May 2009 accounts

A few people have already commented on the 2009 figures just published for Cardiff City Football Club (Holdings) Ltd. and have made some very good observations.Contributors include at least one eminent accountant (yes , I am creeping Tracey )

Quite a few people have asked me to add my own comments. Whether they are mad or not to do so , I will leave you all to decide for yourselves.

General comments

The overall group loss for the year was just over £8.1m ,far worse than the 2008 figure of £2.9m.

Before making a profit on player sales , the group operating loss was an horrendous £11.4m (2008 £6.3m).On top of those losses , a further £3.3m of interest charges were incurred (2008 £2.2m).

Despite the huge loss of £8m , the actual level of net liabilities decreased by £17m as a result of taking an increase in the valuation of the new stadium of £25m into the books.

Turnover

Income dropped by £2.3m to £10.4m , almost certainly because of the impact of not repeating the 2008 F.A.Cup run and the extra prize and gate money that brought.

Cost of sales and administrative expenses

These were up £1m and £1.8m respectively compared to 2008 and its hard to come up with a reasonable reason why as the main costs which make up those figures don`t have to be and aren`t explained in the accounts.Wage costs of £13.5m which would be the main part of the cost of sales figure of £15.9m are hardly up at all from 2008 , so why the big increase is a bit of a mystery.
A bigger mystery is the big unexplained increase in administrative expenses.Why? - Extra non-football employees? Increase in repair costs in the last year at Ninian Park? Even the accounts notes don`t help on this.It doesn`t help that in the apparent rush to get them published , the notes get confused between 2008 and 2009 in a few places which makes it harder to analyse (in note 22 on page 24 they even give up on this and put xx instead of numbers and dates!)

Player movements and profits

The club again made a healthy profit on player sales , up to £6.6m compared to £5.5m in 2008. But neither figure was anywhere near enough to cover the losses made elsewhere on trading.
New players joining the club in the year cost £4m. Those leaving had cost only £672k.Hence the big profit on their sale.

Interest payable

If it wasn`t for the ridiculous amount of interest of £1.25m our former Chairman committed to on behalf of the club to Sports Asset Management in borrowing £2.5m sometime during the year (so interest rate at least 50% - or 100% if borrowed half way through the year!!), interest costs would actually have gone down slightly in the year compared to 2008.

Balance sheet assets

The player asset increased by £3.2m in the year , largely due to the £3.3m of net additions to the squad referred to above.As at 31 May 2009 the net value in the books of the squad was £4m (but its "true" value according to Ridsdale at the EGM was over £30m -a figure those who were there will know I questionned at the time as it appeared to have no basis other than PR`s imagination).

The stadium asset is now in the books at £48.4m based on its cost to replace should it have to be built again. A further £3m will be added to the cost in the 2010 accounts re the fit-out costs incurred after the 2009 accounts year end.A big figure , but still a lot less that the value of £60m PR was trying to get put in the accounts.As I have said before , no independent valuer would risk his reputation by agreeing to such a figure.

The important point here is that it only actually cost the club a net £23.4m to build (build cost of £50.6m , including £3m in 2008,less costs paid for by others - PMG to get the retail park etc. - of £27.2m). So , by revaluing the stadium at £48.4m the asset was increased by £25m and the net liabilities reduced by the same amount. No actual or real gain of course unless and until the stadium is sold for that higher value so really just a very good accounting adjustment making the overall balance sheet look far better.

I see the stock figure was just £941 (no £k or £m missed out).Probably an accurate reflection of the low quantities and poor quality available to purchase in the club shop at the time.

Balance sheet liabilities - payable by 31 May 2010

Normal suppliers of goods and services , including stadium build creditors were £8.4m.Note 26 goes on to say that repayment of the key stadium creditors were renogotiated in May 2010 so that the debts are now repayable over a period of up to 15 months ending in August 2011.

Other creditors of £19m include £9.8m due to PMG which should have been repaid by May this year.Again , note 26 shows this to be renegotiated so that part can be converted into shares (£2.7m - we knew that from the last EGM) and the rest is repayable over the period up to December 2013 , including interest.

Another £7.1m of other creditors relates to a bridging loan taken out (it was Barclays Bank) to fund the stadium build.This was fully repaid in Sept 2009 by the sale of Ninian Park to Redrow so the balance sheet has since been improved by that amount from that sale.

There is a further £8.1m due of accrauals and deferred income. This will have included all the 2009/10 season ticket money received by fans paying up early during the season before.

Balance sheet liabilities - payable after 31 May 2010

The big one here is of course Langston and there are some interesting revelations in the accounts about this.

The debt due to Langston is shown at £17.5m , which is £15m plus interest to date , plus a further (maximum) figure of £9m due should the club sell on the stadium naming rights.It doesn`t say whether any naming rights income has to be paid over forever or whether it is a fixed period. My guess (and it is only that) is that it would be payable for as long as the main debt to Langston remained unpaid or until 2016(the latest date by which Langston had to be repaid) if later.

The accounts clearly show that neither interest nor capital had to be repaid to Langston until Dec 2016 under the Nov 2006 agreement in force as at 31 May 2009.They also disclose the terms renegotiated in Dec 2009 to reduce the main debt down to £10m if repaid by the end of this year and the stadium naming rights liability down to £5m (also now includes an "either/or" of promotion to the Premiership if achieved before the main debt is repaid).

Both the club and Langston undertake to reach a settlement agreement on the debt due by the end of 2010 if the debt is not fully repaid by then.

There is absolutely nothing in the accounts to suggest that non-payment of the £10m by Dec 2010 will mean the debt goes back up to the pre-2006 level of £24m. It seems pretty clear that instead , the 2006 figure of £15m plus interest plus up to £9m will remain in force.

Other creditors of £6.3m include the "dodgy" S.A.M loan of £3.75m , a Football League loan of £500k, and a loan from a former director (almost certainly M Isaac) of £2.1m.


That`s my initial appraisal of the accounts (thank f*ck he didn`t go into it in detail I hear you say ).

In summary , a completely crap set of figures for the year indicating very poor control of the finances.But a set of figures which will have improved by many millions after the year end (sale of Ninian Park , conversion of debt to shares , rescheduling other debts etc. plus a potential "bonus" of a further £11m if the Langston debt is settled before the year end (or otherwise by negotiation with Langston).

On a further positive note , the underlying losses for the year to 31 May 2010 should have been significantly less that 2009 as crowds were up at the new stadium and League general prize money went up by £1.8m last season.And we still sold on players at a profit as well - we wasted some on new additions mind!!

I know this opinion won`t be well received by some , but it would appear to me that in a very short time indeed , the new management of the club under the direction of the new Chairman have already made hugely significant progress in sorting out the financial mess left behind by their predecessors. Yes , there is still a long way to go to finally put these things away but I fail t see why others seem determined to undermine what they have done to date in the (I hope vain) attempt to help bring Sam Hammam back to the club in some senior capacity.
Such a move , in the same way as bringing back Peter Ridsdale , would surely only be disastrous for the club`s finances and undo a lot of the work done in recent months.

Keith

Thanks Owain.

Looks like a great write up Keith.

Haven't got time to read through it properly, so it'll have to wait until the morning!

Thanks Keith, a name Im happy to trust

I have posted a commentary on the accounts on Mike`s messageboard.

Don`t ask me to copy it to here - if I knew how , I might have done

It goes on a bit (as I always do) but might be of interest to some.

And I do have a go at those having a go at the new regime as well at the end of my post - just to stir up an argument again (not really , its my honest opinion).

Keith

Great write up as usual Keith, very informative. It's going to be a bit of a long haul by the looks. Nice to see we are like minded and want neither Sam or Ridsdale near our club again.

Keith '62 Posted alongside the accounts are 2 new mortgage charges, one for Vincent Tan and another for Erskine Finance Limited (unfortunately no actual amounts are mentioned).

So would this indicate that debts are being repaid by loans, which I believe was your view months ago?

I'm not saying that's a bad thing but surely the next accounts would reflect the new debts which means they might not be as good as we might anticipate?

Finally I have a technical question could you explain exactly what a 'debenture' is?

Cheers

Tony

Thanks Keith

Finally I have a technical question could you explain exactly what a 'debenture' is?

Cheers

Tony

It's basically like a loan as far as I'm aware.

You could have a £10k 5 year debenture,which pays £x amount of interest.

There's also mortgage debentures, that would be secured against, and used for a specific purpose. Ie. Building a new office/building

A debenture is an unsecured bond to enable pre purchase of a product or service , in other words as per the Mil Stad for WRU matches then u can buy a debenture for £x thousand to secure your seat for x amount of years ............... but u still have to purchase your seat aswell , the debenture just secures it for you !

Keith '62 Posted alongside the accounts are 2 new mortgage charges, one for Vincent Tan and another for Erskine Finance Limited (unfortunately no actual amounts are mentioned).

So would this indicate that debts are being repaid by loans, which I believe was your view months ago?

I'm not saying that's a bad thing but surely the next accounts would reflect the new debts which means they might not be as good as we might anticipate?

Finally I have a technical question could you explain exactly what a 'debenture' is?

Cheers

Tony

Thanks for the info. Tony.

I haven`t looked at the register of mortgages and charges , so haven`t seen details of the 2 new charges you say about. What date were they created according to the register?

Is it possible that the VT one relates to the initial £1m they put in by way of loan prior to converting it , and a further £5m , into shares after the EGM approval?

And it may be that Erskine is a subsidiary or fellow group company of Sports Asset Management which gave that ridiculous high interest loan. I am sure I heard that the new regime , after they found out that Ridsdale had committed the club to this deal , recently renegotiated the repayment terms but had to make the loan one secured against the assets to do so.

All a debenture is is a charge over specified assets of the company. One termed a mortgage debenture is usually secured over property.Other debentures , sometimes called a fixed and floating charge , take security over the assets listed in the charge document itself.

Keith

Keith, very good write up Thanks for that. You did spoil it though with your final para, which to be honest smacks of arse licking the current people in control.
It's a bazarre statement to make on how they are sorting out the financial mess when clearly you don't really know if that's the case or not. This set of accounts are a year old aren't they? So they only show what went on then rather than now. Your final para looks like you are summing up next years filed accounts, which you wont see until this time next year.
No disrespect but wasn't you singing the priases of Alan Flitcroft this time last year? Now your summary of his performance, after seeing facts before you, is "indicating very poor control of the finances."
I just think that you didn't need to end a very factual and excellent report with a para which has nothing to do with that report but based purely your own feelings (rightly or wrongly) on the current people in control.

Keith, very good write up Thanks for that. You did spoil it though with your final para, which to be honest smacks of arse licking the current people in control.
It's a bazarre statement to make on how they are sorting out the financial mess when clearly you don't really know if that's the case or not. This set of accounts are a year old aren't they? So they only show what went on then rather than now. Your final para looks like you are summing up next years filed accounts, which you wont see until this time next year.
No disrespect but wasn't you singing the priases of Alan Flitcroft this time last year? Now your summary of his performance, after seeing facts before you, is "indicating very poor control of the finances."
I just think that you didn't need to end a very factual and excellent report with a para which has nothing to do with that report but based purely your own feelings (rightly or wrongly) on the current people in control.

Read the notes to the accounts , the directors` report etc.!!Then you will understand that they don`t just contain information about what went on up to 31 May 2009.They contain very useful and specific details of what has been done since the balance sheet date of 31 May 2009 to sort out the liabilities which existed then. Many of the dates given are in the last few months and are clearly the result of actions by the new regime.

So I DO know that they are sorting out the mess - specific actions are clearly set out in black and white and are confirmed as having happened by the fact that they are contained in financial statements signed off by independent auditors.

Its not "arse licking" at all - feel free to apologise if you have now understood the published factual information I was basing my comments on . I happen to think that the new regime has shown that it has started to sort out the mess they inherited - they have also clearly made mistakes on things like public relations with some fans. If they make other mistakes in the future , I am quite happy to join in with (constructive) criticism.

Keith

So Keith, what did the notes say last year for you to form your opinion back then that Flitcroft was doing a good job. And what changed? They can make all the notes they want but lets just wait and see whether your opinion changes this time next year as they did with Flitcroft.
Sorry if the arselicking comments took offence but I will say it as I (and others) see it. I'm still by the way of thinking that your motives are to keep the curent ceo sweet.

Keith '62 Posted alongside the accounts are 2 new mortgage charges, one for Vincent Tan and another for Erskine Finance Limited (unfortunately no actual amounts are mentioned).

So would this indicate that debts are being repaid by loans, which I believe was your view months ago?

I'm not saying that's a bad thing but surely the next accounts would reflect the new debts which means they might not be as good as we might anticipate?

Finally I have a technical question could you explain exactly what a 'debenture' is?

Cheers

Tony

Thanks for the info. Tony.

I haven`t looked at the register of mortgages and charges , so haven`t seen details of the 2 new charges you say about. What date were they created according to the register?

Is it possible that the VT one relates to the initial £1m they put in by way of loan prior to converting it , and a further £5m , into shares after the EGM approval?

And it may be that Erskine is a subsidiary or fellow group company of Sports Asset Management which gave that ridiculous high interest loan. I am sure I heard that the new regime , after they found out that Ridsdale had committed the club to this deal , recently renegotiated the repayment terms but had to make the loan one secured against the assets to do so.

All a debenture is is a charge over specified assets of the company. One termed a mortgage debenture is usually secured over property.Other debentures , sometimes called a fixed and floating charge , take security over the assets listed in the charge document itself.

Keith

Thanks for that (& Owain/Martyn) because all these mortgages are always secured against a 'debenture' and for the life of me I couldn't work out what it meant

Vincent Tans mortgage charge is dated 1 July 2010 & Erskine/Sports Management is dated 6 July 2010.

I think the term debenture used here though is totally different from the example I gave ?

Keith '62 Posted alongside the accounts are 2 new mortgage charges, one for Vincent Tan and another for Erskine Finance Limited (unfortunately no actual amounts are mentioned).

So would this indicate that debts are being repaid by loans, which I believe was your view months ago?

I'm not saying that's a bad thing but surely the next accounts would reflect the new debts which means they might not be as good as we might anticipate?

Finally I have a technical question could you explain exactly what a 'debenture' is?

Cheers

Tony

Thanks for the info. Tony.

I haven`t looked at the register of mortgages and charges , so haven`t seen details of the 2 new charges you say about. What date were they created according to the register?

Is it possible that the VT one relates to the initial £1m they put in by way of loan prior to converting it , and a further £5m , into shares after the EGM approval?

And it may be that Erskine is a subsidiary or fellow group company of Sports Asset Management which gave that ridiculous high interest loan. I am sure I heard that the new regime , after they found out that Ridsdale had committed the club to this deal , recently renegotiated the repayment terms but had to make the loan one secured against the assets to do so.

All a debenture is is a charge over specified assets of the company. One termed a mortgage debenture is usually secured over property.Other debentures , sometimes called a fixed and floating charge , take security over the assets listed in the charge document itself.

Keith

I've had a look at the Erskine company, and not been able to find any details.
The address is down as the British Virgin Islands, however the c/o address is 'Portcullis Trustnet Limited' who are an asian finance company

'Asia's biggest
independent group of trust companies
for comprehensive wealth administration'

However, it could be that they just manage a british company's (Sports Asset Management possibly) offshore finance dealings.

Is this the loan that Ridsdale mortgaged the players against ? If so how does that work and what part did the free trans :afer of Ledley do to de value the loan or indeed the repayments ?

So Keith, what did the notes say last year for you to form your opinion back then that Flitcroft was doing a good job. And what changed? They can make all the notes they want but lets just wait and see whether your opinion changes this time next year as they did with Flitcroft.
Sorry if the arselicking comments took offence but I will say it as I (and others) see it. I'm still by the way of thinking that your motives are to keep the curent ceo sweet.

The information in the accounts then didn`t tell me much about Flitcroft`s performance at all.The notes to the 2008 accounts were far less informative than the 2009 ones in that respect.And its not just a case of "making notes" - the accounts evidence actual steps taken , its not a promise to do something in the future.If those actions hadn`t actually happened the auditors would not have signed off the accounts.

I formed an opinion that Alan Flitcroft would do a good job for the club as its financial director based upon what I had been told about him by former colleagues of his at Ernst Young where he was a senior employee in a major international accountancy firm.

I agreed with that view based upon the few occasions that I met him face to face and admired his initial openness about the financial problems the club faced.That view weakened over time as it became apparent that he was not really in a position of great power and was unwilling or unable to stand up to Peter Ridsdale and his strategy for the club. So I got Fltcroft wrong in my initial assesssment of him - I am quite happy to admit it.

The "arselicking" comments only hit a nerve with me because they are not true.But I can`t do a lot about it if yourself and "others" see it - everyone is entitled to their opinion.I am unsure though why you think that I have to keep the current CEO "sweet". For what purpose? I have only ever met the man twice and had any kind of detailed conversation with him once.In the same way , I have only had one very brief conversation with TG at a club EGM and have never met or spoken to Vincent Tan or to the new financial director.

Keith

I gained respect for Flitcroft after the EGM when he openly admitted that the board had basically lied over the Golden Ticket Fiasco.

Is this the loan that Ridsdale mortgaged the players against ? If so how does that work and what part did the free trans :afer of Ledley do to de value the loan or indeed the repayments ?

No it appears to be another loan. The Erskine Finance loan is charged against the Holding Company whilst the player loan (Mortgage 23) is charged against the Football Club. That loan was provided by Players Finance Fund which hasn't been discharged.

do we know how much Mortgage 23 is for and over how many years , and which players ?

Keith, arselicking can be a good ting.

Especially if it's Kylie's arse, smothered in chocolate sauce...

No it appears to be another loan. The Erskine Finance loan is charged against the Holding Company whilst the player loan (Mortgage 23) is charged against the Football Club. That loan was provided by Players Finance Fund which hasn't been discharged.[/quote]

So then its the decision of the full board regarding the Erskine loan but ONLY whoever is on the board of CCFC Football Limited who signed off the Mortgage 23 ?? Surely this footbal club has joint signatures for ALL deals financial or was Flitcroft then Riddlers 2nd signatory , or indeed Keith Harris ????

I have posted a commentary on the accounts on Mike`s messageboard.

Don`t ask me to copy it to here - if I knew how , I might have done

It goes on a bit (as I always do) but might be of interest to some.

And I do have a go at those having a go at the new regime as well at the end of my post - just to stir up an argument again (not really , its my honest opinion).

Keith

Cheers, I missed these when I was on Hols.