Club finances - Annual Report - £31.6m loss

Discussion in 'The Hornets' Nest - Watford Chat' started by hornetboy1, Feb 14, 2019.

  1. hornetboy1

    hornetboy1 First Team

  2. The undeniable truth

    The undeniable truth Squad Player

    Just goes to show that the premier league is not an ElDorado of mega-profits and positive cashflow. In normal market conditions, competition costs would naturally rise to keep in line with the increased TV revenues as players demand higher pay and clubs demand higher transfer fees to secure the additional revenues. However here there is also the destabilising pressure of megabucks owners being prepared to underwrite losses to massage their egos to own a successful premier league club. It must be almost impossible for a small club to make serious money while comfortably staying in the prem.

    Relegation of course brings a whole host of new issues in trying to restructure costs before revenues fall off a cliff. I'm surprised more ex prem clubs don't go out of business given the temptation to bet everything on a quick return to the prem.
     
  3. Ágætis Byrjun

    Ágætis Byrjun First Year Pro

    We should sign a Chinese player and get £40m in shirt sales.
     
  4. hornetgags

    hornetgags McMuff's lovechild

    It's not alarming, the profit and loss looks bad but the balance sheet is still healthy because of the assets retained in the club.

    The club's net worth will still be around the £100m mark.
     
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  5. The undeniable truth

    The undeniable truth Squad Player

    By net worth - do you mean balance sheet net assets or what the business is "worth" were it to be sold ? Very different values.
    P&L and cashflow are linked with the main difference being timing of when you pay for a player vs when you expense their value. What the last years results show is that we aren't generating profits or positive cashflow by existing in the prem and that we do need occasional player sales to finance day to day investment and running of the club.
     
  6. hornetgags

    hornetgags McMuff's lovechild

    Balance sheet net assets.

    Not having seen the accounts, I would assume the current debt outweighs current assets which will impact working capital. However, the asset position should outweigh long term debt.

    It'd be interesting to see what the gross profit is.

    In terms of seling worth, it was around 3 times the turnover - so to buy the club you'd be looking at around £350m.
     
    Oscar calling likes this.
  7. dkhbrit

    dkhbrit Academy Graduate

    This is precisely why we need to make significant money from player sales.
     
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  8. Keighley

    Keighley Squad Player

    @RookeryDad ?
     
  9. The undeniable truth

    The undeniable truth Squad Player

    Yes broadly agree. The value in net assets is effectively the players. Players are becoming more expensive so more cash is needed to fund a higher intangible asset on the balance sheet (plus of course the higher wages). Cashflow management will be massively complicated for the club given the extended payment terms for players and the uncertainty over future player sales revenue and the likely deficit in short term working capital at any point in time.

    I would love to be their FD (Scott, if you're reading this.....I know the pay isn't great last time I looked!!).
     
    Last edited: Feb 14, 2019
  10. hornetgags

    hornetgags McMuff's lovechild

    Oh I agree, I doubt there is any football club which will have a positive working capital position.

    It also depends if they've included the stadium in their list of assets, although I wouldn't have listed the players as intangibles rather investments.
     
  11. UEA_Hornet

    UEA_Hornet First Team Captain

    hornetgags likes this.
  12. The undeniable truth

    The undeniable truth Squad Player

    Player registrations are counted as intangible assets rather than investments.

    As you say, negative working capital and deteriorating. The sale of Richie will have helped but the fact that we only had £31m of "liquidish" assets of which £7m was only collectible after more than a year,
    and £124m of debts due to be paid within a year (£64m of which relates to player purchases and £6m of which relates to selling future transfer fees receivable) looks frightening and won't be solved by just selling Richie.
    Plus another £94m of debts due after more than one year (albeit some of that is to group companies).
     
    Last edited: Feb 14, 2019
  13. UEA_Hornet

    UEA_Hornet First Team Captain

    I see the debt to Gino's holding company has nearly doubled from £45m to £83m this year. We paid £4m to Udinese in transfer fees too.
     
    Last edited: Feb 14, 2019
  14. Meister

    Meister Administrator Staff Member

    Don't give Ba55ini Bazini Bazinski Bazketcase certain red helmet wearers ideas.
     
    hornetgags likes this.
  15. GoingDown

    GoingDown Pizza & Figs

    We should have signed a £25m centre forward and a £20m centre back as demanded by this forum. These figures prove it.
     
  16. Burnsy

    Burnsy Squad Player

    I really hope Beijing Greenpeace Superstars come and buy Ken Sema for £70m.

    But in all seriousness, it does very much give the impression that without sensible and prudent player ‘trading’ then we’d really struggle to survive as a club.
     
  17. davisp2

    davisp2 Reservist

    Looks to me that going forward player purchases need to broadly equal player sales.
     
  18. hornetgags

    hornetgags McMuff's lovechild

    So a brief summary

    2017 2018
    Current assets £42m £31m
    Current debt £77m £124m
    Working capital -£35m -£93m

    Fixed assets: £127m £159m
    Long term debt £88m £94m
    = £39m £65m

    -£35m + £39m = £4m
    -£93m + £65m = -£28m

    Net worth: £4m -£28m

    Turnover £124m £128m
    Gross profit -£1m -£16m
    Profit before tax £4m -£32m
    Retained prof/loss £8m -£31m
    Depreciation £4m

    Cash availability -£27m

    I stand corrected - the debt due in one year as the Undeniable Truth said is frightening, the increase in deficient working capital is substantial and the cash availability is a concern.

    Let's put it this way, if the club wanted some unsecured lending, they'd struggle as the cub is effectively insolvent at the moment. I'd want to see some MI and bank statements to prove they could service the additional debt and definite directors or cross company guarantees.
     
  19. Meister

    Meister Administrator Staff Member

    We're good at getting bank statements quick.
     
  20. RookeryDad

    RookeryDad Squad Player

    My lawyers instruct me that I am restricted to ownership of just one EPL club.
     
  21. Burnsy

    Burnsy Squad Player

    I have always thought it was interesting that Duxbury gave a big interview to the FT about our football operations earlier this season. I think the choice of newspaper was a big pointer to what the club are aiming for without being vocal about it...

    Let’s not discount either that the FT is part of the Times ‘family’ of newspapers who broken the story regarding the collapse of the outside investment last year.

    I think they aren’t looking to sell up - but they realise that the correlation between increased expenditure and success are more and more present in the modern game - especially if the goal to be ‘best of the rest’ is true and not just lip-service for the fans. On that basis, it’s not a stretch to think that they are looking for outside investment for a minority but reasonable influence within the club.

    TV revenues and deals are beginning to stall. But players demands and transfer fees continue to increase. We are creeping towards an age where every club in the PL and even the Championship will need a billionaire (or multi-multi-millionaire) just to be competitive.

    As much as I hate Simon Jordan - what he said on TalkSport was true last week. The PL need to create their own broadcast network like the NFL if the finances continue as they are.
     
  22. RookeryDad

    RookeryDad Squad Player

    This is the fly in the Pozzo Model ointment.

    The rate of growth of TV revs was never continue to increase for ever but you can budget for that.

    There has, however, been an earthquake in player costs in the last 6 years. Ramsey on £400k/week, undistinguished keepers going for £70m.

    Alarmingly, some midtable crazies (eg Palarse, Muff) are trying to keep playing this game.

    Medium term, Prem survival is a hugely laudable objective. Short term, give it a serious go in the Cup. This year, we have a once/twice in a decade opportunity.
     
  23. The undeniable truth

    The undeniable truth Squad Player

    If their owners can afford to write off the odd £100m then I don't believe it's a problem....for them. It just makes it even more difficult for us to compete on the pitch.
     
  24. Keighley

    Keighley Squad Player

    Thanks, Mr Abramovich.
     
  25. Burnsy

    Burnsy Squad Player

    Exactly.

    Palace and Bournemouth are spending a lot to effectively stand still. We aren’t. It depends whether you believe we can continue to do that.

    But Palace and Bournemouth (and a couple of others) have mystery investors that can offset huge expenditure. I’m not sure either of those clubs are in trouble. Indeed, who were the last PL club to be in financial strife publicly? It’s been a few years at least.....

    As I’ve said above, IMO I think the club is looking for decent investment without giving up any huge amount of control. In the current financial climate, the offers to do so won’t be flooding in. It’s up to Gino to identify serious and prudent investment.

    But I think we are getting to a stage where we have to hope for more investment in some form. Selling a player each year will rely on mercurial managerial talent each season - we may not always have that.
     
  26. RookeryDad

    RookeryDad Squad Player

    пожалуйста.
     
    Bwood_Horn likes this.
  27. RookeryDad

    RookeryDad Squad Player

    Why would someone want to be a minority investor in WFC?

    As trophy assets go, it is on a Subbuteo scale. I wouldn't expect to have any voice in the club's strategy. Financial returns will be modest by HNW standards.

    It makes sense for an super agent to have a shopwindow (a la Wolves).

    That Belgium chap to take a seat on the board? Antwerp Academicals as our feeder club?
     
  28. Burnsy

    Burnsy Squad Player

    I didn’t say it would be easy to find such an individual. But other clubs of our size have managed it. Why are the Americans at Palace? The Russian at Bournemouth? They aren’t the faces of the operation.

    I just think Gino might quietly be on the lookout for an investor in the mould of the above nature but who fits the values of the club. It’s a balancing act for sure.
     
  29. davisp2

    davisp2 Reservist

    Oh well. Give it a few years and we will be playing the scum in the Championship
     
  30. RookeryDad

    RookeryDad Squad Player

    The CPFC background investors are US sports franchise owners. Who knows but you could imagine them misconstruing Palarse a sexy, London franchise (rather than a large toilet with a football team attached). They have $5bn so are not betting the shop.

    The Muff Russian? Money laundering? Ego play? Bolt hole if things get tricky at home?

    Pozzo Sr is valued at $400m so maybe Gino is $100-200m. This is tiny compared with the rest of the EPL:

    https://en.wikipedia.org/wiki/List_of_owners_of_English_football_clubs

    With escalating costs, Pozzo must be looking for extra liquidity. I suspect the best hope is for an outside investor to see Pozzo as having exceptional assets in the form of the scouting network & his experience in running the club. Otherwise, the next Chinese/Gulf chancer would just buy the whole thing (as we know that for the right money, Gino will sell).
     
  31. RookeryDad

    RookeryDad Squad Player

    Any local HNWs who could pony up?

    AJ? Geri? Are Wire streamed much these days?

    Of course, the wealthiest chap with a local connection & a passion for footie is Mike Ashley.
     
  32. The undeniable truth

    The undeniable truth Squad Player

    The valuation of football clubs is a real mystery. Other than the very top clubs, the valuations can't be justified by profits or cashflow as you would a normal business. It's all about the vanity of owning a high profile, limited availability operation. We may well be worth c£300m to a buyer but why would anyone sane pay that for a business that makes no profit and generates no cash ?

    I suspect the Ruskies bought Muff for peanuts in div 2. Div 1 or the champ (can't be bothered to check !).
     
  33. Simmos

    Simmos First Year Pro

    I don't understand this entry in the books? Does this mean we borrowed £38m from Gino's holding company and if so what have we done with this money?
     
  34. The undeniable truth

    The undeniable truth Squad Player

    a) Yes
    b) Blown it
     
    Burnsy likes this.
  35. Horace_goes_up_north

    Horace_goes_up_north First Year Pro

    But how do they invest without breaking ffp rules under the intense scrutiny of the FA?

    I just don't get how we barely spend anywhere near the transfer fees and wages of clubs like west ham, palace, bournemouth etc, have similar fan bases but we disclose how we barely survive each season clinging on to the hope of a big sale while they spend even further.

    Wealth of owner should be irrelevant as ffp dictates the club's must only spend what they earn.

    How do they do it so legally while clearly must be doing it illegally, if our numbers are to be believed?
     

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