A number of people have asked for an overall analysis of 2019 financial statements to get a sense of the game’s financial health.
I start with some broad conclusions. The AFL will survive, but not without substantial change: the AFL’s costs need to be reduced and the code must set itself and the clubs “prudential margins” to make sure substantial cash reserves exist to throw at headwinds.
I believe this means either fewer teams or reduced payments to players, administrators and the AFLPA. Most likely both will need to be restructured.
What follows is a crude assessment of how many months each club could survive in 2020 given its 2019 spend and its cash on hand at the end of the financial year (i.e. as at 31 October). A more detailed explanation of the methodology is provided at the end of the article.
Each club’s financial health is expressed in months (the higher the number, the better): Brisbane 0.3 months, Carlton 1.1, Collingwood 3.5, Essendon 1.2, Fremantle 0.3, Geelong 0.4, Gold Coast 0.3, Hawthorn 4.7, Melbourne 0.1, North less than 0.1, Port less than 0.1, Richmond 1.4, St Kilda 0.2, Sydney 1.5, West Coast Eagles 7.2, and Western Bulldogs 2.1.
Note that Adelaide and GWS are yet to publish their full statements.
This is not a pretty picture. It makes it clear, albeit in a crude way, that few clubs have the sort of unencumbered cash put away to weather even a mild storm, let alone a hurricane.
The best placed are the Eagles who could survive for 7.2 months. The next best placed are the Hawks and the Pies.
The rest would struggle. To put this is a broader context, the clubs listed spent about $935 million in 2019, yet the clubs only had only something like $130 million in cash to call on at the start of this financial year. What goes in goes out, with few exceptions.
Is the AFL in a position to help the clubs? No. The AFL had about $100 million in net cash at the end of 2019. It’s surplus was around $28,000 on a revenue of $794 million. What goes in, goes out.
Will a loan of $600 million to the AFL be enough? Only if there is a significant restructuring.
A Note on Methodology: I take the view that the simplest, fairest approach was to ask “How would the clubs and the AFL be placed if there was little or no revenue in 2020?” and then base the analysis on the last published financial statements.
I looked at three key variables:
– Expenses (or costs) for the last full year of operations;
– Current Assets (ie cash or cash equivalents) but I exclude receivables (likely to be impaired in the current environment);
– Current Liabilities (I made adjustments to some clubs’ cash where they merely reflect current liabilities such as unearned revenue and the like.
Importantly this is a crude analysis that reflects where clubs are placed at a point in time and not how they got there or where they might be headed. It does not take into account 2020 revenue from memberships (which might have to be repaid).