West's Financial Position

There's been a lot said about West's finances and most of it arises from a misunderstanding of interpretation of financial statements and other publicity.

People have taken a statement about West having only $30,000 cash reserves as being the net asset position, which is just wrong.

West's net assets are just over $2,000,000, but that includes a value of $1,500,000 for the poker machine licences, leaving net assets of about $500,000.

You can add to that a house left to the club by a loyal supporter, not yet accounted for.

West have two major and dangerous problems, which is what the auditors highlighted. Their viability is assured only as long as the bank maintains their loan of $1,200,000. That has now been established.

Secondly, although they have a reasonable, but tenuous, asset position, their cash flow is, in accounting terms, ratshit. Big time. Hence the non-payment of obligations and creditors.

They have been negotiaiting with the Tax Office about their taxes liability, so presumably that is being managed.

For them to survive, they have to cut expenditure (and there was room to cut) and relocate their poker machines. Paul Sperling indicated negotiations about that were well under way. West now have a new President, Richard Sykes, of Simply Containers. Richard is a very successful businessman and I'm absolutely confident our financial problems should be behind us.

Oh, I see we've been written off as contenders again.

I'm not so sure.

R&B is the $1.2M debt mainly on the pokies?

Also how much asset is allocated to the licensed premises itself. Or is that the $500,000?

The old saying asset rich, cash poor comes to mind in what you have detailed.

Unfortunately for Sturt it is poor - poor in both cases.
Our only real asset is the pokies, which has a much larger debt to service.
And that is our nemesis at present.

What would be interesting is to stack all the clubs financials in these broad areas for comparison. Back on my shared revenue stream idea, clubs could then look for ways to collaborate to better mitigate some of the things that are duplicated or inefficient.

Maybe most clubs still mistrust each other too much to seriously go for this sort of ethos.

But one thing seems clear to me, survival depends on better understanding of what they are all doing across, fundraising, admin, marketing, IR, and the whole gammut of club admin sectors.

Chambo, I don't know what the bank security is, but I would guess it's certainly against the premises and probably also against the whole of the assets and undertaking.

The land and buildings are in the books at about 2 million.

The value of the pokie licences is shown as an intangible asset, but as has been well demonstrated, theyhave a real value. I'd guess 40 would be valued at a little under 2 million, and they're properly conservatively valued at $1.5 million in the accounts.

Next year's financials will get an immediate kick, with the house and the sale of 5 pokies. The sale of the pokies doesn't affect our holding of 40 licences, so there is scope to buy back 5 machines in the future.

I hope the above explains why some of the public comments made are incorrect.

I guess what I would like to know from the West Adelaide faithful on this site is your thoughts on the statement mentioned at the AGM re the moving of the Poker Machines to an alternate site?

It seems on face value a good idea, a better site should equal more turnover and customers. Yet my thoughts are that such a move will cost a massive amount of money and require a lot of financial investment from the club to set up and it seems that that is exactly what the club lacks at present.

The other question being, where specifically would it be located? Is there a movement to gain property on South rd to link through the club or would it be in leased buildings some distance away from the club? I recall when Norwood wanted to move their machines their reserves were heavilly depleted as the problems raged on with it being challenged by rival businesses and so on until an agreement was finally reached. Its not clear to me that the WAFC are in a position to get into a similar predicament?

Have heard from a couple of different sources that WAFC have been placed on COD terms , similar to Sturt last season

Good points, Ben.

It may not cost much, but that will depend on how they negotiate it and where the premises are.

Paul Sperling said the site is 1.2 kms from City Mazda Stadium, which would place it on one of the main roads surrounding the oval.

The legislative difficulties you refer to are real and it will take up to 2 years to come to fruition.

redandblack wrote:

Next year's financials will get an immediate kick, with the house and the sale of 5 pokies. The sale of the pokies doesn't affect our holding of 40 licences, so there is scope to buy back 5 machines in the future.

I hope the above explains why some of the public comments made are incorrect.

I wouldn't have thought that the selling price of 5 second hand machines, without the licenses, would amount to very much? I admit I'm not up with the cost of the machines themselves. But the real value is in the licenses, which are currently bringing sellers $45,000 each. Which unfortunately is well down on the values reached in the previous OLGC trading round at the beginning of 2012.

I think you're right about the $45,000, cc, but my understanding is that West still retain the rights to 40 licences.

I thought the same as you, actually, but Paul Sperling made it clear at the AGM that West could revert to 40 machines if it bought 5 back in a trading round in the future.

But doesn't that mean you would sell the licences and then buy then back?

over the line wrote:But doesn't that mean you would sell the licences and then buy then back?

Correct

Therefore how do keep a licence for 40 machines if you sell 5?

redandblack wrote:I think you're right about the $45,000, cc, but my understanding is that West still retain the rights to 40 licences.

I thought the same as you, actually, but Paul Sperling made it clear at the AGM that West could revert to 40 machines if it bought 5 back in a trading round in the future.

I think I misunderstood you. I thought you meant to sell just the machines. You're quite right that they could sell some licenses now, then buy them back in a future trading round. They'd almost certainly drop some money on the deal because the buyer always pays more than the seller receives under the present scheme.This is due to having to surrender 1 license in every 4, so the government can keep up the charade of reducing the total number in circulation. Here's the link that explains it. (Sort of )
http://www.olgc.sa.gov.au/gaming/Entitlements/News_Release_31012013.pdf

Ok, I think I get it. You keep the right to own 40 licences so you can sell and buy back but not own more than 40.
Is that right?

over the line wrote:Ok, I think I get it. You keep the right to own 40 licences so you can sell and buy back but not own more than 40.
Is that right?

Yes

Here is the definitive summary of West's AGM, courtesy of 'blackandred' on the bloodntars forum:

The WAFC board fielded a strong group at the AGM on Monday evening. Some looked short of a gallop and some managed to get through the entire contest without one possession but they were ably led by the ‘Prez’, Sterling Sperling, in an inspirational leadership effort in his last outing at the helm. It was good to see Doug Thomas in the crowd.

The game started with apologies from no-one. Sperling didn’t pull any punches in his summation of our financial position and carefully outlined the various steps the board has taken to stem the flow of cash. Much of what he said can be seen in the Annual Report but he built on this. He managed to elude several tackles from Bernie Conlen who has lost little in the way of pace and persistence since he last played for the club around 30 years ago. The Prez outlined Plan A which involves a tight legal defensive zone to secure a licenced premises 1.2 km from Richmond oval within the next 12-24 months. We will rent the place which is yet to be built and will relocate our pokies – of which we have gaming licences for 40 – there. The only weakness in the move is there seems to be no Plan B. Some specialised coaching may be required from some of our more Liberal supporters to secure the deal. The existing clubrooms will be retained minus the pokies and several other organisations are interested in getting involved. The existing Venue may have greater appeal to other groups without the pokies.

We also learnt that we were pretty much a victim of circumstances in regard to the salary cap breach. The SANFL had endorsed the basis of our calculation but still penalised us heavily through the $50000 fine and recruiting restrictions. There was some tongue-in-cheek criticism of Adam Hartlett at this point. If he had been suspended more we may have squeezed under the cap!

It was interesting to hear that the club had been left a property in a will but that the will is being contested. It was concerning to hear that our marketing manager is very ill. Everyone loves Angela and here’s hoping she makes a full recovery. Her role has been taken on by the CEO which has been an extra burden on him. The ‘Prez” reported that both the CEO and the Board had been the subject of written criticism from members/supporters.

The 2Q saw some nifty rotations with Andy Collins starting in the midfield and putting on a passionate, confident and upbeat display, explaining what went wrong last year and what we have to look forward to this year. He told us he’d love a ruckman but we will go with Peter Nelson (I thought he was a ruckman). He told us that Daniel Webb will be our key forward and if anyone had any ideas to help him kick straight then he wants to know. Michael Still is getting back to full fitness. There were some good reports on some of our younger players who are taking it right up to the regulars on the track, young Dijksman in particular. None of this particularly inspired some of the crowd of around 200 and there was some barracking from the outer relating to coaching style. Ryan Ferguson then injected himself into the contest with a wrap of pre-season training.

The premiership Q saw the crowd get involved in the contest. Spirited questioning from the floor, most of it quite intelligent but some less so, saw the Prez deal with the issues but the CEO fumbled the ball on a few occasions. In one bizarre off the ball incident the coach queried why it had taken over 6 months to advise those affected that Super payments had not been made. Lots of paper shuffling took place before a mumbled apology was finally made. An administrative point of order from Bernie Conlen had the board going backwards and sideways before rushing the ball out of bounds deep in the back pocket. There was a cameo from the auditor who assured us all that the club was trading in a solvent situation which was somewhat encouraging.

The last Q saw the steam go out of the contest. Life membership was awarded to 2 very deserving people and the returning officer announced the result of the ballot. Dean Withers will add some weight to the board. West Torrens mayor John Trainer was again endorsed as patron.

While not all expectations were realised at the AGM most would have left reasonably impressed with the efforts of the board and the lengths they have gone to to improve our situation.The club is budgeting for a profit and a premiership this year.

Seems to be making fun if a pretty dire situation?
Very strange

Sometimes humour helps when times are tough.

Besides, West fans are a hardy lot and know we'll survive OK.

Sometimes it comes across as flippant

Perhaps, if you're not familiar with blackandred's style.

He knows his stuff and often writes really good write-ups of our games. Most who know him take it as welcome humour at a difficult time.

Ok, but I would have thought that the financial problems were serious enough to not be joked about?

over the line wrote:Ok, but I would have thought that the financial problems were serious enough to not be joked about?

As stated in the report, despite the debt we are trading solvently and can recover from our situation if the people in charge are wise with what we have.

We can laugh at ourselves down at the Bloods. Something perhaps a little foreign elsewhere?

Well, if you're happy to laugh at yourselves, dont get upset when others do.

howthewestwaswon wrote:We can laugh at ourselves down at the Bloods. Something perhaps a little foreign elsewhere?

It's probably just as well considering the situation you've got yourselves in

Booney wrote:Well, if you're happy to laugh at yourselves, dont get upset when others do.

We can laugh with blackandred, Booney, he's one of us.

We haven't got too bothered about what others say on this issue, as long as they stick to the facts

Not sure if I am missing something here R&B?

Who is "we" and "us"??