How Cats clawed their way out of half a decade of debt
Geelong doesn’t have the giant supporter base of a Richmond or Collingwood to tap into, but the Cats have been a model for how to run a successful footy club. Finally on the verge of being debt free, how can Geelong secure its future?
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When $90 billion bank Westpac needed a tough mind to cast an eye over their alleged 23 million breaches of money laundering regulations it is not surprising they asked for help from Cat’s president Colin Carter.
Under Carter – a founding partner of Boston Consulting in Australia and Lendlease director – the Cats have been a model footy club business.
They refused to “bottom out” to get draft picks. Like investment guru Warren Buffett looking for cheap stocks, the Cats have been frugal in finding and developing their own talent (but also having a big enough war chest to splurge when they need to).
The Cats are now on the way to clearing debt for the first time in 50 years, have hit record member numbers, have launched an AFLW team and last year got within a game of the Grand Final.
WHERE DOES GEELONG GET CASH
Late last year Carter announced a narrow profit of $28,952 – down from the net profit $3.9m the year before.
But the revenue of the club hit $60 million up from $56m the year before.
While the Cats have struggled to attract the membership level of clubs like the Tigers and the Pies, it still attained a record number of members in the last year.
It hit a membership of 66,768, compared to 65,419 the year before.
This raked in $19.7m in revenue compared to $18m the year before.
Carter is confident the Cats can hit 70,000 this year.
In other revenue highlights:
– AFL distributions and prize money came in at $12.6m, up from $11.8m. The increase was to assist in fielding their inaugural AFLW Team
– Food and beverage sales came in at $10.4 million, up by about a million dollars.
– Sponsorship, advertising and fundraising – with major sponsors including Ford, Deakin, and Viva Energy – was at $12.7m compared to $11.9m the year before.
– The club also reaped $1.65m from philanthropic donations, compared to $2m the year before.
NO MORE POKIES
During last year the Cats took the big move of deciding to offload its pokie venue The Brook Point Cook into “discontinued operations”.
This means its $7.3m in revenue and $776,471 in profits were also excluded from the club’s results. The club also forwent revenue in its stadium by stopping gambling advertising at GMHBA stadium.
Carter says it is worth it.
“In the years ahead revenue from these ventures will be seen in an even more negative light.”
“We expect to be out of gaming and gambling by the end of the year (2019), and at the same time will have retired all of our debt for the first time in around 50 years.”
The club will finalise the sale in coming weeks and pay down that debt.
Geelong also last week revealed the latest step in diversifying off-field revenue, by purchasing ‘Geelong’s Gym’, which operates across the road from GMHBA stadium.
It is also continuing to expand its award-winning hospitality business Higher Mark.
WHAT DOES IT COST TO RUN GEELONG
In the last year the cost of putting Geelong teams on the field hit $27.2m compared to $25.9m the year before, driven by the introduction of their inaugural AFLW team.
Commercial activities cost $18.9m, up from $17.7m.
A big constant whack to the Cats is what it pays to adjust the value of its assets (IE things like GMHBA stadium). This came in at a hefty $3.4m last year and was $3.3m the year before.
Geelong is lucky to be asset rich, but being asset rich can be costly.
It also pays about $1m a year to cover the lease of using GMHBA (it has about 26 years remaining on the lease for Kardinia Park).
“The Club continues to make significant investments into a range of assets and capital projects to ensure the long-term future of the Club. The Club will continue to work with the Kardinia Park Stadium Trust on Stage Five to finish the Stadium and continue to lobby the AFL for a greater number of home games at GMHBA stadium.”
MORE FOOTY FINANCE:
SECRET WEAPON THAT HELPED DONS MAKE PROFIT
CAN COLLINGWOOD CALL ITSELF THE BIGGEST CLUB?
To keep developing GMHBA the club has previously borrowed $3.2m to continue work on the Players Stand and invested significant club operating cash flows over the years.
At October 2019, the debt balance decreased to $2,174,130.
This will be paid down in coming months.
WHAT DANGERS COULD GEELONG FACE
While Buffett seeks to take the emotion out of the market (famously saying when investing it was good to “be fearful when others are greedy and greedy when others are fearful”), the Cats seem to be wanting to take the emotion out of footy finance.
After last year’s finals ousting by the Tigers, Carter pleaded with fans.
“As supporters we hunger for success – and that is reasonable. Clearly premierships are very hard to win because, on average, each club will win one flag every 18 years. Just how hard they are to win is perhaps best illustrated by the fact that the AFL’s richest and biggest club, Collingwood, has won just two premierships in over 50 years,” Carter said, channelling Buffett.
Buffett has been successful in his goal, the success of the Cats’ finances will depend on whether fans stay patient. Footy unlike finance, is all about emotion.