Biggest Loss In Our History

[The Year Of The Fox]

http://www.leicestermercury.co.uk/Leicester-City-FC-remain-upbeat-despite/story-20749852-detail/story.html#ixzz2uyLhafjb

Promotion is bloody vital!

[Foxfromburbage]

Interesting reading, the headline figures surprised me and my first thoughts were we better get promoted - are there any accountants out there who can give their views as the club seems relaxed on the surface or is this because we are expecting premiership football next season.

[LanguedocFox]

Definitely!

 

One thing I couldn't understand in the figures (at the bottom of the article) is that there doesn't appear to be any TV money: am I missing something? I tried to upload the table but couldn't do so.

 

 

[Foxfromburbage]

Leicester Ciity  are "highly confident" of meeting Financial Fair Play regulations despite announcing record losses of £34million.

Is this because FFP is for 2014 and we will hopefully be in the premiership ?

[Iwan is a Welshman]

I think, from the Mercury article, that we're allowed to make £13m in losses without being fined, so we only need to save £21m - £7m of which is already saved due to the conversion of the loan. I think that's the case from reading the article anyway.

[Babylon]

Leicester Ciity are "highly confident" of meeting Financial Fair Play regulations despite announcing record losses of £34million.

Is this because FFP is for 2014 and we will hopefully be in the premiership ?

As they say in the article there were a minimum of 12.4m worth of costs in those accounts that won't happen again.

The surprise is wages in that as they have barely moved.

I think, from the Mercury article, that we're allowed to make £13m in losses without being fined, so we only need to save £21m - £7m of which is already saved due to the conversion of the loan. I think that's the case from reading the article anyway.

Plus the £5m of revaluing the squad for FFP.

[Iwan is a Welshman]

As they say in the article there were a minimum of 12.4m worth of costs in those accounts that won't happen again.

The surprise is wages in that as they have barely moved.

Plus the £5m of revaluing the squad for FFP.

So that brings us even closer. I get the feeling we fortunately have planned for this quite well in advance. Bear in mind there's a number of high profile earners to drop off the books as well.

If anything it underlines how tremendous a job Pearson & co have done as well.

[The Year Of The Fox]

Stringers just said we're in big trouble if we don't go up. No pressure fellas

[C-man]

Stringers just said we're in big trouble if we don't go up. No pressure fellas

I imagine he must be a fully qualified accountant to make that sort of insightful statement. Doesn't need saying does it?

[Happy Fox]

Not a surprise, thank goodness we look set in stone for promotion, otherwise it would be unthinkable if we stayed at this level.

[MattFox]

Last season the bottom club in the premier league received 40 million in tv money.

 

We'd make a profit easily if we go up. Not worried about these results

[Babylon]

Not a surprise, thank goodness we look set in stone for promotion, otherwise it would be unthinkable if we stayed at this level.

And why would that be?

[KFS]

Nice bit of scaremongering. Nothing to worry about, especially if we're promoted.

[Guest Bilo]

I dare say the conversion of debt into shares, effectively cancelling out £103m worth of debt, will help this season's figures.

 

We're also looking at the growing likelihood of £100m+ for promotion and, hopefully, more than one season of Premier League football to come. 

 

Obviously these figures would look a hell of a lot more worrying without these two factors, I wouldn't fancy being in Bolton's position for example, but this makes it even more important we don't implode on the pitch these next two months.

[foxes1988]

Bear in mind this was last season so a big loss was always expected.

We had only just started to cut back on wages which is why it didn't drop that much. I would like to think this would drop further this season.

[Leicester_Numan]

These are figures for 2012-13 not this year's, a debt that has been written off by the owners. Stop panicking, the club are still confident we'll comply this season

[Out Foxed]

[jonthefox]

I always thought the conferencing and catering was sold off by Mandaric. When does that deal expire?.

[Guest ttfn]

In the interests of full disclosure I'm a qualified accountant and until recently I was working as an auditor.

 

I haven't seen the accounts - they're not available on Companies House yet - so I am going on the figures reported in the Mercury.

 

The first thing to say is that for the purposes of FFP these results are virtually meaningless. Let's not forget that we're talking about a time range here that spans from 21 months ago to 9 months ago for the purposes of the loss. A lot has happened in the last 21 months, including the offloading of a number of large earners.

 

I am also assuming that the auditors have signed off the accounts on a "Going Concern" basis given that no reference is made otherwise. For those of you who don't know, the auditors are required to confirm their concurrence with management's belief that the company in question will continue to exist for another 12 months from Friday. In my experience to get happy with that in a company making losses like City, they would have got a signed letter from the directors to confirm this, which provides further assurance on top of the conversion of debt to equity that the Thais are going nowhere. 

 

Further "good" news comes in the shape of the fact that £7.2 million of the loss was caused by interest on the loan from King Power which is no longer payable, so we can either expect a reversal of that accrual next year (effectively giving us a £14.4 million swing in profitability) or at worst a reduction of interest payable of £4-5 million in the 2013-14 (FFP-relevant) accounts.

 

I don't understand the revaluation of the squad under FFP, but it could be that the club has decided to "impair" the value of the squad this year as it is not an FFP-relevant year (at least so far as sanctions are concerned), giving the squad value a lower base cost as at the start of 2013-14. This would mean that the depreciation of players' contracts would be reduced in 2013-14 (I think I have explained this in another thread). http://www.foxestalk.co.uk/forums/topic/93154-clubs-make-legal-threat-to-football-league-over-financial-fair-play/page-4. If that is the case, it raises two points:

1) That is a great idea, completely legal, completely sensible and completely in keeping with a fair presentation of the value of our assets.

2) Players we have signed (and had at the end of 2012-13) are considered by the club to be worth £5 million less than when we signed them, which I think tells you all you need to know about Sven's men.

 

So those are the positives. Strip out those one-off costs and we have a loss of £22 million for the year, which whilst still enormous (100% of revenue) is not as bad as first appears and not a million miles away from being FFP compliant.

 

However, from a governance perspective, there are a few worrying things as we move into the age of FFP and also some inconsistencies from what we have been fed by the club over the last 18 months. I should caveat the below by referring back to my original point that the auditors have signed off that there is no danger of the club going bust in the next 12 months or the owners jumping ship and that there is really no need to panic:

 

1) How, after ditching messrs Johnson, Fernandes and Abe from the wage bill (amongst others) have we ended up only cutting £1.5 million out of our wage bill between 2011-12 and 2012-13? We were told that significant savings were being made last season when in actual fact we were still running with a wage bill above 100% of income?

2) Match receipts dropped whilst ticket prices went up. Go figure.

3) We were told (and perhaps this is just my ignorance) that the club is debt free. Well, according to this article in the Mercury "The only debt now owed by the club is the £16 million loan used by one of the owners' companies to buy the stadium last season.". So we're not debt free then are we?

 

Anyway, whilst the numbers are alarming at first glance, a lot of it is just accounting smoke and mirrors. In cash terms the headline news is that the wage bill was still above 100% of revenue which is frankly ridiculous in any business, but the Thais have safeguarded the future of the club through the debt to equity swap anyway so I really don't think there's any cause for concern.

 

As for Stringer's scare-mongering, whether we go up this year or not is irrelevant for FFP. For the future of the club as an entity, I'd suggest that the Thais' commitment through the debt to equity swap (and any going concern declaration which may have been made in the accounts) is good enough for me.

 

If you've got any questions, I think there are a few other accountants on here too, who will no doubt disagree with some of what I have said!

[LCCFox96]

Things have improved on and off the pitch this year. That's a huge loss but we are scheduled to improve and NP has helped this turn around in a short space of time.

Promotion is so important now. The Sky TV money in the first year is enough to wipe out that debt. Also should we be a PL team we will have massively increased gates and revenue. We also still have some of our bigger earners to lose like Gallagher, Danns and SSL. If their wages are what's being reported PL standard replacements shouldn't cut too much deeper into our wage bill.

[MC Prussian]

Staggering numbers (once again - yet nothing shocks me anymore after the Eriksson reign), but the current management strategy is working its wonders, we're pretty much debt-free and promotion beckons.

 

Here's to another eight weeks of smooth sailing.

[TrentFox]

Numbers are not my bag, but at a very simplistic level is it not the case that the accounts that relate to FFP will be published at this time next year? In which case, we will presumably be long into our PL season and have bought who we wish unhindered by any punitive measures that may be applicable for non-compliance? In which case those penalties will presumably apply to the 15-16 season ??? If any of that is true, (and I'm in need of caffeine so it may be utter garbage), then it is our impending PL season where our footballing performance becomes imperative. However, it is hard to imagine that the multi-millionaire, highly successful business people running our club have anyrhing other than tip-top advice on how to ensure that compliance is achieved. I just cannot accept that people of their experience and means are going to fall into a trap that has been signposted for years. ( I crossed my fingers when I typed that - which made typing challenging).

[StanSP]

Isn't there a difference of 'being confident' we can make the cut, so to speak, and actually looking like we will?

 

Where can we find £26m of extra loss ready to meet £8m max loss for 13/14 accounts?

 

How much will the fine be should we go up?

 

And as an aside, what punishments does it look like Bolton and Forest (potentially) will pay? Maybe even QPR?

[Number 6]

Don't forget folks, the Fox & Crop income will not be included in this...

[Tommy G]

As an accountant not worried at all

 

They have effectively impaired some of the playing staff, this is not a cash loss and just an adj between the balance sheet and P&L of £5m. this wont happen again next year. Seems like they have put a lot of exeptional costs through the P&L this year in order for a ''clean slate'' for the next years accounts.

 

Dont forgot next years accounts will no doubt be a loss, as they will be reporting THIS seasons finances.

 

We need to go up, and we will do. But the owners earlier in the season showed us committment by wiping the debt into equity. This shoould be the last set of accounts which show bad news effectively.