President Jeff Kennett has penned the following letter to Hawthorn members...

Dear Hawkers,



Well it has been a difficult few weeks, so please let me try and bring you up to date.



With the announcement of the postponement of the AFL season, the AFL and all clubs have had to quickly and dramatically reassess our ability to see us through this postponed season.



Firstly, the AFL is hoping that we can play the balance of the 17-round competition in the second half of this calendar year, even if that means we play a grand final on New Year’s Eve.



Whether that or another configuration of the competition, or no competition occurs this year, will depend on our ability as a nation to address the spread of COVID-19.



So, the football aspect is one issue for the code’s consideration, and really taken out of our hands by Government direction.



The second major issue is how does the code financially survive without games, or as we saw in Round 1 (let me remind you we are in the four) without spectators in a climate where clubs are receiving no revenue from the gate receipts for home games.



Of course, the AFL has experienced a massive drop off in the monies paid by major sponsors and the media for their rights. This makes up most of the revenue received each year by the AFL.



So, the AFL and clubs are being desperately squeezed financially.



The priority of the AFL right now is to ensure that each club survives this period ready to resume play whenever we are permitted to do so.



In order to do that they have mortgaged Marvel Stadium and some land they own, on behalf of the clubs, to secure lines of credit from the NAB and ANZ banks.



Again, in order to survive this period every part of the industry has been dramatically shrunk to reduce costs. That includes the AFL, who have reduced staff numbers by 80% and the remaining staff, from the CEO down, have taken substantial cuts to their salaries.



At Hawthorn we have done the same.



The players have also for the next two months reduced their pay by 50%. If no games are played, they will further reduce their pay by another 20%, back to 30% of what they were contracted to by the club.



That leaves the club’s other two main components, our Football Department and our administration.



The AFL, in order to reduce costs, have said all clubs must reduce the expenditure in their Football Departments, which we call our soft cap. This will apply to all clubs and will result in several changes in this area. For now, Alastair Clarkson is using up some of his leave, as are some other members of this group, while others have sadly been stood down.



We expect this soft cap will become a hard cap and most likely be further reduced in 2021. This will have a real impact on our football department.



Prior to Covid-19, Hawthorn had 128 staff members across administration and the football department, excluding players.



Sadly, that number has been reduced to 33 in total. Of the 33 remaining, all have taken a significant pay cut.



As you can imagine this is incredibly sad, given we have a very loyal, hardworking, professional team.



This has been very tough on the individuals stood down, some with many years of employment, but also very hard on our senior management who have had to decide who we need to keep employed to ensure the club functions. Justin had a hook-up with all of the club’s current and stood down staff last week, so rest assured we are staying in touch with them, as you would expect from the club.



The Board and I know our members will have sympathy for those we have been stood down but also respect the work of those who remain to serve our collective needs.



Even with all those adjustments it is still going to cost the club close to $11m to run our business between now and the end of October, which is the end of the football reporting year.



Sadly, we might have to make further changes if the AFL decides no football can be played this year. Let’s hope that is not the case.



Between now and the end of October we will have some revenue coming into the club of which membership will be the singularly most important ingredient. I will come back to membership shortly.



The AFL, in arranging monies to draw down from the NAB and ANZ, has tough conditions placed on them by the banks in return for that draw down capacity. This being the case, the AFL has understandably put very strict controls on the clubs who might require access to the banking facility to keep their clubs running. That is completely understandable.



Sadly, the majority of the 18 AFL clubs will need to have access to that drawdown to varying degrees.



At Hawthorn, we suffered a near death experience in 1996, when a merger with Melbourne was proposed. From this point on, the support of our die-hard members and the good management of the club by successive Boards, has put Hawthorn in a reasonably strong position.



So much so, that the Board decided last week that we would not need to drawdown funds through the facility that the AFL has arranged with the banks.



Well at least not for the next 12 months, and maybe longer depending on three factors.



When the competition resumes.



How glued you our members are to helping us through this period, and, how well the club manages your and the club’s affairs.



In other words, we will start off the next 12 months as, what the AFL terms, an Unassisted Club.



In short, that means we will receive the same contribution from the AFL as every other club receives for the totality of our and each clubs’ player payments. BUT ALL OTHER COSTS ASSOCIATED WITH OUR ADMINISTRATION WE WILL PAY FOR OURSELVES.



This will protect the assets we have built up, our land at Dingley for our new home, and our business assets that would normally deliver revenue to the club. The gym at Waverley Park, our hospitality venues, and a small number of share portfolios, which have obviously taken a dramatic hit recently. The monies in our Foundation Fund, which will be utilised for the Dingley development cannot, by law, be used for recurrent expenditure.



All in all, we are in a reasonable position, for the next year at least and maybe a bit beyond. If need be, we can revert to being an Assisted AFL Club, if we apply and the AFL accepts us. That would give us access to their debt facility, which would come at an interest cost and must be repaid at some stage.



Your Board does not like debt, and although we carry some for our hospitality facility at Caroline Springs, the interest on the debt is well covered by trading at the hotel, convention centre, restaurants and gaming facility, and the value of the asset itself.



We will not incur debt for recurrent expenditure as, in our opinion, that correctly questions the model under which we operate.



We have put the development at Dingley on hold at present to preserve our cash.



Electing to be an Unassisted Club does not mean that we will not co-operate with the AFL in getting some of the expenses out of the game. We will, on that and other matters. In fact, the co-operation between the AFL and the clubs in addressing this challenge has never been better. As it needs to be.



That said, we retain considerable independence in managing your club, in your interests and that of the long-term future of the Hawthorn Football Club.



Of course, we are all very sorry our VFL and our VFLW seasons have been put on hold by the AFL. But that has been done for one reason, to severely prune the tree that is the AFL so that it can re-shoot and grow.



I know this is a long letter but as you, our members, are the owners of the club, and the rest of us just your servants, it is important you have a full picture of what is happening and the decisions your Board is making in the club’s interest and on your behalf.



I mentioned the importance of membership to Hawthorn remaining independent of the AFL’s finance package for as long as possible, and hopefully forever.



To date we have two members requesting a refund of the cost of their membership. These are tough times, and we ask any member who is experiencing financial hardship to call our membership team. Rest assured we will work with all members to assist them in these times.



But to date, that is two members out of nearly 70,000 who have signed up. Many have written to me saying they do not want or expect a refund, some have offered further financial assistance if we want it. One member who has for years purchased two memberships has purchased four. So, our members are sticking by us, and the Board and I thank you very much. Particularly in these difficult times.



That said, there are still just over 10,000 members from last year who have not re-signed too date. If any of you are reading this letter, and can afford to sign up, it would be very much appreciated.



Finally, things continue to move very fast. Justin or I will keep you informed regularly so you are up to date with matters affecting our club.



Can I sign off this letter by saying, more than ever…



One for all and all for one, we are the mighty fighting Hawks.



Stay well

Jeff Kennett

President

Hawthorn Football Club

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