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2020 Financials: Reduced Debt Despite Loss



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Once again I think this club is taking it's existing, long term members for granted. I, for one, am bitterly disappointed that they haven't acknowledged our loyalty by waiving reserved seat fees and other such payments that provided zero benefit last year. This generosity is not going to last forever, and a club that has played finals once in the past fourteen years can't afford to be upsetting its loyal supporters.

They acknowledge that we had one of the lowest cancellation rates in the league, and even with that we lost $2.9M. That follows on from a $1.6M loss in 2019 when we couldn't capitalise on playing finals the previous year. These losses are becoming ingrained and at some point we will exhaust these remaining cash reserves. Then presumably we resort to selling the Bentleigh Club, and eliminate our last non-football asset.

We don't have enough income coming in from sources other than an under-performing football team. This is not sustainable in any environment, let alone one in which a global pandemic can reduce football income to nil in the blink of an eye. 

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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 d

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

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.

2 hours ago, Better days ahead said:

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.

They didn't take out a loan they secured a line of credit. Not sure how much of that has been used but there is a difference (ie home/personal loan vs credit card). You only have to repay what you use.

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29 minutes ago, Dr. Gonzo said:

They didn't take out a loan they secured a line of credit. Not sure how much of that has been used but there is a difference (ie home/personal loan vs credit card). You only have to repay what you use

You are correct. I wonder how much of the line of credit has been used/drawndown?

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42 minutes ago, Dr. Gonzo said:

They didn't take out a loan they secured a line of credit. Not sure how much of that has been used but there is a difference (ie home/personal loan vs credit card). You only have to repay what you use.

That is a very good question.  Apparently the Hubs cost just $60m - half to a third of what was originally estimated. 

The AFL had a cash holding of $187m at end of 2019, received about $200m from broadcasters (see article below), other income from sponsors, some income from gate revenues and payments from Qld gov't for hosting the GF.  And it drastically cut expenditure across the board.  I have a sense that it used but a small proportion of the $500m line of credit. 

This article provides a good run down of where the AFL finances are at the-afl-season-is-over-let-the-financials-begin!  Have to agree with its summary:  "...the forthcoming AGM and annual report will provide interest to many."

The issue for me is if the AFL didn't need to use much of the $500m did the cut of 30% in Football Department soft cap need to be so drastic and similarly the sal cap for player payments which forced many clubs into back-ending revised contracts.

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17 hours ago, Jontee said:

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.

 

MCG for sale??

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37 minutes ago, Diamond_Jim said:

One interesting issue is how the expenses were cut so quickly giving a drop of $15M in expenditure.

One big element would have been the 50% part year reduction in player payments agreed in March.

Apparently 30% of staff were made redundant as well...

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34 minutes ago, Diamond_Jim said:

One interesting issue is how the expenses were cut so quickly giving a drop of $15M in expenditure.

One big element would have been the 50% part year reduction in player payments agreed in March.

Players are paid monthly so had already been paid in full for at least 6 months from Oct 2019 to March 2020.  So it was 50% of the remaining (4 to 6) months.

That aside I agree, the speed at which expenditure was reduced was quite impressive.  Sadly most of that was in the football and admin departments which meant cutting peoples' livelihoods.

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15 minutes ago, Lucifer's Hero said:

Players are paid monthly so had already been paid in full for at least 6 months from Oct 2019 to March 2020.  So it was 50% of the remaining (4 to 6) months.

That aside I agree, the speed at which expenditure was reduced was quite impressive.  Sadly most of that was in the football and admin departments which meant cutting peoples' livelihoods.

the financials are until June 30 2020 so many of the staff cuts would not have taken real affect at that time and you would have had redundancy costs pay outs,annual leave etc that would have been expensed into 2020. You'll see those savings mainly in the 2020/21 financial year.

I'm tending towards ground rental and match day costs as the savings but I'm not sure. It has to be something large to effectively reduce annual expenditure by around 50% over a three month period.

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25 minutes ago, Diamond_Jim said:

the financials are until June 30 2020 so many of the staff cuts would not have taken real affect at that time and you would have had redundancy costs pay outs,annual leave etc that would have been expensed into 2020. You'll see those savings mainly in the 2020/21 financial year.

I'm tending towards ground rental and match day costs as the savings but I'm not sure. It has to be something large to effectively reduce annual expenditure by around 50% over a three month period.

The financials are until 31 October Jim

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5 hours ago, Dr. Gonzo said:

They didn't take out a loan they secured a line of credit. Not sure how much of that has been used but there is a difference (ie home/personal loan vs credit card). You only have to repay what you use.

 

5 hours ago, Better days ahead said:

You are correct. I wonder how much of the line of credit has been used/drawndown?

Line of credit could have been used to help with liquidity in time of crisis.

With reduced cash flow and substantial asset value tied up in illiquid assets (ie stadiums) there was a risk the AFL would not have the cash to pay bills. By opening credit against Marvel, they had additional cash to make payments to clubs, so that clubs could keep operating too.

 

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On 12/22/2020 at 9:17 AM, george_on_the_outer said:

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. 

Bentleigh Club was never revalued from the time we took it over until now. Not sure why but can see why they'd do it now to soften the blow of the current year result by showing a much stronger asset base. 

From memory the actual money left over after the sale of Leighoak was $8mill. From memory there were debts or costs etc that brought it back to that from $11mill.  I would love to know what the original intention was in 2018 for this sale and what they planned to do with the proceeds. It seems a great shame to have such a rare asset in the history of the MFC being chewed up to cover operating costs and reduce debt.I believe it was an investment made in the Gutnick era.  I had hoped the plan was to use it for some type of revenue raising. It appears there's now only $1.6mill left and probably nothing by end of next year. Although some has been used to eliminate debt. 

Although we show a healthy financial position it isn't a realistic picture as we are the only club in 18 that doesn't have it's own training and admin base. The financial position will only be comparable to other clubs when we have the full debt for the training base. The $8mill from Leighoak clearly will be gone before that project even starts. 

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Summary of a HUN article detailing AFL club losses.

Sydney had a loss of $6.1m which is pretty severe and we're next at $2.9m. 

Not sure why St Kilda managed a loss of $1m. I would have thought they are comparable to us in terms of size and scale.

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St Kilda has announced an almost $1 million loss for the last financial year.

The net loss of $963,106 follows the devastating financial impact of COVID-19 and comes despite the Saints’ record-breaking membership of 48,775.

The club’s overall debt increased by about $1.7 million, in part because of the decision to defer the first instalment of 2021 membership subscriptions.

Melbourne also announced an operating loss of $2.9 million for the year, but eliminated its debt and retained almost $1.7 million in cash reserves to remain an “unassisted” AFL club.

The financial hit owed to a dramatic $17.9 million decline in revenue as a result of COVID-19.

Sydney has recorded a $6.1 million loss because of the COVID-19 pandemic, and Swans chairman Andrew Pridham says it could have been worse.

The Swans have revealed the “severe impact” on the club’s bottom line, citing the absence of home matches at the SCG and crowds for the 2020 season contributing to more than half of the big loss for the financial year.

The Swans’ membership of 48,322 was well down from 61,912 the previous year while the club reduced operating expenses by 38 per cent in an attempt to “ensure the club’s survival”.

Sydney wasn’t the only club hit hard, with Collingwood announcing a net operating loss of $1.8 million and Geelong posting a $2.6 million loss.

Earlier this month Richmond revealed it took $10 million in JobKeeper funds before declaring a small profit, well down on the profit of over $4 million in the previous two seasons.

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On 12/22/2020 at 11:38 AM, Better days ahead said:

You are correct. I wonder how much of the line of credit has been used/drawndown?

None is drawn down at year end. Refer to Note 14 of the financial statements. There is $4.5m available for use, which is the total line of credit. 

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On 12/21/2020 at 7:30 PM, 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!

They managed to liquidate Jayden Hunt's car which he had left parked at the G, which also resulted in the sale of a case of chocolate Big M's.

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On 12/21/2020 at 7:18 PM, Sir Why You Little said:

Yep. This is the time to borrow

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

Government interest rates have been 0 since near the top of November. I still think bank interest rates will go down further, but it's certainly a good time to borrow providing you can service it.

Interest rates should never go up again, but you're right. They'll probably go up in 5 years time if we're still bungling about with the same economics.

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On 12/22/2020 at 10:04 AM, poita said:

Once again I think this club is taking it's existing, long term members for granted. I, for one, am bitterly disappointed that they haven't acknowledged our loyalty by waiving reserved seat fees and other such payments that provided zero benefit last year. This generosity is not going to last forever, and a club that has played finals once in the past fourteen years can't afford to be upsetting its loyal supporters.

They acknowledge that we had one of the lowest cancellation rates in the league, and even with that we lost $2.9M. That follows on from a $1.6M loss in 2019 when we couldn't capitalise on playing finals the previous year. These losses are becoming ingrained and at some point we will exhaust these remaining cash reserves. Then presumably we resort to selling the Bentleigh Club, and eliminate our last non-football asset.

We don't have enough income coming in from sources other than an under-performing football team. This is not sustainable in any environment, let alone one in which a global pandemic can reduce football income to nil in the blink of an eye. 

Poita you have answered your own question ( don't  agree Necessarily anyway) Why give back money when loyal supporters did not ask for it?
 

It was there snd you were invited but I suspect that you feel more comfortable nitpicking now than asking fir reserved seats payments from your hard earned.
 

The actual fsct is that the 40,000 who stuck fat are loyal and perhaps benevolent in your eyes.

Whst is missing in this post and what Perty evades mentioning the 12,000 members who we lost from 2019 to 2020 are part of this downturn with IMO not a lot of Covid reason but sheer football disappointment and frustration.

We need 55,000 to stick fat and 15/20,000 fair weather fans to add the cream when we experience sustained success and hopefully the long awaited 13 Th and plus premierships.

 

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2 hours ago, 58er said:

Poita you have answered your own question ( don't  agree Necessarily anyway) Why give back money when loyal supporters did not ask for it?
 

It was there snd you were invited but I suspect that you feel more comfortable nitpicking now than asking fir reserved seats payments from your hard earned.
 

The actual fsct is that the 40,000 who stuck fat are loyal and perhaps benevolent in your eyes.

Whst is missing in this post and what Perty evades mentioning the 12,000 members who we lost from 2019 to 2020 are part of this downturn with IMO not a lot of Covid reason but sheer football disappointment and frustration.

We need 55,000 to stick fat and 15/20,000 fair weather fans to add the cream when we experience sustained success and hopefully the long awaited 13 Th and plus premierships.

 

The club finances are precarious given the uncertainty of Covid so I don’t want discounts or special offers for the members although I understand the sentiment behind your suggestion.

The best way this club can repay the loyalty of supporters is to start winning games of footy, deliver consistent performances and start beating some of the top teams. Fulfill the potential we can all see.

Do that and the members will be more than happy.

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I have looked through the report and could not find a reference to the MCC? In last year's report the club thanked the MCC for its support, but nothing this year.

Does anyone know what being an official MCC sporting section means? It doesn't seem to mean anything from a financial perspective. Our MCG tenancy deal doesn't seem to be more favourable than Collingwood, etc.

If being a 'sporting section' is just ceremonial than what is the point?       

 

 

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On 12/22/2020 at 1:23 PM, Lucifer's Hero said:

Players are paid monthly so had already been paid in full for at least 6 months from Oct 2019 to March 2020.  So it was 50% of the remaining (4 to 6) months.

That aside I agree, the speed at which expenditure was reduced was quite impressive.  Sadly most of that was in the football and admin departments which meant cutting peoples' livelihoods.

I agree about how difficult it has been to cut people's livelihoods, but I wonder whether in the longer-term the cutback of football departments forced on all clubs will benefit the game. I suspect in the last decade or so there has been too much over-coaching and over-strategising of the game. Perhaps the cutbacks will do more to alleviate congestion than any rule changes brought in by the AFL.

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3 hours ago, Gouga said:

I have looked through the report and could not find a reference to the MCC? In last year's report the club thanked the MCC for its support, but nothing this year.

Does anyone know what being an official MCC sporting section means? It doesn't seem to mean anything from a financial perspective. Our MCG tenancy deal doesn't seem to be more favourable than Collingwood, etc.

If being a 'sporting section' is just ceremonial than what is the point?       

 

 

There is considerable financial benefit - not my place to talk to the detail but can guarantee that the Club is much better off being a sporting section that not being one. 

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1 hour ago, ox_5 said:

There is considerable financial benefit - not my place to talk to the detail but can guarantee that the Club is much better off being a sporting section that not being one. 

But where does it show up in the financials which are required to be transparent? If there is a benefit it shouldn't be a secret. 

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4 hours ago, Gouga said:

But where does it show up in the financials which are required to be transparent? If there is a benefit it shouldn't be a secret. 

Welcome to the world of accounting....unless you see the actual book entries, you will never see the whole story.

It will never be in the accounts, but the possible advantages could be:

* rental at less than market rates for the administration offices.

* financial support directly from the MCC, but this would be hard to find in their accounts as well

* utilities costs? 

* provision of superbox at the MCG, at cost?

* advertising material inserted into MCC membership renewals

The pity is that the MCC has not provided enough to the MFC through its 160+ years of existence. We don't have a training base because the MCC only rented places like the Junction oval instead of putting up the money for a permanent facility.  Ground advertising went to the MCC for MFC  home games for years. 

Perhaps they can be "encouraged" to contribute to a future training and home base facility. 

 

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On 12/22/2020 at 11:04 AM, poita said:

Once again I think this club is taking it's existing, long term members for granted. I, for one, am bitterly disappointed that they haven't acknowledged our loyalty by waiving reserved seat fees and other such payments that provided zero benefit last year. This generosity is not going to last forever, and a club that has played finals once in the past fourteen years can't afford to be upsetting its loyal supporters.

They acknowledge that we had one of the lowest cancellation rates in the league, and even with that we lost $2.9M. That follows on from a $1.6M loss in 2019 when we couldn't capitalise on playing finals the previous year. These losses are becoming ingrained and at some point we will exhaust these remaining cash reserves. Then presumably we resort to selling the Bentleigh Club, and eliminate our last non-football asset.

We don't have enough income coming in from sources other than an under-performing football team. This is not sustainable in any environment, let alone one in which a global pandemic can reduce football income to nil in the blink of an eye. 

So when there are crowds next year and the club has to make up for  the 17 million dollars lost last year, you want the club to make less money next year, and make another operating loss maybe they should make membership free, maybe you will be happy with  the club folding.

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