RAW: SANFL – The Gravy Trains That Keeps Chugging Along

It was probably the low point of the history of football in this State early last month when Port coach Matthew Primus had to justify his selection approach to one of his players on drive time radio to that player’s father (Graham Cornes.)

Still amidst the on and off field dramas of both the Crows and Port Football Clubs during this long AFL season perhaps the surprise news of it all this year was that the SANFL could no longer keep borrowing against its assets to prop up Port in its (latest) hour of need. So how did the state’s peak football body get into this mess?

Before looking at causes, some background is necessary. The SANFL is a not for profit incorporated entity with nine members, being each of the SANFL local clubs – Sturt, Norwood, Glenelg and the like. Amongst other things, that means the SANFL is not allowed to pay dividends out of profits to those clubs as while they are the SANFL’s members, they are not its owners. It also means it answers to only the boards of those nine clubs no matter how much fans and AFL club members may wish to bleat about issues.

This further means the SANFL does not need to publish its full annual accounts to the public (which it does not, unlike the Crows), providing only some summary information in its annual report. Importantly, information like related party transactions and the salaries of its senior executives never see the light of day.

The SANFL owns Football Park and the surrounding land including Max Basheer reserve. It also currently owns the two AFL licences for the Adelaide Crows and Port Adelaide Football Clubs. The SANFL generates most its revenue from AFL matches and other events at Football Park through hosting corporate boxes and functions and feeding the masses who line up for a spot on the terraces.

At the top of its game, in 2006, the SANFL generated over $5.7m in profit from its operations after removing the impact of various grants and after paying out $3.7m as ‘Club Development Grants’ to its nine members. By last year, that position was reversed significantly with the SANFL losing $1.04m after deducting grant income and paying out $4.1m to its nine members clubs. That represents a $6.8m reversal in just five years. When you consider non grant revenues in that time have remained flat at $30.8m, this is indeed a bad situation.

When one looks at its cash flow statement, again over this five year period, the net cash generated from its operations (netting out grants in and out) has declined from $6.26m to -$0.618m, a turnaround of again that $6.8m figure.

With further declines in crowds and events, one can only imagine this year’s results will be yet worse.

So what has the SANFL done about it?

Complain mostly it seems with the SANFL 2010 Annual Report full of commentary about how the global financial crisis and declines in attendances at AFL games held have been the root causes of its problems.

Maybe, but what hasn’t much changed is the two items that now account for over half of its expenditures, being personnel expenses and grants to its member clubs. These two items alone have gone from 42% of total non grant revenue in 2006 to now 52%.

While people have lost their jobs and others their livelihoods because of the GFC, at the SANFL personnel expenses (and remember this isn’t the cost of Crows’ players or the like) have risen by over 10% a year in four of the past five years and are now up 30% on 2006 or $3m a year.

As a refuge for past players, the SANFL holds few peers. One story by a former AFL / SANFL player is indicative of the issue. When helping out as a coach at an underage carnival a few years back, he was astounded to find nearly as many SANFL ‘officials’ tagging along for the weekend away interstate as players he was guiding. What galled even more was that none of the ‘officials’ bothered themselves with any kind of involvement with the players, not attending games or even dining with the players at the hotel. Having witnessed this largesse to mates of the league, he never offered his services again.

Other than grants it receives from external sources (particularly the State Government and the AFL), the only entities that receive ‘football development grants’ from the SANFL are its nine member clubs. But as these payments have increased over the past five years by more than 10%, the SANFL’s ability to make those payments has declined to such an extent in the past two years it is those payments that have forced the SANFL into operating losses.

At some point, questions need to be asked as to whether indeed the SANFL is now paying out capital to its members and why, having bleated on about the impact of the GFC and AFL attendances, these payments keep going up and up.

In all of this it is important to also remember that the SANFL charges both the Crows and Port sub-licence fees of $600,000 a year each and a Northern Grandstand Contribution fee of about the same amount. That is a total of $2.4m in costless income it receives from its licensees. (As Port Adelaide accounts are not made public, Kryztoff is unable to confirm whether these charges have actually been made in recent years by Port given its dire financial position.)

Deduct those payments from the SANFL’s other net profit from operations and operating cash flow and one can see the profits the SANFL is generating from its own activities are going backwards at an alarming rate.

The consequences of all this on the SANFL balance sheet are obvious and hardly surprising. Bank loans have increased from $15.4m to $25.1m over the past five years, a near on $10m increase and cash on hand has declined from $16.5m in 2007 to just $4.0m at last year end.  Net finance costs are now over $1.25m per annum.

Not that the SANFL can and does complain about State Government support with over $25m in grants from its friends in government over the past five years. In addition, in 2007, the State Government sold the land of Max Basher Reserve to the SANFL, all 4.5 hectares of it, for a mere $1m. Property sources advise Kryztoff that land will be worth in the vicinity of $25 million when it is sold after the move to Adelaide Oval in 2015.

No wonder many critics of the Adelaide Oval redevelopment proposal questioned why the SANFL could enjoy the benefits of $535m redevelopment that the Government says it will co-manage with the SACA without putting in one cent to the deal.

Anyone who believes that the SANFL operates for the betterment of football generally in this State needs to rethink their position. The SANFL is designed to generate funds from football to ultimately siphon back to its nine member clubs that play in what it promotes as the second best competition beyond the AFL itself.

The problem the SANFL faces is by having pulled as much money out of AFL games played at Football Park as they could, the failure of the two AFL club boards (half appointed by the SANFL) to properly deal with the decline of their player and supporter bases in the past few years has led to the SANFL being caught in an increasingly dire predicament from which there is no way 2011 results will offer any respite and it is hard to see what will for some years.

With the SANFL now coming clean about the fact part of its rescue deal with the AFL is the ultimate sale of its two AFL licenses it has to hang on for dear life that the deal that is ultimately struck over the management of Adelaide Oval does not leave it out in the cold because no doubt the cosy deal the SANFL has enjoyed at its own ground will not be replicated at Adelaide Oval with the AFL about to be owners direct of the two clubs that play there. How all that will impact funds flowing back to its member clubs is not yet known.

Given press reports of the Adelaide Oval development not coming in within the budget constraint now imposed by the Parliament and the increasing realisation that the state is broke, the yet bigger fear that the whole development might collapse will likely be giving SANFL, Crows, Port and may be even AFL directors sleepless nights.

But with Football Park now recognised as a dinosaur, it may well prove that the greatest thing the Rann Government ever did for the SANFL was force through the Adelaide Oval arrangements so that the SANFL could sell off Max Basher Reserve as good as gifted to it by the State Government to keep its nine clubs in clover for years to come.

As for the taxpayers of this State, that is another matter.

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