2023 accounts

Members Forum Society Matters 2023 accounts

  • This topic has 4 replies, 3 voices, and was last updated 5 months ago by Harry Ryland.
Viewing 4 reply threads
  • Author
    Posts
    • #247745
      John Cutler
      Participant

        The accounts make for interesting reading (for me; I know others are turned off!).

        1. The cost of the AGM has almost doubled from £1,000 in 2022 to £1,923 in 2023. Is the figure low for 2022 because of Covid? Or is the AGM costing more because it is turning into a mini-exhibition? Which raises my real point which relates to the debate started by Graeme Vickery. Would we save that £1,923 by timing the AGM to coincide with an expo-EM?

        2. I cannot help feeling that the real profit on the Stores trading is much lower than revealed by the accounts. I am pretty sure that a large chunk of the bank charges/direct pay charges/paypal/strike fees relate to the Stores. Similarly a big chunk of the website cost will relate to the Stores. The insurance declaration will require disclosure of sales and stock (and tooling assets like moulds) to help fix the premium so a big chunk of that cost will also be a real trading expense. Lastly, and the biggest chunk of all at £4,891, is depreciation of “fixtures and fittings” which the Treasurer in his report implies is for the moulds for the new track and the B6 turnouts. Did the Stores really make a net profit in 2023? I hope no-one takes this as a criticism; I think we should just know the real result, even if a best estimate. We are kidding ourselves if we really think the Stores are making a big profit.

        3. There is an implication that the only fixed assets are these moulds, which worries me a little. Surely we should have some investment in IT?

        4. We are carrying an enormous bank balance which represents over 22 months’ worth of subscriptions. This is excessive and only benefits the banks who pay miserable interest to corporates such as us (none at all in our accounts!). Could we not invest some of this in more product development such as tools or moulds, or even in joint ventures with manufacturers e,g, financing them in exchange for a royalty etc (maybe as intangible fixed assets or loans?)?

        I am sending this post to Harry Ryland and hopefully he will reply on here.

        Also I hope that it might spark some debate at the AGM!

      • #247747
        William Wyatt-Millington
        Participant

          There are some difficulties in having an AGM at the same time as an Expo. Firstly the rules state that the AGM must occur before the end of the March following the end of the Society’s financial year which is 31st August. Nether of the two Expo’s fall in that time frame. Secondly most of the Board members are fully involved in the running of the show and therefore the show would have to be paused to allow time for an AGM. Also, I am unaware of any society’s that actually schedule an AGM at an exhibition.

          The Board expenses have been considerably reduced by the impact of the Covid pandemic. During the shutdown periods the Board used Zoom to hold its regular meetings. With the end of the pandemic the Board decided to continue with Zoom meetings thus reducing the travel costs, and the cost of hiring a room at Keen house. The other advantage of Zoom meetings is that the Board members are not travelling for up to 4 hours for a 90 minute meeting.

          With regards to assets these are depreciated over a period of 5 years, which is a fairly standard practise and as it happens the only assets we have that are still being depreciated is the society investment in the moulds that PECO hold for the track and turnouts. I know that the cost of sales are included in the Trade Accounts and the accounts are a true reflection of income and expenditure over the financial year. I know when I was Trade Officer a reasonable excess of income over expenditure was always achieved. At the end of the day the investment in the track work moulds came from the Trade Account.

          On the subject of our current balance I believe that this is in line with other Societies such as ScaleFour. Could we use funds in product development: the EMGS and ScaleFour Society do represent a niche market in terms of railway modelling and I think that the large manufacturers would not have a business case for doing anything specifically for these societies. Most of the manufacturing is done in China and the minimum order quantity would run to at least 5000 items before it is considered economically viable. The combined membership of EMGS and ScaleFour is about 2500. We are working with small UK traders in order to ensure the continual availability of specialist items.

          I would like to thank John for his comments and I have tried to answer some of the comments. The new Board will have a lot of items to discuss over the next year and beyond and comments/suggestions are always welcome.

        • #247750
          John Cutler
          Participant

            Thank you, Chairman, for such an unexpectedly rapid response.

            The issue of timing of the AGM could easily be overcome by changing the company constitution accordingly. I accept that Board members may be otherwise engaged in helping out at a major exhibition. However, it does seem to me that over the years the AGM is slowly turning into an exhibition in its own right anyway. This year it is even open to the public (I do not like that personally).

            I am not sure why Board expenses are mentioned. My query is about AGM expenses and whether they could be avoided or absorbed by combination with an exhibition.

            There is no suggestion that the accounts do not show a true and fair view of the EMGS affairs. The accounts show a gross profit on Trade sales not net. The investment in moulds did not come out of the gross profit in the legal accounts. That cost has rightly been capitalised and depreciated over 5 years. That depreciation is not taken off the Stores gross profit in the accounts. There are other costs I have detailed that should really be apportioned against the Stores net profit. Hopefully Harry Ryland will oblige with some estimates, probably after the AGM. I feel sorry for him if he has to try to explain this to a Chairman who clearly does not understand (he is not alone). By the way, I want to emphasise that no blame should be attached to the Stores officer, past or present (or for that matter to the Treasurer or Chairman); I am not in the business of blame. The data for knowing the extent of the Stores real profit is lacking from the format of the legal accounts. This is an issue for any business owner or manager in the outside world; the legal accounts are usually not a good way of telling what is really going on. By the way, I am not concerned if Harry’s promised figures show a loss; I do not see much difference between subsidising the Stores or an exhibition so long as the subsidy is small.

            As for the huge cash balance, it seems we just follow the herd of other model railway clubs and slowly build it up. At the current rate of surplus and assuming subs stay the same (they seem to be gently declining) we will have £100k cash in 5 years time, equivalent to 30 months subs. A business that cannot invest surplus funds in growth would return surplus cash as dividends or a repayment of capital to shareholders. A charity would give money away. Some action is needed. My preference is to invest in products to make life easier for EM modellers. Or do we just Carry On as before, chaps? Remember it is OUR money tied up in that cash mountain!

             

             

          • #248032
            John Cutler
            Participant

              4 weels later it seems there will probably be no answer to my query regarding the real profit on trading.

              Here is my guesstimate, based on professional experience:

              2023                              2022

              Gross trading profit per the accounts                                            7,082                             7,071

              Less depreciation on moulds (track)                                              4,891                             4,891

              Less 10% website costs                                                                 145                                133

              Less paypal/strike fees                                                                   799                                841

              Less insurance: 0.5% of sales & 0.5% of stock & assets (moulds)      376                                354

              Net trading profit                                                                           871                                851

              Possible margins of error: +200/ -1,000

              I think members should know that we do not make a huge profit on the Stores trading.

              Unfortunately I get the impression the Board believes we do.

               

            • #248036
              Harry Ryland
              Participant

                I aplogise for not replying earlier but life does have a habit of getting in the way.

                The easiest way to answer is to use the same numbering system that you used in your original post.

                1.  The cost of AGMs has indeed risen since 2022.  This is not totally surprising since that was a virtual AGM.  Such events are commendably cheap but do not, in my view, give the members such opportunities to engage with the board, either during the meeting or, more informally, before or after it.  Some years ago the board took the decision to move the AGM around the country, thus giving more members the opportunity to participate.  Understandably, local area groups like to make a good showing at these events.  In my view, this has been successful.  It also acts as a way of showing the benefits of EM to members of the public who are welcome to visit the mini show but who are not allowed access to the AGM itself.

                2.  I agree with some of what you say but direct debits, for example, relate solely to the collection of subscriptions and do not relate to the operation of the stores.  Similarly, the great majority of the bank charges relate to the normal operation of the society.  Most of the Paypal charges and all of the Stripe charges do relate to the operation of the stores, however.  It is on the advice of the accountant who audits the accounts that they are shown separately so that people can understand where our costs come from.  It is interesting that you talk of the requirements of our insurance declaration.  When we insure the stock, we only have to declare its value.  Sales figures are not required.  We do not insure the moulds as these are held by (and partly owned by) Peco and covered by their insurance.  The cost of insurance for the stock was £235.43p last year which is a small proportion of the total insurance.  Almost all of the insurance costs are associated with our two main Expo events and the AGM.  The introduction of the track and points was a strategic board initiative so the depreciation is taken by the Society as a whole.  The Stores function is to buy it in and sell it on to our members.  If we put that depreciation against the Stores, we would see a sudden increase in Stores profits in the year 2024-25 which would, I think, be rather confusing.

                3.  It is correct that the moulds are our only fixed assets.  We have no investment in IT as the board members use their own equipment, such as PCs and printers, to carry out their Society functions.  In the past, the Society has bought and depreciated expensive software packages.  Currently, however, all of the software that is bought in is for use on the website and is sufficiently low cost that it is not capitalised.  This is not to say that this will always be the case.  The board is currently reviewing the state of the website and this may lead to further significant investment.

                4.  In his post above, Bill Wyatt-Millington addressed the issue of how best to use the money at our disposal and I think he summarises the situation accurately.  It is interesting to look back over the approximately ten years that I have been treasurer.  The surplus carried forward on 31st August 2013 was £102,793 while on 31st August 2023 it was £114,250.  When one takes inflation into account, I would say that it has a slightly smaller value now than it used to have.  It is not a matter of an ever growing cash mountain, I am happy to say.  There is enough cash available for another major project plus a decent reserve.  The problem, as Bill says, is one of finding a suitable partner.

                Finally, I would like to say that I think the accounts reflect the state of the Society’s finances accurately.  It is always possible to juggle numbers around, as I found when working, so long as the overall picture is correct.  We are clearly not going to agree about the exact position of the depreciation within the accounts but I am untroubled by that.  The main thing is that the Stores do make a profit and I would worry if they did not.  Similarly, the Society itself is in good financial health so I am happy to leave things to Richard Bartlett, my successor.

            Viewing 4 reply threads
            • Only logged in EMGS members can reply to this topic