Dear Members,
In April 2020 we wrote to Members outlining the Board’s response to COVID 19 and the shutdown of the Club’s operations which occurred by Government directive on 23 March 2020. We outlined several actions and financial decisions based on a six-month shut down.
With the recent move to Stage 3 restrictions we anticipate the impact on the Club will now go beyond six months and potentially to the end of December 2020. It is appropriate therefore to update the Members on the current and projected financial position of the Club based on these new assumptions.
In understanding the Club’s financial position, it is important for Members to note that the Club’s profit is predominately derived from its gaming operations and as such little is achieved financially until gaming recommences. Given Melbourne is in Stage 4 lock down, it is not prudent to suggest that this will happen in 2020 and our cash flow forecasts have been recast on this basis.
Having just finalised the Clubs 19/20 financial year accounts, (unaudited) we provide for Members an overview of the past 12 months which includes the last 4 months of COVID impacted trade and venue shutdown. The 19/20 financial accounts will show:
- A Cash profit (excludes depreciation) of $921,000. This includes 12 months loan interest of $514,000. This equates to an EBITDA of $1.416mill.
- At end of Feb 2020 (Last month of full trade before shut down) cash profit was $880K. This indicates that we have been able to almost “break even” through those first 4 months of shut down.
- These results are better than those projected in the April communication to Members. This is due to being able to partially trade in the venue and our Golf Operations side of the business surpassing its normal budget expectations. The profits from which, being greatly assisted by Job Keeper funding our staff wages.
Members were advised in the last update that the Club had secured a $575,000 COVID loan facility to assist cash flow. I am pleased to report that due to the above financial results the Club has not had to expend any of this at 30 June 2020. Its main purpose has been to cash flow the $200,000 of monthly job keeper wages ahead of the Government reimbursement in the first week of the next month. We have approximately 70 staff on JobKeeper.
The current cash flow projections out to December 2020 have been reforecast. There are 4 key assumptions. We return to part trade in October, the Government’s cuts to job keeper from October (impact is $60K less per month), members subscriptions due in Sept 2020 is not impacted and a further assumption that gaming does not return in 2020. On this basis, the $575,000 COVID loan facility will be required to provide the cash needed to meet our commitments for the remainder of 2020. It is not expected any additional loans will be required to trade through shut down up to 31 Dec 2020.
As an aside to the above, there is a very positive story for Members in relation to the results of Board’s recent renegotiation of our 3 year Banking and Loan Facility agreement with ANZ, which is effective from 1 July 2020. There are 3 key elements;
- A reduced interest rate has been negotiated as part of a new 3 year agreement. This will result in the Club’s annual loan interest reducing from $514,000 to $250,000. An annual saving of approx. $264,000.
- The Board negotiated a clause whereby it has the option to not pay the loan principal repayment of $35,000 per month for the first year. It is mandatory that it be paid in Years 2 and 3 of the agreement. This means the Board can choose to pay or not pay up to $420,000 in loan repayments in the 20/21 financial year.
- Based on traditional monthly loan repayments ($48K), should the Board avail of the above right in full, this together with the interest saving is a $840,000 cash “swing” in 20/21 compared to 19/20 and previous years. The Club is fortunate to have this option and flexibility at such financially challenging times.
The Board will continue to reforecast its six-month cash flow projections every month and will exercise its loan repayment option as the cash flow business requirements dictate.
Unfortunately for the Club, the negative financial impacts of the COVID shut down now goes way beyond the six months that we originally anticipated. It is now likely to extend to the beginning of 2021 and the Club needs to continue to “cut its cloth” to suit these ever changing and increasing challenges. All hospitality, Club & Pub venues will be significantly impacted, and some will unfortunately close their doors. Whilst the Warragul Country Club has the fundamentals in place to ride out such adversity, there is a limit for every business, as to how long this can be sustained.
We encourage all Members to attend the AGM on 30 November where hopefully more positive certainty will exist, and we can again update Members with the latest information and the impacts on the Club.
As always any Member wishing to further discuss Club issues, they can call Michael Hodge on 0418 325 252. More specific information on membership fees will be forwarded to Member’s next week.
Stay safe and see you back at the Club soon.
Kaye, Chris and Michael
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