Members' Information Night - West Adelaide

Thanks for the update lee.

You mention cash flow is the problem not equity. My question is this. If the club gains the investment level that you say and offer a return to the investors there must be talk of an agreed buy back?

With as you said cash flow being an issue how is the club going to provide the relevant return to the investors? Is the return provided to the investors by way of buy back after a period of time?

Clearing the debt is one thing but being able to increase revenue within the club is another. Without increasing the revenue this plan cant work?

I wish I was able to attend to ask these questions.

Yes, coach, the club will have the rights to buy back.

The return to investors will come from rent paid by the club to the Unit Trust, replacing interest currently paid on the bank loan.

CEO John Kantilaftas also outlined a plan to lease part our upstairs space to commercial renters to part defray the rental costs.  This should make it cash flow neutral or positive to the club.

The plan is separate from our operations, but you are totally correct in saying that we need to improve our operations and increase revenue.  This plan will allow us the time and resources to take advantage of opportunities as they arise.

The Board has cut expenditure, mainly in salary costs, by about $160,000 for next season and our (very conservative) budgeting sees us in a solid position over the next year.

I am happy to answer any questions at any time, either on the forum or by PM.

Turning around a clubs fortune is never easy, and is usually met with the first and most immediate roadblock of members wanting blood over any previous mismanagement, and wanting to point fingers. All very understandable and natural from their point of view. However, it doesn't help with the task of moving forward and any new proposal(s) has to be met with an open mind by members and then Supported by them. On the surface it sounds as though the West brains trust are serious and genuine about their clubs fortunes moving ahead, so I hope the WAFC community gets behind them and makes this plan (or any other that puts the club in a safer place) a winner.

Would the club look to invest the funds received from the sale in other investments to generate cash flow?

A pot of money is nice to have to fall back on if the cash flow dips and wanes at various stages of the season (like about now I think). But eventually if not used for positive income generation, it gets eaten away in operational activities.

This is where my point comes in that I have been harping on with for a while. Clubs who are in a position do a similar thing (cash flows issues or not), could then look to collectively invest in ventures, property, shares or whatever to provide meaningful returns.

Unfortunately the Blues are not in such a position to do this (without meaningful assets). But a structured scheme delivered through the sanfl could achieve this.

A much longer term and potentially sustainable revenue stream, not reliant on the fickle nature of pokies, licensed premises etc that have been the traditional mainstay of clubs' funds.

Needs a club like West to lead the way with a structured model.

The revenue stream of all clubs have changed significantly since pre AFL days in this state.
Gone are the days when Westies had there 3 or 4 days of bingo attracting 200 people each time and the attraction of poker machines as a money spinner is now on the decline as well.
Also the number of people drinking at the club has declined from years gone, drink driving laws have changed that and people have become more responsible.
As a long term member and avid supporter of the WAFC I fully endorse the path they have chosen to guide the club forward.

As a silver member of The West Adelaide Football Club I fully support
the proposal the Board has recommended

Thank you for your support, testy and lachlan.

It's much appreciated.

Also appreciate the comments of Chambo and Scrunch.

It does sound like a sage move, Lee.

So the premises are purchased by a "trust", the profit/loss of the club/pokies/bar/dining remains a revenue stream for the club while paying a nominal "rent" to the trust for the premises.

I would image the investors of the "trust" have a time frame in mind that would see them either break even or their investment show a return, is this correct?

Pretty much, Booney, except that the club would pay a commercial rent (roughly equal to the interest it now pays on bank loans, etc).

This would give a guaranteed return to the investors.

There are other commercial-in-confidence matters that I can't talk about which might give investors comfort.

Because of various laws, the number of investors is limited.

The information here is all good but it's all here! Earlier posts mention a media release of some kind. Is that still going to happen?

Yes, today I would think.

Lee wrote:Pretty much, Booney, except that the club would pay a commercial rent (roughly equal to the interest it now pays on bank loans, etc).

This would give a guaranteed return to the investors.

There are other commercial-in-confidence matters that I can't talk about which might give investors comfort.

Because of various laws, the number of investors is limited.

So a cash injection of ( lets call it ) $2m.

Monthly over heads ( rent / interest ) remain the same.

Debtors get paid off, meaning $2m > whatever it becomes. I'll hazard a guess at $500k.

So now with $1.5m in the bank and no extra income? ( Other than the interest they would accrue on that remaining monies )

Article from Rucci on this...

http://www.adelaidenow.com.au/sport/afl/west-adelaide-looks-to-private-ownership-model-to-save-its-place-in-sanfl/story-fnii0631-1227137234867?from=public_rss&nk=401bb969dd14e4a6c40c0feb014f0ae1

Interesting take on it, with much that is correct.

It is wildly inaccurate to say that West are the closest to the financial brink, though. The very fact West have substantial equity is what allows them to put this in place and gain a lot of benefit from it. Some other clubs are much closer to major problems than West. This is all about getting an immediate cash injection.

If it succeeds, as I am confident it will, it may be a blueprint for one or two other clubs to follow perhaps.

West Adelaide will keep their members fully informed of progress.

Mr Rucci and the SANFL's point about SANFL clubs living within their means is very much what it's all about, though.

Lee wrote:Interesting take on it, with much that is correct.

Some other clubs are much closer to major problems than West.

Such as?

Clearly you are very good at gathering information, BP, but c'mon, you've got to be more discreet than that.

Some clubs are in much more serious trouble than they will have their members think. One in particular would really surprise and concern their stakeholders.

Big Phil wrote:

Lee wrote:Interesting take on it, with much that is correct.

Some other clubs are much closer to major problems than West.

Such as?

This is one time when I'd rather not name clubs, Phil.

I can be criticised rightly for that, but so be it.

Here is the Press Release from last week:


The West Adelaide Football Club wishes to advise of a bold new initiative regarding the future direction and prosperity of the club. At an information night held at the club on Monday, November 24, the WAFC Board outlined to the members a proposal in relation to the future ownership of the club’s land and buildings.

The Board has resolved to undertake a due diligence process in regard to the transfer of ownership of the club’s land and buildings to a WAFC Unit Trust for the purposes of attracting investment from individuals or entities who may or may not have ties to the club.

This would result in a substantial injection of funds into the club which would enable it to pay off bank debt, other loans and creditors, and thus shift the club’s focus from servicing debt to growing the club.

The club is fortunate to be in the position where its assets comfortably exceed its liabilities and can use its equity of approximately $2million to overcome a long-standing cash-flow problem in order to ensure the strength and growth of the football club on and off the field.

The Board thanks the members for their attendance and their interest in the proposal and looks forward to a more secure and more successful future.

A Sub-Committee has been appointed to oversee this initiative and undertake the relevant due diligence. The members of the Sub-Committee are:

Richard Sykes (President)
Dean Withers (Finance Director)
John Levy (Legal)
Steve Georganas
John Kantilaftas

critical time for the sanfl, need the eight pure sanfl clubs to really be on their feet financially, only going to get harder to compete in the financial climate.