Financial summary of each club's 2008 (no Richmond though)
http://www.theage.com.au/pdf/RF_show_us_the_money_1301.pdf----------------------------------
Economic downturn will sink the boot into clubs
Jesse Hogan | January 13, 2009
"It is over 15 years since AFL clubs have had to operate in conditions of a severe economic downturn which appears almost certain in 2009."
"In summary, 2009 will be a most challenging year financially for the club."
"We expect the hospitality market to also be tough in 2009 … It reinforces how critical the support of our members will be in 2009."SUPPORTERS of the poorest Victorian clubs — Melbourne, North Melbourne and the Western Bulldogs — would be well accustomed to being fed such gloomy sentiments in recent years. But when the club making these predictions is Essendon, far and away the richest of all of them, it should be sending a shockwave through all club administrations.
As the sporting spotlight has shifted to cricket in the past two months, most AFL clubs — St Kilda, Richmond and Fremantle being the exceptions — released their 2008 financial results without the usual scrutiny afforded to footy during winter.
Melbourne appears to be in the most dire financial position. Of the 13 teams to report, the Demons are the club whose debts outweigh their assets — a deficit of $3.8 million — which explains the urgency of new club president Jim Stynes' "Debt Demolition" campaign.
Only three of the 13 clubs reported an increase in profit for the year to October 31 compared to a year earlier: Hawthorn, North Melbourne and the Bulldogs. Furthermore, five of the others — Brisbane Lions, Collingwood, Melbourne, Port Adelaide and Sydney — lost money in 2008.
Little wonder that the Geelong Football Club has changed its website address from gfc.com.au to geelong cats.com.au, when the GFC on most people's minds at present is the Global Financial Crisis.
So what has gone wrong? Like most businesses, the financial crisis had an indirect impact on trading, but it also had a direct impact on two clubs that had invested their surplus cash in shares: Brisbane and Essendon.
The plunging local sharemarket forced Brisbane to write down the value of its share portfolio by $2 million, while Essendon had to cull the valuation of its shares by just over $250,000. While the loss is only a "paper loss", because the shares have not been sold and could regain value in coming years, Essendon chief operating officer Travis Auld denied the club had invested its money recklessly.
"We had some money in managed funds and it was a reasonably low-risk portfolio, but given the downturn in the market it didn't matter how low-risk you were — everybody got hit," he said. "If you look at our accounts over the past three or four years you'll see there's been some significant gains in there, so, at worst, we'd actually be break-even."
Similarly, Lions chairman Tony Kelly said the club remained hopeful "the value of our shares will return over the longer term".
The inclusion of Collingwood in the "loss" category for 2008 would surprise most, although that is also because of unwise investments. The Magpies should have posted a profit of $2.5 million for the year but instead ended with a loss of $3.28 million because of bad pub investments in the Beach Hotel in Albert Park and the Diamond Creek Tavern.
Unlike the Bombers and Lions, Collingwood's writedown cannot be rectified because it elected to sell the hotels at a loss of $5.77 million, rather than keeping them in the hope they would eventually regain value.
Collingwood president Eddie McGuire, whose board approved the pub deals, told supporters he would "totally dedicate myself and I'll get that money back for the Collingwood Football Club and you can take that to the bank".
A crucial indirect effect of the crisis — and one that is expected to worsen in 2009 — was corporate hospitality. Although not all clubs provide specific figures on how much they earned from selling corporate packages, Essendon confirmed its profit from that area sank 18.8 per cent to $3.25 million. Chief executive Peter Jackson said the trend of companies curbing spending became evident in the second half of last season.
"By mid-year we were tracking on target, however, the sudden and enormous drop in business and consumer confidence during January-June started impacting on those areas of our business most sensitive to declines in discretionary spending," Jackson said in Essendon's annual report to members.
"The outlook for 2009 for business operations remains uncertain at best. The second-tier sponsor market remains tough. We expect the hospitality market to also be tough in 2009. These are discretionary spending items for businesses and we expect the financial results in 2009 to reflect this fact."
That negative trend was, unsurprisingly, amplified for last season's worst-performing club, Melbourne.
"Through 2008, the club's core operations traded very poorly," the Demons' directors declared in their annual report. "The club's revenue generation fell well short of management's expectations at the start of the year, particularly in corporate partnerships, sponsorships, game-day hospitality and retail. Our match-day attendances were down, perhaps reflecting our struggling on-field performance."
Clubs are already pushing the AFL hard to help gain
improved stadium deals, which is seen as one of the most important issue confronting the game.
While Melbourne's accounts did not specify the performance of gate receipts, among the falls in proceeds from fans who buy tickets for individual matches, Essendon suffered a 21.1 per cent decline in home match receipts.
North Melbourne's home gate receipts were down 12.1 per cent and Geelong's 48 per cent, due to not playing a home match at the MCG. Port Adelaide lost $310,000 from its home games at AAMI Stadium, prompting intense post-season discussions with the South Australian National Football League to amend the ground-hire terms.
"It would mean looking at all elements of it and trying to reduce the costs — variable and fixed costs — associated with playing our games at the stadium, but also all the good things we can do to make the experience for a lot better than what it has been at the stadium," Port chief Mark Haysman said.
What makes the situation worse for the Power it does not believe falling behind its "break-even" point of 26,000 to 27,000 spectators last season was a blip that can be easily remedied.
"We've had our lowest-ever crowd numbers but we're forecasting that same level of crowd numbers next year, despite all the things we're doing to try and improve in that area," Haysman said.
Frustration with stadium hire deals is not confined to Adelaide. The AFL last month launched legal action against Telstra Dome in an attempt to get access to the stadium's contract with Melbourne Victory, because it suspects the soccer team has a better deal than AFL clubs such as the Bulldogs and Kangaroos.
"There'd be no doubt that when Melbourne Victory's able to put on a game for 20,000 people they must be at least breaking even," Kangaroos chief executive Eugene Arocca told SEN last weekend. "We know for a fact that we can't break even for much less than 31,000-32,000."
One area with almost universally positive results involved profit from membership. The biggest increases from clubs that disclosed membership on its own was North Melbourne (up 81.8 per cent to $2.55 million) and Collingwood (up 11.8 per cent to $5.84 million).
Rising profit from membership is important to cover the rising football department costs — predominantly player wage increases — that clubs are faced with this year.
In 2008, only Essendon was able to cut its football costs, down 0.6 per cent to $12.7 million, while Collingwood spent the most with $16.3 million.
All AFL club accounts must be verified by auditors and, because the auditors are independent, they are compelled to detail any concerns they have about the finances, as they would have to do for any public company.
An example of this can be found in North Melbourne's annual results, courtesy of its audit firm Grant Thornton.
"The company currently has a net asset deficiency, excluding cash set aside for the redevelopment of Arden Street," Grant Thornton said.
"As a result of the matters described … there is significant uncertainty whether North Melbourne Football Club Ltd will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report."
Similar sentiments are
expressed by the directors or auditors of Carlton, Melbourne and the Western Bulldogs, although each also cited the main reason why such issues are not fatal: a benefactor called the AFL.
"The Melbourne Football Club Limited is economically dependent on the ongoing support of the Australian Football League through receipt of distributions and dividends," said the Demons' report.
And the Bulldogs: "The company's directors consider the going concern assumption to be appropriate … as the AFL has committed to continued support."
And North Melbourne: "The company's directors consider the going concern assumption to be appropriate based on future operating performance and the Australian Football League's commitment to continued support."
In terms of the season ahead, Essendon predicts it is "over 15 years since AFL clubs have had to operate in conditions of a severe economic downturn which appears almost certain in 2009".
Auld's only comfort is that the Bombers "can suffer a little bit before we're in trouble and part of that's because of our revenue levels, part because we've got a healthy balance sheet".
"If your balance sheet's not strong you're going to be more susceptible in times like this," he said.
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