Penrith's New Academy Opened

[Pomoz]

I don't have a problem with the academy read what I said. .Its the amount 25 million of borrowed money that they spent on it. Other clubs such as Souths received 16 million to build their academy from government handouts.
Without a leagues club there is no football team.
The leagues club got into trouble because of poor management.

If I misunderstood you, then I apologise. The chicken and the egg routine isn't needed here though. It is clear the club was set up to support the team and the team existed first. I can but agree though, without it the football team would be gone. This is a response to the fact the club hasn't access to the corporate sponsorship that other teams based in the city, or single catchments (Brisbane) have. It makes sense for a league club in the Riff, but maybe not so much in Paddington for the Roosters where they have to compete with a thousand other venues.

I also agree that poor management got the club into trouble financially. I believe the club is receiving some government funding for their facility. I haven't reviewed the club accounts to confirm that but it was stated when the venue was opened. If they have received the funds it could be listed as a contingent liability (if conditions are attached) and in the cashflow statement as funds received. However, it may not have made the cutoff for the last set of financials and it also may be immaterial so not required to be shown in the published accounts.

 

[darkbloom]

Plenty of propositions to debate there but:

The Academy was financed entirely by Panthers. No government funding. There was to be Givernment funding for an adjacent and related facility but I think that has now gone..

The ongoing costs of running the Academy are huge and cannot be financed through football which loses money every year. The cost tyo the Panthers group of running football now is over $5m per year.

The licensed club has not been in anything like the trouble made out in the press - always had a healthy debt to equity ratio and strong cash flow.

Right now the support for football is coming from property development not from efficient licensed club management - I have even heard they have come to an agreement to outsource their gaming operations an admission.

Where it was once the pride of the club industry and the industry leader it is now an also-ran and something of a laughing stock.

But do not worry the football team will continue to be well financed well into the future due to the lucrative possibilities with the property holdings that had been built for the group over many years.

 

[Pomoz]

Plenty of propositions to debate there but:

The Academy was financed entirely by Panthers. No government funding. There was to be Givernment funding for an adjacent and related facility but I think that has now gone..

The ongoing costs of running the Academy are huge and cannot be financed through football which loses money every year. The cost tyo the Panthers group of running football now is over $5m per year.

The licensed club has not been in anything like the trouble made out in the press - always had a healthy debt to equity ratio and strong cash flow.

Right now the support for football is coming from property development not from efficient licensed club management - I have even heard they have come to an agreement to outsource their gaming operations an admission.

Where it was once the pride of the club industry and the industry leader it is now an also-ran and something of a laughing stock.

But do not worry the football team will continue to be well financed well into the future due to the lucrative possibilities with the property holdings that had been built for the group over many years.

As you said, plenty to debate there. The club did have a liquidity issue when their loan was withdrawn and that could have sent it into administration. Thankfully they got replacement funding in time. As you probably know, administration doesn't mean the end of the club, but it could have left to a loss of assets at fire sale prices.

The club must sort out the running of its club, because that is its ongoing business. They seemed to make progress, but I haven't seen the latest numbers so that could have changed.

Outsourcing the gaming operation isn't a big deal. A casino outsources its restaurants and sometimes its bars. It really depends where you think your expertise is. Catering and hospitality may be where the club thinks it can shine. Gaming requires capital and perhaps the club felt its returns weren't worth the investment.

The govt funding fell through? Typical politicians, there at the opening and then disappear when they have to actually do something.

 

[darkbloom]

That is quite right if you don't have the expertise to run it then outsource it. That is what they have done - recognised they don't have the expertise and outsourced. By the way I have not yet seen confirmation of this but it is pretty common knowledge throughout clubland.

I'm glad you didn't say casinos outsource their gaming. The big clubs a more closely aligned in terms of operational structiure to casinos than to anything else.

Panthers some time ago took the view, like casinos, that outsourcing restaurants brought many benefits and was good business. But gaming - no. No way!

With the bigger clubs gaming represents anywhere between 60% and 80% of its revenue.

It would be interesting to know where the club thinks it can shine.

I'm thinking it is rugby league where they think they can shine.

We have been told that Rugby League is the core business of the group. And also told by the Group CEO that it is acceptable for Rugby League to lose $6m a year. This on what is probably a revenue base of $20m, maybe $25m - $7m of which is in the form of grant from the NRL. Further to have a sporting franchise as your core business - wow? They must think they can shine at that - for the odds are firmly stacked against it not devolving into a financial nightmare - especially RL and especially in Sydney.

But then to outsource part of your business that represents almost 4x the revenue of football - and generates profit?

If they get the club business right, the football can be always be well financed. Not to the tune it has been in the last 5 years but well finance nevertheless.

But I guess so it can with what seems to be the strategy and where they shine - offloading stuff. There's still plenty to offload.

So, there's nothing to worry about.

 

[Pomoz]

Darkbloom, casinos make their money at the tables and through high rollers, not through poker machines. That is a big difference from a poker machine fuelled leagues club. A modern casino is an entertainment centre with accomodation, shops, restaurants, gaming and entertainment (shows) as its revenue streams. The Panthers doesn't have shops and doesn't have gaming tables or high rollers. The latter is where the big money is and why Packer went to town trying to get a license for Bangaroo. It ain't because of the poker machines. In respect of the Panthers, it is impossible to comment whether outsourcing the gaming makes sense without being privy to the business case that was put forward. I share your reservations but is often the case, high revenue doesn't necessarily mean high profit and a good ROE.

Rugby league is the core business of the group. However, that doesn't mean that they can't run other businesses which support the core and they key is to run the "other" business successfully. It is quite difficult for any Australian sporting franchise to make money just from its related operations (the team) such as merchandising, ticket sales and sponsorship. The Australian market is too small. It is sobering to think that Manchester United generated $876m of revenue in 2016 and spent $153m in acquiring ONE player. Wayne Rooney is paid $25m per year to play for Man Utd. That is the salary cap for 3 teams. They can generate enough from their core business.

Just to hammer home that point. The Broncos made a profit of $4.1m in 2016. They are a one city team with unfettered access to all the corporate sponsorship in that town and their importance in the TV market means they constantly get prime time slots. Yet they were probably the only team that made a profit and a mere $4.1m at that.

All this really points to is that a team like Penrith, based in the suburbs and facing multiple franchises in the same geographical area, need to generate funds by other means. Its core business is still rugby league, but it needs diversity in its revenue streams.

I take your point that brilliant management and vision by the management in prior years built up the wealth of the Panthers group. But I don't believe for one minute that Fletcher and Gould are happy with a strategy that runs down the assets to eventually leave the club broke. Only an idiot would adopt such a strategy and Gould has many flaws and blind spots, but he is no idiot.

 

[darkbloom]

I disagree with a number of points Pomoz:

Firstly you are quite wrong about casino revnue. Not sure about the ratios now but not so long ago around 66% of Las Vegas gaming profits came via poker machines - this is because they produce more revenue and cost less to run. See this comment from a 2014 article about Packers Crown Sydney which will have only tables and machines that replicate table games.

But Crown's concession to the NSW government, that it will not operate poker machines at its Sydney casino, will lead to the property having the lowest earnings margin of any of the developments. Poker machines generally generate the most profits of any casino revenue.

(The developments mentioned there are a number of other casino developments in Australia and NZ)

Secondly, Rugby League may be the Panthers Group's raison d'etre. If it is the core business then it is and always will be in serious trouble. You point very well to the trouble of being a business in sport - especially in a region that has 8 competitors operating in the same sport and the same media, sponsorship, and consumer marketplace.

It is important that this not be mixed up - the profits from the core business provides the livelihood for its reason for existing.

Whatever the relative strengths held by Gould and Fletcher - and you are right about Gould, he is smart, close to genius I'd say - Fletcher? Well!! - I feel decidedly uncomfortable about a combination of facts that I think can only lead to a degradation of the financial and reputational standing of the Panthers Group - and therefore in the long run the Panthers football club.

One part of that, for me disarming, combination of factors is that the most powerful man in the Panthers organisation is not an employee of Panthers at all - he has ultimate authority but zero responsibility. Further he has a couple of other quite demanding jobs.

 

[Pomoz]

Darkbloom I was talking about profit not revenue. Lets talk about Crown Casinos. Main floor gaming, which includes tables as well as machines is 60% of the total of VIP and main floor gaming. But of course, main floor gaming includes tables as well as poker machines, so the revenue split is not 60:40 at all. According to my source, who was the senior finance person at Crown casinos, VIP gaming is where the profit is. Low floor space required, albeit more upmarket than the rest of the casino, low number of employees required and basically low overheads. Las Vegas is unusual in that it has a massive number of casinos in a small area and a lot of them just have mainly poker machines and get the foot traffic because well, it's Vegas. Not quite the same as a leagues club. Interesting discussion though. They are a great business, Casinos, if you can get a license.

What does it matter if the core business of sport is supported by leagues club entertainment revenue? The only thing that is required is to have managers who understand how to run a leagues club. They don't need to know a thing about league. Similarly, the coach doesn't need to know how to run an entertainment venue. Symbiosis as long as one doesn't kill the other, which I think you are hinting at.

Gould, a near genius? I think you could be right, even though he drops a few clangers (Corey Paine, WTF?). I don't think you need to worry about his accountability though. Plenty of people are accountable and don't care. Gus cares. Without that, why would he bother?

 

[darkbloom]

Crown is a pretty unique property - with a powerful junket program (even though it has them in heaps of trouble now). But even with those ratios - do you think they would outsource their poker machines even if they could? I doubt it, I'd even be prepared to gamble on the fact they wouldn't.

The locals casino environment in Las Vegas is very much like the club scene in NSW.

Now consider a large leagues club ... and a decision to outsource its gaming with even greater impact on the bottom line,

I guess you can call RL the core business of Panthers - it is not a core business I would invest in with the intent of getting anything more than an emotional return.

I guess it doesn't matter what you name as the core business except it may determine the nature of your business focus. And it also may depend on what constitutes a business.

Focus on the club business your business focus is on over $100m in revenues and high potential profits. Focus on football on your focus is hardly on business at all and even if it was it is on $25m in revenues and trying to minimise the losses.

There's a million reasons Gus cares - he is very driven by each one of them.

 

[Pomoz]

Crown is a pretty unique property - with a powerful junket program (even though it has them in heaps of trouble now). But even with those ratios - do you think they would outsource their poker machines even if they could? I doubt it, I'd even be prepared to gamble on the fact they wouldn't.

The locals casino environment in Las Vegas is very much like the club scene in NSW.

Now consider a large leagues club ... and a decision to outsource its gaming with even greater impact on the bottom line,

I guess you can call RL the core business of Panthers - it is not a core business I would invest in with the intent of getting anything more than an emotional return.

I guess it doesn't matter what you name as the core business except it may determine the nature of your business focus. And it also may depend on what constitutes a business.

Focus on the club business your business focus is on over $100m in revenues and high potential profits. Focus on football on your focus is hardly on business at all and even if it was it is on $25m in revenues and trying to minimise the losses.

There's a million reasons Gus cares - he is very driven by each one of them.

Haha, Darkbloom 'emotional return" is in short supply at the moment. No ROE there!

 

[darkbloom]

Yes ... the emotions are as red as the ledger at the moment.

But the love remains and that means:

you have certainty that moments of delirious joy and excitement will come your way - if only for a fleeting moment they still heavily outweigh the down time.

and

you maintain an optimism - however misplaced you may suspect it to be - that what is happening behind the scenes will create an ongoing financial stability for your club.

I am afraid with the latter, for me, it is more a forlorn hope than optimism. I am pleased to see optimism being maintained by some intelligent people.