HOW WE ARE CONTROLLING COSTS DURING LOCK DOWN
Has it really been nearly 3 weeks already since the PM announced lockdown? That’s the day we knew the golf course and tennis courts would have to close and probably for a couple of months at least. Since then, a small subset of the Board have been meeting regularly on Zoom to work through what needed to be done to control our costs and to understand how the Government announced initiatives might help us. Foremost in our minds though was our people – both our staff and our members - and thinking about how we could best keep them safe and supported.
Members who have read my Finance Report on the year ended 30 November 2019 (included with the notice postponing the AGM and available under “2020 Company AGM Papers“ on the Information page of the club website) will know that in 2019 our recurring costs of running the club were £1,054,000, or about £90k per month once we add some inflation to last year’s costs. This excludes the direct costs of running the bar & catering operations which are contracted out to our franchisee, Andy Johnston.
The biggest single cost we incur is Wages & Salaries which account for just under half our total costs at £495k pa, and £300k of that is for the greens keeping staff. As Alec MacIndoe comments in his blog in this month’s Club Newsletter, James Newman and David Amey were quick to discuss with Alec how we could maintain the course to a standard that will allow us to reopen with only a day or two’s notice, while also minimising our costs. Alec established a team of 4, including himself, to provide this minimum maintenance and it was agreed the remaining 5 team members would be “furloughed” (we expect until the end of May). They continue to be paid 100% of their wages, are available to return to work on immediate notice, and 80% of the cost will be recovered from the Government.
Elsewhere within the costs of maintaining the course we have in the last month taken delivery of replacement John Deere machinery largely for mowing tees and greens. This new 5-year operating lease arrangement replaced a similar expiring contract and was due to start in March, but we have managed to defer the first cash payment until July. Having brand new kit, though, means our machinery maintenance will initially be very low. We expect water usage to be restricted to the borehole only, and what chemicals are needed have already been purchased.
IN THE CLUBHOUSE
In the clubhouse we cancelled things like newspapers, flowers and laundry and we expect our costs of cleaning, electricity and gas to be substantially lower. But some things we have to continue with like insurance and security. Many of our commitments are annual contracts which will be more expensive to stop and restart or are impossible to cancel. One of the biggest savings achieved is in business rates where we have received a credit for a full 12 month rebate of just under £50k. We have also applied for the additional £25k grant available to leisure businesses.
IN THE OFFICE
In the office, Tara is just warming up to the busiest time of her year as the annual subscriptions are prepared, invoiced and then collected so she will continue to work full time, albeit from home. John Pearson, who had just achieved a record £100k in society bookings for this summer, has had the unenviable task of cancelling and where possible rebooking the societies and open events we had planned through to the end of June. With that job completed, John has commenced a period of furlough from 1 April also on full pay. Alex Coopper (no it’s not a typo!) has been catching up with the regular accounting after the distractions of the annual audit and year end closing processes. Once the March accounts, the quarterly VAT return and the April payroll is done in mid April, Alex will also furlough at home for a minimum 3 week period before returning to catch up again in May.
James Newman has been fully occupied with these and other matters and seems likely to remain so at least for the immediate future.
BAR & RESTAURANT
Our bar & catering operations are run by our franchisee, Andy Johnston, who also employs the staff. Once the course was closed, the staff were all put on a furloughed basis at home and James agreed a reduced monthly franchise fee to help cover Andy’s costs. Duncan Giblett is contracted as our golf professional to provide coaching, to run the pro shop & the practice range and to provide trolleys & buggies. He employs Ben and Elliott who are both now furloughed at home and the club has agreed a reduced monthly fee with Duncan to assist him to cover his fixed costs.
The bunker programme this last winter has extended way beyond the original planned timescales. Our external contactor, Abbott, were however on a fixed price contract so while the costs have fallen more into 2020 than we expected, and we still have invoices to pay, the club itself is not out of pocket.
CLUBHOUSE REDEVELOPMENT
The clubhouse redevelopment project was less than a month from completion when not unexpectedly the contractors ceased work. We have received an agreed interim stage payment schedule up to that point and we understand that with the lead times required for restarting it will take about 6 weeks to finish off the work. The £900k cash we raised from members in Loan Notes, Preference & Ordinary shares last November was earmarked specifically for this and other capital projects and we intend to honour that commitment. We do therefore have the cash available to pay the contractors as and when the project is completed.
Overall, these actions have reduced our monthly cash operating costs from c£90k per month to c £50k per month for April and May. It is not clear what the position may be in the months that follow. The course and clubhouse may be open, partially open or closed. The Government furlough scheme is guaranteed only to 31 May. The clubhouse refurbishment is unlikely to be completed until July at the earliest, restricting our ability to plan societies or events. Our monthly costs as described above will vary as these scenarios unfold, but the Board is focused on taking decisions that are best for the maintenance of our prime asset, the golf course, and for all our people, whether staff or members, while seeking to keep our costs at a minimum.
Roger de Peyrecave
Finance Director
8 April 2020
Members who have read my Finance Report on the year ended 30 November 2019 (included with the notice postponing the AGM and available under “2020 Company AGM Papers“ on the Information page of the club website) will know that in 2019 our recurring costs of running the club were £1,054,000, or about £90k per month once we add some inflation to last year’s costs. This excludes the direct costs of running the bar & catering operations which are contracted out to our franchisee, Andy Johnston.
The biggest single cost we incur is Wages & Salaries which account for just under half our total costs at £495k pa, and £300k of that is for the greens keeping staff. As Alec MacIndoe comments in his blog in this month’s Club Newsletter, James Newman and David Amey were quick to discuss with Alec how we could maintain the course to a standard that will allow us to reopen with only a day or two’s notice, while also minimising our costs. Alec established a team of 4, including himself, to provide this minimum maintenance and it was agreed the remaining 5 team members would be “furloughed” (we expect until the end of May). They continue to be paid 100% of their wages, are available to return to work on immediate notice, and 80% of the cost will be recovered from the Government.
Elsewhere within the costs of maintaining the course we have in the last month taken delivery of replacement John Deere machinery largely for mowing tees and greens. This new 5-year operating lease arrangement replaced a similar expiring contract and was due to start in March, but we have managed to defer the first cash payment until July. Having brand new kit, though, means our machinery maintenance will initially be very low. We expect water usage to be restricted to the borehole only, and what chemicals are needed have already been purchased.
IN THE CLUBHOUSE
In the clubhouse we cancelled things like newspapers, flowers and laundry and we expect our costs of cleaning, electricity and gas to be substantially lower. But some things we have to continue with like insurance and security. Many of our commitments are annual contracts which will be more expensive to stop and restart or are impossible to cancel. One of the biggest savings achieved is in business rates where we have received a credit for a full 12 month rebate of just under £50k. We have also applied for the additional £25k grant available to leisure businesses.
IN THE OFFICE
In the office, Tara is just warming up to the busiest time of her year as the annual subscriptions are prepared, invoiced and then collected so she will continue to work full time, albeit from home. John Pearson, who had just achieved a record £100k in society bookings for this summer, has had the unenviable task of cancelling and where possible rebooking the societies and open events we had planned through to the end of June. With that job completed, John has commenced a period of furlough from 1 April also on full pay. Alex Coopper (no it’s not a typo!) has been catching up with the regular accounting after the distractions of the annual audit and year end closing processes. Once the March accounts, the quarterly VAT return and the April payroll is done in mid April, Alex will also furlough at home for a minimum 3 week period before returning to catch up again in May.
James Newman has been fully occupied with these and other matters and seems likely to remain so at least for the immediate future.
BAR & RESTAURANT
Our bar & catering operations are run by our franchisee, Andy Johnston, who also employs the staff. Once the course was closed, the staff were all put on a furloughed basis at home and James agreed a reduced monthly franchise fee to help cover Andy’s costs. Duncan Giblett is contracted as our golf professional to provide coaching, to run the pro shop & the practice range and to provide trolleys & buggies. He employs Ben and Elliott who are both now furloughed at home and the club has agreed a reduced monthly fee with Duncan to assist him to cover his fixed costs.
The bunker programme this last winter has extended way beyond the original planned timescales. Our external contactor, Abbott, were however on a fixed price contract so while the costs have fallen more into 2020 than we expected, and we still have invoices to pay, the club itself is not out of pocket.
CLUBHOUSE REDEVELOPMENT
The clubhouse redevelopment project was less than a month from completion when not unexpectedly the contractors ceased work. We have received an agreed interim stage payment schedule up to that point and we understand that with the lead times required for restarting it will take about 6 weeks to finish off the work. The £900k cash we raised from members in Loan Notes, Preference & Ordinary shares last November was earmarked specifically for this and other capital projects and we intend to honour that commitment. We do therefore have the cash available to pay the contractors as and when the project is completed.
Overall, these actions have reduced our monthly cash operating costs from c£90k per month to c £50k per month for April and May. It is not clear what the position may be in the months that follow. The course and clubhouse may be open, partially open or closed. The Government furlough scheme is guaranteed only to 31 May. The clubhouse refurbishment is unlikely to be completed until July at the earliest, restricting our ability to plan societies or events. Our monthly costs as described above will vary as these scenarios unfold, but the Board is focused on taking decisions that are best for the maintenance of our prime asset, the golf course, and for all our people, whether staff or members, while seeking to keep our costs at a minimum.
Roger de Peyrecave
Finance Director
8 April 2020
