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.
(Photo by Daniel Carson/AFL Photos via Getty Images)
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).
Ball Burster
Roar Rookie
They don’t. The numbers are designed to compare the ability of each club to deal with an event like this. They also highlight how vulnerable clubs are to revenue or expense shocks.
Ball Burster
Roar Rookie
I understand the difference between the two and also that the terms are are not public. But I think the following are reasonable assumptions: (i) the AFL will most likely need to draw down the whole amount within 6 months of training starting (ii) the interest rates won't be very friendly.
Ian
Guest
I note your assumption that you used the total expenses for the year. Does this factor in the drastic cut to the cost structure and player pay cuts?
Lukey Miller
Guest
The AFL were doing a pretty good job pre-virus, but there had been a fair bit of empire building going on. Like most businesses and corporations they are struggling to cope with the present situation, but they can come out of this intact. Expect a leaner version of the AFL to emerge, with essential people only. I am sure they would like to retain all of the team's. Like the clubs, there will be fewer people working at the AFL, with a load of prioritising going on. People will want to get back to watching footy, so the AFL need to make sure the game is attractive to watch. I get the feeling that 17 minute quarters will be retained and that interchanges will be down to 40-50 per game. One thing that they might want to change is the cramming of 44 players into a 50 metres area - this is just not footy. I am not sure how they can get the coaches to sort that problem out, because it is the coaches who created and maintain the issue.
WCE
Roar Rookie
WC have 93,000 members and i hope very few will be requesting a membership refund so hopefully we will be okay. I certainly hope all 18 clubs get through this , it would be devastating to have your beloved footy club fold. Good luck to all
Mr Right
Roar Rookie
IAP, have you been advocating this change for years or just now that a situation that hasn't occurred previously in our lifetime's has entered our world? Curious to hear your reply to this. So many people criticize a club / AFL when it is run as a business not as passion. The AFL has broadened the competition to attract a wider supporter base which attracts national sponsors & increases media contracts. In the 1st & 3rd largest cities in Australia the interest in Sydney & Brisbane has increased dramatically over the last 20 years with the help of the AFL. Lets all take a deep breath & be positive in the current climate.
Nick
Roar Guru
We do when the next corona virus or any virus is as virulent and lethal, yes.
Nick
Roar Guru
1. A line of credit is slightly different to a loan in how they get repaid and how interest is calculated. Instead of being given $600m (as you would a loan) he has the option to draw up to $600m. 2. You don't know the in's and out's of how the line of credit has been offered. 3. Most importantly, he's not just been given a line of credit, it's been provided by providing Marvel stadium up as collateral. If he can't repay the the debt, the bank seizes the stadium.
Naughty's Headband
Roar Rookie
Gil started as a consultant and then worked for the AFL - he has no real world experience. He is an ex-footballer - he played in the VAFA and was on Carlton's supplementary list.
Paul
Roar Guru
I know in the NRL, David Smith, the previous CEO tried to set up a contingency fund, but this kept getting raided by Clubs coming back to the NRL asking/demanding financial support. This led to the current CEO handing all of the available funds out the Clubs and issuing an ultimatum - there was no more money, so swim or sink. The Club and the NRL are not one and the same, IMO. The Clubs have a huge say in what happens in the game, far greater than a simple 50:50 partnership with the NRL. They're argument is simple, they pay the players, the players are contracted to them, so the Clubs should have the final say on what happens to their players. I'm sure when all of this blows over, there will be significant changes to the way the finances are managed in both codes, but I doubt anyone could have planned for this, bearing in mind nothing like this has happened to either code in at least 70 years. Your suggested 6 months funds to run a skeleton operation might also be moot, if this crisis extends past September.
Paul D
Roar Rookie
Generally funds that can be liquidated quickly aren't in investment streams that deliver 8%. Or if they are, there's a tremendous amount of short-term volatility which makes it difficult to access at a given value.
JW
Guest
To say if they had business people running the show things would be different is a bit of a stretch. I don't disagree they should have cash set aside but...The US airlines are currently asking the gov for a $50bn bailout, and I bet the execs running those all have MBAs from top business schools. Their revenue dried up completely too. Gillon is also a businessman, not an ex-pro footballer.
Paul D
Roar Rookie
I'm probably not the best person to answer this question. I don't have daughters of my own. I know a number of people on this place do have daughters, and they have commented that since the advent of the women's competition there are a lot more women's teams at grassroots levels, and more opportunities for girls to continue playing as they age. In many instances girls dropped out in their mid-teens due to not having sufficient numbers to field a side, which I understand is no longer the case. This editorial contains a number of relevant stats and figures. https://www.theage.com.au/sport/women-s-afl-moving-in-leaps-and-bounds-20200205-p53y2t.html My argument re: money is that the salary cap for all ten women's teams last year was 4.7 million, less than half what it is for one of the 18 men's sides. I don't see it as money down the toilet at all, it's a tiny fraction of what the AFL makes and earns to demonstrate the AFL has some skin in the game when it comes to improving equality in society. If you can't see the point of the women's comp beyond what you call virtue signalling I'm certainly not going to bother trying to change your mind.
Brendon the 1st
Roar Rookie
I don't understand why everyone is so keen to see clubs shut, this is the third article I've seen on the roar about this in the past week. There is demand for an 18 team comp, where there is demand there will be a way to make it happen, the example I used above is just one way club supporters could help, there will be many other benefactors and strategies. Everyone just needs to calm down and stop trying to make it worse than it is before we even know how long the lockdown runs for. Panic much?
Naughty's Headband
Roar Rookie
I'm suggesting that the governing bodies have it wrong. This issue is being convoluted by the clubs/governing body thing - they're one in the same, they're effectively the same entity. The governing body generates its revenue through the clubs, and the clubs rely on the governing body for their revenue. I have written it in one of my posts - they should have 6 months of a skeleton operation in their bank at all time. By not planning for the worst case scenario they absolutely lack business acumen. Take a look at the books of any major company; they all have contingencies just in case.
Ball Burster
Roar Rookie
No one would suggest that bank executives lack "business acumen". But we still had the scandals - they weren't evil, they never paused to consider whether it was all too good to be true.
Ball Burster
Roar Rookie
You are right - it's not last year. On the other hand we could probably agree that the cost of running a club at full tilt is way beyond the means of their supporters if other revenue dries up.
Ball Burster
Roar Rookie
You are quite right. Nonetheless if you run the same assumptions through every club you would come up with a similar batting order: bunnies from number 4 (and you wouldn't bet your life on 2 and 3). In the end the analysis was meant to give a sense how vulnerable clubs are to shocks and how poorly placed the AFL is to deal with general shocks.
Seymorebutts
Guest
Corona viruses make up about 15% of all the known viruses that circle the world each year. So , is this the new normal? Every single year we run the risk of shutting the country down because the next COVID virus has mutated??
Seymorebutts
Guest
Im intrigued by the ''inclusiveness'' argument. Presumably, inclusiveness is good because it is the opposite of exclusiveness. What evidence can you present to show that Australian Rules football EXCLUDED women? They already had existing comps in most cities... nobody was campaigning to forbid them from playing.. .so what exactly was the barrier to a woman playing footy? If there are no barriers, the game was already inclusive. A higher % of women attend AFL games than probably any other football code in the world.. I went to Upton park in 1980, 35,000 screaming east enders and I didnt see a single woman within coo ee of the ground. Not many women attend rugby league games compared to Aussie Rules, US college football does get a decent % of women attending I believe. The AFL has spent millions (hundreds of millions in today's dollars??) renovating stadiums to make footy a more family friendly environment, women, wives, daughters, sisters etc who are fans of the game have all benefited from this capital investment. So what was it exactly that was the catalyst for creating a stand alone womans competition which supposed to represent the ''elite of the elite''. Arent some of them soccer players etc who only agreed to take part because they would get paid? I would argue that not only, was nobody clamoring for a female AFL comp, most female AFL fans do not give a toss about it. Would any of them, given a choice, choose to watch the woman Collingwood team play over going to the G to watch the men play? The women have had a couple of big crowds.. but as far as I know, it was free admission... and that point is almost irrelevant when you consider, the Brisbane soccer team got a 45,000 crowd when they made the grand final back in the late 1990's.. people were saying ''this is a new day for Australian football'' yet the code never took of the way the optimists were saying and I suspect the side in question went under at one point.. they were called the Lions but are now the Roar. To me, the AFL are acting like public servants, just continue to throw money at a problem and refuse to admit defeat. Kevin Rudd spent 700 million on Aboriginal housing one year and didnt build a single house... Is that the standard the AFL is holding itself too?? So to people like you and Gill, what is the point of the women's AFL other than virtue signalling and at what point do you admit failure? Or is the plan to NEVER admit failure and just keep pouring money down the toilet?? If you're going to use the taxpayer money argument let me stop you there, I dont think the govt should be pouring tax payers money into any sport, golf doesnt get much taxpayer funds, they look to be doing just fine.