Just to add a disclaimer here, I am a retired accountant so this article may not appeal to everyone. However, the profitability of the above should concern everyone, a weak Leagues Club result impacts the Footy Club in that there is less money available for players.
Now the Leagues Club has stated that they want to do a $100m redevelopment. Now I don't know the current business lending rates for a loan of that size but lets say 7% or $7m pa. That means $7m just in interest payments alone without any capital repayments.
If the club currently makes $12m profit the $7m interest payment is deducted from it leaving only $5m. If the Footy Club looses $8m the Club is now making a $3m loss. Unsustainable, and this in an environment of record low interest rates.
For the sake of the Club I hope they do a staggered development so they can afford the loan repayments. With clubs, if interest rates rise their income diminishes. This is because people use discretionary spending at a club, if interest rates rise they have less discretionary income to spend. At the same time the clubs pays increased interest costs, so a double edged sword. I should know, I was a club CFO in this situation where renovations were undertaken just before a credit squeeze in the 1980s.
Now the Footy Club. Any cost centre, and this should be treated as such, should make a profit. A $8m loss is simply unbelievable. Unbelievable that the Leagues Club directors allowed this to happen!
Now part of this is, imo, a problem the NRL has yet to address. Clubs with large nurseries, ours and Penrith among others are penalised when compared with teams with small nurseries. Also these clubs get no compensation in developing their juniors when other clubs come in and poach them. Clubs should be reimbursed an amount for each team in their catchment area, say $5,000 per team from the NRL. Therefor 200 teams in the nursery the club receives $1m to offset their costs. Comparing Souths, with no nursery costs at all, against clubs with nurseries is simply ridiculous.
It is good that the NRL finally realises that there are costs not counted in the salary cap, coaches and ancillary staff and they are stumping up an extra $1.5m (I think) each year. However, in some circumstances, the coach himself is paid a huge salary, Bennett reputed to be $1m pa. Therefor the NRL should be more realistic and increase it to a least $2.5m.
Regardless, a team has to perform well be become profitable with increased bums on seats and additional sponsorship. However all cannot be successful, at least 8 will not be in any one year. We just have to become one the these successful clubs to place less burden on the Leagues Club finances.
Replies
We know:
Total football loss $8m
Less: juniors $(1.6)m*
Less: 1 time items (1.4)m^
= Normal comparable loss $5m
What did we lose $5 million on? If you strip out income of say $10m from memberships, crowds and sponsors (and assume NRL grant covers players), that means we spend about $15m on non suing costs. That is a lot of money for BA, Anderson and the coaching staff!
* Sharpie said we invested $1m on junior league, $0.6 on junior development
^ We spent $1m on new training centre. Some of this will be maintenance and will be expensed over the next few yrs btw! Plus we had the salary cap fine of $0.4m.
Tele today says Broncos spend most on football costs of $16.5 and Gold Coast $10 least. So $15 is probably close.
You need to be simplistic Brett, if you get too technical people will just turn off. Already 200 have viewed but only 5 have responded, see what I mean. Everything the club is trying to achieve in the development involves parting people of their discretionary income. In times of increasing interest rates people save their money for basic living costs and paying their debts off as quickly as possible.
However the premise still remains, too much debt and increasing interest rates means the club will struggle. Banks only have a short tolerance if you're struggling servicing the debt and basically do anything to get their every last cent out of an organisation to the detriment of all others. It is a big risk not staggering such a large development. Souths RL Club was a good example of a club over-reaching and a half finished structure stood as testament for about 20 years.
Does anybody know how in the hell did the footy club lose $8m ? I'm curious if anyone is aware of footy clubs financial performances historically.
More importantly, how can we expect to turn around these losses in the future ?
We're stuffed turkeys if we can't.
Yobz, this is being ultra simplistic. All clubs have cost centres that should make a profit such as catering, bar, pokies, entertainment, etc and in our case footy operations. No organisation with a profit of only $12m needs or wants a cost centre losing $8m.