As we draw to the end of our calendar year I would like to take the opportunity, as your new Chairman, to welcome on board our new Exco. More importantly, I wish to bring you, the membership of Kyalami Park Club, “up to speed” with where we find ourselves 6 months after our transition from a Society to a Club.
The Landscape to date:
- We are no longer a society that effectively holds a monopoly on the horse sport in our region (province) where we are able to:
- Charge a levy for every round of competition irrespective of which show holding body it is. This equates to a loss of R612 000.00 per annum to the club.
- Charge a registration fee on every horse in the region, this equates to a loss of R1.15million per annum.
- Charge a membership fee that is compulsory if you want to compete anywhere in the country
- We are now simply a Club:
- We now compete against several other clubs in the region for members and show entries
- We have gone through a transition phase where our income is significantly curtailed and restricted to a levy per round.
- To combat the loss of income we underwent an extensive retrenchment process and to date have reduced the staff complement to 3 support staff (down from 9) including a GM, a receptionist, one grounds manager and 12 ground staff, (down from 2 grounds managers and 22 ground staff.)
- Contrary to common perception the club only earns approximately R80 per round of Showjumping out of an entry fee of R215. The balance goes to Discipline levies, Medics, EDS, Officials, and Course Designers.
- Through a rigorous and focussed cost containment exercise we have, over the last 6 months, reduced our operating costs from R690k per month down to R360k per month. This is a 48% reduction in operating costs.
- The cost of R360k per month is split between salaries, wages and the running costs of the facility including water, electricity, maintenance, and vehicle repair (tractor, trucks etc.).
- The full budget will be available for review and comment at a member’s communication evening planned for January 2014.
- We have a fixed income base of R50k per month in rental income which means we need to generate approximately 3500 rounds of equestrian competition per month to cover our costs on this revenue model (this figure excludes sponsorships, catering and any other ad hoc income)
Where are our reserves and profits from Derby?
- The transition process from a society (GHS) to a club (KPC) saw us make the change with 1105 voting members. This reduced number was partially as a result of the controversial, but necessary, levy to improve the facilities at KPC. In addition to the levy, the previous Exco, felt that we needed to apply a temporary membership fee for non-members competing in shows at KEP as it would effectively “encourage” them to join the club as it would be cheaper in the long run.
- In “hind sight” :
- The communication strategy and the way the message was communicated was perceived to be arrogant and overbearing, however, in mitigation to the incumbent Exco at that time, they were forced into a position by SASCOC and they made hard and critical short term decisions to ensure the sustainability of the facility based on the facts and financial position at the time.
- A business model was formulated aimed at the future of the club that, in principle, is sound and will continue to be the base model from which the new Exco will work.
- The membership fee was reserved and meant to be allocated monthly to our Opex account to be used for the running of the club.
- A profit of R600 000.00 was made from Derby and this too was meant to be reserved and allocated to our operating expense account
- What went wrong?
- We had significant overspends in several areas as documented below:
- Voluntary retrenchment costs of R 324 000.00 (the retrenchment process was undertaken with the advice and guidance of our labour lawyers). The costs were unavoidable in reducing our staffing costs to an acceptable level and the savings in salaries and wages in the next few months more than compensate for these once off costs
- Overspend on Peter Minnie arena of R350 000.00 as a result of less members contributing to the levy than was originally budgeted for.
- Additional spend of R116 000.00 on bringing the warm up and other arenas up to an acceptable standard
- Our reserves are now running at a rate equal to one month’s expenses.
Where are we now financially?
- We are in a cautionary position at the moment:
- The new Exco have invested a significant amount of time and energy in reviewing the current financial position of the club, including the financial impact of the new dispensation as mentioned above (no registration fees or competition levies), the cost of running the property, reviewing our debtors and creditors books and any short term sponsorship opportunities.
- Without changing our business model we will run out of cash at the end of January 2014
- By applying an additional administration levy of R40 (Incl Vat) per round and assuming an entry rate equal to only 80% of last year’s entries, we will cover our monthly operating costs until the end of June and show a loss of R200 000.00 as at the end of our financial year. (This assumes an 80% entry rate for the Easter show based on last year’s entries. The Easter Show is a major source of income for the club).
- The model assumes a zero sponsorship rate except for Easter show which will be sponsored.
- The model also shows a zero contributory factor from Catering for the period to the end of June.
- The challenge with the business model that we have been forced to adopt by the changes is that historically we have never really had to sweat the asset that is KPC, and the limited time that we have had since the change has been focussed on managing down the expenses as opposed to growing the income base. The new Exco has already met and exchanged very valuable ideas on a strategy to change the focus of the business going forward, these ideas will be debated at our Exco workshop in the second week in January and shared with you, the membership, at a communication evening which will be set for the third week of January.
How can you help your Club?
We need you to use your facilities, and more importantly to support the shows that are coming up in the early part of the year. January will be a significant milestone for your club and we encourage you to enter as many classes as you can to show your support of the club.
We also have a special sponsorship deal that we will be announcing shortly that will allow our business community the opportunity to show their support for the club by sponsoring individual classes at the January show and in turn to be permitted to display advertising material in the arenas for the duration of the 2013/2014 financial year.
We also recognise that there are many businesses that benefit commercially from KPC, either directly or indirectly. We will be making contact with these businesses with a view to obtaining their reciprocal support of the club.
Good support at the shows including a strong response from our business community will allow us a “cushion” of time to prepare a new, comprehensive and sustainable strategy for the club in the future. We look forward to your support as we move forward into 2014 and the years ahead.
In summary, the Exco have a plan in place that will ensure the sustainability of the club until June 2014. This plan includes extremely tight control over cash flow and general expenses. The Exco believe that this plan is practical however caution that the success of the plan is dependent on the support of every single member of the club in supporting our shows, soliciting sponsorships and in ensure that all outstanding debts owed the club are settled.
Whilst your Exco are all volunteers and receive no fees at all for their service, they are all 100% committed to the success of your club.
I ask that you support the Exco in their endeavours to keep the club on a sound financial footing and to ensuring that Kyalami Park remains the premier equestrian venue in the Gauteng.
In closing, I extend to you and your families my personal best wishes and those of your Exco over the holidays and wish you a prosperous 2014.
Kyalami Park Club