Fiscal shrewdness is not lacking at Allamhouse. Will the benevolence towards the club always continue though?
It doesn't matter, they cannot take back the money, the club doesn't have it, as long as we owe them the money they either support us or loses the money. If they are successful and we get into the PL they may reduce the loan amount outstanding, by taking cash out, but they need to keep the clubs overall value up. We would need to be saleable, At the moment we are not,5 years time we may be.
They paid off the ones it was worth paying off at the time. The rest they're paying as they fall due because it's better for cashflow. The main issue has been wages, which should be sorted this summer with the last of the PL contracts expiring. Assuming he signed by the end of July (I can't remember the date) and the HDM have given the additions figure that confirms there's promotion/appearance related clauses. I don't think they can claim anything now, but if it were gifted the club would be showing a profit and end up with a tax bill, then later when they took it back out the club it would be as a dividend and be taxable. There's more levels to it, and a lot of ways of changing the nature of it by converting it to shares and such like. Given when Abramovich bought Chelsea he put his money in as a loan I don't think anybody should be reading anything suspicious into the Allams having done the same. I actually want them to get it back at some point. That way we can say that the club has paid for what it spent, we'll have had help to get there, but no writing down of debts or anything will have gone on this time.
If the club make profits in the future they will be able to set off the losses brought forward against the taxable profits. Groups of companies can set off losses between each other so, if Hull City are owned by Allamhouse and it is owned by Allam Marine, then losses of Hull City can reduce the taxable profits of Allam Marine. In 2012 Hull City carried forward £33m of tax losses after surrendering £10.6m of losses to group companies.
"Given when Abramovich bought Chelsea he put his money in as a loan I don't think anybody should be reading anything suspicious into the Allams having done the same." Abramovich will have bought Chelsea for very little. He has spent a lot of money funding transfer fees and wages which he introduced the money as loans. I think he converted a lot of the loans to shares to comply with some UEFA rules. If an owner never expects to get the money back then it doesn't matter whether it is shares or loans but if there is the choice loans make more sense as they can be repaid without any tax effect whereas dividends would be subject to tax. Most owners expect to get their money back with any profit when they sell the club. Some clubs, eg. Blackpool, go up to the Premier League with the intention of making a profit by keeping costs down. The other approach is to make an effort to stay up and risk more money. The gamble usually isn't successful.
Agreed, it's the "ooh they've loaned it not gifted it so they must be evil" feeling that comes across from some posts I'm trying to dispel.
Yes, we should be grateful that they have provided the funds. It's madness if they don't do it the most tax efficient way.
Some posters on here don’t seem to understand the workings of finance or don’t want to, Hull City as a going concern have very little in assets so any loans the Allems’s give can only be recouped by selling the club as a going concern or the club make yearly profits and recoup that way
Ricardo can you explain to me what happens if we do not go up as far as the financial fair play rules go? It seems destined that if we do not go up we will take a loss for the next season. Are we going to be faced with a transfer embargo?
We're allowed to lose a certain amount of money each year anyway so I don't think it's a problem. A big part of what we've been losing in the accounts has been the transfer fees for players like Olofinjana and Bullard. When you sign a player the fee is spread out over the length of the contract. Bullard was due to be with us for 5 years (4 1/2, but accounting wise 5 years) so each year he was costing £1M on top of his wages. Unless I've got my timing out, in the accounts the HDM is reporting Bullard had his contract terminated. At the start of the year he was still valued as a £2M asset, so that full cost was included in our expenses. Similarly Olofinjana was about £750k a year plus wages. That's almost 1/3 of our losses from last season were "one off" costs that are no longer a concern just for 2 players.
I cannot remember any chairman or owner who in the near 50 years that I've followed Hull City who have dipped into their own back pockets and poured money into the club for the love of it, can you? Everyone to a man expects a return on the initial investment. Even Harold Needler got a return, and I don't condone him for that. Good luck to the Allams. But 5% of £48m is a nice little earner.
The rise of a club beyond its history and dreams Hull City's first experience of the top division is down to shrewd business, civic pride and happy timing l David Conn The Guardian, Wednesday 19 November 2008 A Premier League table with Hull City beaming out in sixth place presents the season's most romantic story, a crucible of local pride amid all the global brands. But there is also a hard business nose behind Hull's rise and to understand it you begin at the KC Stadium. The launch pad for City's revival, the stadium was built by the local council for £43.5m and the source of the money tells its own tale about Hull. The city feels far from everywhere - a "cul-de-sac ending at the sea" as one fan at Sunday's match cheerfully described it - and uniquely it has its own telephone company, Kingston Communications, with trademark white phone boxes. In 1999 the council made £263m from selling part of the company and resolved to build a new, landmark stadium for the football and Hull FC rugby league clubs as a statement of ambition in their futures and in that of an often beleaguered city itself. The council was not, however, too eager to sign that bonanza over to the club while it was substantially owned by Stephen Hinchliffe, who in February 2001 was sentenced to five years in prison (reduced to four on appeal) for corruption and bribery following the £70m collapse of his company, Facia. Hinchliffe, with a businessman, Nick Buchanan, had in 1998 bought 65% of Hull from David Lloyd, the former tennis professional and fitness clubs entrepreneur, who had become disillusioned after failing to rouse the slumbering Tigers at Boothferry Park. Hinchliffe was a living, breathing, Mercedes-driving advert for a fit-and-proper-person test. The police had been investigating him for fraud since Facia's 1996 collapse and the Department for Trade and Industry had also been seeking to disqualify him from acting as a company director. The game's authorities were then still deriding the idea of establishing such a test and, even now they have introduced it, somebody with long-standing criminal investigations hanging over him can still take over a club - as Thaksin Shinawatra did at Manchester City. People are barred from being club directors, or 30% shareholders, only once they have been convicted or disqualified. In February 2001, with Hinchliffe still the largest shareholder, Hull City fell into administration with debts of £1.8m, after Lloyd changed the Boothferry Park locks because Buchanan's regime had lapsed on the rent. Into this landscape arrived Adam Pearson, the Leeds United commercial director who, it would turn out, was leaving Peter Ridsdale's Elland Road with shrewd timing. Backed financially by a Leeds-based internet entrepreneur Peter Wilkinson, Pearson saw in Hull's wreckage "massive latent potential": a one-club city, no competitors for miles around, with a council presenting it with a new stadium. Pearson and Wilkinson bought the club from the administrator for £360,000 and the council was prepared to do business with them. In December 2002 City moved to the KC Stadium, immediately attracting extraordinary crowds, beginning with 22,000 for the first home game, against Hartlepool, in the bottom division. Pearson recalls "immense pride" from fans hungry for respectability and success. He says he and Wilkinson invested some money, although the club was soon self-funding, and he went through two managers, Brian Little and Jan Molby, before finding Peter Taylor, "the right man at the right time", to win Hull promotions in 2004 and 2005. In the Championship their ascent faltered; Pearson says the economics in that division are awful, the clubs without parachute payments all losing money trying to compete. "It needed a boost financially," he explains, "which wasn't available to me." Two businessmen, Paul Duffen and Martin Walker, and an Essex-based property investor, Russell Bartlett, were looking to buy a football club when West Ham, whom Bartlett supports, were for sale in 2006. The Icelandic bank Landsbanki was backing them initially but after West Ham won promotion the price tripled and the Icelanders ultimately bought the club themselves. Duffen's consortium continued looking at Championship level, first at Cardiff before Keith Harris, merchant banker and serial football takeover broker, introduced them to Hull. It was, Duffen says a little unromantically, "a perfect box-tick": wide catchment area, new stadium all paid for and property around it to develop. They bought the club in June last year for a reported £13m. Pearson shared his handsome profit for seven years' involvement with his backer, Wilkinson. They looked for another club, tried to buy Leeds out of administration but lost to Ken Bates' consortium, then Pearson bought into Derby County, ushering them quickly into a takeover led by the United States consultancy GSE. "I don't feel regret," Pearson says of selling Hull just before their delirious promotion to the Premier League. "I had seven great years, it was a fantastic deal financially and the club needed new investment." When planning how to vault the financial chasm between the Championship and Premier League Duffen and Bartlett calculated that clubs with parachute payments have wage bills of £12-£15m, so to have half a chance of competing by paying wages of £8m, Hull would lose £6m. So they budgeted to invest that, £6m, for three seasons, Duffen moving from Surrey to become full-time chairman in Yorkshire, Bartlett staying in Essex and providing most of the money. Under Phil Brown, an inspired appointment, they made it, via the play-offs, in one season. Around football they are considered to have spent the £30m Premier League TV windfall wisely. Duffen explains it: they looked for free agents, where no transfer fees were payable, unearthing this season's find, Geovanni, that way, but did spend to sign others: £500,000 for George Boateng, £1m for Daniel Cousin, more than £2m each for Anthony Gardner, Kamil Zayatte and Peter Halmosi; 12 players altogether, without borrowing. If Hull do not make it this season - "We don't use negative words like relegation at this club," Duffen says firmly - the players' contracts stipulate they can leave for free, or take a drop in wages, to ensure the books would balance. If they survive, Hull could become a Premier League fixture. A debt-free Premier League club with a paid-for stadium would surely fetch more than £13m from a buyer but Duffen, clearly relishing being involved, says they have no plans to sell. Duffen argues that City, given their catchment area, which includes wealthy stretches of Yorkshire as well as poor neighbourhoods in Hull, can be "bigger than Bolton, Blackburn, Reading, Wigan and Middlesbrough". Asked whether he is pleasantly shocked by Hull's start in the Premier League, he says no. "This was our plan, we have confidence in Phil Brown, the coaching staff and players and, when a plan succeeds, you should not be shocked," he argues - with, throughout, a determined and straight face.
