This makes interesting reading from NY addick. "What We Gonna Do When The Money Runs Out?" (David Gray)  The audited accounts of the football club and its owner (Baton 2010 Ltd) to 30 Jun 2012 have been published on the Companies House website rather earlier than expected. As a reminder, the club (Charlton Athletic Football Company Ltd) is 100% owned by Baton, which in turn is 90% owned by CAFC Holdings Ltd (the mysterious BVI entity) and 10% owned by Richard Murray. As a result the accounts of Baton consolidate the accounts of the football club (as well as those of Charlton Athletic Holdings Ltd, an additional and not very relevant property-related subsidiary). Here is a summary of the accounts, with my personal observations in italics: Turnover was only 2.4% higher than in 2010/11 at £8.5m, despite the record-breaking performances on the pitch - as I've mentioned here before, attendances were poor last season in my view and indeed ticket/matchday income was approx £600k lower in 2011/12 compared to 2009/10 (the 'play-off' season) despite near identical average attendances (the difference must presumably be explained by heavy discounting). This aspect must be disappointing to the Board and does not seem to have materially improved in the Championship; By comparison, operating expenses increased by 10.6% to £16.0m, of which wages/salaries accounted for approximately half (and which in turn increased by 17.8%) - as a result the operating loss increased from £6.1m to £7.5m, and this was only partially offset by £1m profit on the sale of players and other contingent payments relating to transfers (Elliott, Shelvey and Richardson) - in short, the operational finances remain a horror show even though the £16m expense line is lower than it was in 2009/10. Whilst turnover will be higher in the Championship, so presumably will be the payroll (which at 100% of turnover in 2011/12 is eye-wateringly high). Meanwhile the 17.8% increase in wages is indicative of the investment made in the playing squad to secure promotion, although given how much stronger the squad became perhaps this was actually indicative of how well the club 'wheeled and dealed' (ie. the increase wasn't even higher); The increase in wages/salaries however can partly be explained by 'contractual bonuses' of £658k upon promotion - if one dared to suggest that 75% of this was paid to the players rather than management, then it implies an average of £20-25k per first-team squad member; During 2011/12, £818k was paid to acquire players registrations (ie. transfer fees) - as we know, most of our transfers these days have 'undisclosed' fees, whilst this £818k only includes the upfront cash elements of any transfer. Meanwhile various websites show the transfer date of many of our 2011 summer signings as being either 30 Jun or 1 Jul, suggesting a degree of uncertainty over exactly which financial year they apply to. However, my best guess would be that these fees relate to Messrs. Wiggins, Morrison, Hamer, Smith, Clarke, and Haynes ie. pretty good business; Bank loans and overdrafts (payable within one year) increased by £700k - meanwhile bank loans payable in more than one year decreased by £1.5m - it was noted in the 2010/11 accounts that £1.1m of bank loans were payable in less than one year, so assuming this was indeed repaid then bank loans/overdrafts effectively increased by £300k. This is perhaps curious given banks are reportedly no longer financing football clubs; Totally unsurprisingly, amounts owed to the parent (ie. CAFC Holdings) has increased materially by £7.3m, an amount roughly equal to the operational loss above (net of transfer fees) - this is perhaps the most important line in the accounts and at least partly confirms how the club is financing itself. We don't know of course how CAFC Holdings is financing itself, suffice to say that it is rather important to the club that it does indeed do so!; Of the aforementioned bank loans and overdrafts outstanding, £2.2m is at a fixed rate of 7.2% whilst £3.5m is at floating rates of 2.5-3% above base rate - if we can hopefully assume that the CAFC Holdings debt is 'friendly' debt then the bank loans and overdrafts are the debts to worry about, and they are all repayable within five years - during the year, £405k was paid in interest; The club owes HMRC £1m within one year - this is not unusual given the lag between paying staff and paying PAYE/NI, but it is not hard to imagine a scenario where the ability for a company (losing over £500k per month) to actually write out the cheque when due becomes problematic (of course HMRC are hardly renowned for their patience); Up to £778k might be payable if members of the squad reach certain milestones (appearances etc.) - conversely up to £3.8m might be receivable for the same reason - there has been some speculation whether Jonjo Shelvey's England cap in Oct 2012 might trigger a payment, but if so one imagines it might have been material enough to constitute disclosure as a 'subsequent event' (it wasn't). It is not clear therefore on what basis the full £3.8m might be earned (hopefully not Arsenal or Liverpool winning trophies); Of the £4.15m owed to Richard Murray at 30 Jun 2012, £1.55m has now become payable given promotion to the Championship (and of this amount, £250k is payable within one year) - we will have to wait until next year's accounts to see whether this repayment was indeed made or perhaps deferred/restructured. Meanwhile it is worth recalling that the loans from other former directors are not repayable until promotion to the Premier League - given the ongoing losses at the club and Murray's continued involvement, it is not entirely clear who had the better deal; Whilst the term 'debt' on a football club's balance sheet is not entirely clear-cut (it is vital to understand who it is owed to and their incentives), it is worth noting that total amounts owed in 30 Jun 2012 of £38m compares to £30.6m two years earlier - thus to believe that the club is in a stronger position today than it was then (prior to the involvement of the current owners), then one must conclude that the structure of that debt is 'safer' from the club's point of view, because it is unquestionably materially higher. Not surprisingly the accounts are only prepared on a 'going concern' basis subject to the ongoing support of the club's bankers and CAFC Holdings; Since 30 Jun 2012, £661k has been spent acquiring player registrations (ie. transfer fees) - this was somewhat higher than I anticipated and is not easily explained. Initially I thought it might relate to instalments due on existing squad players (perhaps by virtue of gaining promotion), but the note is not worded that way. Instead I presume it relates to the transfers of the likes of Wilson, Button etc. Either way, it seems high and if interpreted correctly rather flies in the face of the commonly-held view that no investment has been made in an already big squad. So in short no huge surprises but important to have it confirmed how the club is financing its losses. It would be wonderful to obtain the accounts of CAFC Holdings but alas the British Virgin Islands has rather different disclosure requirements to the UK. Looking back, perhaps it was indeed true that the club could never have been sustainable in League One, but a wage bill of over £8m was several times the turnover of some of the sides we played last season. With all due respect to our exceptional achievements last season, a degree of perspective is nonetheless due. This season whilst matchday turnover will be moderately higher and TV revenue substantially higher (albeit from a base of just £1m), it is hard to envisage the 2012/13 operating loss being much smaller given no substantial increase in attendances and the presumed relatively high wages of the likes of Fuller, Kerkar and the Premiership loans. A final thought: the important line just below 'operating loss' on the P&L account happens to be 'profit on disposal of players' - with a few days left in the transfer window and given the above ,will the owners 'stick or twist'?
Interesting set of accounts. Our squad has been too big for years and this shows that this is still the case. We really do have a lot of players on the wage bill who are not considered good enough to play any part in our first team. Sullivan and Pope ( not much younger than Joe Hart) for instance, otherwise why sign Button? We could have tried Fox at LB, could have tried Jordan at midfield, could have played BWP or Azeez up front. The loanees didn't come free, and if we're still losing this sort of money we've got to trim the squad to those who are or will be good enough to play a part. I've always thought our best years were when we had a small squad under Curbs, everyone playing their part, although towards the end of Curbs' time the squad did mushroom somewhat, enabling us to win the reserve league with a team full of experience. Just read on the OS The Doctor is talking about players leaving, and quashing the rumours about Judge, Wordsworth etc. Also talking about not being afraid to bring youngsters in, so he must have read these accounts!
On a similar theme here: http://www.bbc.co.uk/sport/0/football/20980190 On the face of it clubs are being asked to do the impossible. To find enough money to replace what the sugar daddies are bankrolling means putting up admission prices massively, plus catering, programs and everything else. In the current economic climate fans could not afford that, leading to falling attendances and eventual closure. But I think it is a good thing. The only way to break that vicious circle is of course to refuse to pay players inflated wages and transfer fees and bring some reality into the game. That will happen sooner or later but it will be an interesting few years arriving at that point.
Just wondering if anyone has any accounting experience: Is there any possibility for 'transfer pricing' or anything like that between the club and CAFC Holdings? If Amazon can disguise profits by selling services from the Luxembourgish company to their British one, is there anything like this that CAFC Holdings can do? Then, with CAFC Holdings based in BVI, its accounts are hidden. I've no reason to doubt the accounts, but it was something that came to mind. Or is the only reason for CAFC Holdings to hide the identity of the club's funders?
Transfer pricing is possible but there are rules, this does not stop the rules being interpreted by Accountants to the best advantage to their clients. A Company based in BVI has advantages in may areas of tax (i.e Capital Gains) as well as advantages of secrecy.
Thanks AllHell. So I have two more questions at the moment. a) is the figure for 'wages' exclusive to wages paid to players, or does it include all administrative, ticketing, commercial etc staff? Could it include payments made to directors? I know there *used* to be a rule preventing chairmen from making money out of football, but I can't recall if it was abolished, forever ignored or if clubs got round them by creating holding companies, which in this case would be Baton 2010 and/or CAFC Holdings. ii) if wages account for £8m of a total £16m expenditure, what is the other £8m? From my reading of the above passage, there's £400k on debt repayment and about £1.5m on registration/transfer fees. So what has the other £6m been spent on? I can imagine that running a stadium hosting large events with contracted security staff and associated policing is expensive, but I feel it's worth asking how much. There's something a bit worrying about this figure. It's like something that happens a lot in Ireland - many clubs say that even if they had only amateur players and volunteer admin staff, they would still run at a loss, or close to it. If the costs are general running costs for a League 1 football club housed at the Valley, they account for 75% of the total revenue...
A) Payments to Directors are headed up as 'Directors Remuneration' and should be listed separately. ii) Other costs will include the costs of running the stadium, the training ground, insurances, agents fees, professional fees, advertising, club shop stock, food, transfer fees, debt payments (but not Capital repayments) so I guess £6m does not seem excessive to me.
Transfer fees already accounted for as £1.5m, debt repayments also given as £400k. So £6m for the bits in bold, plus agents' fees (they are 'published' somewhere, but I guess lower than transfer fees, let's guess them at £1m). Leaving me with £5m, all spent on day to day running costs of a football club, that would have to be spent even if the club sacked the entire squad and management and replaced them with fans. 62% of the total revenue that was available in a HMS Piss the League season. Does that not worry you?
I pointed out amongst all the takeover crap that we were self financing. None of this we've received 2million in the bank stuff. But as I understand it we had an injection and that will have to repaid come the summer. No it wasn't friendly
Charlton paid £265,170 to agents last season. Those accounts look pretty average for a Championship club, probably a similar level to Leeds when they were in League 1 - price of promotion I guess.
I vaguely remember something about the bank being concerned about a £5m overdraft you had in 2010/11 - surely any money investment of that size would have been swallowed up by that?
