Debt problems ahead? (from accounts)

[Davidlingfield 63]

There has been lots of talk on other threads about elements of the accounts released yesterday - this attempts to summarise potential future debt issues based on known future players-related payments and receipts.  It ignores contingent based payments as these presumably will be triggered only by success (i.e. remaining in the Premier League) and therefore it feels a reasonable assumption to assume they would be self-funded by PL TV rights money.

So:

Amounts due in from player sales:

Player debtors due within one year (Note 17):                                                                                                                                              £26.5m

Player debtors due after one year (Note 17):                                                                                                                                                 £27.8m

Less: Short term loan repayable in Sept 2022 (i.e. repayment of accelerated receipts from previous player sales) (Note 19):     £(25.2)m

Total net cash due in from player sales:                                                                                                                                                          £29.1m

Amounts due out from player purchases:

Player creditors due within one year (Note 18):                                                                                                                                              £(14.0)m

Player creditors due after one year (Note 19):                                                                                                                                                 £(9.2)m

Player creditors due on players bought after 1 July 2021 (not known if < or > 1 year) (Note 30):                                                          £(52.7)m

Total cash committed to being paid out on player purchases:                                                                                                                     £75.9m

Total cash shortfall                                                                                                                                                                                             £(46.8)m

Now, this is not necessarily an immediate problem because of the unknown timing of the future £52.7m of payments.  But whichever you look at it, it is a shortfall that will need to be addressed at some point, and feels no different to the risks taken in the previous McNally regime - risks that currently don't really seem to be generating rewards in terms of Premier League results.

If we stay in the Premier League, this debt will probably be very manageable (although contingent payments will be triggered too as mentioned above) - however, if we are relegated, I think this is a concern, although we do have valuable players who could be sold to mitigate this.

[cambridgeshire canary 6,675]

'although we do have valuable players who could be sold to mitigate this'

 

Why else do you think we bring in so many young players?

[Disco Dales Jockstrap 1,891]

20 minutes ago, Davidlingfield said:

If we stay in the Premier League, this debt will probably be very manageable (although contingent payments will be triggered too as mentioned above) - however, if we are relegated, I think this is a concern, although we do have valuable players who could be sold to mitigate this.

If we get relegated, Aarons, Cantwell etc etc etc will be off. Shortfall sorted; the model works! Trebles all round!

OTBC

[Indy 3,283]

It’s certainly something we cannot complain about our outlay has been adventurous this summer. Shame that we don’t play all the players we spent the 50 million pounds on!

Edited October 28, 2021 by Indy

[Davidlingfield 63]

23 minutes ago, cambridgeshire canary said:

'although we do have valuable players who could be sold to mitigate this'

 

Why else do you think we bring in so many young players?

I wouldn't expect us to have a shortfall of £46m on transfers if we were bringing in young players - particularly as these numbers are inclusive of Buendia (definitely), Lewis and Godfrey (possibly) and maybe even some Maddison money. 

Intuitively, I would expect us to be buying cheaper and selling for more, but this suggests the other way around - although hopefully, those bought recently will generate higher values when eventually sold.

[Davidlingfield 63]

7 minutes ago, Disco Dales Jockstrap said:

If we get relegated, Aarons, Cantwell etc etc etc will be off. Shortfall sorted; the model works! Trebles all round!

OTBC

Hopefully - but I am not too sure about Cantwell's valuation currently?

[Disco Dales Jockstrap 1,891]

Just now, Davidlingfield said:

Hopefully - but I am not too sure about Cantwell's valuation currently?

Dropping by the day I would imagine. Webber might even offload him in January if there are indeed issues between him and the club that cannot be resolved.

OTBC

[Somerset exile 4]

I would say that the valuation of most city players has dropped significantly this season already.

 Cantwell most of all.

[shefcanary 2,385]

Any business faces cash flow issues, football clubs more than most. 

The auditors would not have signed off the accounts as being "true & fair" without any qualification, if there was any potential of the club being unable to settle liabilities as they fall due within 12 months of the sign off of the accounts.  So the clubs Board have clearly demonstrated that there is no issue until at least October 2022.  A lot can happen in 12 months, but your analysis above fails to take note of the Going Concern note in the accounts and the mitigation in place to avoid the grim scenario you paint.

Rest easy ......

Now how do we beat Leeds on Sunday?

Edited October 28, 2021 by shefcanary

[Davidlingfield 63]

15 minutes ago, shefcanary said:

Any business faces cash flow issues, football clubs more than most. 

The auditors would not have signed off the accounts as being "true & fair" without any qualification, if there was any potential of the club being unable to settle liabilities as they fall due within 12 months of the sign off of the accounts.  So the clubs Board have clearly demonstrated that there is no issue until at least October 2022.  A lot can happen in 12 months, but your analysis above fails to take note of the Going Concern note in the accounts and the mitigation in place to avoid the grim scenario you paint.

Rest easy ......

Now how do we beat Leeds on Sunday?

It’s not the next 12 months that concern me and I agree about the auditors signing off on that basis. It is longer term.

I also agree with the point that a lot can change in 12 months - I guess I was just surprised about the quantum on this shortfall based on comments made by Stuart Webber about previous overspending.

[shefcanary 2,385]

7 minutes ago, Davidlingfield said:

It’s not the next 12 months that concern me and I agree about the auditors signing off on that basis. It is longer term.

I also agree with the point that a lot can change in 12 months - I guess I was just surprised about the quantum on this shortfall based on comments made by Stuart Webber about previous overspending.

Let's get past Leeds first ....  In my view win that and long term financing becomes mere hypothetical! 🙂

 

[norfolkngood 1,086]

i would say all the transfers  signings we have bought this season have lost money so far ! 

Sargent would someone pay you half or more on what you have seen ? 

Cantwell value dropping like a stone 

Gunn ,Rashica Tzolis you would not get money back let alone a Profit ,

even poor Idah i imagine was worth more last season due to Potential 

Even Aarons i would say is close to dropping in Value 

 

 

[komakino 272]

1 hour ago, Disco Dales Jockstrap said:

If we get relegated, Aarons, Cantwell etc etc etc will be off. Shortfall sorted; the model works! Trebles all round!

OTBC

Until you run out of players to sell. 

[Disco Dales Jockstrap 1,891]

Just now, komakino said:

Until you run out of players to sell. 

Indeed. I think we might get a box of Ferrero Rocher for Sargent.

OTBC

[TIL 1010 4,722]

Is the OP a member of the Guild of Fag Packet Accountants ? 😜

[Davidlingfield 63]

9 minutes ago, TIL 1010 said:

Is the OP a member of the Guild of Fag Packet Accountants ? 😜

Actually a Chartered Accountant👍

[Petriix 2,834]

I would think that the second and third installments of the TV money would more than cover the shortfall. But we do seem to have p*ssed a lot of money up the wall when you look at the lack of quality on display.

[TIL 1010 4,722]

1 hour ago, Davidlingfield said:

Actually a Chartered Accountant👍

Being a new poster what i said was lost on you so apologies.

We recently had a well known poster on here Lappinitup sadly pass and he used to make fun of certain posters who used to make comment on financial matters who were unqualified and made reference to them as ' Fag packet accountants ' who were members of a Guild of such people.

[Canaries north 151]

4 hours ago, norfolkngood said:

i would say all the transfers  signings we have bought this season have lost money so far ! 

Sargent would someone pay you half or more on what you have seen ? 

Cantwell value dropping like a stone 

Gunn ,Rashica Tzolis you would not get money back let alone a Profit ,

even poor Idah i imagine was worth more last season due to Potential 

Even Aarons i would say is close to dropping in Value 

 

 

Our whole transfer policy is always based on players improving and the value going up. As a rule we have done this very well. Is it just me or is it the more we spend on players the worse they end up being. The jury is out on a number of them as they can't get on the pitch. Those on the pitch must be losing value in my opinion. 

[Davidlingfield 63]

38 minutes ago, TIL 1010 said:

Being a new poster what i said was lost on you so apologies.

We recently had a well known poster on here Lappinitup sadly pass and he used to make fun of certain posters who used to make comment on financial matters who were unqualified and made reference to them as ' Fag packet accountants ' who were members of a Guild of such people.

Ah, makes sense - was certainly lost on me, but I can assure you I am not “unqualified”😉

[Branston Pickle 3,635]

Football finances are always and will always be rather difficult to completely ‘get’ - I’m sure ours read better than most but there’s obviously a pile of unknowns that aren’t (usually) present in other industries.

Clearly a lot on future flows, in and out, depend on remaining in the PL; that there are fewer current outstanding ‘inflows’ is merely an indicator that we’ve not sold many of our assets recently (Emi being the main one), but the outflows show we have invested in the squad (wisely or not, time will tell) - which is a good thing.  The idea that the value of players on our books is going to vastly diminish is a bit daft - look at Godfrey, sold after relegation.

[PurpleCanary 5,554]

1 hour ago, TIL 1010 said:

Being a new poster what i said was lost on you so apologies.

We recently had a well known poster on here Lappinitup sadly pass and he used to make fun of certain posters who used to make comment on financial matters who were unqualified and made reference to them as ' Fag packet accountants ' who were members of a Guild of such people.

Hold on a minute there! Who said we...er, sorry, I mean they, of course...were all unqualified? You will be saying next we didn’t know how much Watling walleted.

Edited October 28, 2021 by PurpleCanary

[TIL 1010 4,722]

1 minute ago, PurpleCanary said:

Hold on a minute there! Who said we...er, sorry, I mean they, of course...were all unqualified?

Please don't tell me you are one of those certain posters i made reference to ?

[TeemuVanBasten 3,327]

8 hours ago, Davidlingfield said:

although we do have valuable players who could be sold to mitigate this.

Do we though?

I really think its only Max Aarons left who is going to pull in a Godfrey type fee.

Might be our last bail out before we realise the flaw in the model.... relying on a conveyor belt which could stop working.

[Michael Starr 519]

Firstly, have we ignored the 60m yet to be paid to us for past transfers. We still owe on signings but we're still owed 60m from sales. There's loads of sell on clauses that are likely to be activated over the next 3-5 seasons also which appear to have been forgotten about. Even if we go down, we'll get para payments which aren't yet accounted for because... we don't know if we'll be going down yet and that's worst case... if we stay up then we're actually pretty well off.

One thing you cannot criticise the club for is balancing the books or not making profit. We've probably weathered the whole covid storm better than most other clubs.

We moan about signings not retaining value but things can change in football very quickly. As Farke has found out of late. We're fickle. It only takes for one of our players to find form and suddenly he's the next 40m star we're selling as we're not ambitious.

Edited October 28, 2021 by Michael Starr

[Jersey Canary 143]

8 hours ago, Disco Dales Jockstrap said:

If we get relegated, Aarons, Cantwell etc etc etc will be off. Shortfall sorted; the model works! Trebles all round!

OTBC

If we go down with a whimper I doubt we’ll get too much for the 3 maybe enough to cover the debt but where’s the money for the reinvestment? 

[TeemuVanBasten 3,327]

2 minutes ago, Jersey Canary said:

If we go down with a whimper I doubt we’ll get too much for the 3 maybe enough to cover the debt but where’s the money for the reinvestment? 

He was being facetious, you are on the same side.

I just think it will be interesting the next time the club has to go cap in hand to the fans, might not be too long in the future, what with the cyclical nature of football.

If the club is charging £49.50 for a ticket, charging for premium memberships and the likes, how many fans are going to feel like they have the cash to throw at a bond issue / share issue / begging bowl. There is a point that you've squeezed every last drop of juice of out the lemon.

[norfolkngood 1,086]

2 hours ago, Canaries north said:

Our whole transfer policy is always based on players improving and the value going up. As a rule we have done this very well. Is it just me or is it the more we spend on players the worse they end up being. The jury is out on a number of them as they can't get on the pitch. Those on the pitch must be losing value in my opinion. 

it Does seem the More you spend the seem to be worse 

But i think in Reality say we bought someone from Cambridge for 300k stuck him in under 23's it is easier to then sell for a profit than 

if he makes 50 games for the club he will always be worth more than 300k 

Sargent and the others i can not see us getting a profit on them they simply cost to much to start with 

IF Sargent scored 15 goals in the PL then maybe but who is going to give us 15 to 20 mil for a non scoring Striker 

[Disco Dales Jockstrap 1,891]

19 minutes ago, Jersey Canary said:

If we go down with a whimper I doubt we’ll get too much for the 3 maybe enough to cover the debt but where’s the money for the reinvestment? 

Indeed! My comment was a tad...tongue in cheek. 😉

OTBC

[Canaries north 151]

2 hours ago, Branston Pickle said:

Football finances are always and will always be rather difficult to completely ‘get’ - I’m sure ours read better than most but there’s obviously a pile of unknowns that aren’t (usually) present in other industries.

Clearly a lot on future flows, in and out, depend on remaining in the PL; that there are fewer current outstanding ‘inflows’ is merely an indicator that we’ve not sold many of our assets recently (Emi being the main one), but the outflows show we have invested in the squad (wisely or not, time will tell) - which is a good thing.  The idea that the value of players on our books is going to vastly diminish is a bit daft - look at Godfrey, sold after relegation.

Godfrey had at least shown some potential and it was when Everton were chucking money about. Let's hope one of the new boys pick up and we might have an asset on our hands but it doesn't look like it. The only player to have gained value is Norman and he's not ours. Even Aaron's has gone off the boil a bit. Still a long way to go but I just don't see our summer investment turning a profit.