THE BOTTOM LINE

The Hon. Treasurer’s report to The Alpine Garden Society for the year
1 September 2022 to 31 August 2023

Company lawyer LCB Gower wrote of published financial statements …that to the average investor or creditor…’the man on the Clapham omnibus’— they are cyptograms (puzzles) which he (or of course she) is incapable of solving.

1. At the recent AGM the Director gave a very full account of what the Society achieved in the last year and the President outlined plans for the coming two years. it is my job now to convert that account and those plans into pounds shillings and pence, in, In other words it is my account of the audited accounts: the financial position at the beginning and end of the year, a brief account of the financial activity in the year between, and the future projection.

2. Any member wishing to see the Society’s complete audited accounts (which run to 39 pages) can apply to the HQ Office for a copy. What follows here is based broadly on Auditors Kendall Wadley LLP’s consolidated statement of the Society’s financial activities over the year and the position at the year’s end. In some details of presentation it differs from the account given at the AGM although overall the financial picture is unchanged.

3. The word ‘consolidated’ may need explanation. The AGS has two subsidiary companies, AGS Expeditions and AGS Publications. The companies have their own audited accounts. The Society’s own accounts have traditionally included those of the two companies, the source of ‘consolidated’.

4. It is worth my reminding members that the AGS is a registered charity and. as such much of its spending is on its ‘charitable objects’ and the fundraising necessary to fulfil those objects.

5. Broadly speaking (and for convenience) AGS’s financial affairs can be grouped under a small number of heads. In turn each of the heads is subdivided to give a more detailed picture of the various activities. Notice again that what is presented by the auditors are ‘consolidated’ accounts, comprising those of both the main society and its two subsidiary companies. In this presentation in the interests of clarity where possible I have attempted to separate the two. It is also worth stressing that the different ways of cutting the income and more particularly the expenditure ‘cake’ are not always or necessarily mutually exclusive.

Table 1. Income of the Society and its subsidiary companies conflated. This includes contributions from its investments but not those of its other fixed and current assets which can be found in table 10.

*Such gifts and bequests are always most gratefully received but by their nature are something of a moveable feast varying greatly from year to year.

Table 2. The charitable activities referred to in table 1 can be detailed as follows.

More than half the income detailed in Tables 1 and 2 is down to two sources, investments in financial markets and the subsidiary companies. Because they play such a major part they are explained briefly in the next sections.

6. The Society’s investments

The Society holds investments managed by two investment companies CCLA (Churches, Charities and Local Authorities) and BlackRock. Our investments with both are in Growth and Income Funds. In other words funds that grow (or not) over time depending on the state of the markets in which the investments are made, and an income in the form of ‘dividends’ paid on the units of investment. The funds paid out a total of £54,290 to the Society during the year, £3,805 by CCLA and £50,485 by BlackRock. The income represented a return of around 3% on the capital.

During the year the value of both funds fluctuated as they followed markets and they ended the year well down from last year.by almost £120,000. In addition the Society disinvested £100,000 of BlackRock units (see table 1). The total value of investments fell by £219,406 over the year.We paid £1064 for the disinvestment to be processed.

Table 3 Movements in the Society’s investments

7. The two subsidiary companies

The Society has two subsidiary companies: AGS Publications and AGS Expeditions. The companies are constituted to covenant a proportion of any trading surplus to the Society following the deduction of their operating and administrative costs. The contribution to the Society’s income shown as £165,104, in table 1 is the sum of the turnover of the two companies. From this must be deducted their necessary expenditure, £126,025

Table 4 Accounts of the two subsidiary companies

AGS Publications covenanted nothing to the Society, having suffered an operating loss of £2568 over the year. The loss included recharges to the Society for administrative expenses of £5156.. AGS Expeditions had an operating profit of £15,664 and covenanted £11,207 to the Society included under administration.

Table 5 Income of the Society neglecting the disinvestment contribution and that of the subsidiary companies

8. What the Society spent

In describing what the Society spent and how it spent it the financial ‘cake’ can be cut in different ways.The chief way divides the costs into charitable activities, the raising of money to finance those activities nd support costs.

Table 6 Total expenditure

Table 7 Charitable activities in detail

Table 8 Support and governance costs

Table 9 Direct costs of raising funds

9. The Society’s assets

Statements of the Society’s income and expenditure do not exhaust its ongoing financial activity or entirely define its position at the beginning and end of the year. At any particular time the AGS also has a monetary value expressed in terms of its ‘assets’. These are of three kinds:

Fixed assets: the notional value of what the Society owns in terms of for instance its buildings lease, equipment, library… ‘Notional’ because in practical terms the real value is realised only if and when the asset is sold. In other words what someone is prepared to pay for it. Strictly speaking these are ‘tangible’ assets, they have a physical reality. They include the value of the lease on the Society’s HQ building.In principle there might be other ’intangible’ assets..

Current assets: these possess a real as opposed to a notional value and comprise, stocks, cash reserves in the bank or to hand together with what the Society is owed (from which must be deducted what it owes.)

Investments: these are described in 6 above. To some extent the value of investments is again notional since their true value can be realised only by selling them. Over the year their notional value rose and fell as the state of markets changed and their value with it. Neglecting the £100,000 disinvestment the value fell by £119,406 in response to the weakness of markets during the year.

Table 10 Tangible assets and investments

At the beginning of the year the tangible fixed assets stood at £329,681, including the value of the lease on the HQ building plus the ‘fixtures and fittings’ and the library. Most of the fall in value followed a reassessment of the value of the trophies and medals from £79,258 to £25,000 a reduction of £54,258.

Table 11 Details of current assets

The two tables show that the Society’s assets fell over the year by £334,278.The great majority of this loss was that of the Society’s investments, plus the revaluing of the trophies and medals and the fall in the cash reserve..Paying off the Society’s debts almost exactly balanced the fall in what it was owed at the beginning of the y ear.

10. Difference between income and expenditure

Expenditure at £388,640 for the year (Table 6) exceeded income at £257,596 (Table 5)

by £131,044. The trading deficit has been met largely by the sale of £100,000 of investments (-£1064,the cost of disinvestment) leaving a deficit of £32,108. At the start of the year the Society held £80,7820 in cash (Table 10). Presuming that the whole of the trading deficit has been absorbed by the banked cash at the year end, £ 48,670 should have remained. Table 10 shows the actual recorded figure at £45,617

11. A comparison of the Society’s finances with last year’s

Table 12 The key differences recorded between 2022-2023 and last year 2021- 2022

The year 2022-2023 showed a significant improvement over the year before. Despite a much increased inflation rate and a much reduced voluntary income both from subscriptions and from gifts and legacies, total income was up by £23,512 and expenditure down by £21,436. The result was a marked reduction in the trading deficit of almost £50,000 and a consequent fall in the need for disinvestment of the same sum.

12. Commentary and conclusion

This year’s accounts show a marked improvement in the Society’s finances over those of the last few years. It is true that for the first time income-producing stocks had to be sold and at a time when markets were performing poorly but the sale was substantially down on earlier years. And income was up and costs down compared with last year as the table shows.

It is crucially important that this very welcome improvement is the beginning of a trend in the right direction. There are good reasons to believe this to be the case. First the Society has weathered the financial storms of the last three or so years, Covid, Brexit,War in the Ukraine, poor market performance in the UK and not to say inflation. Second, the lessons learnt over the last three years have prompted radical changes in management and administration of the Society which should both increase income and lessen costs even further. These include the introduction of Gift Aid, digitisation of The Alpine Gardener and reorganisation of the subsidiary companies to partial or total outsourcing of management and administration.

While not all of these are to everyone’s taste they are I believe absolutely necessary if, as is intended, within two years, disinvestment should no longer be needed.

John Galloway
Hon. Treasurer Alpine Garden Society

November 2023