THE MOST common question I have been asked over the last few months relates to our merger with the Bentleigh Club, and why we would seek to take over a club that has been making a loss in recent years.
Further to Jim’s comments in the press release last week, I think the value of the merger from the MFC’s perspective can be summarised into three main areas:|
- Assets - over $9m are being added to the MFC balance sheet. These assets are offset by $1.8m of debt taken over and $1.2m in gaming machine entitlement obligations - however, in a net sense the improvement in the balance sheet will be over $6m. The Bentleigh Club will represent the first real asset MFC has owned. This strengthening of the balance sheet creates the potential for further strategic investment as we continue to explore all avenues to grow the club;
- Improved profitability - from August 2012 the gaming regime in Victoria changes dramatically, which provides an opportunity to significantly increase profits. Under the new regime, a much greater share of the gaming revenue will flow back to the venue operator (MFC), which is the driver of the increased profitability. It is not a case of backing ourselves to turn the venue around - although we will be working hard to do this also - with no growth in revenue, the club will become substantially more profitable.
- Before the new regime coming in, we believe that we can operate the Bentleigh Club at close to a break-even level. It is important to point out that the projections we have done for our gaming operations indicate that the debt assumed under the merger can be repaid from the profits of the venues and not from any other activities of the club. This was a key criteria in our decision making - the debt taken on had to be able to be repaid from gaming operations, so that the rest of the core operations of the club remain debt free. We believe that not only will this be achieved, but the profits from the venues will allow cash to be injected into key areas like our community programs and the football department; and
- Heritage and relationships - ensure the survival of the Bentleigh Club and continue the long standing relationship between the clubs. As Jim said last week, we believe we have rebuilt the MFC on the basis of inclusivity and respect for heritage.
The key threat to the profitability of the venue in the medium to long term is the debate going on at Federal government level at the moment around high impact machines and the possibility of introducing mandatory pre-commitment for gamblers (i.e. out a cap on their potential losses before they start playing).
Any potential significant changes to the industry were of concern during our negotiations - hence, a clause was included in the transfer deed that provides for the closure of the venue and the sale of the land if a legislative change makes the venue unviable.
We will report in detail in this year’s Annual Report regarding the impact of the merger, but it will certainly have a significant impact on the reported profit figure for the year.
However, as we have done in recent years with other ‘one-offs’, we will strip this out and show the true underlying profitability of the MFC.
One of the key strategic priorities of the MFC over the past couple of years has been to strengthen the financial position of the club.
The highly successful Debt Demolition campaign erased the club’s debt as our first priority.
We were then keen to create opportunities to build assets - assets which are also income generating.
We believe the merger with the Bentleigh Club is a very important step to the achievement of this aim, as it not only significantly strengthens the balance sheet of the club, but also has significant potential to deliver profits that we can reinvest in key parts of the business in the future.
We hope all our members view the merger as a positive step in the continuing growth of the Melbourne Football Club.
I would like to add my thanks to the Board of the Bentleigh Club and the Consultative Committee for their professionalism and personal time in achieving this outcome for their members.
I would also like to acknowledge David Chippindall from the MFC, who has done a power of work in putting the deal together.
If anyone has any further questions about the Bentleigh Club merger, please send them through to my attention on info@melbournefc.com.au.
Further to Jim’s comments in the press release last week, I think the value of the merger from the MFC’s perspective can be summarised into three main areas:|
- Assets - over $9m are being added to the MFC balance sheet. These assets are offset by $1.8m of debt taken over and $1.2m in gaming machine entitlement obligations - however, in a net sense the improvement in the balance sheet will be over $6m. The Bentleigh Club will represent the first real asset MFC has owned. This strengthening of the balance sheet creates the potential for further strategic investment as we continue to explore all avenues to grow the club;
- Improved profitability - from August 2012 the gaming regime in Victoria changes dramatically, which provides an opportunity to significantly increase profits. Under the new regime, a much greater share of the gaming revenue will flow back to the venue operator (MFC), which is the driver of the increased profitability. It is not a case of backing ourselves to turn the venue around - although we will be working hard to do this also - with no growth in revenue, the club will become substantially more profitable.
- Before the new regime coming in, we believe that we can operate the Bentleigh Club at close to a break-even level. It is important to point out that the projections we have done for our gaming operations indicate that the debt assumed under the merger can be repaid from the profits of the venues and not from any other activities of the club. This was a key criteria in our decision making - the debt taken on had to be able to be repaid from gaming operations, so that the rest of the core operations of the club remain debt free. We believe that not only will this be achieved, but the profits from the venues will allow cash to be injected into key areas like our community programs and the football department; and
- Heritage and relationships - ensure the survival of the Bentleigh Club and continue the long standing relationship between the clubs. As Jim said last week, we believe we have rebuilt the MFC on the basis of inclusivity and respect for heritage.
The key threat to the profitability of the venue in the medium to long term is the debate going on at Federal government level at the moment around high impact machines and the possibility of introducing mandatory pre-commitment for gamblers (i.e. out a cap on their potential losses before they start playing).
Any potential significant changes to the industry were of concern during our negotiations - hence, a clause was included in the transfer deed that provides for the closure of the venue and the sale of the land if a legislative change makes the venue unviable.
We will report in detail in this year’s Annual Report regarding the impact of the merger, but it will certainly have a significant impact on the reported profit figure for the year.
However, as we have done in recent years with other ‘one-offs’, we will strip this out and show the true underlying profitability of the MFC.
One of the key strategic priorities of the MFC over the past couple of years has been to strengthen the financial position of the club.
The highly successful Debt Demolition campaign erased the club’s debt as our first priority.
We were then keen to create opportunities to build assets - assets which are also income generating.
We believe the merger with the Bentleigh Club is a very important step to the achievement of this aim, as it not only significantly strengthens the balance sheet of the club, but also has significant potential to deliver profits that we can reinvest in key parts of the business in the future.
We hope all our members view the merger as a positive step in the continuing growth of the Melbourne Football Club.
I would like to add my thanks to the Board of the Bentleigh Club and the Consultative Committee for their professionalism and personal time in achieving this outcome for their members.
I would also like to acknowledge David Chippindall from the MFC, who has done a power of work in putting the deal together.
If anyone has any further questions about the Bentleigh Club merger, please send them through to my attention on info@melbournefc.com.au.
