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COMMODORE'S REPORT TO FINANCE GENERAL MEETING
16 May 2019

Good evening Ladies and Gentlemen

As it’s the Finance General Meeting tonight my report will focus mainly on the financial aspects of Club activities.

I would like to express my thanks to the Flag Officers, the Trustees, the Committees, and of course to Celia, Victoria and Zoe in the office, now joined by Liz and Lucy. We also have to thank Ollie & Eloise and their staff for continuing the high standards we have grown accustomed to enjoying. Finally, and not least, all the many other helpers who contribute to making the Club run as well as it does.

The Club is in a good financial state and in excellent repair. We have a stable membership of about 1700 members and a waiting list.

For the benefit of members attending for the first time and those who come regularly my hard-working colleagues, the Flag Officers, sitting here alongside me will report on their activities as well after I’ve taken you through the accounts. They will each give a short talk about the work of their committees which run the Club under the guidance of the General Committee.

So, turning first to the accounts:

We are a sailing and bathing club but most definitely a business as well.

For newcomers this year, I’ve been in financial services most of my working life but I realise that most people don’t look at accounts on any regular basis and have difficulty assessing what they mean.

So here’s a simple guide, as in previous years. When looking at any accounts there are generally 3 key things to look at:

First Key Figure

Turnover and the growth in turnover.

Second

EBITDA. This is financial services jargon, but becoming common parlance in the press, and stands for Earnings before Interest Tax, Depreciation and Amortisation. In our case it’s conveniently labeled in the accounts as Net Revenue before Depreciation.

Third and finally, Cash.

We try hard during the year and in the presentation of the figures to categorise accurately and correctly label our income and expenses, so they are not only easier to read and understand but are mostly with some exceptions directly comparable year to year. This is done through the hard work in the office of Celia and Zoe. You can ask questions about the detail later if you wish.

So, first key figure Turnover also called Revenue or Income in our case.

Our income rose 7.0% to £314k after a 1.8% rise in 2017.

Within this, membership income was up by 3.1% almost entirely in subscriptions,with entrance fees flat.

House income decreased by 2.3% to £22.1k partly because we decided to make a prudent stock provision of £1.5K. Also franchise income increased but income from the flat decreased when Ollie and Eloise moved back in. Their business continues to grow very healthily.

Sailing income increased by 19% to £94.4k after falling in the previous year. Within this Training income was up 35.5% reflecting our success as a training Club. Martletts and Cobnor was up 58.5% but after falling 40% in the previous year – so more than recovering.

Mooring income increase 5.7% after being flat the previous year.

The second key figure, and the most important for any financier, is Net Revenue Before Depreciation or EBITDA. This is Net Revenue before Depreciation in our accounts. This was down 1.4% last year to £82k.

EBITDA is very important because it is essentially the free cash the Club generates after paying for all staff wages and Club expenses. This is what the Club can use for Capital Expenditure (Capex in the jargon), repayment of debentures and bonds, the small amount of tax we pay and to increase our cash reserves for future development. It is the best measure of the Club’s health and, generally, of most businesses'. Although it declined last year it is still a healthy figure but reflects the fact that despite the strong growth in sales, we, like all clubs, face cost increases over and above inflation. This is not just because, for example, utility prices are increasing faster than inflation but the increased requirements on businesses in general on safety, security, GDPR for example and SCM, our club management system. For the future we now must pay bank charges which includes £1.50 on every cheque.

What did we spend this cash on?

The Capital Expenditure (Capex) last year is not quite so easy to see from the accounts but it’s in the Fixed Assets Analysis on Page 10.

The Club spent £45k on Capex in 2018 (£39k in 2017). This was £2.3k on kitchen equipment, £4.7k on IT and office equipment, £4.9k on tables and cupboards, and £9k net on Club boats after we got back £19k for old boats we sold. In addition, we spent £6.7k on slipway repairs and £15.5k on site security including CCTV and the gates. The total spend was less than we had budgeted for.

We also redeemed one of the subscription bonds for £30k and debentures of £10.5k as normal plus another £7.9k early with no premium.

The third key figure is of course cash. The cash at our balance sheet date of Dec 31st should be the lowest in the year. The Club cash flow profile is pretty simple. We receive almost all our income in the early part of the year from subscriptions, moorings and billets, then some joining fees and subs from new members and finally training and sailing income over the spring and summer. We spend this cash relatively smoothly over the year. The general Club costs of wages and running costs are consistent over the year as, for example, winter heating of the Club is matched by summer heating of the pool.

The cash figure in the accounts is £148.3k. However, this includes subscriptions in advance of £15.2k and the cashless bar creditor (Ollie) of £16k so netted out the real end of year cash was about £117k compared to £148k last year. But this was after the repayment of the subscription reduction bond of £30k and £7.9k of debentures early which helped finance the wet bar extension early in the year so netted out was about £8k above the previous year.

For your information, cash this week is about £275k.

At the year-end balance sheet date, if we had paid off all the outstanding liabilities of bonds and debentures of £41.9k, we would have had net surplus cash of about £75k compared to £47k in 2017 at this the low point of the year. This shows good progress in increasing the Club’s net cash reserve.

However, we will need to do better than that to finance, in due course, the refurbishment or replacement of the changing rooms, etc. Even with substantial increases in membership income, the buildings will require raising further funds.

Total Expenses were up 10.0% or £21.6k. Within this Estate costs were up 7.7%, House 15.3% and Admin 14.1%. Many expenses are, of course, volume related to extra training and social functions. Within admin are SCM and IT costs and an extra £4.7k in irrecoverable VAT. SCM is proving very effective and we are now booking courses through SCM and not through a third-party contractor, at a cost saving to the Club.

Two notes of Caution for the future.

Firstly, We have talked in previous meetings about the changing demographics with fewer young people, members leaving for college or work at 18 or so and not coming back until their mid 30s.

We are addressing this through the proposed changes in membership categories, the subject of one of the resolutions later.

We are luckily a town centered club, big enough to support full catering all year round and therefore with an excellent social programme to financially support sailing. We are so much better placed than many in this harbour. We are also extremely cheap as a club: almost a third the cost of Itchenor and Bosham and have a free swimming pool and free parking, no race fees and no duties other than for billet holders. We have a wonderful volunteer base which helps keep costs down. My plea is that we need volunteers in all areas, so we can continue to keep costs down.

I am very pleased that the new members this year are of a high calibre, both with many young families to build the core for the future and some very active and experienced older sailors – and we still have a waiting list.

The Second note of caution on the otherwise good financial performance is that we are not immune from inflation and costs. Costs are increasing fast as the bureaucracy of running businesses increases but we are also substantially building our training activities. Fuel prices are also set to dramatically increase.

All the above says is that we will need to look at subscription rates increasing more than inflation in future but then we start as far and away the best value for money club in the harbour or perhaps this coast.

So, to reiterate on the accounts, the key numbers are:

Turnover up 7%, Net Earnings down 1.4% but our cash reserves after capital expenditure and bonds and debentures up £8k. Overall, a good result.

We look forward to another successful year in 2019 with a full club and we are currently on budget.

Just a note on other committees before the FOs

Finance

The Finance Committee, with excellent support from Joe Burnie, Craig Summers, Zoe and the Trustees, continues to oversee the Club’s financial management. Most memberships are now paid for electronically by direct debits, bank transfer or cards through iZettle. Cheques cost us £1.50 per cheque and now have to be paid in in Havant. All new members are signed up on Go Cardless and we will not accept cheques except in exceptional circumstances.

Pay Pal has also proved very successful for on-line booking of Training courses.

IT committee

The IT committee (Iain Lynch, Giles Bowman, Joe Burnie) was set up originally to introduce SCM and now manages the process of putting all membership related activities on the system including bookings, Club dinghies and training on the Club systems. Many thanks to the endless hours they have and continue to spend for us.

Centenary Committee

Under Chris Clode’s chairmanship, up to15 people at times including FOs, GC members and others have worked for over 2½ years on putting this Centenary year together. We also had the tremendous work load of organizing HRH The Princess Royal’s visit recently which went off very smoothly and was a great credit to the Club. We still look forward to many events but particularly the Ball weekend with 4 events, and the Regatta weekend.

Finally, the archivists have done a great deal for the Centenary Book and the Centenary Exhibition launching on 1 June.

I will now ask the Flag Officers in turn to give you a report on their areas.

Jane Scott          Estates
Tim Keeping       Sailing
Jane Mellor        House

Thank you for your time.

Any questions??

Michael Geary
Commodore

 

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