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Diane

NCFC Accounts for year ending June 2018

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Key points of note: No doubt the accountants amongst us will explain all the nitty gritty to us

Income down to £63.7m as a result of a lower second year parachute payment.

Operating profit of £19m (Operating loss of £2.6m in 2016-17).

Profit after tax of £14.6m (Loss after tax of £2.7m in 2016-17).

Profit in the year driven by cost reductions and significant player trading in the January transfer window and early summer.

Cash inflow in the year of +£16.4m explained as follows:

- Cash generated from operating activities of +£9.5m

- Player purchases – cash outflow of -£20.1m

- Player sales – cash inflow of +£24.8m

- Fixed asset spend of -£2.3m

- Receipt of the Canary Bond and director loans +£5.1m

- Other cash flow movements -£0.5m.

As at June 30, 2018 there was no external debt with a cash balance of £16.1m at the end of the financial year. The Club anticipates a negative cash position by the end of this calendar year.

Since the June 30, 2018 financial year end:

- End of parachute payments (c£32m in 2017-18) further significantly reducing revenue in the current financial year;

-  Corporation and VAT payments due in the first quarter of 2018-19 in excess of £10m;

- Recruitment of six first team players in the summer 2018 transfer window

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Thanks for setting that out.

I guess what really matters is that last year the club had income of £63.7m which included £32m parachute payments that have now stopped. You don''t have to be an accountant to work out that the player sales were necessary to balance the books this year.

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Player wages as a percentage of turnover were 50% which suggests a wage bill of around £32m.

Clearly that % figure is going to be a lot higher next season but with Martin, Naismith, Jarvis and I assume Klose off the bill we should be able to get it down to a manageable level without having to flog too many players!

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Two other points of interest. Accounts appear to me to state that we made £48m on player sales so whilst i am sure this did not all come in one chunk, there is perhaps a bit of downplaying of that fact in the press releases.

Also noticed this line which i''ve not seen before in the accounts:

"Included in staff costs are £12.2m (2017: £nil) of charges relating to the contracts of certain players whose

registration value is impaired and whose contracts have been classified as onerous contracts."

Any accounts experts care to express a view as to what this might mean? Players under contract who can;t play/aren''t playing (presumably the likes of Jarvis and Nelson?)

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Well our turnover is likely to be in the region of £32m. I''d say that we will need to have the wage bill down to around two thirds of that. Most of that should come with Naismith, Martin, Jarvis, Oliveira (If I am right re the above £12m of costs seems to be allowed for those players plus maybe Wildshutt) and perhaps Klose if he leaves. i don;t see that we will be having to make multiple sales next summer as I think most of the work reducing the wage bill has already been done.

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Their understanding of financial matters is rather lacking though, most of them don''t even consider that their club is in debt because the money owed to Evans is "internal."

I''ve brought this up before but it is worthy of repetition; if we continue to average gates of 10,000+more than they do over the course of a season that difference in match day income will more than compensate for the money Evans has to pump in to keep that club afloat.

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They also seem to ignore the fact that as well as our income decreasing our wage bill is also decreasing and will continue to do so, Many seem to have convinced themselves we are going to have to plug a Maddison sized financial gap every season which is rubbish.

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These will be contracts where we will not receive any benefit for the payments or the payments are in excess of the benefit we will receive. Obvious jokes aside i would assume this is Naismith, Wildeshut, Martin etc. players out on loan / paid up where not all of their wages are met by the other party but we are still liable for the costs.

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[quote user="Darryl Dixon"]These will be contracts where we will not receive any benefit for the payments or the payments are in excess of the benefit we will receive. Obvious jokes aside i would assume this is Naismith, Wildeshut, Martin etc. players out on loan / paid up where not all of their wages are met by the other party but we are still liable for the costs.[/quote]

Sorry, this was to the question above about onerous contracts.

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Also, the coverage makes note of the corporation tax payment to be made but we need to bear in mind that this a cash flow issue and not a profit issue. The cost of the CT is already included in this years accounts - as it relates to this period - but the actual cash expense will sit 9 months and 1 day after the year end.

As such, when it is paid, there will be a balance sheet transaction (credit bank, debit CT account) but this won''t be reflected in the P&L. Our account was £16m in positive so the CT will form part of the normal cash churn of the business - however this will require us to use financing for working capital come the year end. One assumes this will revert when the more expensive contracts we are still carrying have washed through.

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Archant are reporting that the figures include some of the Maddison money, but how is that possible if he was not transferred until August whilst the accounts were made till the end of June.

Was a deal reached with Leicester much earlier then?

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[quote user="Big Vince"]Archant are reporting that the figures include some of the Maddison money, but how is that possible if he was not transferred until August whilst the accounts were made till the end of June.

Was a deal reached with Leicester much earlier then?[/quote]
Maddison was transferred on 20th June some 10 days before the accounts for 2017/18 were closed.

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[quote user="Big Vince"]Archant are reporting that the figures include some of the Maddison money, but how is that possible if he was not transferred until August whilst the accounts were made till the end of June.

Was a deal reached with Leicester much earlier then?[/quote]

As another poster has said, Maddison was sold before the accounting year end. The accounts include the whole of the agreed fee with any unpaid amount included as a trading debt.

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A poignant note on Steve Stone - he generously put £20,000 into the Canary Bond. I did wonder if any compensation to him for loss of office would be included in the post-balance sheet events, but no.On the big picture, the accounts indicate what has been generally known - that in our first season after relegation the board backed Neil for an instant return. But when that failed the decision was made to start cutting back on wages rather than jeopardise the club''s future. But the figures also show it has not been that easy, presumably in part because of the few high-wage players still on the books, and the need to try to keep the squad competitive.So overall staff costs have fallen by £12.9m from £67.1m in the PL. But despite the start of cost-cutting the drop from 2016-17 to 2017-18 was only £900,000, from £55.1m to £54.2m.The figures for player wages highlight the cost-cutting effort a bit more clearly with a decrease over those three seasons of £22.9m, and a drop between the trying-to-go-straight-back-up season and the trying-not-to-go-bankrupt season of £6.85m.As to income for this season and the future, the combined amount from ticket sales, catering and commercial has  all but held up over the two Championship seasons, dropping only by £1.1m to £21m.Given the apparent contrast in entertainment value from last season to this it is  a fair assumption that income stream will continue to hold up, and perhaps increase. Added to which there will be £7m in TV money. A rough guess would put income for this season at a bit north of £30m.But that is a figure very similar to the £30.8 we spent just on player wages for the last season, and well below the £54.2m of overall staff costs. So more cost-cutting looks necessary.

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[quote user="Icecream Snow"]So how much Corporation Tax will we be paying? 19% of £16million? [/quote]

The accounting profit and taxable profit are different things but we don''t get to see the tax computation. There may be some losses from earlier years available for set off but there may also be deductions in the accounts which are not allowable for tax purposes. But 19% of the accounting profit is a reasonable estimate

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Yes Purple although if I am reading it correctly the current staff costs include the £12.1m associated with contracts the club considers onerous which I take to be Naismith, Martin, Jarvis and Wildshutt (plus maybe a couple more). If that’s the case then presumably the staff costs will drop by £12m next financial year even without us selling anyone. With Olivier’s likely to go as well that should give us a good start and hopefully mean we do not have to make enforces sales of players we want to retain.

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I''m fairly sure now Oliveira will be going in January. It''s probably all but sorted. Naismith''s contract will be shortly resolved (Martin already). Cannot see Bolton buying Wildschutt. Just reminds me how dire some of Neil''s appointments were (Wildschutt, Jarvis, Naismith) and how ''onerous'' their wages are even now.

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Seems to me to be fairly well what was expected - a decent profit made that was needed to offset costs for this season.  We will see what happens this season because the accounts next year will make for more interesting reading.  We are being squeezed a bit more this season financially, still with expensive contracts to wind down, not to mention the cost of the other players, so things will be a lot tighter financially.  Promotion would obviously help, but in the event of non promotion, it is clear that we would need to sell players.
Fortunately, the stock of many of our players will have risen exponentially so there should not be any real problem balancing the books and giving us money to invest in the squad too.  Hopefully I am wrong and we won''t need to sell anyone, but realistically, one or two of them may be poached anyway, regardless of promotion or not. 
So a good set of figures that helps this season''s finances - and because of the players we have now doing well, the future finances, at least for a year or two looking good - so all in all, plenty of reasons to be cheerful.

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[quote user="Jim Smith"]Yes Purple although if I am reading it correctly the current staff costs include the £12.1m associated with contracts the club considers onerous which I take to be Naismith, Martin, Jarvis and Wildshutt (plus maybe a couple more). If that’s the case then presumably the staff costs will drop by £12m next financial year even without us selling anyone. With Olivier’s likely to go as well that should give us a good start and hopefully mean we do not have to make enforces sales of players we want to retain.[/quote]
Jim, I am not an accountant so I didn''t want to assume something I wasn''t certain of, but I think you''re right, and the situation will sharply improve. My amateur guess is that if we stay in the Championship we may well have to sell a player each summer but what one might call the TWTD Fantasy - that we will need to sell a Maddison for more than £20m every year - is wide of the mark.Also amusing that posters on TWTD - and some here - have painted the fact that we had someone as good as Maddison to sell to make ends meet as some kind of totally undeserved fluke, rather than yet another sign that overall the club is well run, with directors, executives and coaches who know what they are doing.

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After backing out the £12.2m for onerous contracts then total wages and salaries are at £34.0m.(£12.2m is a lot of money! This figure almost definitely Martin and Naismith. From my fag-pack maths, it probably Jarvis and Wildschutt and Oliveria too. My maths being: £39k pw = 12.2m / 52 weeks / 6 (that is, 6 years of contract payments, 1 for each, 2 for Oliveria). I think it clearly illustrates how painful bad transfers can be.

Overall, the wage bill shows the club has been cost-cutting well. But as Purple says, there is still some way to go.

This was a bumper year for player sales, £48m in total. This being coming from the sale of, amongst others, the Josh and Jacob Murphy, Maddison, Pritchard, Howson, Dorrans and Jerome. I very much doubt we will reach anywhere near that figure next year.

That combined with the end of parachute payments (c.£17m) means the club will need a minor miracle to be profitable next year.

One slight area of concern is the consistent decline in both our commercial and catering income. Perhaps understandable as we spend longer outside the PL. But historically, it''s been a feather in our cap compared to other Championship clubs. Careful stewardship of that part of the business is required.

I think it''s worth crediting Webber and co. with some good work in getting money for players. Of those c.£48m in player sales, we''ve already brought in c.£25m in cash which has given us good leeway to reinvest into the squad. We''re due another c.£20m or so in cash within the next year, a further c.£22.5m thereafter. On the other side, we owe c.£8.8m in the coming year and c.£5m thereafter. This gives us a bit of room to pump into the squad if the right opportunity comes up. In short, I would say that ''the committee'' has done a good job balancing the conflicting cash and investment needs of the club.

We''ve impaired (written-off) the value of players by about £9m. I suspect this is Wildschutt and Oliveria (I''m pretty sure Naismith and Jarvis have already been written down entirely). Generally speaking, the club has been pretty active in writing down players (the benefit of not having to ''worry'' about loses). This puts us in good stead going forward as any player sales are likely to result in accounting profits on disposal.

The net current book value of the squad is £14m (down from £30m) and save for some big purchases, will likely tick down further. Our amortisation (the annual reduction in player values) was still high last year at c.£14.5m. As the value (purchase cost) of our squad moves towards the single-digit millions, I imagine this will be the last year of such a high charge.

Some minor notes, director costs are also well down £100k vs £1.1m (£400k salary plus £700k pay-off to Moxey). There may be no, or nominal costs next year given that Steve Stone has left the club. As Purple notes, he still put £20k into the Canaries Bond. Though it appears Smith & Jones did not, they did however, loan the club £250k last year.

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Oh for an edit button for my typos...

In retrospect, "minor miracle" is perhaps too strong a word. More cutbacks and players sales are required. I''d imagine once the financial transition to a Championship club is more complete (i.e. most of the highest earning players have moved on) breaking even is a good possibility (that''d be, not in next year''s accounts, but the year after).

That''s my bi-annual post done for now.

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A couple of further points to note. The drop in average attendance is equal to the drop in season ticket sales. The waiting list has gone!

Why did the club spend £176 m with the auditors on tax advice? That''s a significant figure and must have summat to do with the large tax payment the board were wittering on about. I just hope they have not entered into some dodgy offshore tax avoidance scheme. It was probably linked to the bond scheme but still a good question for someone at the AGM?

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[quote user="shefcanary"]A couple of further points to note. The drop in average attendance is equal to the drop in season ticket sales. The waiting list has gone!

Why did the club spend £176 m with the auditors on tax advice? That''s a significant figure and must have summat to do with the large tax payment the board were wittering on about. I just hope they have not entered into some dodgy offshore tax avoidance scheme. It was probably linked to the bond scheme but still a good question for someone at the AGM?[/quote]

As you''ve said in a subsequent post, the figure is £176,000. That is still a significant amount and I''ll ask about it at the AGM.

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