AVFC accounts 2014/2015

[Stevo985]

23 minutes ago, OutByEaster? said:

So, accountant types - you've seen the figures, based on the accounts for that period, what do you think a reasonable price for this business is?

 

A very basic method of company valuation is merely the total assets less the total liabilities.

Ironically, in this case that values us at around £67m which, IIRC, is what lerner paid for us in the first place.

In reality it's impossible to be that simplistic about it. There's loads of factors that you'd have to take into account and, like most things, it's worth what somebody will pay for it.

 

[MikeMcKenna]

13 minutes ago, OutByEaster? said:

So, accountant types - you've seen the figures, based on the accounts for that period, what do you think a reasonable price for this business is?

 

As we are about to be relegated, I doubt these accounts are actually that material to our value. Being in the championship, no SKY money, reduced sponsorship/commercial etc will determine our value. Our sales could drop by up to 60 million if not more. We will get the first 25 mill parachute payment, so next year sales inc parachute say 83 mill at best

This explains why they are desperately trying to reduce staff costs, offload players etc

Valuing the club now is very difficult. Theoretically it is worth less now than he paid originally given it's soon to be Championship status. 

Assuming he still wants 150 mil, who would pay that for a Champsionship club with big doubts over whether and when we can return to the PL? Even 100 mill seems expensive.  Any new buyer will have to invest heavily again. 

[Harry]

Having now had chance to read the accounts in full the are a total car crash. As an accountant in a previous life I tried to look at them dispassionately but however you cut them they are a mess. They have desperately been converting the debt to equity again this year which in one sense is merely window dressing as we are leaking cash, £18m to be precise which it seems was funded by RL.

The bit that sticks out for me is the staff costs, what the heck is going on? In a year of cost cutting, or so we thought, we have 80 more staff and the wages bill has gone up by £14m. The bulk of that must be player related which I simply do not understand. The whole key to being a successful club financially is to control those costs whatever level you play at. The real killer point is how does that compare to the other clubs in the PL or better still the bottom half of the PL. I would bet we are still outspending most other clubs at that level and we have a very poor overall squad.

We could argue endlessly about whose fault it is amongst the current and former directors but the one constant is Lerner. Years of mismanagement ultimately sit with him in terms of responsibility. Save for his deepish pockets we would be bust. Added to that I thought last years small loss was trumpeted as us having turned a corner.

Final thought how can we have possibly lost £17m on buying and selling players? I appreciate it excludes the likes of Benteke and Delph but really?

[Godders]

Quick question about this debt to equity conversion for some of you accountant types.

I get that the idea behind it is to move debt off the accounts without paying it off- the creditor would get the sum due back to them on the sale of the equity it's converted to.

Im assuming in this case that it's the club's debt to RL, so this conversion makes the accounts look better, with RL getting the money back on the sale of the club.

Why don't we just convert all the debt to equity then? Is it just debt to RL we carry? What's the benefit of leaving debt on the balance sheet if he's looking to sell?

Apologies if this is a stupid question!

[Stevo985]

If LErner is expecting to get what debt he's converted to equity back when he sells then he's going to be disappointed.

I don't think there's much to suggest he's going to do that.

More than likely what he's converted to equity is the amount he's writing off knowing he's never going to get it back.

[snowychap]

23 minutes ago, Harry said:

Final thought how can we have possibly lost £17m on buying and selling players?

Where are you taking that from? The P&L?

[ciggiesnbeer]

[MikeMcKenna]

40 minutes ago, Harry said:

Having now had chance to read the accounts in full the are a total car crash. As an accountant in a previous life I tried to look at them dispassionately but however you cut them they are a mess. They have desperately been converting the debt to equity again this year which in one sense is merely window dressing as we are leaking cash, £18m to be precise which it seems was funded by RL.

The bit that sticks out for me is the staff costs, what the heck is going on? In a year of cost cutting, or so we thought, we have 80 more staff and the wages bill has gone up by £14m. The bulk of that must be player related which I simply do not understand. The whole key to being a successful club financially is to control those costs whatever level you play at. The real killer point is how does that compare to the other clubs in the PL or better still the bottom half of the PL. I would bet we are still outspending most other clubs at that level and we have a very poor overall squad.

We could argue endlessly about whose fault it is amongst the current and former directors but the one constant is Lerner. Years of mismanagement ultimately sit with him in terms of responsibility. Save for his deepish pockets we would be bust. Added to that I thought last years small loss was trumpeted as us having turned a corner.

Final thought how can we have possibly lost £17m on buying and selling players? I appreciate it excludes the likes of Benteke and Delph but really?

Agree, as you say they are total car crash! My finance guy has done a basic breakdown which I will try to summarise later, but essentially the addition 21 mill in costs are

15 mill player costs

3 mill severance - lambert?

3 mill - Fox plus additional staff costs

I have West Ham's figures for same period somewhere I will try find a link, but iirc correctly they made a reasonable profit on 120 mill turnover which is similar to ours. But it would be useful to compare theirs to ours to understand costs/staff etc. 

Reference The 17 mill loss relating to player transactions mentioned in note 27, doesn't that relate to 15/16? 

[MikeMcKenna]

20 minutes ago, snowychap said:

Where are you taking that from? The P&L?

It's note 27, I think it relates to 2015/16 as it states some about being after the accounts

[MikeMcKenna]

32 minutes ago, Stevo985 said:

If LErner is expecting to get what debt he's converted to equity back when he sells then he's going to be disappointed.

I don't think there's much to suggest he's going to do that.

More than likely what he's converted to equity is the amount he's writing off knowing he's never going to get it back.

Or the club needs to raise working capital and wouldn't get it if debt wasn't converted to equity possibly? 

[Stevo985]

23 minutes ago, snowychap said:

Where are you taking that from? The P&L?

Note 27. But it's talking about this summer and says it will be reflected in the accounts up to May 2016. Sounds about right to me.

[snowychap]

7 minutes ago, Stevo985 said:

Note 27. But it's talking about this summer and says it will be reflected in the accounts up to May 2016. Sounds about right to me.

I saw note 27 but, as the poster said I appreciate it excludes the likes of Benteke and Delph, I didn't think he was referring to the post balance sheet date events that would surely have included the sales of Benteke and Delph.

Even if it was a reference to the £40m net income minus the £57m net cost in note 27, a 'net spend' does not (necessarily) mean a 'loss', does it?

 

Edited March 11, 2016 by snowychap

[Stevo985]

1 minute ago, snowychap said:

I saw note 27 but, as the poster said I appreciate it excludes the likes of Benteke and Delph, I didn't think he was referring to the post balance sheet date events that would surely have included the sales of Benteke and Delph.

Even if it was a reference to the £40m net income minus the £57m net cost in note 27, a 'net spend' does not (necessarily) mean a 'loss', does it?

 

I was assuming the poster misinterpreted note 27

[snowychap]

3 minutes ago, Stevo985 said:

I was assuming the poster misinterpreted note 27

Ah, okay.

[blandy]

10 hours ago, dont_do_it_doug. said:

The P&L is king, the debt being converted into share equity is an entirely separate matter. Nobody is arguing that isn't a good thing, it was done in preparation for a sale that never materialised and still hasn't materialised and probably won't materialise with the P&L the way it is. Unless the owner has a drastic rethink of his asking price. 

We are a club that currently spends £140m a year heading into the championship where in all likely-hood turnover minus the parachute payments will be ~£40m. We are most definitely not in "reasonable shape". We're absolutely ****, as things stand. 

I take your point, but at the same time, while RL is in essence writing off the debt the club is "OK". So yes, the finances are poor because the club is not well run, but RL is kind of saying by his actions, yep, it's a mess, here's a ton of money to sort them out.

Obviously the things that need to happen are that the club is run properly in terms of finances, but also (the often conflicting one of) resourcing the team so that it is competitive.

Throughout his 10 years, there's been a big see sawing. First there was loads of resourcing the team, which led to a structural fault in terms of the over high wage bill.

Then there was a period of selling off players which (despite the continuing high wages) under resourced the team, then there was a cutting of the wages, combined with not spending on transfer fees, which weakened the team but recovered some of the wage bill issues, and then more recently the wages have gone back up, and money has been spent on the players, but it's been spent very badly.

It also looks like there's a pattern with wages for people. Where Faulkner got a 260 grand wage, Fox gets 5 or 6 times that. Likewise, clearly, under-performing players are, from the figures, collectively on much more than their performances merit.

The financial costs of all that are being borne by Randy Lerner, so the club isn't ****ed, but it's not healthy.

Next season, TV income, gate receipts, and commercial income will all fall so there will be perhaps a 40+ million drop in income. Halving the wage bill and a couple of players sold would cover that, but obviously that would still leave the club running at a loss, and with the need to rebuild the squad, which will take money there's a big problem. There may be a way to overcome that, but I'd be concerned that even if we accept there is expertise in the finance side of things from Hollis and Merv King, there's an absence of football experience to inject into planning for promotion. In the absence of that football knowledge, the finance element will prevail, and the sporting performance will suffer.

There has to be a person(s) brought in with experience and understanding of how to regenerate a team while managing a tight budget and who also has an appreciation of the demands of Financial Fair play and so on.

Another factor is that if the numpties who have contributed to the mess have to be paid off, then that's another hit on the balance sheet. 

The finances themselves are not good for the year, and I'd wager that most other Prem clubs will be in profit over the same period. While Randy covers the losses, it's not a disaster, but they need to be sorted out and trying to do that while also trying to get promoted looks like an nigh on impossible task, particularly with the club structured as it is now.

 

[blandy]

1 hour ago, Godders said:

Quick question about this debt to equity conversion for some of you accountant types.

I get that the idea behind it is to move debt off the accounts without paying it off- the creditor would get the sum due back to them on the sale of the equity it's converted to.

Im assuming in this case that it's the club's debt to RL, so this conversion makes the accounts look better, with RL getting the money back on the sale of the club.

Why don't we just convert all the debt to equity then? Is it just debt to RL we carry? What's the benefit of leaving debt on the balance sheet if he's looking to sell?

Apologies if this is a stupid question!

He is extremely unlikely to get the money back upon selling the club. it's theoretically possible, but it's just basically Randy writing covering the debt from his own funds. Though you can see why he has an incentive to try to get as much back as he can by not simply selling the club for next to nothing. He'll never get all of it back, nor do I think he wants to.

I think there are maybe some tax reasons for leaving debt on the balance sheet, and maybe there's a limit as to how much over the year Randy is prepared to cover from his own pocket. I dunno. That would need a bean counter to answer.

[Harry]

1 hour ago, snowychap said:

I saw note 27 but, as the poster said I appreciate it excludes the likes of Benteke and Delph, I didn't think he was referring to the post balance sheet date events that would surely have included the sales of Benteke and Delph.

Even if it was a reference to the £40m net income minus the £57m net cost in note 27, a 'net spend' does not (necessarily) mean a 'loss', does it?

 

On the face of the P&L account there is a separately disclosed loss on 'Player Transactions which I assume is related to buying and selling players. This amounts to £17,226k.

Note 27 specifically states that players bought and sold after the balance sheet date, 31 May 2015, will be accounted for in the following year hence my point about Benteke and Delph. Worryingly that is a further loss of £16.6m plus whatever else happens in this financial year.

[PompeyVillan]

Randy is as much a victim of his own poor decision making as we are.

This disaster of a club is costing him a freaking fortune.

[villa89]

One thing to point out is alot fo people are assuming the 3.3m in severance pay was to pay off Lambert. I was under the impression that if we were in the bottom three he could be sacked without paying compensation. If that wasn't the case then the people running the club are extremely incompotent.

[Harry]

I would suspect loss on player sales is proceeds of sale less the unamortised purchase cost so it's no just cash. So if a player was bought for £10m on a four year deal they would charge £2.5m to the P&L account in each of those 4 years. If we sold him two years in for £3m we would book a loss of £2m.

There may be bits round the edges I am missing but I go back to my original post as given who we have bought and sold the magnitude of the losses is unfathomable to me at least.