british eventing agm november 4, 2018 minutes part 1 finance 1 · 2019-03-13 · british eventing...

British Eventing AGM November 4, 2018 Minutes – Part 1 Finance 1


Directors Present:

Paul Hodgson (Chairman) (PH) Fiona O’Hara (FOH) Jude Matthews (JM) Jane Peters (JP) Guy Prest (GP) Nigel Tayor (NT) Leslie Smith (LS) David Holmes (Chief Executive Office) (DH)

1. Welcome Guy Prest welcomed all attendees and explained that he had been appointed by the Board to chair the Annual General Meeting. He went through the procedure for exiting in case of an emergency and advised all persons present that the voting would soon be closed. Guy then introduced each of the Board Directors. He explained that as per the Articles of Association the minimum quorum required to open the meeting was 12. More than 12 persons were present and the meeting was therefore declared open.

2. Notice of the Meeting

The notice of the meeting had been circulated to all members on 6th October, which included a formal notice to vote on the following:

a. Ordinary resolution: Reappoint the auditors Saffery Champness b. To elect two Directors to the Board


3. Approval of Minutes of the AGM in 2017 and minutes of the EGM held 22 October 2018 Approval of the minutes of the AGM held in 2017 was proposed by Nicky Salmon and passed by all. Approval of the minutes of the EGM was unanimously passed.

4. Voting Closed At 12.36 GP announced that voting was closed.

5. Business Review including questions and answers.

Guy Prest stated that presentations would follow given by each of the Board Directors and the BE Management Team which would cover all areas of business. Questions submitted prior to the meeting would be addressed and then further questions taken from the floor. He continued to say that all attendees had a common interest and therefore should respect each other’s opinions and avoid abusive behaviour. He then handed over to Paul Hodgson, Chairman of the Board.


Paul Hodgson thanked Guy and welcomed everybody to the meeting. He went on to say: Today is about sharing with you how BE works in terms of how we serve the membership and provide the Sport. We are here to demonstrate progress made over the year across all the departments. We recognise there was an EGM called only 13 days . Clearly there were some members who raised points at the EGM and we understand there are areas that need to be addressed. We also recognise that that there is significant support for the current direction of travel. The Board is here to ensure we deliver the agreed Strategy and indeed, to ensurethe management team deliver this . We will share with you the progress made over the year and take questions from you here present and our members who have submitted questions. I take a positive in that we can see that the “members are engaged”. The current Strategy was created almost four years ago and is reviewed annually and in December we will review the Strategic Plan once again. Our current structure of the Board’s responsibilities and the committees reflect this. Previous to this we had a generic Board structure with no formal responsibilities aligned to Directors and no Strategy - it was just a business plan written by the CEO. So as an example we now have a Commercial and Marketing Strategy with outputs and tool kits that did not exists before. This was viewed essential to enable Eventing to maintain a competitive edge in an ever busy digital marketing space and to ensure our Eventing proposition is able to punch at our weight or above our weight. IT: we had an ageing expensive legacy platform that was expensive to run and inflexible. We have Entries platform delivered by a 3rd party which is widely used and respected. Paul Harris has spent 30 years perfecting this but it is on an old legacy platform run by one man who is retiring. Research was undertaken, advice given and the current IT project was launched – more to follow. This was collective decision by your Board some 3 years ago – A collective decision and collective responsibility – no one resigned during this period. You will hear more about the detail later today but the challenges are right. However the Project is delivering and you will hear the detail and how this is financed from reserves and how these reserves will be replaced.


Over the next 2 hours we intend to share with you the key milestones and achievements. We will share with you and remind you how the Board Directors take a lead in chairing the various committees. There is a significant amount of collaborative work and engagement with our stakeholder groups – more to follow. We are here to listen and understand, so we can make informed decisions and make changes where required and we respect the views of all. For the record, there is no “black listing” as I have heard mentioned and we will make decisions for the benefit of the collective. So, to all of you present, be open, there is no such thing as a daft question or point, although it may not be persuasive but we do need to be tolerant and respectful of each other. Finally, we have had a successful year - our sport operates with so much good will and support from our organisers, officials (Stewards, TAs and Scorers) our contractors, volunteers, trainers, our U18 coordinators and assistants, our field based RCs, RDO’s and RTO’s. I have only started the list and could go on but I would I would like to start today by saying massive thank you to you all for the magnificent contribution that you make. We then have the riding members, owners and support teams who work so hard, day in day out to compete - well done and thank you and I trust you have progressed this season and have achieved your goals or certainly part of them.

This is the Board and Committee structure


And these are the stakeholder representatives. Thank you to all who contribute in running our sport. Paul then handed over to Fiona O’Hara, Director, and Wendy McGowan, BE’s Chief Operating Officer to go through the financial year.


Fiona stated that she had been a Board Director since June 2017 and that she was a partner in a global IT company, Accenture. She was co-opted onto the Board with the aim to chair the Finance committee but the Board had asked her to support the IT Project as this was an area of expertise. She thanked Tim Holderness-Roddam for retaining his position as Chair of the Finance Committee during the ITTP project. She believes that BE’s finances are well run and the Committee had the correct level of scrutiny. She stated that the expenditure on IT was high for a business of BE’s size, but this was a period of investment. She also clarified that the salaries and percentage spend at Head Office were in line with the size of the business. She then handed over to Wendy McGowan, Chief Operating Officer.


Wendy presented on the 2017 accounts which were released in May.

A loss was reported of just under £250K however this was as a result of conscious decisions by the Board around the IT project and the investment in to the commercial strategy. When removing both of those costs and the unrealised gains reported of £53K, normal business activities achieved a surplus of £127K. For 2018, we again will be reporting a loss, currently forecasted to of around £446K, but again when stripping out the strategic investments, the organisation will have operated profitably.

7


As has been reported the ITTP is a large investment for the sport. The costs are a mix of capital shown under Assets Under Construction, and relate to those elements of the project which are income generating and those expended in the year they are incurred. The summary of those both actual and forecasted can be shown here with the total being £1.99Mil.

The Admin part of EARS is being completed in house due for trial in March, hence why there are some costs which will be reported in 2019. We bought forward £52K of costs in relation to the website which also sits in Asset under Construction. Each asset area, the website and EARS, will be written off over 5 years. As the website is scheduled to be complete this year, some deprecation for that asset will be written down this year with EARS starting next year.

As a result the depreciation which will be written off in the years 2019 -2023 £897K

.


So what does that mean for the reserves. Back in 2008, 10 years ago when Wendy first joined the organisation, the reserves were less than £1M. The Board consciously built those reserves to a level that safeguarded the long term stability of the business and in the knowledge that a significant investment was required in IT. By 2014 they totalled just under £3M. The IT project and commercial strategy is being funded from those reserves and so the forecast for the end of 2018 is that they will be just under £2M. We advised in the ITTP release that the reserves would be back to £2Mil by 2025.

So how will that be achieved? When taking the forecasted balance for 2018 and the depreciation that we know will be written off until 2023 in to account, the business will need to operate at a surplus generating a total of £1,024K in those years or an average of £146K per year. Given that the average achieved in the past over the same number of years to 2017 was £206K per year, this should be achievable.

9


So each year we provide a breakdown of how members fees are spent over the year.

Some costs are unavoidable such as governance and taxes and others considered for the wider benefit of the sport such as the BEF contribution and supporting our youth teams to championships.

There have been comments made this year that the amount being spent on sport is being reduced. I would like to correct that misconception. Looking back over the years from 2011, it can be seen that we have consistently spent between 34 and 37%. In 2017 it was 35% which is fact is 1% higher than that in 2011. It is true that the amounts spent in 2015 and 2016 were higher than normal, but this was due to out of the ordinary expenditure, in 2015 the expended specialist equipment was much higher than normal and in 2016 we subsidised the medical and doping costs incurred at FEI events due to exchange rate fluctuations. (FEI charge in Swiss Francs)

The Sport, correctly so, remains the largest area of spend of members fees.


So on to Events fees or affiliation fees as they are often referred to. [afternote: there is a typographical error in this slide - the Event fee All Competitors line should read £6.50, however all the totals are correct] Concern has been lodged with us that this fee is too high and if we were to lower this charge then the entry fees could be reduced. The amounts we charge events is based on the number of starters that they have. For most classes it is £6.50 per competitor but we adjust that in some classes if the numbers are low and we provide a fixed value rebate to events depending on how many days of XC they run and what time of year. This is because those at the start and end of the season have less daylight and so can run fewer sections. You can see that the fee charged ranges from just under 10% of the entry fee received by the event to less than 1%. We charge events these fees because there are a number of services which are paid from the central funds. These include the costs and expenses for the BE officials, stationery, public liability insurance, the subsidised ground care costs. The costs associated with those items totalled £732K in 2017. The amount claimed in fees was only 57% of the costs and so were subsidised 43%. We are very aware that costs need to be maintained and that competitors would prefer lower entry fees, however these services are essential for our high standard events and they need to be covered somehow. We believe that the balance is fair but we do review each year in light of whether membership fees or season tickets are being increased. Which in the main haven’t been since 2014.


Another area of concern to members is in relation to the amount spent on salaries at the head office and whether these are all necessary.

We are constantly balancing the need of delivering a good service to our members and to govern the sport against the costs of doing so. So looking at the numbers, are our salary costs out of control? In the years 2015-2017 our revenue grew by 9%, our total membership by 3% and when taking day pass members out of the equation, by 6%. By comparison our total salary costs increased by 3%. Each year the salary increases awarded have been on or below the national earning index as we are very aware that many of our members are in public sector roles which have not received increases as high as the national average. The numbers of full time equivalents in head office were on a ratio of 1 to 559 in 2015 and are now 1 to 601 members and similarly the head office salary costs as a % of revenue has reduced from 26% to 25%. Looking at the high level, these appear to be less than the other Olympic disciplines where they appear to be around 27% and 29% from the information available in their published accounts.


Training and Education has been delivered in the main by the Charitable Foundation in recent years. This has been a mix of surplus generating training courses for riders of all ages but also those areas of training that as a sport we have a responsibility to deliver around officials and volunteers and the subsidised U18 programme and BE80T coaches.

We set up the Charity in order to be able to access additional funding not available to the NGB. Whilst we have had some success in accessing additional grants, it has not been as high as we were originally advised it could be. We have also found that the charity itself has a confused message about its objectives and so from next year we will be bringing T&E back into BE and the Charity will be concentrating on raising funds which will help support the wider Eventing Family in times of need.

The cost related to the delivery of those sport related activities is £121K. T&E is also a successful pathway to recruiting members and the income from members who joined having attended a training course first was £65K


Commercial and marketing, this again has been an area of concern. The 5 years strategy will be discussed in greater detail later, but from a financial perspective – the total costs of the both the marketing and communication team and the commercial team delivering on the strategy in 2017 was £390. This includes costs relating to the Two Circles research and the generation of the commercial guide. Income directly related to those areas totalled £195K into BE funds and a further £86K to the wider sport in relation to the class sponsorship, league prizes and a contribution to the costs of the BE80 coaches. Therefore the nett cost of that part of business is £111 and includes the editorial of the magazine, the servicing of sponsors, all of the communications across socials and website.


John Lawrence (present and pre-submitted questions) Q. His submitted question is to ask how BE will rebuild the reserves by 2025? He assumes that BE will have an agreement with the IT provider to maintain and upgrade where necessary the programmes being put in place. Can BE inform us what the annual cost of that will be. As the new IT programmes are all embracing I would therefore assume that, with a maintenance agreement, there will be no need to maintain an IT department at BE. A: Wendy first asked John if the details on the slides relating to the rebuilding of the reserves had answered his initial question. John responded that he was still concerned that by generating a surplus each year, BE will not have funds available to invest in the Sport Wendy challenged his statement and referred John back to the slide where the reserves build up is explained and that there had been no impact on the spending relating to the sport even in the years that a surplus was being generated. To the second part of the question, Wendy replied that the external team was not as efficient as the internal one and so there would continue to be an IT team. Fiona O’Hara added that this will be addressed in the ITTP presentation but it is worth noting that a maintenance contract was always part the total scope of the ITTP project. Currently BE are reviewing the IT structure to provide the best support to the sport but as the Board have lost confidence in the current supplier MakePositive it was not planned to continue with them. Several options are being explored including whether the support should be done in house or by another contractor.

Anna Sims-Hilditch – Pre submitted question Q: The present Government is instigating a Commission, to look into the Charitable status of all organisations who have been granted Charitable Status. If BE was to lose it’s Charitable status how would this affect the finances. A: BE is not a charity but a non-for profit organisation. The BE Charitable Foundation runs the T&E project but as indicated in the finance report, this element will be brought back into BE the objectives of the Charity will be reviewed for 2019. Therefore there is no expectation that BE finances will be impacted.

(no name given) - Pre submitted question Q: How did the Chairman amass expenses of approx. £15k if he only went to 16 events? Seems extremely high? A: The expenses claimed by the Paul Hodgson in 2017 were £9,241. These were higher than normal as a consequence of him attending many more meetings surrounding the BEF challenges last year.


Paul also visited 18 events around the country, had meetings with Eventing Live and ERM and with the contractor for the IT project. Two further payments were made to him during the year for his honorarium as approved by the Board of £5000 for 2016 and 2017.

Name withheld – Pre-submitted question Q: After such a close vote of no confidence what will the Chairman and CEO do differently? A: Ensure that we improve our communications especially in terms of openness and transparency and that we look at more opportunities for meeting with members to discuss progress to the various projects that we are embarked upon and listen to concerns and feedback

Kim Pengelly. – Pre submitted question

Q: Can BE provide a plan to address the current financial and strategic issues facing the organisation? In particular, a plan to reverse the operational losses of 2016 and 2017, equating to £614k (£995k if you take into account the capitalisation of Intangibles) before consideration of the IT costs (since this is, in theory, covered by Reserves) and to address the decreasing number of Full members and the move to more Day Pass members. Even with our current Reserves (if not wholly spent on IT) this financial performance is unsustainable. A: Wendy said this was addressed in the presentation on Reserves. Wendy emphasised again that the annual operational budget was not affected by the IT project.

Anonymous via Les Smith.

Q: Can BE provide a breakdown of every type of membership nationally and regionally over each of the last 5 years? A: We do have this information available however it is a lot of numbers to present on slides. We can publish after the meeting

Tim Bennett (present) Q: It would be useful for Organisers to have a clear idea of the roles and responsibilities of the office staff and how does BE justify the expenditure on salaries and does the Board think that in order to help events BE should consider reducing the affiliation levy? A: This was answered in the presentation, but to be clear, there is information on our website on all the roles of the head office staff and this will be enhanced on the new website. The Affiliation Fee covers only 53% of the cost of services provided to Organisers and so is already subsidised.

Further questions were then invited from the floor. David Gatherer. Q: Is £2mil reserves enough for the future? A: The Board feels £2mil is a minimum requirement. Q: David Gatherer. The Finance Committee reported that 7% of the membership revenue is spent on Training and Education. Please can you confirm the amount spent on u18’s? A: £48k was spent on the u18 Programme in 2017. Ben Nicol. Q: Did the IT project increased spend affect BE normal operation budgets and was anything cut? A: No, The IT project is funded from reserves, not from operational budget. B: Paul added further comment here – what notes are available?

Richard Clapham Q: To Wendy - Presuming the IT budget was prepared on a 3 year budget cycle, where are you on the current cycle? A: The IT business plan was prepared on a 10 year forecast. Richard asks if BE’s overall budgets are prepared on a 5 year cycle, Fiona O’Hara replied they are done annually however the Finance Committee will consider this suggestion of a 5 year cycle.


Q: Richard also asked how close to the original plan BE were and how satisfied they were with the IT Project overall. A: Wendy quoted that there was a variance of £600K being the overspend.

Clare Chamberlayne Q: Is there a full Ground Care budget in place for 2019 as rumours are going around that this is being stopped. A: the Ground Care programme is undergoing a review but BE does have a Ground Care Machinery budget in place for 2019 as per previous years. The Board is currently undertaking this review to assess the state of the machinery, what is needed, care and maintenance etc. as this is a big investment by the business. No decisions have been taken but Ground Care will remain part of BE’s strategy to invest in the sport. Q: How is BE intending to improve communications. A: Wendy said this will be covered later on in the presentation. Peter Brace Q: How did BE fail to have an IT maintenance contract when they negotiated on the IT Project. A: Fiona O’Hara reiterated once again that the IT Project does have a maintenance contract as part of the overall budget but the Board are reviewing this as they have lost faith in the current supplier MakePositive. Additionally Members should be aware that agreement has been reached with MakePositive for non-delivery of part of the project which means a significant sum is saved from the budget. Bruce Haskell Q: Can the Board reassure members that the cost of entries and registrations will not be increased to replenish the reserves? A: WM confirmed that membership fees had not increased since 2014. Registration fees for Grades 2 and 1 horses had been increased slightly, but the fees for Grades 3 and 4 horses had remained the same. The introduction of the Owner Membership category had actually reduced the fees payable by Horse Owners. Membership fees for 2019 would not increase, with the exception of Day Pass membership. Bruce responded that he was suggesting that members wanted reassurance that future increases would not be made to achieve the surplus. WM felt it was evidenced that wherever possible, membership and registration fees would not be increased and confirmed that the Board understood that the Sport costs more than everyone would like it to, although it would be inappropriate for her to predict what would happen in future regarding other costs and economics. PH added that the intention was always to put members first.

Suzannah Cotterill Q: Is 25% staff costs for HQ staff only. A: Wendy confirmed this was correct. Q: what is the % for the total salary bill A: Wendy said she does not have those figures to hand here. Suzie asked that those are shared please. Q: Is the £10,000 for Osberton House Event support budgeted for 2019 and will it be honoured? She referred to written communications by a Regional Coordinator with one organiser to assure them this was the case. A: Paul Hodgson said he would answer that later on in the presentation.

british eventing agm november 4, 2018 minutes part 1 finance 1 · 2019-03-13 · british eventing...

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