notnow john Posted 4 March 2014 Posted 4 March 2014 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[/size][/size] 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! Thanks for that.I nearly understood it and I'm thick!
Babylon Posted 4 March 2014 Posted 4 March 2014 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? £34m Loss Take off the £7.2m loan (we won't be paying interest this year as loans no longer exist) Take off £5.2m squad revaluing one off cost Take off the £8m we are allowed to lose under FFP Take off costs for youth team and other one offs that don't count under FFP (Club seem to think that's £5m form press the merc report) Club say revenues will be back up this year, so lets say we go back to what we were the year before. Take off another £1.8m =£6.8m cuts needed or £6.8m profit to be found elsewhere.
StanSP Posted 4 March 2014 Posted 4 March 2014 Good work, ttfn. Makes sense to me . And good work, Babylon. Cheers for clearing it up.
Jon the Hat Posted 4 March 2014 Posted 4 March 2014 I reckon we have a gap of about £8M, which while not great is not a disaster. See Bablyon's post, I get the same figures pre assumptions on increased revenue.
sylofox Posted 4 March 2014 Posted 4 March 2014 Would the devaluation of the squad have something to do with the fact we have so many players out of contract in the summer. Where they had a value they no longer have one.
davieG Posted 4 March 2014 Posted 4 March 2014 http://www.foxestalk.co.uk/forums/page/matchdetails.php?mid=4527 We were pissed though.
Harry - LCFC Posted 4 March 2014 Posted 4 March 2014 Clearly I was being very naive but I honestly thought we'd have improved our situation on last year's. With all the talk of cutting back and seeing the squad trimmed down I got the impression we'd lose less, even if it was only a little.
Beliall Posted 4 March 2014 Posted 4 March 2014 The increased losses were blamed on a fall in match receipts, sales of merchandise and the value of sponsorship deals. maybe if we actually sold some sponsorship it wouldnt have been so bad
Simonb Posted 4 March 2014 Posted 4 March 2014 I wouldn't be surprised to see the £16m eventually changed to equity too, which they'll probably use to reinvest in the stadium to try and improve capacity for match days and structure to attract concerts
Dan Posted 4 March 2014 Posted 4 March 2014 Headline looks worrying but I'm pretty confident we'll be fine.
foxgas Posted 4 March 2014 Posted 4 March 2014 Interesting that turnover and match receipts went down. I hope that the money men get to realise that increasing ticket prices does not mean that the club gets better off due to attendance fall off and ST sales. I visited the club shop on Saturday and was dismayed by the quality of merchandise on sale even the numpties that buy anything with Leicester City on it must be barmy to buy this dross.
65RosesFox Posted 4 March 2014 Posted 4 March 2014 Clearly I was being very naive but I honestly thought we'd have improved our situation on last year's. With all the talk of cutting back and seeing the squad trimmed down I got the impression we'd lose less, even if it was only a little. This is last years figures. 2012/2013 season.
Harry - LCFC Posted 4 March 2014 Posted 4 March 2014 This is last years figures. 2012/2013 season. Yeah that's what I meant. Last season the whole 'cutting the cloth' thing seemed one of the main objectives for the club along with getting promoted. So I'm surprised that we lost more than our 'spend what we like' season before that.
MooseBreath Posted 4 March 2014 Posted 4 March 2014 Re the smallish drop in wages, looking at transfermarkt.co.uk for that season reveals the following big tickets Players sold or released: Moussa Vassel Bamba Peltier Paintsil Players loaned out: Beckford Wellens Danns SSL Futacs That's a lot of departures, though we don't know the terms of the loans, it's quite possible that we were still paying all or some of their wages. Then look at the number of players we brought in and maybe it starts to make sense: Vardy De Laet James Futacs Whitbreast Knockeaet Wood And on loan Kane Lingaard Keane I can see that balancing to a 1.3m reduction. Difficult to see where that extra 6-7m of profit/saving is going to come from though.
Bert Posted 4 March 2014 Posted 4 March 2014 We also don't know how much of the loanees wages we are paying either.
CosbehFox Posted 4 March 2014 Posted 4 March 2014 Or how much we are still paying some players who left.
Guest ttfn Posted 4 March 2014 Posted 4 March 2014 Re the smallish drop in wages, looking at transfermarkt.co.uk for that season reveals the following big tickets Players sold or released: Moussa Vassel Bamba Peltier Paintsil Players loaned out: Beckford Wellens Danns SSL Futacs That's a lot of departures, though we don't know the terms of the loans, it's quite possible that we were still paying all or some of their wages. Then look at the number of players we brought in and maybe it starts to make sense: Vardy De Laet James Futacs Whitbreast Knockeaet Wood And on loan Kane Lingaard Keane I can see that balancing to a 1.3m reduction. Difficult to see where that extra 6-7m of profit/saving is going to come from though. You also need to consider those whose wages we paid in 2011-12 for at least part of the season but not at all thereafter - Johnson, Abe and Fernandes spring to mind.
Foxes Blue Blood Posted 4 March 2014 Posted 4 March 2014 £34m Loss Take off the £7.2m loan (we won't be paying interest this year as loans no longer exist) Take off £5.2m squad revaluing one off cost Take off the £8m we are allowed to lose under FFP Take off costs for youth team and other one offs that don't count under FFP (Club seem to think that's £5m form press the merc report) Club say revenues will be back up this year, so lets say we go back to what we were the year before. Take off another £1.8m =£6.8m cuts needed or £6.8m profit to be found elsewhere. Surely there must be a fairly big saving in not having to lease/rent the KP Stadium this season?
MooseBreath Posted 4 March 2014 Posted 4 March 2014 You also need to consider those whose wages we paid in 2011-12 for at least part of the season but not at all thereafter - Johnson, Abe and Fernandes spring to mind. Yes those three plus minor dross like Ball and Banton. We did also bring in Morgan, Drinkwater and Marshall which will have balanced and carried some of that wage level through into 12/13
Babylon Posted 4 March 2014 Posted 4 March 2014 Surely there must be a fairly big saving in not having to lease/rent the KP Stadium this season? Not sure without seeing full accounts, we were paying £1m a season pre the owner buying it. Accounts we have seen so far suggest we are in debt to the owner for the stadium... so they could well be charging interest on this, as they were their other loans.
broughtonblue Posted 4 March 2014 Posted 4 March 2014 Would the devaluation of the squad have something to do with the fact we have so many players out of contract in the summer. Where they had a value they no longer have one. Was thinking this. We were all worried about the amount of players out of contract at the end of this season, perhaps it's all part of ffp. Come new business year next month they will probably be offered new contracts worth x millions, if done before then surely this would show on the accounts as money committed? Were we worrying about nothing if this had been explained to all staff involved?
Dan Posted 4 March 2014 Posted 4 March 2014 You also need to consider those whose wages we paid in 2011-12 for at least part of the season but not at all thereafter - Johnson, Abe and Fernandes spring to mind. I thought all three of them had gone by the time of the 12/13 tax year?
Merging Cultures Posted 4 March 2014 Posted 4 March 2014 Regarding gate receipts, can someone compare the average attendance for last year against this years average? One would hope it is higher as mentioned by Susan.
MC Prussian Posted 4 March 2014 Posted 4 March 2014 Regarding gate receipts, can someone compare the average attendance for last year against this years average? One would hope it is higher as mentioned by Susan. It is: 22'367 last season to 23'725 this year - an increase of approximately 1'300 people per game. Sources: http://espnfc.com/stats/attendance/_/league/eng.2/english-league-championship?cc=5739 (this season) http://www.football-lineups.com/tourn/The_Championship_2012-2013/Stats/Home_Avg_Atte/ (last season)
davieG Posted 4 March 2014 Posted 4 March 2014 It is: 22'367 last season to 23'725 this year - an increase of approximately 1'300 people per game. Sources: http://espnfc.com/stats/attendance/_/league/eng.2/english-league-championship?cc=5739 (this season) http://www.football-lineups.com/tourn/The_Championship_2012-2013/Stats/Home_Avg_Atte/ (last season) Hmm how many of them are free U10s because the family stand regularly looks fuller than it's ever been.
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