current Board would be well aware that we need to boost on and off field performance to ensure we derive revenues that cover operating expenses and pays whatever debt there is as soon as possible.

Given where the competition is going and that MFC is one of the minnows we have no need to carry longer than necessary the dark shadow of debt bestowed by poor decisions in the past.

Rhino, I'm not an accountant but as I understand the debt situation you are way off beam here.

It is important to separate the debt situation of the Club's footy operations and it's developing non footy operations. They both have to end up in the same financials but are entirely different.

Debt created from football operations is BAD as it is the milestone around the neck you are talking about and money has to be found to pay it off.

Debt taken on in order to own long term revenue earning assets is not a problem, especially when those assets pay the debt off on their own and then leave debt free revenue sources for the long term. As I understand it the Club took on something like $5mill in debt when it took over the Bentleigh Club but received an asset who's land value alone, not including the value of the club or its buildings, is over $9mill. Further to that the Club has invested in an increase in pokie machines which has incurred a further debt of $2.7 mill. The revenue from these pokies jumped from $6.9mill last year to $11.1mill this year. According to PJ in the annual report between the Bentleigh and Oakleigh Clubs and their operations they will pay off this debt completely in 4 years time, by 2017. That will leave the Club with an unencumbered asset at the Bentleigh Club with land value that will only go up, of over $9mill and pokies currently generating $11.1mill but by then I would expect it to be much more.

As you can see, there is no problem with the non football debt. It is required in the short term (4yrs) in order to create long term assets and income.

Assuming and it is a big assumption, given the last 7yrs, the Club becomes competitive over the next couple of years, I am expecting the footy operations and I include, memberships, sponsorships, commercial etc in this, to be generating a surplus.

[Rhino Richards 1,467]

I agree you are not an accountant.

We still recorded a significant operating loss last year which includes all non match revenue. Our expenses were greater than the revenue and has to funded by debt.

And if you are correct on the LT debt ( I had thought 12 months ago) then I still don't see why we have gone into this debt when struggle to fund our football operations each year to compete with other clubs, went cap in hand to the AFL for funding to pay out contracts and we are punting on an uncertain LT outcome.

I trust this is not the case.

Given the financial disposition of MFC I don't think you can sensibly split the debt into good debt and bad debt. It all has to be repaid and we have such limited resources to do that and service the interest costs in the meantime.

[Dr. Gonzo 23,888]

Yes but the point is debt incurred to purchase a revenue producing asset is different to debt incurred because you're losing money on gameday/paying out contracts.

[daisycutter 29,429]

Yes but the point is debt incurred to purchase a revenue producing asset is different to debt incurred because you're losing money on gameday/paying out contracts.

true. an accountant could see that LOL

that's why a balance sheet has different sub categories of debt

[Macca 16,662]

A comparison could be made between our club to many of the "Leagues" clubs in Sydney. Historically, a number of the Rugby League clubs may not have brought in a lot of money through gate receipts, memberships, sponsorship and the like but the revenue from poker machines helped pay the bills and kept those clubs afloat.

A lot has changed in those aforementioned areas for the NRL clubs and of course, there's also the large dividends that these Rugby League clubs now receive from the NRL (that money would mainly be derived from their huge media rights deal ... apart from other sources)

You could say that a lot of the AFL clubs have done things in a reverse sort of way to the NRL clubs and effectively, many of the clubs in both the AFL and the NRL now derive their income from the same sort of sources.

In other words, many AFL clubs have gone down the pokies path and the NRL clubs have gone down the Membership and gate receipts path (as well as keeping their "traditional" revenue streams)

Looking at the breakdown of our revenues from 2013, here are the notable figures ...

11,291,234 ... Social and gaming revenue

10,846,244 ... Distributions from the AFL

6,368,135 ... Marketing/corporate sponsorship and general fundraising

5,100,106 ... Membership and annual reserved seating

3,311,071 ... Gate receipts

723,068 ... Merchandise

462,141 ... Foundation heroes/debt demolition fundraising

1,329,341 ... Other revenue

What is also notable is our Social and gaming "expenses" ... 7,413,586 (although Peter Jackson did intimate that this figure will drop in the coming years as we service the debt on our gaming businesses)

[Its Time for Another 4,088]

Yes but the point is debt incurred to purchase a revenue producing asset is different to debt incurred because you're losing money on gameday/paying out contracts.

Dr G why bother. He isn't going to hear. He just wants to whinge. He won't separate the debt and revenue of the pokies and clubs to see if they are paying off the debt so there will be large assets and revenue streams in four years. I haven't seen the figures broken down so I don't know the answer but given PJ says they will pay off the debt in four years I assume that they are generating enough revenue to service and pay out the debt. As I understand it the operating debt created this year was in footy operations. But hey whatever he wants to hear.

[The Great Pretender 456]

I agree you are not an accountant.

We still recorded a significant operating loss last year which includes all non match revenue. Our expenses were greater than the revenue and has to funded by debt.

And if you are correct on the LT debt ( I had thought 12 months ago) then I still don't see why we have gone into this debt when struggle to fund our football operations each year to compete with other clubs, went cap in hand to the AFL for funding to pay out contracts and we are punting on an uncertain LT outcome.

I trust this is not the case.

Given the financial disposition of MFC I don't think you can sensibly split the debt into good debt and bad debt. It all has to be repaid and we have such limited resources to do that and service the interest costs in the meantime.

And you sir, are definitely not an accountant judging by this gobbeldygook.

[Machsy 2,858]

Not even a bookkeeper.

[daisycutter 29,429]

he has a good avatar but