News: Options explored as Magna fights for future
Despite being on target to achieve a turnover of over £1m by the end of 2014-2015, the financial position at the Magna Science Adventure Centre remains fragile, with Rotherham Council set to step in with more financial support and more involvement on its board.
Set in the former Templeborough steelworks, Magna is a family attraction with more than 100 hands-on exhibits. Millions of pounds have been invested in conference facilities at the centre which plays host to nationally important music events, boxing, corporate launches and award ceremonies.
The facility is operated by the Magna Trust, a charity that by its constitution cannot go overdrawn. In times of financial difficulty the Council has provided long term and short term loans using their ability to borrow at much better rates than than commercial loans. It was no more serious when earlier this month the Council's interim chief executive approved an immediate £100,000 loan after the Magna Trust identified a potential cash shortfall of up to £100,000 before the end of March 2015, with an immediate cash requirement to fund the salaries of its 80 staff.
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Bookings secured within this financial year have put Magna well on target to achieve over a £1m turnover by the end of 2014-2015 but the current trading environment remains challenging with competition coming from Rotherham United's New York Stadium.
Along with its Christmas party nights, events at Magna in 2014 have included the Yorkshire International Business Convention, conferences for blue chip companies such as Mercedes Benz, Honda, HSBC and the Royal Mail; an exhibition by an industrial tool distributor; a pool tournament; a jobs fair; Weston Park Hospital's annual charity dinner, and a tattoo convention.
In 2006, Rotherham Council provided a £300,000, 15-year long term loan, with £195,000 currently outstanding but a "payment holiday" has been in place since 2013. In 2008, during the recession, the Council provided Magna with an unsecured one year working capital facility. This is reviewed annually by the Council's cabinet and a sum of £250,000 was agreed in March 2014. An additional unsecured £80,000 bridging loan facility was agreed in January 2014 which has not yet been repaid. It is believed that were it not for this financial support then Magna would have been forced to close.
Now, Council reports show that on the basis of current cash flow forecasts, Magna requires an increase in their facility from £250,000 to up to £350,000. The existing £250,000 council loan is set to be repaid, with outstanding interest of £6,250, on March 31 2015. The Council's cabinet are being asked to approve a new facility of up to £250,000 on April 1 2015, taking the total available for the year to £350,000.
The report states: "The trustees of the company are acutely aware of the challenges that the business faces, but are confident that the business has a long term future. Once the economic environment improves, they believe Magna can become a profitable business.
"Magna is a key facility for the borough both as a tourist attraction, education and training facility, conference and event space and local employer."
As a condition of the new loan, Magna will be required to develop and demonstrate that they have a sustainable business model for the facility. An independent review of this business plan would give the Council confidence that it can be delivered. The Council, as a director of the business, is also set to increase its board involvement so that it can shape the future direction of Magna and its position in the borough.
Legal discussions are also taking place so that the Council could secure the loan against the Magna property rather than just the offices fronting Sheffield Road.
Potential income opportunities that would reduce Magna's reliance on the Council are set to be discussed by the Council's cabinet in a private session next week. One option is Magna's keenness to explore with the Council the potential for a hotel on site, which will enable them to drive forward with the conference business.
The council report concludes: "Although showing signs of improvement, the current trading environment remains challenging. On this basis Magna's trading position remains vulnerable. However, without the Council's ongoing support the business will cease to trade."
Magna website
Images: Magna
Set in the former Templeborough steelworks, Magna is a family attraction with more than 100 hands-on exhibits. Millions of pounds have been invested in conference facilities at the centre which plays host to nationally important music events, boxing, corporate launches and award ceremonies.
The facility is operated by the Magna Trust, a charity that by its constitution cannot go overdrawn. In times of financial difficulty the Council has provided long term and short term loans using their ability to borrow at much better rates than than commercial loans. It was no more serious when earlier this month the Council's interim chief executive approved an immediate £100,000 loan after the Magna Trust identified a potential cash shortfall of up to £100,000 before the end of March 2015, with an immediate cash requirement to fund the salaries of its 80 staff.
Advertisement
Bookings secured within this financial year have put Magna well on target to achieve over a £1m turnover by the end of 2014-2015 but the current trading environment remains challenging with competition coming from Rotherham United's New York Stadium.
Along with its Christmas party nights, events at Magna in 2014 have included the Yorkshire International Business Convention, conferences for blue chip companies such as Mercedes Benz, Honda, HSBC and the Royal Mail; an exhibition by an industrial tool distributor; a pool tournament; a jobs fair; Weston Park Hospital's annual charity dinner, and a tattoo convention.
In 2006, Rotherham Council provided a £300,000, 15-year long term loan, with £195,000 currently outstanding but a "payment holiday" has been in place since 2013. In 2008, during the recession, the Council provided Magna with an unsecured one year working capital facility. This is reviewed annually by the Council's cabinet and a sum of £250,000 was agreed in March 2014. An additional unsecured £80,000 bridging loan facility was agreed in January 2014 which has not yet been repaid. It is believed that were it not for this financial support then Magna would have been forced to close.
Now, Council reports show that on the basis of current cash flow forecasts, Magna requires an increase in their facility from £250,000 to up to £350,000. The existing £250,000 council loan is set to be repaid, with outstanding interest of £6,250, on March 31 2015. The Council's cabinet are being asked to approve a new facility of up to £250,000 on April 1 2015, taking the total available for the year to £350,000.
"Magna is a key facility for the borough both as a tourist attraction, education and training facility, conference and event space and local employer."
As a condition of the new loan, Magna will be required to develop and demonstrate that they have a sustainable business model for the facility. An independent review of this business plan would give the Council confidence that it can be delivered. The Council, as a director of the business, is also set to increase its board involvement so that it can shape the future direction of Magna and its position in the borough.
Legal discussions are also taking place so that the Council could secure the loan against the Magna property rather than just the offices fronting Sheffield Road.
Potential income opportunities that would reduce Magna's reliance on the Council are set to be discussed by the Council's cabinet in a private session next week. One option is Magna's keenness to explore with the Council the potential for a hotel on site, which will enable them to drive forward with the conference business.
The council report concludes: "Although showing signs of improvement, the current trading environment remains challenging. On this basis Magna's trading position remains vulnerable. However, without the Council's ongoing support the business will cease to trade."
Magna website
Images: Magna
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