Handyandy said:
Andy,
you jettisoned a good deal of your footy department, and had to hire 'cheap' assistant coaches. you'd think that would be impacting your onfield performance to some degree.
-
AFLW 2024 - Round 10 - Chat, game threads, injury lists, team lineups and more.
Power lose $514k
- Thread starter Macca19
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Andy,
you jettisoned a good deal of your footy department, and had to hire 'cheap' assistant coaches. you'd think that would be impacting your onfield performance to some degree.
*PAF
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However you can run at a loss but have positive cash flow.Crow-mosone said:
*PAF said:
only in the short term.
Crow-mosone said:
There is always Belize.
Sorry mate but couldn't resist it.
sog35
Premiership Player
Then issue you stated was to do with realisation. Realisation will only impact if they have the cash or not.Crow-mosone said:
If they had received the cash for the lottery and the draw is in the 2006 financial year one approach would be to move some of the income off the P&L and into the balance sheet (income received in advance). Without knowing the ins and outs of the discussion I would presume that the stance they have taken is that due to the draw not taking place some of the income relates to the 2006 financial year. It appears to be material to profit but in general the auditors would be concerned with overstating profit.
I'm not sure what you mean by mixing and matching cash and accrual accounts though. The actual policy of bringing the amount to account will be stated in the accounts. It is possible to have accounts prepared overall on an accrual basis but have certain amounts recognised on a cash basis. Lotteries is the normal example as they generally open and close in one year. Given that the treatment is slightly different I would be almost 100% assured the treatment has been given the seal of approval by the auditors.
beagle2
Team Captain
Gravel said:
You Will have to pay $409k under to the salary cap from now on for this to work
No Tax on a loss.
noddy said:There is always Belize.
Sorry mate but couldn't resist it.
no worries noddy.
they're very friendly over there
sog35 said:
no read again, my young student. it's to do with probability of realisation.
they cannot account on a cash basis for some items, and on an accrual basis for others.
I had to think about this for a minute. Again, unless the proceeds are not deemed to have been earnt until the draw, then perhaps. However, that much funding $120k+ , under what circumstances would a draw not take place? none realistically, therefore no case for deferral.
they are normally just as concerned with understating it, for tax avoidance. However in this case, that's not applicable. mind you, auditors are low men on the totem pole, so who knows what they think
What I would be interested in is if this is one lottery, or many? either way, I don't much of a case for deferring the income if it were certain, and you can be sure that the Power hierarchy would have been keen to mitigate this seasons loss.
no it's not. this is fundamental. if you are using actual receipt as realisation it is because, on an accrual basis, certainty is not achieved until that point.
this reflects the nature of the item. that is not 'cash' accounting, that is accounting for uncertain items on an accrual basis.
which is why I don't think you should arbitrarily add this deferred item back onto this years result. if there were certainty of realisation it would already be there.
see above re: certainty.
you give auditors too much credit, they are just failed accountants
rubberman said:No Tax on a loss.
I don't think you pay tax anyway?
- Banned
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Port posts obscene loss
Old news, but good nonetheless. Like toots on our board, I was surprised that you guys didnt mention this after the advertiser article.
http://www.theadvertiser.news.com.au/footy/story_page/0,8747,17510540%255E21545,00.html
Just concerned as to what the Port Power supporters thoughts are at this very point in time? Club stilll going forward???
Old news, but good nonetheless. Like toots on our board, I was surprised that you guys didnt mention this after the advertiser article.
http://www.theadvertiser.news.com.au/footy/story_page/0,8747,17510540%255E21545,00.html
Just concerned as to what the Port Power supporters thoughts are at this very point in time? Club stilll going forward???
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Re: Port posts obscene loss
I'm not at all concerned with us filling our list. If you were going to do it any year, this year is the year to do it. Available talent should dictate your recruiting style, not short-term financial trouble.
I'm not at all concerned with us filling our list. If you were going to do it any year, this year is the year to do it. Available talent should dictate your recruiting style, not short-term financial trouble.
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Re: Port posts obscene loss
Salary Cap - Primus' wages + cost of one extra rookie.
Difference/saving of $400-500K or so on last year when we paid Primus two incomes in one year.
One would also think (hope) that this year we would pay:Porthos said:
Salary Cap - Primus' wages + cost of one extra rookie.
Difference/saving of $400-500K or so on last year when we paid Primus two incomes in one year.
Re: Port posts obscene loss
So it's a case of "monkey see, monkey do".General Havelock said:
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Re: Port posts obscene loss
though, that does give me a good launch pad to call you a monkey.
more or less.Toots Hibbert said:So it's a case of "monkey see, monkey do".
though, that does give me a good launch pad to call you a monkey.
comradekane_02
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I don't think its all doom and gloom, not long to go and the AFL entry payment will go, and there were other "abnormals" this year also. It just makes it even more important to make the right choices and consolodate on field success.
RussellEbertHandball
Flick pass expert
So let me put on my old chartered accounting hat on, one I don’t wear too often these days, and make some comments on the financial results and above comments. Let me say that I don’t have a copy of this years annual report in front of me as I get all my stuff sent to my sister’s place in Adelaide, a legacy of the pre bar code for finals days when you had to have all you cards presented to the club. Don’t you love it how family members will line up to get you tickets.
I should get it by the end of the week but based on the info provided in this thread and from previous annual reports, I make the following observations.
With a net trading loss ok $514k and a $220k distribution to the SANFL our net assets have decreased by $734k from $5.984m to $5.25m. So the true bottom line was a loss of $734k but the $514k is the correct figure used to compare against other clubs, as only 3 of the other 15 have to make a distribution for a sub-licence. I don’t know where the $850k loss some have mentioned comes from.
The SANFL distribution over the period 2003 to 2006 was set at $1,060k, so far we have paid,
2002 $ 75k prepayment
2003 $225k
2004 $220k
2005 $220k
Total $740k , therefore $320k will be paid next year. It will be interesting to see what the SANFL negotiates for the crows whose fixed distribution was for the period 2003 to 2005, and then for us. I suspect they wont go back to a % dividend as they have survived so far without it for the last 3 years. I have argued in other threads that this is the correct thing to do and the WAFL has followed suit and decreased the Eagles and Dockers dividend pay out rate.
Many of you have said your not happy with the result, no one should be but you have to look at the whole picture to see if it’s poor management or unforseen circumstances that have accentuated the loss. ie where were the major variations from the budget. Port said that they had budgeted to make a small profit in 2005. I’ve never seen a figure, but I assume in meant less than last year and enough to cover the SANFL payment.
Lets look at last year’s result to start analysing this year.
Operating loss prior to finals ($584,00)
Profit on sale of investments $196,000
Profit from premiership
Incentives, prize money,
Merchandise sales $720,000
Profit prior to SANFL distn $332,000
Last year the club exceeded their revenue budget by the following amounts;
Merchandise $869,000 mainly due to purchases of premiership merchandise
AFL prize money and distributions $278,000
Sponsorship incentives $160,000.
I don’t know what the club budgeted for this year but these revenue streams didn’t produce the same income in 2005. From the AFL’s 2004 Annual report Port received $130k finals allowance and $265k prize money ($15k for Wizard cup). If the same amounts paid last year were paid this year, then they only received $70k + $80k+$15k for Wizard cup. So there’s $230k less than last year along with the $160k Scott’s and Vodafone didn’t have to fork out. Now if we budgeted for the same amount as last year then this would have been a poor management decision.
Last years increased revenue was more than offset by an increase in the football operations department. Marketing expenses also increased significantly.
In 2001 Port had the 3rd lowest football operations expenses in the league and by the end of 2004 this had risen to the 3rd highest. The quest for the premiership costs money. This was a conscious decision taken by the board over the 3 years to increase the football operations department. With out knowing the full figures, it blew out last year and probably was on budget this year until the Primus payout.
So we start 2005 knowing it will be tight and if things go wrong on the field, then our results will suffer accordingly.
It will be interesting to see what has happened to total revenues and expenses in 2005. Maybe some of you who have the report can fill me in.
Our trading operations revenue had increased from $19.8m in ’02 to $21.5m in ’03 to
$23.2m in ’04. Other in come was $347k (’02), $84k (’03) and $429k. The growth in trading revenue was good and to my surprise higher than the crows turnover. Other income are one off’s such as sale of investments, fixed assets etc.
With respect to Football, Marketing and Admin and Interest and Finance costs these have moved from $17.2m (’02) to $18.2m (’03) and then $19.9m (’04).
Now this is where it gets a bit tricky because the operating results are affected by the PAFC Foundation and the Port Club results. Last year, the Port club made a profit of $342k, before distributing 25% to the Magpies, i.e. $85k. It will be interesting to see what result they achieved in 2005 given that $1.3m was spent upgrading the place. Last year the new building depreciation was $78k as the building was only operating for part of the year. I expect it went up to around $130k this year. You have to dig through the Port Club financials to see what expenses or revenues have changed dramatically. The club doesn’t supply any info on the PAFC Foundation so it’s hard to work out what is happening there. This might be where some of the investments Porthos mentioned are “kept”. It will be difficult to do any analysis on these numbers.
PRIMUS PAYOUT
I’m not sure how much of this is for his payout but I would assume that it’s probably $300k+ of the $409k. When the budgets were set in October 2004 there is no way the club would have budgeted for this payout as he was under contract until 2006. I suspect that Pelchen’s redundancy probably had been budgeted for, but I don’t know if restructuring of the sales and marketing department expenses were as new General Operations Manager position wasn’t advertised until well into the football season.
Primus’ payout was extraordinary in layman’s term but abnormal in an accounting sense. An Abnormal item is so because of “reason of size and effect on the results for the reporting period.” Under the current CBA, Port did not have to make a termination payent to Primus!!!!
From Clause 12 of Schedule B of the CBA;
12. Termination Payment
12.1 An AFL Club shall be entitled to apply to the AFL to delete a Player’s name from its List and by written notice to the Player in accordance with the contract, terminate the contract upon the Player being delisted. In such case, the contract shall be at an end provided that the AFL Club shall pay the Player by way of compensation:
(a) the balance of the base payment payable for the year in which the Player was
delisted;……………..
(c) where the Player’s contract had one or more further years to run, the base
payment for each year following the year in which the Player was delisted;
and……….
……
12.3 The provisions of this paragraph shall not apply to a Player:
(a) who, by his agreement, is involved in a pre-draft transfer between AFL
Clubs which results in a transfer and such Player being listed with the
transferee Club;
(b) who has retired;
I have given up trying to work out if this payment is or isn’t out side the Total Player Payments and if so if it relates to 2005 or 2006. Prima Facie it appears to count for 2006 but I’m not 100% confident, as the CBA isn’t clear on this. There are probably AFL regulations that cover this situation. However, I figure the club would have got the relevant guidance from the AFL and they did the honourable thing by Primus and giving him a redundancy payment. This is a cost I believe the overwhelming majority of members are prepared to wear. I think that Shane Bond would have been the only other player in the 9 years in the AFL that Port would have made a termination payment but it’s a bit of a guess.
So to say that a $300k termination payment to a player that wouldn’t have been budgeted for, is a smoke screen and is just a small part of the TPP, is an ill informed comment.
BASIC ACCOUNTING RULES
Lets sort out this Cash Vs Accruals accounting issue. There is no law saying that you can’t mix cash and accruals accounting. It happens all the time in a majority of organisations in this country. A classic example is the receipt of passive income such as interest, dividends, royalties, rent etc. Most organisations which have an accruals accounting system only record these income streams on a cash received basis. They do this because of simplicity and the Tax Commissioner and case law have ruled that for most taxpayers they only have to account for this income on a cash basis. These rules don’t apply to banks, super funds and other businesses whose principle business is one of investment and receiving passive income. Also situations such as dividend reinvestment plans are when the cash basis is ignored.
For example, most small to medium businesses who work on an accruals basis will not show interest accrued if they invested say $100k in a term deposit for 6 months @ 6% on the 1st of May. They are unlikely to show accrued interest at 30 June of $1,000. Now if your BHP with $10bil in a term deposit thanks to our Chinese comrades, they will show accrued interest earned of $100m at 30th June because it’s a material amount.
What the Commissioner of Tax doesn’t allow is the accounting of normal trading sales on a cash basis and then claiming expenses on an accruals basis, or vice versa.
Accounting standards talk about being consistent with one form or another but in practice they are mixed. Examples I have seen are Research and Development expenses and Mining Industry expenses. Some expenses go straight to the P&L and others are capitalized and there is bugger all difference. The Auditors will only qualify the financial statements if they believe that the difference will cause a material impact on the financial result. So if the conservative approach is taken and these expenses go straight to the P&L the auditors are likely to give it a green tick.
The green tick merchants don’t worry too much about recognising expenses early but they do have a problem with recognising revenue early. Oh, except for the auditors of Enron and HIH.
So the deferral of lottery income I’m confident is ok. If they have received the cash and Boulton is saying that they have deferred the recognition of income until 2006, then the other side of this entry is sitting in the Current Liabilities as Unearned Income. If you don’t know what the lottery is about, what the obligations attached to these funds are, what has been recognised in the balance sheet then you are just involved in idle speculation.
One offs, and/or abnormal items will occur each year. It’s all about the size and effect of these abnormal items and if they have been budgeted for that is important and how the club manages these unforeseen expenses, and that the management team effectively deal with them. There will be more next year and in the following years.
OTHER ISSUES
Last year we had cash reserves of $800k and interest bearing debt of $3.0m. Someone said our debt is now $3.8m. What’s the 2005 cash assets total?
A few people have said that we will make $1.0m in 2007. This is not what Greg Boulton has been saying for the last 3 years. He has consistently said (see 2003 and 2004 annual report) that it is the board’s goal to reduce debt, and have cash assets of $1.0m by the end of 2007. If our cash assets are $500k or more at the moment, then this goal is achievable. So after 3 years of major debt reduction we increased debt in 2004 to renovate the Port Club, and it looks like a poor performance in 2005 has meant debt went up instead of down. A key issue for the club is to make a decent profit from the Port Club. It has to continue to encourage people to get back to the club for a drink and a meal and host functions that are profitable and unfortunately if our members play the pokies, play them at the club rather than somewhere else.
The club has to realistically budget to break even again this year or have a $320k profit to meet our SANFL distribution. If it’s able to do this and continue to do this in 2007 then we will see Port get it’s profit over the $500k mark when our licence fee and the amortisation our establishment costs are extinguished.
Some people have said that we have record membership and increased crowds and have wonder why this hasn’t reduced the loss. I am skeptical about the record membership. Last year we had 36,340 members. Our highest figure is 38,305 in 1998.
I haven’t seen a final figure but I did see an early figure that was in the high 36k around the start of the season. Unfortunately the figures in the annual report don’t break down income from memberships. A rough guide is that it’s a $100 per membership. So our extra income from memberships this year was probably between $100k to $200k, a good increase but not great.
Remember our total membership is the addition of;
club members who aren’t season ticket holders or SANFL members, plus
club members who do have season tickets or are SANFL members, plus
season ticket holders only, plus
SANFL cat 1 members only, plus
SANFL cat 3 members only
Also Port has pushed to increase junior memberships. You only get $45 income from new junior members and $45 or $79 for the cheaper season tickets for kids. That’s why $100 per member is the rule of thumb used throughout the AFL. We also only get a small amount of the membership fee of SANFL members. So if the SANFL members have increased then this has a limited impact.
The 3000 increase in average crowds is pleasing but once again we don’t have a breakdown of this income stream. If 1/3rd of this increase is kids who haven’t brought season tickets then the total increase in revenue would be 1000 x $2.75 x 11 = $30,250. The net amount is less GST and less a rent component paid to the SANFL. Not a hell of a lot of money. If our membership increased by 2,000 and all these people attended all the games then gate receipt only increased by 1,000 new people per game that hasn’t been counted in the $100k to $200k I mentioned above. So the maximum new revenue would be $20 x 1,000 x 11 = $220k
If you are going to the AGM, and are interested in this issue, ask for total revenue figures, for 2005 and 2004, for Season Tickets + Memberships + SANFL members contributions + gate receipts. I suspect that the difference won’t be much more $400k and probably closer to $250k.
As someone said above we do a good job on the revenue side but we have to be tougher to controlling expenses. Some of these were unforeseen, some should have been managed closer. I heard Brian Cook from Geelong a couple of years ago say how important and powerful the word NO is. It could be time for our CEO to start saying this more often. It would have been tough for the new guy following Bucky to do this in his first year but he has to start doing it more often in 2006.
So I take a realistic rather than pessimistic approach to our results. Not good but not disastrous. It will be a tough few years, but it’s always been tough. That’s why I decided to buy a membership a few years ago and a couple of years later buy a season ticket even thought I’ll only use it 1 or 2 times a year. If our board and management were hopeless the SANFL would have stepped in. It’s a long way from that happening. I like the fact that club is targeting the youth and making a sustained effort to drive up junior membership. It’s the future but, this is a long term investment that will take time before a substantial return is seen. In the meantime sustained success on the field is a key driver to our off field performance.
One of the most concerning issue is the retirement of 2 long term directors Ian McLachlan (member-elected) and Ric Mollison (SANFL Commission-elected) – both of whom have indicated they will be retiring following the 19th December AGM. Both have been Board Members since the start of the Port Adelaide Football Club’s AFL journey.
From Greg Boulton’s press release,
“Ian was involved as a Board Member with the club in the SANFL. He was a key contributor to preparing the club’s tender to support its admission to the AFL. Ian has been a great advisor to the Board on many financial and property issues over the last 13 years.
Ric Mollison has been Chairman of the club’s Foundation and was instrumental in leading the fundraising to build the club’s $4.5 million training and administration facility, known as the Allan Scott Power Headquarters. He has also over the years promoted and attended many of the Foundation activities and been a significant contributor on commercial matters around the Board table.”
I have worked for McLachlan, he is a tough, smart operator whose talents will be missed. I don’t know the other director but he takes a lot of knowledge of the club away with him.
If I find any further interesting facts once I receive the Annual Report I’ll make some further comments.
If you are going to the AGM and have some great concerns, let me know and I draft up a few questions you can ask.
I should get it by the end of the week but based on the info provided in this thread and from previous annual reports, I make the following observations.
With a net trading loss ok $514k and a $220k distribution to the SANFL our net assets have decreased by $734k from $5.984m to $5.25m. So the true bottom line was a loss of $734k but the $514k is the correct figure used to compare against other clubs, as only 3 of the other 15 have to make a distribution for a sub-licence. I don’t know where the $850k loss some have mentioned comes from.
The SANFL distribution over the period 2003 to 2006 was set at $1,060k, so far we have paid,
2002 $ 75k prepayment
2003 $225k
2004 $220k
2005 $220k
Total $740k , therefore $320k will be paid next year. It will be interesting to see what the SANFL negotiates for the crows whose fixed distribution was for the period 2003 to 2005, and then for us. I suspect they wont go back to a % dividend as they have survived so far without it for the last 3 years. I have argued in other threads that this is the correct thing to do and the WAFL has followed suit and decreased the Eagles and Dockers dividend pay out rate.
Many of you have said your not happy with the result, no one should be but you have to look at the whole picture to see if it’s poor management or unforseen circumstances that have accentuated the loss. ie where were the major variations from the budget. Port said that they had budgeted to make a small profit in 2005. I’ve never seen a figure, but I assume in meant less than last year and enough to cover the SANFL payment.
Lets look at last year’s result to start analysing this year.
Operating loss prior to finals ($584,00)
Profit on sale of investments $196,000
Profit from premiership
Incentives, prize money,
Merchandise sales $720,000
Profit prior to SANFL distn $332,000
Last year the club exceeded their revenue budget by the following amounts;
Merchandise $869,000 mainly due to purchases of premiership merchandise
AFL prize money and distributions $278,000
Sponsorship incentives $160,000.
I don’t know what the club budgeted for this year but these revenue streams didn’t produce the same income in 2005. From the AFL’s 2004 Annual report Port received $130k finals allowance and $265k prize money ($15k for Wizard cup). If the same amounts paid last year were paid this year, then they only received $70k + $80k+$15k for Wizard cup. So there’s $230k less than last year along with the $160k Scott’s and Vodafone didn’t have to fork out. Now if we budgeted for the same amount as last year then this would have been a poor management decision.
Last years increased revenue was more than offset by an increase in the football operations department. Marketing expenses also increased significantly.
In 2001 Port had the 3rd lowest football operations expenses in the league and by the end of 2004 this had risen to the 3rd highest. The quest for the premiership costs money. This was a conscious decision taken by the board over the 3 years to increase the football operations department. With out knowing the full figures, it blew out last year and probably was on budget this year until the Primus payout.
So we start 2005 knowing it will be tight and if things go wrong on the field, then our results will suffer accordingly.
It will be interesting to see what has happened to total revenues and expenses in 2005. Maybe some of you who have the report can fill me in.
Our trading operations revenue had increased from $19.8m in ’02 to $21.5m in ’03 to
$23.2m in ’04. Other in come was $347k (’02), $84k (’03) and $429k. The growth in trading revenue was good and to my surprise higher than the crows turnover. Other income are one off’s such as sale of investments, fixed assets etc.
With respect to Football, Marketing and Admin and Interest and Finance costs these have moved from $17.2m (’02) to $18.2m (’03) and then $19.9m (’04).
Now this is where it gets a bit tricky because the operating results are affected by the PAFC Foundation and the Port Club results. Last year, the Port club made a profit of $342k, before distributing 25% to the Magpies, i.e. $85k. It will be interesting to see what result they achieved in 2005 given that $1.3m was spent upgrading the place. Last year the new building depreciation was $78k as the building was only operating for part of the year. I expect it went up to around $130k this year. You have to dig through the Port Club financials to see what expenses or revenues have changed dramatically. The club doesn’t supply any info on the PAFC Foundation so it’s hard to work out what is happening there. This might be where some of the investments Porthos mentioned are “kept”. It will be difficult to do any analysis on these numbers.
PRIMUS PAYOUT
I’m not sure how much of this is for his payout but I would assume that it’s probably $300k+ of the $409k. When the budgets were set in October 2004 there is no way the club would have budgeted for this payout as he was under contract until 2006. I suspect that Pelchen’s redundancy probably had been budgeted for, but I don’t know if restructuring of the sales and marketing department expenses were as new General Operations Manager position wasn’t advertised until well into the football season.
Primus’ payout was extraordinary in layman’s term but abnormal in an accounting sense. An Abnormal item is so because of “reason of size and effect on the results for the reporting period.” Under the current CBA, Port did not have to make a termination payent to Primus!!!!
From Clause 12 of Schedule B of the CBA;
12. Termination Payment
12.1 An AFL Club shall be entitled to apply to the AFL to delete a Player’s name from its List and by written notice to the Player in accordance with the contract, terminate the contract upon the Player being delisted. In such case, the contract shall be at an end provided that the AFL Club shall pay the Player by way of compensation:
(a) the balance of the base payment payable for the year in which the Player was
delisted;……………..
(c) where the Player’s contract had one or more further years to run, the base
payment for each year following the year in which the Player was delisted;
and……….
……
12.3 The provisions of this paragraph shall not apply to a Player:
(a) who, by his agreement, is involved in a pre-draft transfer between AFL
Clubs which results in a transfer and such Player being listed with the
transferee Club;
(b) who has retired;
I have given up trying to work out if this payment is or isn’t out side the Total Player Payments and if so if it relates to 2005 or 2006. Prima Facie it appears to count for 2006 but I’m not 100% confident, as the CBA isn’t clear on this. There are probably AFL regulations that cover this situation. However, I figure the club would have got the relevant guidance from the AFL and they did the honourable thing by Primus and giving him a redundancy payment. This is a cost I believe the overwhelming majority of members are prepared to wear. I think that Shane Bond would have been the only other player in the 9 years in the AFL that Port would have made a termination payment but it’s a bit of a guess.
So to say that a $300k termination payment to a player that wouldn’t have been budgeted for, is a smoke screen and is just a small part of the TPP, is an ill informed comment.
BASIC ACCOUNTING RULES
Lets sort out this Cash Vs Accruals accounting issue. There is no law saying that you can’t mix cash and accruals accounting. It happens all the time in a majority of organisations in this country. A classic example is the receipt of passive income such as interest, dividends, royalties, rent etc. Most organisations which have an accruals accounting system only record these income streams on a cash received basis. They do this because of simplicity and the Tax Commissioner and case law have ruled that for most taxpayers they only have to account for this income on a cash basis. These rules don’t apply to banks, super funds and other businesses whose principle business is one of investment and receiving passive income. Also situations such as dividend reinvestment plans are when the cash basis is ignored.
For example, most small to medium businesses who work on an accruals basis will not show interest accrued if they invested say $100k in a term deposit for 6 months @ 6% on the 1st of May. They are unlikely to show accrued interest at 30 June of $1,000. Now if your BHP with $10bil in a term deposit thanks to our Chinese comrades, they will show accrued interest earned of $100m at 30th June because it’s a material amount.
What the Commissioner of Tax doesn’t allow is the accounting of normal trading sales on a cash basis and then claiming expenses on an accruals basis, or vice versa.
Accounting standards talk about being consistent with one form or another but in practice they are mixed. Examples I have seen are Research and Development expenses and Mining Industry expenses. Some expenses go straight to the P&L and others are capitalized and there is bugger all difference. The Auditors will only qualify the financial statements if they believe that the difference will cause a material impact on the financial result. So if the conservative approach is taken and these expenses go straight to the P&L the auditors are likely to give it a green tick.
The green tick merchants don’t worry too much about recognising expenses early but they do have a problem with recognising revenue early. Oh, except for the auditors of Enron and HIH.
So the deferral of lottery income I’m confident is ok. If they have received the cash and Boulton is saying that they have deferred the recognition of income until 2006, then the other side of this entry is sitting in the Current Liabilities as Unearned Income. If you don’t know what the lottery is about, what the obligations attached to these funds are, what has been recognised in the balance sheet then you are just involved in idle speculation.
One offs, and/or abnormal items will occur each year. It’s all about the size and effect of these abnormal items and if they have been budgeted for that is important and how the club manages these unforeseen expenses, and that the management team effectively deal with them. There will be more next year and in the following years.
OTHER ISSUES
Last year we had cash reserves of $800k and interest bearing debt of $3.0m. Someone said our debt is now $3.8m. What’s the 2005 cash assets total?
A few people have said that we will make $1.0m in 2007. This is not what Greg Boulton has been saying for the last 3 years. He has consistently said (see 2003 and 2004 annual report) that it is the board’s goal to reduce debt, and have cash assets of $1.0m by the end of 2007. If our cash assets are $500k or more at the moment, then this goal is achievable. So after 3 years of major debt reduction we increased debt in 2004 to renovate the Port Club, and it looks like a poor performance in 2005 has meant debt went up instead of down. A key issue for the club is to make a decent profit from the Port Club. It has to continue to encourage people to get back to the club for a drink and a meal and host functions that are profitable and unfortunately if our members play the pokies, play them at the club rather than somewhere else.
The club has to realistically budget to break even again this year or have a $320k profit to meet our SANFL distribution. If it’s able to do this and continue to do this in 2007 then we will see Port get it’s profit over the $500k mark when our licence fee and the amortisation our establishment costs are extinguished.
Some people have said that we have record membership and increased crowds and have wonder why this hasn’t reduced the loss. I am skeptical about the record membership. Last year we had 36,340 members. Our highest figure is 38,305 in 1998.
I haven’t seen a final figure but I did see an early figure that was in the high 36k around the start of the season. Unfortunately the figures in the annual report don’t break down income from memberships. A rough guide is that it’s a $100 per membership. So our extra income from memberships this year was probably between $100k to $200k, a good increase but not great.
Remember our total membership is the addition of;
club members who aren’t season ticket holders or SANFL members, plus
club members who do have season tickets or are SANFL members, plus
season ticket holders only, plus
SANFL cat 1 members only, plus
SANFL cat 3 members only
Also Port has pushed to increase junior memberships. You only get $45 income from new junior members and $45 or $79 for the cheaper season tickets for kids. That’s why $100 per member is the rule of thumb used throughout the AFL. We also only get a small amount of the membership fee of SANFL members. So if the SANFL members have increased then this has a limited impact.
The 3000 increase in average crowds is pleasing but once again we don’t have a breakdown of this income stream. If 1/3rd of this increase is kids who haven’t brought season tickets then the total increase in revenue would be 1000 x $2.75 x 11 = $30,250. The net amount is less GST and less a rent component paid to the SANFL. Not a hell of a lot of money. If our membership increased by 2,000 and all these people attended all the games then gate receipt only increased by 1,000 new people per game that hasn’t been counted in the $100k to $200k I mentioned above. So the maximum new revenue would be $20 x 1,000 x 11 = $220k
If you are going to the AGM, and are interested in this issue, ask for total revenue figures, for 2005 and 2004, for Season Tickets + Memberships + SANFL members contributions + gate receipts. I suspect that the difference won’t be much more $400k and probably closer to $250k.
As someone said above we do a good job on the revenue side but we have to be tougher to controlling expenses. Some of these were unforeseen, some should have been managed closer. I heard Brian Cook from Geelong a couple of years ago say how important and powerful the word NO is. It could be time for our CEO to start saying this more often. It would have been tough for the new guy following Bucky to do this in his first year but he has to start doing it more often in 2006.
So I take a realistic rather than pessimistic approach to our results. Not good but not disastrous. It will be a tough few years, but it’s always been tough. That’s why I decided to buy a membership a few years ago and a couple of years later buy a season ticket even thought I’ll only use it 1 or 2 times a year. If our board and management were hopeless the SANFL would have stepped in. It’s a long way from that happening. I like the fact that club is targeting the youth and making a sustained effort to drive up junior membership. It’s the future but, this is a long term investment that will take time before a substantial return is seen. In the meantime sustained success on the field is a key driver to our off field performance.
One of the most concerning issue is the retirement of 2 long term directors Ian McLachlan (member-elected) and Ric Mollison (SANFL Commission-elected) – both of whom have indicated they will be retiring following the 19th December AGM. Both have been Board Members since the start of the Port Adelaide Football Club’s AFL journey.
From Greg Boulton’s press release,
“Ian was involved as a Board Member with the club in the SANFL. He was a key contributor to preparing the club’s tender to support its admission to the AFL. Ian has been a great advisor to the Board on many financial and property issues over the last 13 years.
Ric Mollison has been Chairman of the club’s Foundation and was instrumental in leading the fundraising to build the club’s $4.5 million training and administration facility, known as the Allan Scott Power Headquarters. He has also over the years promoted and attended many of the Foundation activities and been a significant contributor on commercial matters around the Board table.”
I have worked for McLachlan, he is a tough, smart operator whose talents will be missed. I don’t know the other director but he takes a lot of knowledge of the club away with him.
If I find any further interesting facts once I receive the Annual Report I’ll make some further comments.
If you are going to the AGM and have some great concerns, let me know and I draft up a few questions you can ask.
Portia
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Yep, looks like accountancy to me. No doubt about it.
Thank you for that Russell
Yes thanks REB. A post worth rereading several times, for me anyway. Very informative.
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Great work REB. Sadly none of the replies we are seeing from the financially literate can make the result look better. We have an inadequate financial base even when payments to the AFL are taken out.
RussellEbertHandball
Flick pass expert
Win the NAB cup and thats a $250k - $15k (we got last year for the rd1 loss to the crows)= $235k improvement over 2005 by the 31st March 2006.
Sounds good, but like others have said or at least implied, it's worrying if we aren't breaking even BEFORE any wizard cup or finals payments. These should be the icing on the cake, used to invest in non-footy related investments to help 'average' (and increase) our cash flow whether we are having a good or bad year.RussellEbertHandball said:
sog35
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Cheers REH re: the cash vs accruals. Effectively what I was trying to say, I just couldn't do it as well.
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The whole thing though is we know nothing about the cash flow.Andre said:
Losses per se do not mean much.
As REH said it's how we got to those losses that will or will not matter. So far we do not know much.
The Primus payout could easily mean we have that money "extra" this year, and thus we will automatically be heaps better off. However it could also be the money we used to pay Motlop.
Without details it (the loss) doesn't mean much.
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