Discussion in 'The Hornets' Nest - Watford Chat' started by hornetboy1, Feb 14, 2019.
Quina could be worth loads more.
Yes I think in many ways the profit number is artificial and a bit of a distraction. The key driver is cashflow and understanding who you need to pay when and how you are going to raise the funds to meet the obligations as they arise. Must be a tough balancing act with the need to also fund some new acquisitions to remain competitive on the pitch. There would also need to be a cashflow B to show how we would trade through a relegation. As an accountant that is what would keep me awake at night.
The accounts for Hornets Investments Ltd have just been filed. Pozzo's increased their loan from £5m to £25m in FY18 and were charging 5% all in. So there is their debt plus the £55m loan from XXIII Capital. The notes also say the club are due net income from player sales of £45m in the next FY so this must be largely the Richarlison sale (net of Fluminese's cut on any sell on).
Out of interest-Palace accounts also filed-turnover £150m, wages £117m and a loss of £38m. They charged amortisation of £46m on their player costs compared to our £41m. Their players valued at £115m-ours £123m. Their wages a third higher than ours
Shows how much better Pozzo is at running a football club than ‘The Hairdresser’ is his Croydon salon.
Not sure what the going rate is in the UK for business loans, but by current US standards that's a decent rate for the club.
Yes it is, but personally I don't think it's done because we actually need loans for cash flow purposes. Pretty sure it's all engineered & designed like that so it becomes a tax efficient way for Pozzo to use his own money to make more money via the club vehicle. Better to do that than seek outside investment.
Those interest payments to Pozzo (1.25m per annum) can legally be written off against tax on the Watford accounting side & off set the loan on his personal tax obligations.
@The undeniable truth - I once remember you saying you're an accountant, is that how you would see it?
5% is high for a bank loan to a secure and stable business. We were paying 3.25% 18 months ago in my prior role (no debt in this one) and that was a little higher than it should be but as good as I could get at the time I negotiated it. It of course depends on how secure the bank sees the business they are lending to. For Gino it will be governed by the best tax structure for the various international businesses and his personal tax. 5% is probably a reasonable rate to claw a good interest rate out of the club without HMRC arguing that it's artificially high and blocking it's deduction for UK corporation tax purposes.
The loan from Ginos business is unsecured-the secured Loan of £55m is from 23Capital so one could say the owners loan is cheap as another lender has first call on everything and given that we owed £99m in outstanding payments for players that would also rank ahead of Ginos loan ?
Also given that we made a £30m loss those interest payments have not caused that loss so there was no profit to offset the interest payments against ?
Clearly no one can know what his personal tax situation is but given what we have spent on players over the past few years and the ground/London Colney one can sense the loans have been needed. Of course the increased value of the club given the achievements this season via his investment will ultimately benefit him (and us !)
1/ Very true
2/ Yes but HMRC would still disallow if they felt the rate was unreasonable. One day of course any tax losses will be utilised when we make the mega profits that come with just being in the prem
3/ Yes of course.
In fairness Steve does a great shampoo and set though!