Treasurer’s Finance Update

Dear Members, 

I have now been in the Treasurer role for a few months and we have implemented some key changes in that time, including an ongoing focus on operational costs as well as identifying opportunities for increasing revenue. This has included department labour reviews and the soon to be offered Corporate Membership. 

It has, however, become apparent that the most significant matter needing to be dealt with in the immediate term is addressing the long-term debt position of the Club. Currently there are two main facilities from CBA as well as operational lease arrangements with various financers. There is no set repayment plan with repayments at the discretion of the Board which is subject to an annual election process. This results in a lack of debt funding policy continuity and visibility for members over the total debt position of the club. The Club through its debt position incurs much higher finance costs than is ideal and compliance requirements associated with multiple loans and difficulties with managing cash flow. 

A process is currently underway to determine the total debt currently required by the club and to possibly consolidate the debt and cash holdings of the Club into one redraw facility. Currently we have the construction facility loan totalling approximately $3.6m and a CBA line of credit which is forecast to hit approximately $2.4m in August 2024 (before the subscriptions for 2024/2025 start being received). The club also holds a term deposit for around $1m, giving a total net debt requirement of approximately $5m.  

Accordingly, we are looking for a finance facility for approximately this amount that has an offset feature such that the interest expense is reduced earlier in our financial year when our debt requirements are reduced due to the receipt of the annual subscription revenues. 

Clearly this means that the club continues to bear a significant debt burden that will need to be repaid. Carrying a debt level such as this is not unusual – it is just a requirement of operating a club such as ours. There are also additional funds that will be required in due course for major capital expenditure (e.g. desilting of the waterways and possible clubhouse remediation) along with more regular annual capital expenditure requirements. 

The 2023 Annual Report noted that the fixed loan facility for the Course Redevelopment was paid off on 31 October 2023. Though in this period, however, the Club has expanded use of a line of credit. It’s akin to paying off the mortgage but we’ve maxed out a few credit cards on the side! 

We thought members may be interested to know how the course redevelopment was actually paid for and present the below financial information to illustrate this: 

As can be seen from the above, asset sales funded the bulk of the course redevelopment with members contributing approximately $5.69m (approximately 30%) across various streams. This $5.69m positively indicates a similar debt reduction can be met through members contribution without asset disposals. 

At this stage, there is not a desire to resort to developing or disposing of further assets to fund required payments on the debt, but rather developing a plan for the existing ownership to fund. 

As a result, and for members information, the only practical way that the current debt can be repaid is through the continued application of a loan reduction levy as part of the annual subscriptions (as has been the case for a number of years).  

Financial Summary 6 months to March 2024

Date: 2 May 2024