Sharks 2009 financial report - Good or Bad news?

[Goddo]

http://www.sharks.com.au/?s=article-display&id=25460

Sharkies Leagues Club 2009 Annual Report

10/05/2010 7:02:17 PM

A MESSAGE TO MEMBERS:
The Cronulla Sutherland Leagues Club Group has announced a consolidated loss for the 2008-2009 year of $3,448,000.

The Cronulla Sutherland Leagues Club (CSLC) has taken the first steps to ensure the on-going growth of all operations of the Group.

Cronulla Sutherland Leagues Club as the parent entity has absorbed all Cronulla Sharks Football Club outstanding debt, in lieu of a substantially reduced grant from the 2010 season.

The write off of previous costs associated with the Club’s property development ($1.4 million) and various restructuring costs have been accounted for in the Group Consolidated Loss.

The Cronulla Leagues Club ran at an operating profit before grants in excess of $1,300,000 during this period with expectations for this to increase under the new appointment of Ms Deborah Feening to the role of General Manager.
The Leagues Club net loss ($5.9m) reflected the write off of the development costs ($1.4 million), various restructuring costs, a grant to the Football Club ($2.0m) and the write down to nil of the debt due from the Football Club totaling over $3.8m.

The Football Club’s contribution to the Groups reported loss was $1,300,000 (after a $2 million grant from the Leagues Club during this period) and would have been substantially greater without the full review and reduction of costs under the new Board of Directors and Management Team in the later part of the year.

The Football Club had been consistently running at a loss of more than $2,500,000 before Leagues Club grant for each of the past 5 years and this has now been addressed.

Cronulla Sutherland Football Club CEO Richard Fisk backed the Board’s decision to crystallize and clear all outstanding bank debts into last year’s accounts.

“A line has been drawn in the sand to highlight the current financial position of the Club and clearly illustrates our present financial position. For the first time in many years our football club begins a new year without the legacy of a substantial bank debt."

“The Football Club has been bleeding for many years and new prudent initiatives have cut waste and stemmed the losses. We have had to share the pain around, however this was critical for the long term future and survival of the Club."

“We have had all operational contracts reviewed to reel in the over spending in the Football department, Leagues Club and Toyota Stadium maintenance."
“The forward projections for 2010 provide an even brighter picture of the Club under the new policy of controlled spending and we have budgeted to utilize the Club’s full salary cap,” added Fisk.

We are confident a clear picture has been provided and all areas of the group are working hard to complete the turn around of the Club.

“The 2010 and 2011 projections and budgets illustrate what can be achieved when there is a clear direction, strong control, financial prudence and a good team of people”.

“I can assure all fans and corporate partners we now have a stable formula to build a strong platform and competitive team for the long term future of the Club,” concluded Fisk.

The Cronulla Sharks have been boosted in 2010 with the signing of international electronic company Hisense as a major sponsor, Pokerstars.net, Coldwell Banker, Shire Steel Supplies, Salmon Buckets, Bullet Labour Hire, Douglas Maher Coleman, Carlton United Brewery, Schweppes, ISC, Gatorade, Harvey Norman Commercial, Body Science and over 160 local business partners.

We have restructured many areas of the Group to ensure every opportunity is provided to the Football Club to become self sufficient on a much reduced annual grant.

The Leagues Club is currently working on a strategic plan that would benefit the Group, involve the community, its members and supporters to make the Club the place to be.

Any Finance/Ecconomics geeks want to translate?

 

[keeney]

Leagues club is doing ok, it's losses were inflated by the fact that it wrote off some assets that were owed to it by the leagues club. Also, it incurred a one off loss from the write off of an investment into that slaterd development.

Basically the Leagues is making money. However, not enough to continue granting the Sharks 2 million a year it would seem, although they remain hopeful of increased income this year. It seems hard to believe that they could increase it significantly enugh to not be granting more than they profit.

 

[simostorm]

“The forward projections for 2010 provide an even brighter picture of the Club under the new policy of controlled spending and we have budgeted to utilize the Club’s full salary cap,” added Fisk.

We are confident a clear picture has been provided and all areas of the group are working hard to complete the turn around of the Club.

“The 2010 and 2011 projections and budgets illustrate what can be achieved when there is a clear direction, strong control, financial prudence and a good team of people”.

“I can assure all fans and corporate partners we now have a stable formula to build a strong platform and competitive team for the long term future of the Club,” concluded Fisk.

Sounds like good news.. i think.

 

[Russell Crowe's Band]

yeah the leagus club does alright.

footy club loses hand over fist.

if you could say...stem the flow and tighten the footy club to lose less money (or god forbid make a dollar)

this is what the new guys are trying to do.

im less than convinced however so. interesting

 

[Goddo]

It seems like they are still losing money but at a slower rate due to cost cutting, and are hoping that with an increased TV deal and the development they can chip away at the debt in future.

This isn't healthy and a lot of it sounds like management spin to me. They have their work cut out to survive to 2013 by the sounds of things.

 

[sharko]

The Sharks have been very sensible in trying to reduce the large debt attributed to the Football Club..that appears to have been achieved at this stage. They ahve numerous sponsors which is encouraging and you will see them in the market for some quality first graders next year.
There may have to be some action taken on the coachiong and support staff front..nobody wants the spoon so Stuart will be having some hard decisons to make soon.
Given the truamatic couple of past seasons the Sharks may be on the way back.
The other clubs have not released their figures yet as they still being massaged..there is no doubt a number of the clubs in the top 8 have done what Melbourne did and are now scambling to cover their tracks!

 

[Goddo]

The other clubs have not released their figures yet as they still being massaged..there is no doubt a number of the clubs in the top 8 have done what Melbourne did and are now scambling to cover their tracks!

They are the figures for the 2008-2009 financial year dopey. It has nothing to do with other clubs or the salary cap.

The only other clubs that I know of that delayed their reports from last year were Parramatta, due to a corporate restructuring, and Newcastle, due to the ongoing stadium issues with Hunter Venues.

Both these clubs filed them a while ago as far as I'm aware.

This isn't a case of a conspiracy to get rid of the Sharks or of salary cap cheating. Its a case of them being so woefully financed/managed they are on the brink of colapsing.

 

[Russell Crowe's Band]

formerly woefully managed.

we are yet to see the full effects of the new board members financial restructuring, belt tightening and what not.

 

[petetheileet]

soubds like they will stay afloat till 2013 if you ask me.....

just!

 

[Russell Crowe's Band]

i agree pete

we will be a shoe string team til 2013.

simply, we need to do more with less.

that or dig up the carpark and find oil.

 

[m0nty]

Headline is: Sharks will continue to be a busted arse club on field, but slightly less busted arse off field.

 

[nz eagle]

As an accountant, I have the following thoughts:

its the annual report, message to fans - it needs to be a positive message. The more interesting parts of the report would be the financial statements.

The most interesting item is the 3.8m loan that the leagues club has written off - this is 3.8m of funds given to the football club over and above the 2m grant given each year. I wonder how long this debt accumulated before it was written off?

 

[myanonymoususername]

The Sharks have been very sensible in trying to reduce the large debt attributed to the Football Club..that appears to have been achieved at this stage.

They haven't actually eliminated the debt. The Leagues club loaned money to the football club and has effectively written it off. The Leagues club still has to pay the bank back. Its just a bit of window dressing to make the football club look less bad.

The quid pro quo for writing the debt off is that the leagues club grant can't exceed $250k per year from 2010, as opposed to $2m in 2009. This is a condition imposed by the bank which loaned the money to the leagues club. The club is already trying to renegotiate with its bankers to allow the leagues club to pay a higher grant than $250k to the football club this year which indicates that the football club hasn't succeeded yet in reducing costs or generating external replacement income to the extent planned. By my reckoning they need to find something like $1.75m in extra revenue and/or cost savings - the fact that the leagues club mentions they are renegotiating with the bank for a grant up to $1m suggests the football club is about halfway to the targets it needs to get to.

For the next 2-3 years the club is entirely dependent on keeping its bankers onside. The bank pulls the pin, bye bye Sharks.

 

[m0nty]

Double post

 

[Cheesie-the-Pirate]

Money quote:

"The Leagues Club has after year end failed to achieve gaming performance covenants of its bank debt facility and has accordingly in this report revised the classification of its bank debt to current."

p12

This is a bad set of financial statements by absolutely any standard. Worse than last year by any reasonable measure.

Read note 1(b). That's the single most important part of the report and it's completely damaging.

1. Debt has increased.
2. The mooted saviour asset has been impaired.
3. Debt remains current and the club is in breach of its debt covenant.
4. The Leagues Club cannot afford to pay the Football club.
5. The club is reliant not simply on its bankers but also on the goodwill of its trade creditors.

 

[Goddo]

Thanks Cheesie... I was hoping you would cast your eyes over this.

 

[Perth Red]

Reads like the Leagues club makes $1.3 mill profit but gives $2mill to the Sharks NRL club. Doesn't sound very sustainable?

 

[_snafu_]

Reads like the Leagues club makes $1.3 mill profit but gives $2mill to the Sharks NRL club. Doesn't sound very sustainable?

No. The leagues club cannot provide more than $250,000 by way of a grant to the football club because the banks who are funding the leagues club have imposed this limit as a condition of the loan.

 

[Alex28]

I can't see how next years is going to be much better (excluding one-off write off's and the like) - turnover decreased on the previous year in nearly every category. You would have to think that income isn't going to increase next year, but expenses certainly will. Interest will go up substantially on the basis that interest rates have increased this financial year and it appears they have to service another $2 Million in lending (so at 8% that's another $160,000 in interest).

Those figures can't be sustained for a long period. I know the development is their saving grace, however I can't see how a Bank will lend to them on those figures (even adding back the write off's).

 

[seanoff]

the football club lost $3.3M before the Leagues Club grant. :crazy:


that's a boat load of costs that need to be taken or income found out if the grant is coming down to $250K

and the Leagues Club seems to be in a world of hurt as well.


good luck Sharks, you're going to need it.