2010 ACCOUNTS

[PurpleCanary 6,386]

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I’ve been inundated with private emails (OK, two emails) asking what to look for in the forthcoming accounts. The following may be helpful. It is of necessity long.[:''(]  Those uninterested[:|] should look away now. Of course the obvious thing to do would seem to be to wait until the accounts come out, but my copy will probably not reach my tax haven[ip] until after UK-based[li] shareholders have received theirs, and I may also be away from my computer. So...

 

Any set of accounts is always deeply fascinating[8-|] but the real interest lies in these being the first accounts produced in the era of the new regime, with its seven-year debt-eradication and financial stabilisation plan. Will the figures show signs of that plan? Probably yes, but also probably not that much. The first step in turning round a supertanker heading (as deemed by the new guard) full-steam in the wrong direction is to slow it down. The turning-round bit comes after that. Bear in mind, also, that these accounts cover only the first 11 months of the new regime, to May 31, 2010, so some events (the recent land sale to reduce debt, for example) will not figure, unless noted in post-balance sheet remarks.

 

1.   Have we downsized? One of the big questions. The new guard said cuts would have to be made, partly to get finances under control and partly to reflect our lower footballing status. (It should also be borne in mind that the old guard, if left in place, might well have instituted cutbacks in the wake of relegation. Academic now). There are all sorts of indicators, such as group turnover, staff costs, wages and salaries, and the number of non-football employees. Cuts may well show up. Particular in those latter areas, so here for comparison are the 2009 figures:

 

i)                    Turnover  £17,929,000

ii)                  Staff costs: £13,716,000

iii)                Wages and salaries: £10,945,000

iv)                Non-footballers:  131 (out of a total staff of 199)

 

2.      Profit and loss. One of the big headline figures. There are various measures for this, but the easy one to go by is the post-tax figure. Last year it was £4,979,000 as against £2,292,000 for 2008.

 

3. Debt. Another of the big issues. Last year net debt was £22,946,000. The majority of this is owed to two lenders – AXA and Bank of Scotland (which is part of Lloyds TSB). The accounts don’t split up the debt, but when Cullum went public in the summer of 2008 the overall bank debt figure was roughly £16m, of which around £12m was said to be owed to AXA. As is well-known, the club, as part of its stabilisation plan, got a deferral from both lenders of repayment of capital and interest until the end of the financial year about to be reported on. Those deferred payments were then due for payment from May 31, 2010.

 

However this time last year the club also said AXA was not averse to “a waiver of outstanding payments and the provision of interest-free and capital-free periods in the longer term which will reduce the additional funds required by the club to cover the period from May 31 2020 to May 31 2011.” BoS was apparently also making supportive noises. The club put that “additional funds” figure to tide it over to May 31 2011 at £2.9m. And it was this uncertainty over the future - whether the club could fund itself going forward - that prompted the auditors to issue a gentle warning about whether the club would continue to be a going concern.

 

So any more up-to-date and definite news from the directors on deferrals and the like beyond May 31 2010 may be highly significant. Equally no further news – the dog that doesn''t bark - might also be significant. Certainly something to look for.

As is the debt owed to various directors and ex-directors, that amounted to £5,312,000 (although interestingly the club put the amount of unsecured, interest-free loans slightly higher, at £5,815,000):

 

Smith and Jones: £2,142,000

Foulger: £670,000

The Turners £2,500,000

 

A fair assumption is that the Turners have not lent any more, but have the others? Beyond a doubt. At least £800,000. But possibly more. McNally, in saying recently the accounts would not make pretty reading, hinted that Lambert’s spending had been bankrolled by directors. The assumption is that debt, by way of loans (or are they effectively gifts?) from directors, has increased. It is unlikely that the banks, having given us a repayment holiday, would have let us borrow more. I mean, what kind of crazy banking policy would that be? It needs to be stressed, as with other issues, that only new loans up to the end of May 2010 will show up, although more recent ones might appear in post-balance sheet information.

 

4.    Land and buildings. Otherwise known as Tangible Fixed Assets.[;)] In the 2009 accounts the club said it thought these assets were undervalued at £34,503,000, but didn’t know by how much since it lacked a professional assessment. By now it should have had that assessment and the new accounts should include its valuations.

 

5.    Shares. There were 32,000 ordinary shares (the voting kind) available to be bought, if the club wanted. It’s the difference between the number authorised (568,000) and the number actually paid for (536,000). Presumably the three new directors (Bowkett, Phillips and McNally) who joined in July 2009 have bought some shares. How many will show up in the directors’ holdings, normally listed on the first page proper of the accounts. Assuming they bought shares from the club’s available stockpile that money has gone into the coffers, at the number of shares times £30. Last year, for comparison, only 84 ordinary shares were issued by the club. Stephen Fry, of course, will not appear until the 2011 accounts. The recent “For sale” sign put up on £85,000 worth of shares won’t figure either, being a private transaction.

 

6.      How much are they paying McNally? This comes under directors’ emoluments. But unless things have changed, only the chief executive out of the directors gets paid. Neil Doncaster was on £179,000 in 2008. The 2010 figure for McNally will probably not be quite comparable, as it should only cover 11 months, but equally should give an indication.

 

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[The Butler 0]

Thanks PC thorough as usual.

Will have to take up smoking again so I can have a 200 pack to work it all out on!

[Canary_on_the Trent 0]

Certainly will make interesting viewing.

As you say, the figures aren''t going to be an improvement on the previous year, what with the considerable loss in revenue through our relegation to League 1 but despite this there should be signs of where/how things are to be improved from now on in.

[Bill 1,788]

Excellent report Mr Purple chap.

Personally I''m not too bothered about the forthcoming accounts. We did what we had to do - get out of Div 1, and by an impressive margin. A season that, as far as I''m concerned ranks with some of the best - going back to the 60''s.

However that relegation cost us money. The deferred payments will show up in the accounts - and will have to be paid at some point. A look at how so many other clubs of our standing have become stuck down there for a few seasons shows how important the ''bounce back'' was.

If the club intends ridding itself of the debt over seven years that would mean around £4m a year (with compound interest). That cannot be met through any real cost cutting measures as I believe we are almost hitting maximum income through the turnstiles and matchday sales. Certainly ''one offs'' such as big cup ties help but they are few and far between. It will need us to be in the Premiership.

Whilst the club were always correct to be involved in the land and it''s redevelopment I do wonder whether those deals allowed the club to take it''s eyes off the ball knowing that it had ''money in the bank'' elsewhere.

As to the future I am very optimistic. It matters little how big the debt is as long as we able able to manage it. It is not through reckless spending either. Stuff like the new South Stand and the various infills were necessary investments that had to be done and will certainly be paying for themselves. Likewise with the pitch, we had to carry out this work when we could rather than when it was forced on to us.

At the moment we have a healthy crop of youngsters breaking through. The U18''s look in excellent shape. We have a board of directors who seem to know exactly what they are doing and have the ruthless determination to succeed (NOTW last season). A good manager and a fairly decent squad that doesn''t seem to be carrying any passengers. Even with that I expect one or two to go in January.

More importantly there is a great buzz about the place. The excitement is back. Last season was stupendous in that there was almost a mad cavalry charge about some games. So what if we are not winning, or losing - sound the bugle, throw and couple more upfront and chaa-aarge ! Reading and Millwall we should have won. We are easily up there with the playoffs and will be, come May.

Finally I think we have someone who epitomises the new club spirit. Grant Holt. He may not be the prettiest or the most skillful but he takes me back to the days of Jim Bone holding his fists up to the Barclay urging them on. That''s what football is about - passion and belief. We have that back.

So as to finance I doubt we will be in the High Court like Sheff Weds or Queer Street like our impoverished neighbours but we might with a bit of luck, better refereeing and one of two new ''uns come January be at Wembley in May .... or dare I believe it, automatically up.

[PurpleCanary 6,386]

[quote user="The Butler"]

Thanks PC thorough as usual.

Will have to take up smoking again so I can have a 200 pack to work it all out on!

[/quote]

 

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TB, lucky for your health, then, that I only posted the simplified version aimed at Financial Times[;)] readers and NCISA chairmen[;)] rather than the rather more technical account[8-|] being published in the Wall Street Journal and the Frankfurter Allgemeine Zeitung...[:D][:D][:D]

 

[ca 1]

Thats very helpful PC , thanks for your time in putting that together for us.

[nutty nigel 7,902]

Indeed it is helpul Angel. But I hope PC realises that Tangie is now this forum''s FPA since Mr Carrow packed in[;)]

 

 

[PurpleCanary 6,386]

[quote user="nutty nigel"]

Indeed it is helpul Angel. But I hope PC realises that Tangie is now this forum''s FPA since Mr Carrow packed in[;)]

 

 

[/quote]

 

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Trust me, nutty, I do, I do. I wouldn''t dream of usurping Tangible''s position. Which is why I have skimmed over vasts tracts of the accounts. Indeed, as Isaac Newton said:

"If I have seen further it is only by standing on the shoulders of giants."

 

More seriously, I realise this section is not entirely clear:

2.  Profit and loss. One of the big headline figures. There are various measures for this, but the easy one to go by is the post-tax figure. Last year it was £4,979,000 as against £2,292,000 for 2008.

 

Those figures, of course, are LOSSES, not PROFITS.

 

 

[GMF 1,010]

Unless I''m mistaken, the projected shortfall of £2.9M referred to above was of course, based on the cashflows completed circa May 2009 for the period from the 1st June 2010 to the 31st May 2011 (this season) rather than for the period of the accounts to be produced shortly, for 1st Jnue 2009 to 31st May 2010. My guess would be that the reported loss is therefore likely to be greater than £2.9M. 

[PurpleCanary 6,386]

[quote user="GMF"]Unless I''m mistaken, the projected shortfall of £2.9M referred to above was of course, based on the cashflows completed circa May 2009 for the period from the 1st June 2010 to the 31st May 2011 (this season) rather than for the period of the accounts to be produced shortly, for 1st Jnue 2009 to 31st May 2010. My guess would be that the reported loss is therefore likely to be greater than £2.9M. [/quote]

 

GMF, that forecast of a £2.9m shortfall was indeed based on cashflows up to May 31, 2011, but also on other factors, such as making deferred interest payments, AND continued League One status.

 

[Davo 0]

I have a question about these differed payments.

How exactly do they work? I mean have we extended our payment terms by one year so we got a year off paying? Or have we only differed payments for a year but will end up paying slightly more per month to make up for the year off?

Davo

[Bill 1,788]

I would assume, using very rough figures that if we owed -

£20m @ 10% interest

we pay £2m plus an amount off the £20m

when this is defered it means that some or all of those payments are not paid so are added to the total owed

ie the next year we would then owe £22m plus possible interest of £220,000, If that were so we would be due to pay this year an amount off the £22m plus the interest on the now £22m

However pretty much all is variable and I''m sure open for negoitiation so we can''t really be sure how much of what was paid and how much wil be paid.

It''s worth bearing in mind that banks make money by selling money ie £20m in their account is no use if it is not earning inerest - so as long as they are charging us interest and it looks like we will be able to pay that money they will continue that arrangement.

Our problem is how do we pay that debt so as to remove those interest payments whilst still having a strong enough team to generate income ... to reduce the debt.

[YankeeCanary 0]

[quote user="City1st"]I would assume, using very rough figures that if we owed - £20m @ 10% interest we pay £2m plus an amount off the £20m when this is defered it means that some or all of those payments are not paid so are added to the total owed ie the next year we would then owe £22m plus possible interest of £220,000, If that were so we would be due to pay this year an amount off the £22m plus the interest on the now £22m However pretty much all is variable and I''m sure open for negoitiation so we can''t really be sure how much of what was paid and how much wil be paid. It''s worth bearing in mind that banks make money by selling money ie £20m in their account is no use if it is not earning inerest - so as long as they are charging us interest and it looks like we will be able to pay that money they will continue that arrangement. Our problem is how do we pay that debt so as to remove those interest payments whilst still having a strong enough team to generate income ... to reduce the debt.[/quote]

City 1st, respectfully ( although perhaps irrelevant ), this is also a problem our respective countries have presently.

[Bill 1,788]

Unfortunately the club has attracted a few who believe that meeting any demands made by ''player''s agents should be the club''s sole expenditure - and that expenditure on it''s own will achieve success.

[PurpleCanary 6,386]

[quote user="City1st"]


 If the club intends ridding itself of the debt over seven years that would mean around £4m a year (with compound interest). That cannot be met through any real cost cutting measures as I believe we are almost hitting maximum income through the turnstiles and matchday sales. Certainly ''one offs'' such as big cup ties help but they are few and far between. It will need us to be in the Premiership.

 

 

[/quote]

 

City1st, thanks for crunching that bank debt eradication number for me! I''m sure you''re right about the limited effect of any cost-cutting, and the need to reach the Premier League for the aim to be achieved. The only other way would be a benevolent takeover which included paying off the bank debt.

I am not so pessimistic as some fans as to the likelihood of that happening (which may explain why I have a £100 bet that we''ll have new owners in time for the 2013-2014 season...) but that kind of offer is certainly thin on the ground.

 

[nutty nigel 7,902]

[quote user="PurpleCanary"]

I am not so pessimistic as some fans as to the likelihood of that happening (which may explain why I have a £100 bet that we''ll have new owners in time for the 2013-2014 season...) but that kind of offer is certainly thin on the ground.

 

[/quote]

 

Was that a friendly wager with someone you know Purple?

 

I would have thought you''re on to a winner.

 

 

[PurpleCanary 6,386]

[quote user="nutty nigel"][quote user="PurpleCanary"]

I am not so pessimistic as some fans as to the likelihood of that happening (which may explain why I have a £100 bet that we''ll have new owners in time for the 2013-2014 season...) but that kind of offer is certainly thin on the ground.

 

[/quote]

 

Was that a friendly wager with someone you know Purple?

 

I would have thought you''re on to a winner.

 

 

[/quote]

 

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A friendly wager? Hmm. Is there really any such thing, nutty, apart from the PUPs? As to me being on to a winner, you wouldn''t think so from some posters here,[:@] who maintain ad infinitum[|-)] (and possibly even ad nauseam...)[:$] that Smith and Jones will take the club with them to their graves. Funnily enough, though, this adamant conviction never seemed to translate itself into risking hard cash on the subject...[;)]

 

[Bill 1,788]

" The only other way would be a benevolent takeover which included paying off the bank debt"

aha, the old mythical ''hinvestor'' much beloved of the not too bright (nothing personal). A creature whose sole purpose is to fulfill the wishes of the much trdeen upon supporters - thwarted only by the wicked misdoings of the evil stepmother Delia Cruella.

Would life ever be that simple ?

What does give rise to concern, or maybe just questioning, is when the club states it wants to see the debt erased in 7 years. Now, does that mean ALL of the debt or just the amount that has arisen over an above projected debt. ie the amount borrowed on a securitisation basis that rolled all previous debt and paid for the new South stand.

That debt was scheduled to be paid off over a longer period of time, so it should not really be included in the 7 year plan. If that is the case then with a good wind behind us it could be possible to pay of that remaining debt over the next 6 years irrespective of not being in the premiership.

But there''s an awful lot of ''ifs'' that could throw that plan off course between now and 2016.

[PurpleCanary 6,386]

[quote user="City1st"]" The only other way would be a benevolent takeover which included paying off the bank debt" aha, the old mythical ''hinvestor'' much beloved of the not too bright (nothing personal).

 

 

[/quote]

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No offence taken, City1st. You did see the bit where I said such paragons were "thin on the ground"?!

 

!

 

[As my login causes problems [ :o) ] 0]

Ahhh yes the removal of the debt within 7 years, now that would certainly become the mythical elephant in the room if it meant ALL debt.

I think most of us could see this only being possible in one of three scenarios:

1. An un-loan-financed (ie not Glazer/Hicks style or even small wealth owner) take over

2. Premiership with no intention of spending monies earned on playing budget etc.

3. Sale of family silver, brass, copper, tin cans and anything else not bolted down.

So a very difficult objective.

[Bill 1,788]

"You did see the bit where I said such paragons were "thin on the ground"?!"

I did

it was their fabled abilities I was questioning, not their numbers

[. 0]

Jesus... Talk about watching paint dry.............Booooooooooooooooring..............

[John 0]

[quote user="Cluckbert Chase"]Jesus... Talk about watching paint dry.............Booooooooooooooooring..............[/quote]Read it, see it, and say it simple, and if it''s not simple be sure to turn a blind eye to it, ''ey Cluck? It is after all a bit much to ask from those with such little thought capacity to think at the expense of being p*$$ed off with someone.Funny how the one''s who get ''bored'' of the facts have this bitter resolve in seeing ''Delia and her cronies'' ushered out of the club, isn''t it?One would think their almost savouring the ignorance to fuel this hate fest... [^o)]

[nutty nigel 7,902]

 

Man after my own heart..

 

Take a bow John and Thefutureisyellow[Y]

 

 

 

[Bill 1,788]

"Jesus... Talk about watching paint dry............."

possibly due to the speedy you read at

trying doing it without your finger moving along the screen .....

........ or with your lips moving at the same time

[John 0]

[quote user="nutty nigel"]

 

Man after my own heart..

 

Take a bow John and Thefutureisyellow[Y]

 

 

 

[/quote]I only feel we''d be doing the world a disservice not to say anything when Cluck opens his mouth to say such drivel Nutty, my good man. [Y][;)]

[. 0]

[quote user="City1st"]"Jesus... Talk about watching paint dry............."

possibly due to the speedy you read at

trying doing it without your finger moving along the screen .....

........ or with your lips moving at the same time[/quote]

Nope.... I can''t ....Errrrr... nope.Errrrrrr.....Look...... could someone translate this for me please?

[paul moy 235]

''Ahhh yes the removal of the debt within 7 years, now that would certainly become the mythical elephant in the room if it meant ALL debt. I think most of us could see this only being possible in one of three scenarios: 1. An un-loan-financed (ie not Glazer/Hicks style or even small wealth owner) take over 2. Premiership with no intention of spending monies earned on playing budget etc. 3. Sale of family silver, brass, copper, tin cans and anything else not bolted down. So a very difficult objective.''

 

 

With regard to points 1 & 2, it''s worth noting that Burnley FC made a 14.4 million pounds pre-tax profit on their season in the Prem after an 11 million loss the previous season in the Championship. On that basis it''s surely feasible that City can clear their whole debt over two seasons in the Prem, regardless of a new owner being found.      

[John 0]

[quote user="Cluckbert Chase"][quote user="City1st"]"Jesus... Talk about watching paint dry............."

possibly due to the speedy you read at

trying doing it without your finger moving along the screen .....

........ or with your lips moving at the same time[/quote]

Nope.... I can''t ....Errrrr... nope.Errrrrrr.....Look...... could someone translate this for me please?

[/quote]If you''re really struggling to understand a comment as a result of a couple of grammatical mistakes, i shouldn''t think ''the internet'' is for you. Nevertheless, it''s along the lines of:"Possibly due to the speed in which you read, whilst

trying not to do it with your finger moving along the screen.... Or with your lips moving at the same time."Just doing my bit as an honest volunteer to help the elders of our community get by, by answering any questions you have Cluck.

PS. If you''re reading this out to yourself, the ''h'' in ''honest'' is silent, and the same goes for the ''w'' in ''answering''. [Y]

[As my login causes problems [ :o) ] 0]

Paul,

Burnley certainly did set out to "take the money and run" and made good money, with more to come in parachute payments.

However you will get relegated if you spend nothing and you will lose Lambert.

So the business plan may not be what some of the fans want to hear.

However in the long term we would have a very solid club for another attempt on the Premiership in a further three or four years. The other issue of course is whether the Club would need to spend significant money (increasing the debt) to get there ...... and that is what gets clubs in the mess in the first place.