Cardiff post losses of £13.6m

There's going to have to be some serious cost cutting for clubs not promoted when the FFP regulations kick in.

 

Our figures were never going to be good for the year ending May 2012 given the circumstances the new owners took on a year previously, but the balance sheet is a lot better than it appears at face value. Some serious decisions have been taken since that should see an improvement in the this year's P&L.

No doubt these massive losses generally around the clubs cannot be sustained by other than those who have owners are prepared to write off capital loans by converting them into equity. Steve Lansdown at Bristol City personally picked up their losses of over £14M last year.

Should we be fortunate enough to gain entry into the Premier league this season, VT is committed to doing just that on top of the equity he has already purchased. I wouldn't say it was a matter of life or death for us, but it would certainly help further relax everyone at the club (including supporters).

 

"No doubt these massive losses generally around the clubs cannot be sustained by other than those who have owners are prepared to write off capital loans by converting them into equity."

What's the point of that? It just makes the tax position worse for the owner.

 

It's nothing to do with "tax position", it's a personal committment in converting particularly an on-demand loan, or even a term loan into share capital.

Football clubs are just businesses and you don't pay tax on a loss making enterprise.

You can attempt to recover your capital loaned to a club by invoking security guarantees held or debentures obtained as a condition of a loan. Once you have converted the loans into equity (share capital) you cannot recover it at all unless you can sell on that share capital to a third party.

That is one hell of a huge difference.

 

"Football clubs are just businesses and you don't pay tax on a loss making enterprise."

You can set off losses against other companies in the same group.

"You can attempt to recover your capital loaned to a club by invoking security guarantees held or debentures obtained as a condition of a loan."

Nobody loaning money to a club would have much chance of getting their money back unless they are the owner.

"Once you have converted the loans into equity (share capital) you cannot recover it at all unless you can sell on that share capital to a third party."

So what is the point of doing it?

 

And we have another qualified (though not practicing yet) tax accountant on here as well.

 

I think they should suffer an immediate 11 point deduction ...

 

.. not bad sparkey .... however you can do a purchase of own shares which will not constitute a distribution (dividend) provided it does not exceed the original share subscription price (Clever ****ers R Us) ..

 

I think any team that posted a loss of £8M or more should be banned from promotion

Too many teams trying to buy their way out of this league!!

 

You're just bitter because I reminded everyone of the episode where you got bummed by Officer Dibble .... great result tonite mind ...

 

Did Millwall play 2 games tonight then.

With Cardiff I was more interested in the intention to change the valuation method for the stadium. It's currently at £45M under what must presumably be a market value system, but they're going to change to a replacement value in the hope it will increase the value (at least according to the report I saw). I don't know how that works, my replacement cost on surveys for mortgages has always been lower than the market value, I can't see why it would go the other way for a ground, as the land on market value would surely be worth more than the ground costs.

 

May be an accounting anomaly - don't know for sure but UKGAAP (UK Generally Accepted Accounting Practice) versus IFRS (International Financial Reporting Standards) can potentially give you a different outcome - all bollox (but legal) - which generally just helps to line the pockets of accountants ..

 

I know there's ways of getting different results, it was just the fact it was openly stated that they were moving to replacement cost to increase the value, made me wonder what they were currently using as it seemed odd for property to be more valuable that way, it's not like it's a classic car that's appreciated with age.

 

With property, recording in your books at historical cost (UKGAAP) is likely to give a lesser value than recording as replacement cost due to property values generally increasing with inflation ...

 

Is it just the IFRS that requires a revaluation every year then? (Since every bugger is going to be shifting that way eventually it would explain them not prioritising teaching us to just hold the original purchase price when it comes to property)

 

By no means an expert on the accounting aspects - but as long as Cardiff's accountants agree to the methodology they are well within their rights to adopt whatever methodology gives then the desired 'result'..

 

at those losses, I'd say both Cardiff and Leicester are ready for the Premiership. They ll be in good company when they go up. Of course, they ll be in the company of Bolton, Wolves, Blackburn, oh and HMRC, when they come down again

 

Well Fosse (edit: - and scooterman) me old muckers and the rest of you, I just read this lot, and for accountants (actual, non-practising, non-qualified but practising, would be, and wishful thinkers), you don't half talk a load of bollucks trying to convince yourselves........

Round the houses, over the garden fence and up a back alley, you've tried to spin them all...

I built up, owned and have now sold/run down three incorporated SMEs simultaneously over the past 35 years with combined annual T/O reaching £12M (sadly little NP after 2007), and although not an accountant and aware of the finer details of the practice, I've gained a more than a passing insight into corporate funding.

I'm certainly not going to argue the finer detail of accounting nuances with any of the illustrious posters on here, but will say just this:-

CCFC is not another Starbucks in reverse offsetting losses against other profit making "group" members. Unless you are suggesting that it will be acquired by some Malaysian conglomerate headed by VT for it's losses, it is essentially a stand alone business.

As for asking why should VT convert loans into share capital when there is little possibility of recovering the cash unless they could be sold on, apart from demonstrating his committment, you'd better ask him.

He has stated categorically that he will do it, and it maybe something to do with long term future committment like Dave Whelan or Jack Walker previously. Although obviously not a "local" like those two, VT might just be the exception that breaks the rule regarding foreign owners - who knows?

As for the property (stadium) revaluation exercise proposed, I don't mind admitting I have no idea of the reason other than to assume the re-calculation would produce an enhanced value.

All in all, I'd love to see his huge investment in a club with life threatening debts, you could even say one in its' death throws, pay dividends to him and those who have stood by and supported the club through these past difficult years.

Here endeth the sermon from a totally unqualified accountant but fully qualified supporter.......