oldskyblue58
CCFC Finance Director
Hopefully people will find this useful. Tried to keep factual but is always going to be an interpretation of things/opinion and there will be things seen differently by others or missed by me/us. Would be first to hold my hands up to say I/we dont know it all
Will try to keep short as possible but apologise in advance for it being so long, it is not meant to be a lecture only a reference to help. Have picked out areas from the financials where questions regularly arise
Just a bit of background. Pre takeover there was CCFC limited wholly owned by CCFC Holdings Limited. Losses are not a new phenomenon to CCFC. Up until the accounts of 1996 the group nearly always maintained net assets despite sometimes making small (by current standards) losses. However in 1996 they returned losses of £8m and the financial position continued to worsen from there. That was the year that BR, GR, and MM came together to be directors on the same Board and was part of the period that saw the plan of selling Highfield Rd and building what is now called the Ricoh become reality. By the takeover in late 2007/ early 2008 the club had sold HR, did not own the new ground, had accumulated net liabilities of £43m and had run out of money & options. Unless a deal that met with the approval of some of the major creditors could be struck then the club would cease to exist. Sky Blue Sports & Leisure became the new holding company owning CCFC, CCFC Holdings and Prozone (RR’s company that he included in secure his stake in the new venture) with SISU investment funds owning majority shares
Losses. Root causes of the losses are two fold really. Insufficient income and living beyond our means. The club doesnt own the stadium and pays rent to ACL for limited use of it. What that does is not only include a cost but excludes many income streams from other events and functions. But that isnt the only reason for income restriction – look at it any way you like and CCFC has historically never been a well supported team, whether it is the lack of success, the prices,the economy, unemployment, the standard of play or plain apathy of the public can be argued but the fact remains one of the biggest factors to financial stability remains unsolved by the club – income from fans. Add to that our inability over decades to balance the books and that is a recipe for major losses and potential disaster. Just as an example in the years 2008, 2009 and 2010 the football operation of the Group (ie CCFC) spent 112%, 118% and 111% of turnover on wages – that is before any other costs like rent!!!. This is not a new phenomenon attributable to SISU this has gone on for years and years and it is simply unsustainable. (What is troubling is that no one has had the courage to deal with it but successive Boards all claim to be working in the best interests of the club – really??)
Structure. SBS&L was originally owned by RR and 4 private investment funds managed by SISU. The funds collectively owned approx 85% of the issued shares and that is control of the company. We can argue whether the Board or shareholders ran the company but effectively if the Board decisions were not to the controlling shareholders liking they could effect changes. SISU because they provided the funds to the group were not passive shareholders. (That they didnt act sooner to get a grip on finances or that they didnt provide adequate team funds in the first place are two major errors in judgement.)
Loans. Much is discussed about the SISU and other loans. Here are the facts as have so far been made available. On takeover the net liabilities of the group were discounted down by £35m leaving net debts of £8m for SISU to fund plus £3m losses from takeover until 31/05/08. By 31/05/08 they had provided a loan of £11m, this money loaned to the company to pay its debts. During the year to 31/05/09 these loans to SBS&L had risen by £12.4m to £23.4m. A further £700k was provided in 2010. Not all of that cash came to CCFC some would have covered the June 2008 acquisition of Prozone Group and funding its liabilities. Bear in mind that the funding SISU investors provide are loans to SBS&L that doesnt mean it all filters down to CCFC Ltd although because of cash flow difficulties much will have. RR was able to say we dont owe any banks but neglected to make clear we sure as hell owed SISU – we were never debt free as claimed. In fact there was £1.5m owed to RR’s own company Arley Group PLC in addition to SISU loans. The SISU loans do not charge interest those from Arley Group PLC did £153745 (2009) £310059 (2010)
Directors Remuneration In the accounts from 2008 to 2010 there is only one Director that has been paid – RR. He was paid via Arley Group £169750 (2008) £294500 (2009) £303125 (2010). There is nothing in the accounts so far published that indicates any other directors have been paid. Just to be clear disclosure is required by the Companies Act and if not done would be disclosed by the independent auditors in their report. Total cost of RR’s services & interest to 31/05/10 £1.23m
Players Contracts. Players contracts are included in the accounts at the cost of purchase and then written off over the life of the contract. For example Eastwood cost £1.2m on a four year contract so the value in the Balance sheet reduces by £300k each year and that £300k is shown as a cost/loss in the profit& loss account. Players such as Turner came through the academy and as such were not purchased so the cost in the Balance sheet is £nil – when he was sold the £750k was a clear profit reducing this years losses by that full amount. The contracts are owned by CCFC limited and any sales proceeds/profits are CCFC’s not SISU’s. Money after sale could be transferred to them yes but there is no evidence that this has happened – the loans from SISU up to 31/05/10 only ever increased.
Funding at £500k pm Often quoted but not very accurate. Firstly that figure is based on historical accounts and as we all know by the time they became public they were a year out of date. But it isnt accurate to say SISU funded the 2010 losses at £500k pm simply because in that year the loans from SISU increased by £700k in that year not £6m. Current data is pretty scarce but with the savings in wages and other overheads then the losses should be smaller. However the losses are not the cash funding requirement (money required from SISU)in the first place. Included in the loss each year is the depreciation/amortisation of assets and player contracts that do not in that year require funds to be paid out. It suits certain people to say SISU are funding the loss at £500k pm the current reality is something else- with the current savings it should not be true
Other Loans The club and group has taken out other loans notably against the Ryton facility and ticket sales. This is not unusual but not desirable either. The alternative is however, given SISU will not put in further major funds, that the club fails to meet its debts and goes into administration. Might not be what we want to see but it keeps the club going. Hopefully these facilities will be only short term. However as the loans are secured on assets (eg Ryton) it puts these assets at risk if the loans are not repaid. Plus such loans incur interest and make the losses bigger
Undertakings. To sign off the 2010 accounts SISU gave an undertaking to continue to fund the Group and club. The auditors needed to be sure that there was a credible plan for the club to continue to trade and they would have checked that out in detail. But we should all be aware that part of that plan included the sale of assets, that means players aswell as Prozone. There are clear statements in the accounts that player sales form part of the strategy
Prozone This was an asset of the SBS&L Group not of CCFC and therefore CCFC has no devine right to the proceeds of the sale. The value in accounts of Prozone was £4m and sold for reported £7m so the Group should show a profit of £3m on the deal – some of the proceeds went to pay RR/Arley Group out though
Debts. By the takeover the club group had accumulated £51m gross liabilities. Some £35m was written off during the takeover. Leaving gross debts of £16m. This is different to the above because it takes no account of the assets taken over in the deal by SISU. Per the 2010 accounts these gross liabilities stood at £37m (of which £24m owed to SISU) but some of that figure also relates to Prozone not just CCFC operations. Bottom line though is that liabilities continue to rise and up to 2010 no owners past or present had really got to grips with the problem
Thats the take on it - hopefully largely factual and hopefully useful to people here
OSB/Godiva
Will try to keep short as possible but apologise in advance for it being so long, it is not meant to be a lecture only a reference to help. Have picked out areas from the financials where questions regularly arise
Just a bit of background. Pre takeover there was CCFC limited wholly owned by CCFC Holdings Limited. Losses are not a new phenomenon to CCFC. Up until the accounts of 1996 the group nearly always maintained net assets despite sometimes making small (by current standards) losses. However in 1996 they returned losses of £8m and the financial position continued to worsen from there. That was the year that BR, GR, and MM came together to be directors on the same Board and was part of the period that saw the plan of selling Highfield Rd and building what is now called the Ricoh become reality. By the takeover in late 2007/ early 2008 the club had sold HR, did not own the new ground, had accumulated net liabilities of £43m and had run out of money & options. Unless a deal that met with the approval of some of the major creditors could be struck then the club would cease to exist. Sky Blue Sports & Leisure became the new holding company owning CCFC, CCFC Holdings and Prozone (RR’s company that he included in secure his stake in the new venture) with SISU investment funds owning majority shares
Losses. Root causes of the losses are two fold really. Insufficient income and living beyond our means. The club doesnt own the stadium and pays rent to ACL for limited use of it. What that does is not only include a cost but excludes many income streams from other events and functions. But that isnt the only reason for income restriction – look at it any way you like and CCFC has historically never been a well supported team, whether it is the lack of success, the prices,the economy, unemployment, the standard of play or plain apathy of the public can be argued but the fact remains one of the biggest factors to financial stability remains unsolved by the club – income from fans. Add to that our inability over decades to balance the books and that is a recipe for major losses and potential disaster. Just as an example in the years 2008, 2009 and 2010 the football operation of the Group (ie CCFC) spent 112%, 118% and 111% of turnover on wages – that is before any other costs like rent!!!. This is not a new phenomenon attributable to SISU this has gone on for years and years and it is simply unsustainable. (What is troubling is that no one has had the courage to deal with it but successive Boards all claim to be working in the best interests of the club – really??)
Structure. SBS&L was originally owned by RR and 4 private investment funds managed by SISU. The funds collectively owned approx 85% of the issued shares and that is control of the company. We can argue whether the Board or shareholders ran the company but effectively if the Board decisions were not to the controlling shareholders liking they could effect changes. SISU because they provided the funds to the group were not passive shareholders. (That they didnt act sooner to get a grip on finances or that they didnt provide adequate team funds in the first place are two major errors in judgement.)
Loans. Much is discussed about the SISU and other loans. Here are the facts as have so far been made available. On takeover the net liabilities of the group were discounted down by £35m leaving net debts of £8m for SISU to fund plus £3m losses from takeover until 31/05/08. By 31/05/08 they had provided a loan of £11m, this money loaned to the company to pay its debts. During the year to 31/05/09 these loans to SBS&L had risen by £12.4m to £23.4m. A further £700k was provided in 2010. Not all of that cash came to CCFC some would have covered the June 2008 acquisition of Prozone Group and funding its liabilities. Bear in mind that the funding SISU investors provide are loans to SBS&L that doesnt mean it all filters down to CCFC Ltd although because of cash flow difficulties much will have. RR was able to say we dont owe any banks but neglected to make clear we sure as hell owed SISU – we were never debt free as claimed. In fact there was £1.5m owed to RR’s own company Arley Group PLC in addition to SISU loans. The SISU loans do not charge interest those from Arley Group PLC did £153745 (2009) £310059 (2010)
Directors Remuneration In the accounts from 2008 to 2010 there is only one Director that has been paid – RR. He was paid via Arley Group £169750 (2008) £294500 (2009) £303125 (2010). There is nothing in the accounts so far published that indicates any other directors have been paid. Just to be clear disclosure is required by the Companies Act and if not done would be disclosed by the independent auditors in their report. Total cost of RR’s services & interest to 31/05/10 £1.23m
Players Contracts. Players contracts are included in the accounts at the cost of purchase and then written off over the life of the contract. For example Eastwood cost £1.2m on a four year contract so the value in the Balance sheet reduces by £300k each year and that £300k is shown as a cost/loss in the profit& loss account. Players such as Turner came through the academy and as such were not purchased so the cost in the Balance sheet is £nil – when he was sold the £750k was a clear profit reducing this years losses by that full amount. The contracts are owned by CCFC limited and any sales proceeds/profits are CCFC’s not SISU’s. Money after sale could be transferred to them yes but there is no evidence that this has happened – the loans from SISU up to 31/05/10 only ever increased.
Funding at £500k pm Often quoted but not very accurate. Firstly that figure is based on historical accounts and as we all know by the time they became public they were a year out of date. But it isnt accurate to say SISU funded the 2010 losses at £500k pm simply because in that year the loans from SISU increased by £700k in that year not £6m. Current data is pretty scarce but with the savings in wages and other overheads then the losses should be smaller. However the losses are not the cash funding requirement (money required from SISU)in the first place. Included in the loss each year is the depreciation/amortisation of assets and player contracts that do not in that year require funds to be paid out. It suits certain people to say SISU are funding the loss at £500k pm the current reality is something else- with the current savings it should not be true
Other Loans The club and group has taken out other loans notably against the Ryton facility and ticket sales. This is not unusual but not desirable either. The alternative is however, given SISU will not put in further major funds, that the club fails to meet its debts and goes into administration. Might not be what we want to see but it keeps the club going. Hopefully these facilities will be only short term. However as the loans are secured on assets (eg Ryton) it puts these assets at risk if the loans are not repaid. Plus such loans incur interest and make the losses bigger
Undertakings. To sign off the 2010 accounts SISU gave an undertaking to continue to fund the Group and club. The auditors needed to be sure that there was a credible plan for the club to continue to trade and they would have checked that out in detail. But we should all be aware that part of that plan included the sale of assets, that means players aswell as Prozone. There are clear statements in the accounts that player sales form part of the strategy
Prozone This was an asset of the SBS&L Group not of CCFC and therefore CCFC has no devine right to the proceeds of the sale. The value in accounts of Prozone was £4m and sold for reported £7m so the Group should show a profit of £3m on the deal – some of the proceeds went to pay RR/Arley Group out though
Debts. By the takeover the club group had accumulated £51m gross liabilities. Some £35m was written off during the takeover. Leaving gross debts of £16m. This is different to the above because it takes no account of the assets taken over in the deal by SISU. Per the 2010 accounts these gross liabilities stood at £37m (of which £24m owed to SISU) but some of that figure also relates to Prozone not just CCFC operations. Bottom line though is that liabilities continue to rise and up to 2010 no owners past or present had really got to grips with the problem
Thats the take on it - hopefully largely factual and hopefully useful to people here
OSB/Godiva
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