Sunday, 20 December 2015

Questioning QVM's Financials

An analysis of the financial arrangements at QVM, in particular the lack of re-investment, has prompted this article from one of our traders. - 

As discussed in last week, for the first time the City of Melbourne has required both of its wholly owned subsidiary companies to publish an Annual Report along with their Financials.
Councillor Stephen Mayne chair of the City’s Finance and Governance Committee made some very interesting comments at a Council meeting held this week, which no doubt traders and others associated with the Market will find of great interest.

Firstly, Councillor Mayne highlighted the fact that our Market with its $5million return to council is “more than any market owner in the world”. That return, whilst it may seem moderate, if not low if one considers the Market as part of a property investment portfolio, is an incredibly high profit margin if it is seen as a profit return based on its percentage of total revenue. I would think very few entities return 22% of revenue back as pure profit.

With the Market facing great challenges from all directions, some traders would see this as taking essential resources away from management, and possibly one of the primary causes of the situation the market finds itself in today.

These traders are not alone, and some very experienced market operators have expressed similar concerns when market owners insist on seeing their markets as part of a property portfolio, for instance in a response to a UK House of Commons Select Committee into Traditional Retail Markets, George Nicholson ex Chairman of the Trustees of London's famous Borough Market stated the following: 
There has in recent years also been a trend – encouraged by central government – to view markets as simply part of the wider property portfolio of an authority… If markets are to be sustained and develop… it is crucial that adequate investment is made and income generated is retained. “
Mr Nicholson also cites the Barcelona Market model as an example and says:  
“All 40 markets in Barcelona are legally bound together in an independent legal vehicle that receives the rents and uses any surpluses to re-invest in the markets.”

The impending renewal may murky the waters somewhat about the point being made here, but fundamentally the point is a simple one, and that is that for retail markets to successfully coexist and thrive alongside our retail competitors  and in today’s complex and ever changing retail environment they need maximum resourcing of management and its day to day operations.

As indicated by the Barcelona model ideally this could mean ring fencing the market and its financial resources, or in other words the returning of its surplus back into its day to day operations budget. ( possibly including a large portion of the current $5 million return to the city a part of the Head Lease - It is worthy of note that a counter argument to this position is that the Market being a place of business and hence unlike other community focussed assets, the beneficiaries (i.e. the traders) are making profits, it would seem only appropriate that it’s owners the City also can expect a profitable return from the Market. This is a valid point, and there is no objection whatsoever to the City having a return once the Market has been fully resourced both via an appropriate number of professionally proficient personnel and adequate finances to permit the Market to perform and meet its current challenges).

So whilst it is possible to applaud the renewed interest in the markets infrastructure requirements, as recognised in the Strategic Brief and the Master Plan, and towards management culture, as shown by the requirement to lodge an Annual Report, are we seeing much of a change in attitude or acknowledgment of these day to day challenges and in a more flexible operational budget? Perhaps quite the contrary.


Councillor Mayne made another point when he commended the Financials presented by the city’s other subsidiary company, Citywide.  QVM may need to take a leaf out of their book (or 29 pages out of their Annual Report) since Citywide’s Annual Report contained 29 pages of Financials to QVM Pty Ltd’s 2 pages.

It would be also appropriate to say that this new approach directed by the City does challenge some of the long standing attitudes from other participants at the market to show like openness and transparency in their dealings. For this new mindset and culture to truly become a new way forward at the Market it must certainly be embraced by all participants at the market not just its owners and managers.

22/12/2015 12:12:24 Questioning QVM Financials "An update on the above article and a very positive sign coming from Council.
This is in fact the second time that money has been fed back into QVM in the last 6 months. In July $300k was reduced from the money budgeted to flow back from QVM to City of Melbourne.
You can read the recent resolution below:
The Council, at its meeting on 15 December 2015  Resolved: (part) - That Council authorises officers to inform QVM that no budgeted QVM licence fee payments are to be made to Council for the month of December in 2015 and that these funds of almost $400,000 are to be available for modest short-term management initiatives to improve the volume, amenity, safety and viability of the market, whilst also contributing to a higher than budgeted QVM net profit for the 2015-16 financial year."
Thank you for this update - Ed