2020 Financials: Reduced Debt Despite Loss

[Demonland 64,391]

 

[skills32 229]

      https://www.melbournefc.com.au/news/845785

If I read this correctly;  if not for Covid and our projected revenue was realised  then we would have made a profit of $15 million this year which is a fantastic result and augers well for the future.

Well done Perty.

I am not an accountant and if wrong someone will point it out,  which they should do, but never the less it seems like some good news.                                                                

Edited December 21, 2020 by skills32
insert comma

[IWAP 168]

I'm no expert either, but i read it a more negative way. We sold Leighoak (for around 10 million?), and the proceeds were basically used to cover the debt accrued from the past few years. Now the only real asset we have is the land value of Bentleigh club.

[Jontee 3,632]

Neither am I but remember revenue raising costs money, so   revenue 18 mill (down) may have cost 17 mill  to raise.

Nearly 4 mill in job keeper payments.

A small capital loss on the sale of investments. I think.

Not sure why we want to go debt free when interest rates are at historical lows.

 

[Diamond_Jim 11,676]

Some highlights

they reduced expenses by around $16M due to covid which helped to offset the revenue reduction of $17.5M.

Jobkeeper earned them nearly $4M

Sponsorship income dropped by $4.4M

They revalued  Bentleigh Club upwards by $14M

There's a positive $13M odd swing in financial investments  which I assume reflects the proceeds of sale of Leighoak

 

Edited December 21, 2020 by Diamond_Jim

[Sir Why You Little 34,405]

13 minutes ago, Jontee said:

 

Not sure why we want to go debt free when interest rates are at historical lows.

 

Yep. This is the time to borrow

interest Rates won’t move for 3-4 years, maybe longer

[Demons1858 1,657]

1 hour ago, IWAP said:

I'm no expert either, but i read it a more negative way. We sold Leighoak (for around 10 million?), and the proceeds were basically used to cover the debt accrued from the past few years. Now the only real asset we have is the land value of Bentleigh club.

Don't like the fact that the Leighoak sale isn't mentioned in any of the financial updates, a bit deceiving and trust takes a bit of a hit as a result. They also liquidated their assets ... more information please!

Edited December 21, 2020 by Demons1858

[Diamond_Jim 11,676]

12 minutes ago, Demons1858 said:

Don't like the fact that the Leighoak sale isn't mentioned in any of the financial updates,

I think that is reflected in the movement in financial investments fro negative $7M to positive $6M but I agree it's not obvious

[BAMF 3,783]

Fingers crossed we are staying out of debt in the short term in anticipation of going into debt to get a brand new training facility.

[ox_5 163]

25 minutes ago, Demons1858 said:

Don't like the fact that the Leighoak sale isn't mentioned in any of the financial updates, a bit deceiving and trust takes a bit of a hit as a result. They also liquidated their assets ... more information please!

I haven’t looked at the financials yet, but wasnt the Leighoak sold in 2018 and wouldn’t be in this years result? These accounts would be for the year ended 31 October 2020, unless it didn’t settle until after 1 November 2019 which would be surprising? 

[ox_5 163]

Have had a quick look. The Leighoak was sold in 2018 and was settled even before last financial year, hence the non-mention given it happened all of two financial years ago. You will note some post sale expenses are reflected in the 2019 profit and loss statement. 
 

 

[Demons1858 1,657]

5 minutes ago, ox_5 said:

Have had a quick look. The Leighoak was sold in 2018 and was settled even before last financial year, hence the non-mention given it happened all of two financial years ago. You will note some post sale expenses are reflected in the 2019 profit and loss statement. 
 

 

Fair enough ... I think I'm more annoyed they claim to be paying off debt while making a loss without mentioning they had sold down assets to be able to do that

[ox_5 163]

2 minutes ago, Demons1858 said:

Fair enough ... I think I'm more annoyed they claim to be paying off debt while making a loss without mentioning they had sold down assets to be able to do that

the full detail of the financials rather than the website summary does mention the investments were liquidated to get through the year from a cash flow perspective, and the rationale of that decision. 

[Demons1858 1,657]

7 minutes ago, ox_5 said:

the full detail of the financials rather than the website summary does mention the investments were liquidated to get through the year from a cash flow perspective, and the rationale of that decision. 

ox_5, seeing as you appear across this, where did he proceeds of the sale of leighoak go? It was sold for $11mill

[ox_5 163]

1 minute ago, Demons1858 said:

ox_5, seeing as you appear across this, where did he proceeds of the sale of leighoak go? It was sold for $11mill

Let me take the time to have a proper read. It was 2 years ago, so some will no doubt have gone towards debt. 

[BDA 19,978]

The club liquidated the investment of $6.6m which was the wash-up from the Leighoak sale. $2m when to pay-down debt and $3m to fund the operating loss. The remainder is in the bank account.

The debt was in the form of commercial bills which can be expensive. Interest expenses was greater than the interest earned on the investment hence made sense to pay down the debt.

They are not pretty numbers but we were lucky to have the leighoak proceeds to tide us over. Another year like this year and we’ll either have to tap the AFL, drawdown on the commercial bill facility again or sell the Bentleigh Club and live off the proceeds.

Note 2b outlines the basis on which the directors are satisfied to sign off the statements on a going concern basis. I note the auditors haven't included a reference in their audit report to going concern which is positive. Suggests no immediate reasons to be concerned about the financial situation.

I’d be interested to see what sponsorship and membership are looking like for 2021. Are we renewing at the same rates or is there a drop-off?

I hope the vaccines are effective and we can get back to full crowds again and relative normality otherwise it’ll be another round of wage cuts, reduced list sizes and austerity.

Edited December 21, 2020 by Better days ahead

[Demons1858 1,657]

10 minutes ago, Better days ahead said:

The club liquidated the investment of $6.6m which was the wash-up from the Leighoak sale. $2m when to pay-down debt and $3m to fund the operating loss. The remainder is in the bank account.

The debt was in the form of commercial bills which can be expensive. Interest expenses was greater than the interest earned on the investment hence made sense to pay down the debt.

They are not pretty numbers but we were lucky to have the leighoak proceeds to tide us over. Another year like this year and we’ll either have to tap the AFL, drawdown on the commercial bill facility again or sell the Bentleigh Club and live off the proceeds.

Note 2b outlines the basis on which the directors are satisfied to sign off the statements on a going concern basis. I note the auditors haven't included a reference in their audit report to going concern which is positive. Suggests no immediate reasons to be concerned about the financial situation.

I’d be interested to see what sponsorship and membership are looking like for 2021. Are we renewing at the same rates or is there a drop-off?

I hope the vaccines are effective and we can get back to full crowds again and relative normality otherwise it’ll be another round of wage cuts, reduced list sizes and austerity.

Do you recall where the remainder of the $11mil Leighoak sale went of approx $4.4mil (i.e. $11mill minus 6.6mill)?

[BDA 19,978]

19 minutes ago, Demons1858 said:

Do you recall where the remainder of the $11mil Leighoak sale went of approx $4.4mil (i.e. $11mill minus 6.6mill)?

https://resources.melbournefc.com.au/aflc-melb/document/2019/12/16/392d79e2-bd8d-46b4-8db1-57f764504f4d/MFC_Financial-Report_2019_Digital.pdf

The above link is to the 2019 financial statements.The sale was accounted for in the 2018 financial year.

Looks like the proceeds on sale were $10.65m – see cashflow statement 2018 comparative - Proceeds from sale of discontinued operations.

The money was banked.

In 2019 some of the funds were re-invested – see $7.6m financial investment on 2019 statement of financial position ($1m + $6.6m)

We incurred a loss in the 2019 year of approx. $2m which accounts the majority of the remainder of the Leighoaks proceeds (used to cover the losses).

Alternatively you could look at the 2019 cashflow statement which details components of the decrease in the bank account of $10.2m. 

[ox_5 163]

1 hour ago, Better days ahead said:

https://resources.melbournefc.com.au/aflc-melb/document/2019/12/16/392d79e2-bd8d-46b4-8db1-57f764504f4d/MFC_Financial-Report_2019_Digital.pdf

The above link is to the 2019 financial statements.The sale was accounted for in the 2018 financial year.

Looks like the proceeds on sale were $10.65m – see cashflow statement 2018 comparative - Proceeds from sale of discontinued operations.

The money was banked.

In 2019 some of the funds were re-invested – see $7.6m financial investment on 2019 statement of financial position ($1m + $6.6m)

We incurred a loss in the 2019 year of approx. $2m which accounts the majority of the remainder of the Leighoaks proceeds (used to cover the losses).

Alternatively you could look at the 2019 cashflow statement which details components of the decrease in the bank account of $10.2m. 

Good summary, saved me a lot of typing! 

[darkhorse72 1,718]

While interest are low for "households" but not sure what the commercial rates are?

Rather have zero debt and that is the safest way to be in the current climate, massively reduces the risk to the club.

 

[deanox 8,510]

11 minutes ago, Darkhorse72 said:

While interest are low for "households" but not sure what the commercial rates are?

Rather have zero debt and that is the safest way to be in the current climate, massively reduces the risk to the club.

 

If you are a government, issuing bonds to raise debt is very low interest. Commercial entities borrowing new money at bank is relatively low interest. Existing loans or financial agreements could be at various rates.

If the choice is between investments paying a high rate of return vs low interest debts, then you keep the investment (if you are liquid enough to survive).

If it's between debt being repaid and cash invested at no interest, then repaying makes sense.

 

 

[whatwhat say what 18,764]

as, theoretically, the afl and subsidiaries (i.e. clubs) are not for profit, any money we would have to pay back as part of a loan to clear debt etc. would be money that we could have otherwise spent, yes?

we can carry the debt without a care in the world (theoretically) because of the afl being able to guarantee us

[Demon trucker 1,729]

5 hours ago, whatwhatsaywhat said:

as, theoretically, the afl and subsidiaries (i.e. clubs) are not for profit, any money we would have to pay back as part of a loan to clear debt etc. would be money that we could have otherwise spent, yes?

we can carry the debt without a care in the world (theoretically) because of the afl being able to guarantee us

Would you go into debt and be guaranteed by the AFL, most clubs like ours have moved heaven and earth to avoid this why? The AFL is committed to a 18 team competition, but they have never said they are committed to having all the teams based in their current location. Don't think a second the AFL won't hesitate to relocate 1 of these AFL assistant teams, without a home base to Tasmania.

[BDA 19,978]

7 hours ago, whatwhatsaywhat said:

we can carry the debt without a care in the world (theoretically) because of the afl being able to guarantee us

Depends how financially secure the AFL is. They took out a big loan early in the covid crisis for $500m which was secured against Marvel Stadium. That needs to be repaid and i'd love to know the rate of interest they were charged. HQ was gutted and all the "make work" roles were done away with (which was most of them). Player payments reduced as well.

Gill was looking very nervous there for a while but i think the bubble meant a financial crisis was avoided for now. 

I wouldn't like to be relying on the AFL. Much prefer we retain our financial independence and can make our own decisions.

[george_on_the_outer 6,944]

14 hours ago, Diamond_Jim said:

Some highlights

they reduced expenses by around $16M due to covid which helped to offset the revenue reduction of $17.5M.

Jobkeeper earned them nearly $4M

Sponsorship income dropped by $4.4M

They revalued  Bentleigh Club upwards by $14M

There's a positive $13M odd swing in financial investments  which I assume reflects the proceeds of sale of Leighoak

 

That one line explains everything that has been claimed.

The Bentleigh club had not been revalued for years ( and should have been). 

We have been drawing down on the sale proceeds from the Leighoak club for 2 years now.  While this past year has been difficult, in terms of operational cash flow, all that has been happening is we are selling assets. 

Importantly, although the sale of Leighoak was fortuitous in terms of COVID since Poker machine venues couldn't operate, we have not replaced the $1M per year of profit that it provided. 

Revaluation of Bentleigh, doesn't put any more food on the table.  The sooner it is sold so that either the money can be invested to provide decent long term income or directed toward a training base, the better. 

Edited December 21, 2020 by george_on_the_outer