Howick Golf ClubAnnual General Meeting

October 27 2010

KEEP PRESSING ENTER BUTTON

TO VIEW

Introduction

Key issues to consider – Including funding for Wash Down Bay / Shed project

Members need to be fully informed To enable correct decision Explanation of situation Questions at the end

Overview

Golf Clubs under financial pressure – Howick is OK– But feeling the pinch

Declining membership– Worldwide trend

Average age of golf club member around 60 NZ Golf research:

– 25 to 40 year olds biggest decline in memberships– Family, financial and time constraints– Don’t want to be tied to one club– Still play and pay at a number of courses– So green fees are important

Howick

85% of club income comes from:–Member subscriptions (65%)–Green Fees (20%)

Membership

0

200

400

600

800

1000

1200

2003 2004 2005 2006 2007 2008 2009 2010

F ull O ther Total

1047

756735

556

312

200

179 full members 112 other members 291 members lost since 2003 28% drop

Green Fees$193,000 in 2006$154,000 in 2010$ 39,000 20% drop

$700,000

$720,000

$740,000

$760,000

$780,000

$800,000

$820,000

$840,000

$860,000

$880,000

$900,000

2006 2007 2008 2009 2010

$850,000 in 2006$750,000 in 2008- Mainly s ubs c riptions and g reen fees-$100,000 drop in inc ome

Impact On Income

The Good News

$700,000

$720,000

$740,000

$760,000

$780,000

$800,000

$820,000

$840,000

$860,000

$880,000

$900,000

2006 2007 2008 2009 2010

Income almost back to 2006 level

$700,000

$720,000

$740,000

$760,000

$780,000

$800,000

$820,000

$840,000

$860,000

2006 2007 2008 2009 2010

But Expenses Have RisenIncreased Costs:- Course improvements- Fertiliser- Administration- System- Catering

Trading ( Excluding Depreciation)

-$50,000

$-

$50,000

$100,000

$150,000

$200,000

2005 2006 2007 2008 2009 2010

$153K

$108K$90K

$9K loss

$56K

$46k loss

Excludes $130k • 10 year members• Funding grant

Trading ( Excluding Depreciation)

NOTE: Trading loss of $46k excluded:

– 90% of income received from10 year memberships• $13k taken up as income last year• Balance will be accounted for over next 9 years

– See Subscriptions In Advance of $121k in balance sheet

– Funding grant of $20k for Wash Down Bay / Shed project received late in year

• Will be accounted for next year• In line with proposed project commencement

Would have been trading surplus of over $80k if these had been included last year

Trading

-$20,000

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

2005 2006 2007 2008 2009 2010

$153K

$108K$90K

$9K Loss

$56K

$80K

Including full income from 10 year members &

grant

Last Year In Detail31 Aug 2010 Previous

YearComment

Subscriptions $521,027 $529,365 Inc.$13k 10 year subs. Exc.$121k subs in advance.

Green Fees $154,738 $165,538

Golfing Income $58,099 $71,408

Other Income $17,915 $48,433 $25k repayment of grant received last year

Bar $80,755 $53,185 Impact of functions

Shop $21,588 ($23,829) $36k shop wages to administration this year

Catering ($29,334) ($24,235)

Income $824,788 $819,866

Course Expenditure $438,620 $420,993 Continued improvements

Administration $253,480 $174,614 $36k shop wages, system implementation, one off costs

Golfing Costs $52,950 $52,549

Occupancy $111,171 $98,092 Inc. provision for $40k rent from July. Still under negotiation.

Finance $15,248 $17,248

Expenditure $871,649 $763,496

Net Trading ($46,681) $56,370

$25,000 shed grant received in previous year

Had to be repaid last year – not ready to start project.

Without this the results would have been:

This Year Last Year

($21,681) $31,370

The good news - $50,000 next year

Catering Losses

-$30,000

-$25,000

-$20,000

-$15,000

-$10,000

-$5,000

$0

2006 2007 2008 2009 2010

• Providing member service is expensive

• Accounts for 60% of trading loss • Low sales • Major drain on club resources• How can we stop the losses?

Cash Flow

The real test is how much money we have in the bank.

Trading surplus needed to fund capital expenditure:– Course equipment replacement– Projects

Cash / Bank Position$240k spent on clubhouse in 2007/ 08

• Committed expense back in 2006Led to future shortage of working capitalBecause of drop in trading surplus from 2006

The Bottom Line Golf income has dropped

– Memberships– Green fees

Worldwide trend To fund future developments we need to either

– Increase golf income– Or generate more non golf income

Combination of both

Summary Cash flow has suffered:

– Membership and green fee income drop– Clubhouse renovation impact– ($15,000) overdraft at year end– Would have been ($135,000) without 10 year subscriptions

• Bank would not have funded this We do not have the cash flow or reserves to fund major

projects– Wash Down Bay– Shed– Sprig Bar

Need to borrow if projects are to proceed And need enough money to pay it back!

Capital Projects

Total cost of Wash Down Bay / Shed project $275,000– Wash Down Bay necessary for compliance– Current Green keepers facilities are dilapidated

Grant funding of $70,000 (hoping for more) Balance required $225,000 National Bank have offered loan of $200,000 payable

over 5 year term.– Floating rate – current 7.99%– Security over assets of club

Loan repayment of around $50,000 a year

Wash Down Bay / ShedStage 1

Foundations, Base, Drainage,Uncovered Wash Down Bay

Cost $125,000Plan DecemberBorrow $70,000 maxRepayments $17,000 a year

Note: - Includes cost of plans & permits - Borrowing will not be needed until

later in financial year - Positive cash flow early in year

-Subscription income

Stage 2Shed, Fitout

Cost $150,000Plan 2011Borrow $130,000Repayments $31,000 a year

Note: -Stage 2 will commence on

achievement of trigger points: - Membership renewal

- Budget being on track - Otherwise will be delayed - Need to ensure Club has cash flow to

repay loan

Summary Of Bank Loan ProposalADVANTAGES Will enable us to build Wash Down Bay and Shed

– Has been on drawing board for a long time– Resolve compliance issues– Better staff conditions– Undercover storage for machinery

DISADVANTAGES Need to find repayments of $50,000 a year

– Additional income needed– Expenses may have to be cut if necessary (Course expenses)

Project will not bring in any additional income

Financial Situation

Minimum trading surplus of $100,000 needed to cover:– Bank loan repayments $50,000– Rent Increase (being appealed) $35,000– Capital expenditure $15,000

» $100,000

Hopefully The Corner Has Been Turned

Including full income from 10 year memberships and grant

But risk if $100,000 surplus not achieved• Bank loan still has

to be repaid

Board Strategy Keep subscriptions competitive Minimise expense Stronger Management focus on budget accountability:

– Need to be more proactive and make things happen– Can’t rely on members walking through the door any more

Increased marketing :• Membership drive (including 10 year and corporate)• More Golf events to increase green fees:

– Trade days• Green fee specials at quiet times• Web site marketing• Sponsorship (including Sprig Bar)• Functions (weddings etc)

– Competitive market

Club Management

Ian Higgins has confirmed he will continue as General Manager– Good news– Overall responsibility with key focus on course

Della Gray is retiring after 13 years– Thanks for everything she has done

Board has reviewed structure Carolyne Hughes commencing November:

– Administration and Development Manager– Support to Ian– Includes marketing role (in conjunction with Margaret Greer)

Increased role for Annette Smart

Trust Fund

For donations and bequeathments to the club Separate trust fund to be used only for course and

club development– As approved by Trustees

David Philippe initiative

Lease Situation Club has perpetual lease

– Value Have paid $4,000 a year since 1974 ! Should have been renewed in 1995

– Lost in bureaucracy– Crown / Manukau City Council/ Treaty issues

Board wanted lease sorted before major capital projects Negotiations over last year Crown rental value $266,000 a year !! Lease has “hardship” clause Crown has offered $40,000 a year (because of financial situation) Still under negotiation Hopefully less than $40,000

Budget For Next YearBudget Last Year Comment

Subscriptions $572,000 $521,000 Fee increase & New members.

Green Fees $175,000 $154,000 More trade days

Golfing Income $70,000 $58,000

Other Income $80,000 $18,000 $70,000 grant funding approved

Bar $80,000 $80,000

Shop $35,000 $22,000

Catering ($20,000) ($29,000)

Income $992,000 $824,000

Course Expenditure $420,000 $439,000 Part time staff member reduction

Administration $250,000 $253,000

Golfing Costs $50,000 $53,000

Occupancy $135,000 $111,000 Inc. rent at $40,000 – still under negotiation.

Finance $28,000 $15,000 Inc. bank term loan interest

Expenditure $883,000 $871,000

Surplus $109,000 ($47,000)

Budget

Budget is conservative Internal target is higher Includes $70,000 grant funding (already received) Includes $40,000 rent

– But hoping for less Sprig Bar not included in budget

– Looking for sponsors to assist with capital cost– Will proceed when funding permits

Proposed Sprig Bar Food and beverage available at all times from shop

– When bar and catering are closed– Better service for members and visitors– Additional income for club

Accommodation for members if lounge is being used for function– Weddings etc– Further income opportunity

Will incorporate deck expansion Looking for Sponsors so we can go ahead

– $70,000 – Not easy!

And Volunteers– To help with materials and building

Drop Down Sides

Finally ! Proud tradition over 75 years

– Built on volunteer support Member support needed to carry on the tradition

– Enable the club to continue– Overcome the difficult times

Renew your membership Introduce new members Get the younger people back in to the game

– They are the future of the club Support club activities Team effort to get the Sprig Bar up and running

We all need to sing from the same sheet

Working Together

For the good of the Club

Remember JF Kennedy

Ask not what your Club can do for you

Ask what you can do for your Club

It’s about our future

Next Steps

1. Questions2. Approve reports3. Approve annual accounts for year to August 20104. Approve budget5. Approve proposed bank loan for Shed / Wash Down Bay

Questions