Discussion in 'Wasps' started by oldskyblue58, Nov 19, 2017.
Looking at some of sisu previous investments they probably paid full whack for them
I’ve raised that before but it seems that’s not the case. I do have a feeling that may play out in time though, hedge funds love distressed debt.
It's probably implausible though as you're getting to a robbing Peter to pay Paul situation
The situation as I see it is SISU could buy up the bonds, refuse to roll them over meaning Wasps either have to pay back the £35m or forego the stadium. If the price drops into the 60s that represents a very good discount. In practice I don’t know whether it’s permitted but just a thought I had (which I think I’ve run through before).
The owner of wasps must be holding enough to make sure that they can’t get hold of enough I guess
Lots of assumptions here that should not be so
You should look at the postion from WASPS FINANCE Plc and the Bond Holders and you should get a different angle
If I was a Bond Holder and read your article I would wonder what was going on
Bond has lost just over 4% today. Down to 68.38
Still dropping. That said its 9 trades so far this month with a nominal value of 225k out of a total value of £35m (0.65%)
The drop seems bigger than for other bonds registered on LSE. Is there something else going on in the background?
Financials should be out soon be interesting to see what effect they have on the bond price
this is what I don’t get
Strange that something you see as a fundamental breach of terms doesn't get a mention in the 2016 Financials or the 2016 independent auditors report of any group company, but most importantly Wasps Finance PLC then (which were signed off 30 September 2016). That is the auditors who had access to all the information (including the bond document), parties involved etc where as we do not. Nor following more extensive work for 2017 was it mentioned in the Wasps Finance PLC audit report, by the same auditors who were clearly (as is their duty) and quite rightly prepared to bring any breach of the bond terms to light. We have little choice but to assume for both years that the auditors did their job properly, professionally and to the standards set technically & ethically. I am not aware of any actions being taken by the trustees or bondholders on the matter of no valuation in 2016 either. Its a dead issue. Will leave it at that
The bond holders may be more concerned when they see the 2019 financials of course. It will be interesting to see what wasps plan to do going forward. They need to deal with their mess at some point between now and May 2022
My point is the Bond Holders should not have to ASSUME anything. It was a condition precedent in the covenants the valuation would be in 2016. Any variation of this should have been reported together with the Trustees agreement that 2017 would be the first year and every 2 years after that. As this was quite an important variation, especially for the first reporting I do not understand why it was washed over - if it was not disclosed in the accounts then at least a short RNS was appropriate.
I suppose one could equally have assumed the 2016 Accounts were correct - which they weren't
Good job the 2017 revaluation was so positive to be able to smooth out the issues - ( eg : Trading Update - RNS - London Stock Exchange)
As you say 2019 accounts will be interesting - especially any reference to the stadium valuation and the subsequent departure of CCFC
Similarly the value of the P Shares after the percentage sale
Looking at the trade history. Most trades tend to be Auto trades so will be investment firms I'm guessing rather than individuals.
Will be interesting to see as it gets lower and lower when the next set of auto trades kick in. I would guess the closer it gets to 50 the more likely people are going to start to panic and run.
Latest results are up: https://www.wasps.co.uk/media/6375/wasps-holdings-limited-year-ended-30-jun-2019.pdf
Looks a mixed picture, revenue up but operating loss up as well.
Senior debt is down overall as they've paid off their £3.5m overdraft with the CVC funding I think.
Debt to Richardson up £200k (presumably cash flow?)
The statements mention the court dismissing the JR2 but doesn't mention the ongoing EC investigation
Valuation of the Arena and investment properties The Group assesses the value of Arena on an annual basis in accordance with the accounting policy stated in note 2. This valuation follows the principles of IFRS 13 and is based on an income approach. This approach requires estimation of the future income streams, length of the leasehold and a number of other market-based assumptions. Any changes in these assumptions will impact the carrying value of the Arena. The Arena was revalued as at 31March 2019 by an independent valuer, Gerald Eve LLP, at £51m (including £6.8m relating to the leasehold of the casino). This valuation was at a point in time and does not reflect changes in the business since that date. Management have prepared forecasts for future years which support the carrying value of the Arena. The projections show a continued improvement in the underlying trade, which if not achieved could result in a further downward revaluation. The next formal valuation is due in 2021.
I’m getting Gerald in to value my house if that arena is worth £51m
Quick glance at figures tell me they made a £12.1 loss ignoring exceptional items (one off money form CVC and revaluing their share in premier rugby.
Can’t see us getting a mention.
Yes ACL and IEC income up (CCFC will contribute) but Wasps Rugby income down.
The point I was making is that the prior improvement in revenue for ACL and IEC will potentially be pegged back by the loss of CCFC as a tenant
Key Points on wasps 2019 financials. Will try to keep opinions out of it
- Turnover up overall by 1.6m to 34.5m. In that wasps (sports side) turnover dropped 700k but ACL and IEC (the venue side) up 2.3m
- Operating loss increased by 3m to minus 5.162m. that has to improve it is unsustainable
- Wages were up 900k, f&B costs up by 850K, utilies up 350k, match day & event cost up 1mother costs (?) up 1.4m
- Exceptional item was a positive 16.7m Profit on CVC shares 12.5m (assume proceeds lest value already held) revaluation of the shares still held after the CVC sale 4.1m JR costs recovered 85k
- Finance costs are up 370k interest payable 3.8m in total
- Tax provision of 1m but it is deferred tax (based on a calculation of tax that could be paid in the future) so is not actually paid out
- Overall net profit 3.6m ( but after excluding exceptional items that’s a net loss 13.2m) Not good because wont get exceptional item every year.
- Take off the fall in leasehold valuation after tax provision there is negative of 3.5m although it is a movement through revaluation reserve rather than the P&L
- Total assets have dropped 3.5m to 82.9m
- Total liabilities are 89.9m up by 3.4m
- Balance sheet is negative by 7m but that does include a charge of 4.7m to settle out Compass. Compass has a charge on the group because it wont get all its money back till July 2024
- The group is cash flow positive by 3.1m for the year
- The group spent 1.9m on plant & equipment in the year, including 595k on “other leasehold property”?
- Drew down 1.5m in borrowing but repaid 5.8m other borrowing and had 3.1m in the bank at the year end
- There is a detailed note on going concern which the auditors refer to. Group still relies on Richardson. Not unusual for many sports teams to rely on their owners
- No qualification of the audit report but material uncertainty regarding going concern detailed. Audit fees have increased by 70k to 150k
- Lot more mentions of the refinancing of the bond
- Details of valuation imply that all tenants at 31/03/2019 were included so that would mean CCFC too. Find that odd because even in March they knew there were problems and nothing had been agreed. Was expecting a greater value on the P share.
- They have restructured things since balance sheet date at a cost of £130k, we knew that staff at ACL were leaving for example. That said total non playing staff increased by 12 in year
- Highest paid director £170k
- Amount owed to Richardson 18.3m but that’s 290k down
- Total borrowings down 3m (loans & bank)
Very detailed accounts, but cant hide the fact that exceptional items aside there is a big loss in there. That said the feeling I get is that there is a lot of very careful tidying up of the balance sheet going on, crossing “t’s” and dotting “I’s”. Is there something else going on, say to do with the bond finance? i dont believe they are about to up sticks and move away. Will also be interesting how the new deal with CVC unwinds through future accounts
True, but their move was sold to stop this being necessary.
Anyway, I'll stick for another year to my sitting on the fence whether they succeed or fail
OSB, do you think there is something to read in to the way they've valued the lease on the casino separately?
no fp it is more to do with accounting rules and regulations. Technically the casino 10 year lease makes it an investment property not the wasps trading property so there has to be a correction in how it is disclosed in the financials
I'm not sure if this would work either, but I find that if I check the latest bond price, read your post out loud, and then add an evil cackle at the end, it cheers me up every time.
Mwah ha haa etc.
Thanks, as ever, for the measured analysis OSB. It certainly doesn't sound like they're in a great financial position.
I'm still not convinced regarding valuations or bond repayments, and the CVC deal could come back to bite them too perhaps. Maybe the biggest risk is their debt to Richardson though, if he tires of it or runs out of finance, then I think it's going to be a bad place for them...
The accounts are horrific and going one way only
Got to say they are far worse than I thought they'd be. Was preparing myself for the disappointment of them being quite good with the CVC deal.
Think its safe to say now with some certainty the Ricoh move is a failure for them. Of course that doesn't mean they're likely to disappear elsewhere any time soon.
Struggle to see how they turn it around. There's not an unlimited amount of conference and exhibition business to take on and even if there was their competitors are far better positioned to see off any threat to their business. The likes of the NEC Group won't just sit around letting Wasps take custom off them.
Think I'm correct in saying the next set of account will cover the loss of a high profile tenant in CCFC, failure to qualify for Europe and attendances in freefall. Laughable to think it was only a few months ago they were talking of every game being a sell out!
And of course their option on car park C is expiring. They've had since July 2018 to apply for planning permission for the hotel but nothing has materialised. Similar to the training grounds at Higgs and Old Leamingtonians and the housing near Higgs.
Said before the big question is how long will their owner put up with this and what happens when he wants out, although if you believe some of the rumours he's already at that stage.
They’re massively running out of options. They need an outside investor that wants to get involved in a failing business located away from its customer base. Those figures when they’ve been given a wedge from CVC are shocking.
Bloody hell if oldskyblue is giving wasps a pretty average/poor appraisal of there accounts then they are in the shit! (Joke)
Correct me if I’m wrong but the indications are wasps accounts will be even worse this FY with decrease in attendances, no European rugby, poor results, no CCFC etc etc....
It's going to have to be one hell of a turnaround to not be making a significant loss again for FY 19/20, not sure how to address losses that are such a high % of total turnover.
I can see Richardson trying to offload the rugby club at some stage. The accounts usually seem to hint heavily that the P share is a saleable asset
This Richardson bloke may have missed his best opportunity to get rid of this pocket emptier of a business.
I am puzzled by a few things in these financials
1) why has the gross profit margin dropped from 33% to 25% given the prices being moaned about. I assume it is partly the increase in wages but that is a big drop equivalent to £3m lost Gross profit
2) the CVC disposal was supposed to be only to be used for infra structure projects not paying down existing debt. i would expect a larger cash balance. The cash flow statements do not show any fund movement for the proceeds of disposal
In addition we were told that the Premiership Rugby had held back some of the proceeds. where are these disclosed in these financials ?
3) Did wasps like many other clubs invest in the joint venture company with CVC that was set up, if so where is that disclosed?
4) given the financial constraints why has the number of employees increased by 19 (inc 6 players which i can perhaps understand) Since then of course there has been job losses at ACL reported. Never understood why ACL needed 50 odd employees
5) why are there £50k additional audit charges relating to previous years?
6) what is the other leasehold land that has been purchased for 595k?
7) what does the £10m licence under deferred income relate to?
There is other stuff but thats enough from me on the accounts themselves
Some starting to sound less than enthused. Even Steve from Cov is “worried”
DrunkenWasps.com - 2019 financial results - adopt the brace position
took a look at the wasps forum. I disagree with some of the thoughts on there - dont disagree with the wish that they had never turned up and bought in. However they have.
It is the rugby side of the operation that makes the biggest loss. The evidence is in the accounts which state the holding company (which is the rugby side)made a profit of £6.2m however the exceptional profits £16.8m relates to the rugby side alone. So the real annual result of the rugby operation is a £10.6m loss. That leaves a loss for the rest of the business at £2.6m and the way i read it is much of that is to do with closing the Compass contract down and taking on Delaware. Ignore the depreciation (it isnt money spent), and reduce staff levels, increase the ACL income and the non rugby side would at least break even. How you get the rugby club to run profitably i have no idea but it isnt the stadium pulling the group down
Crowds are a factor of the team success, wasps have not been very successful of late
To my mind ACL is over staffed and there are savings to be made there - apparently already being done. Under the previous ownership turnover was higher and staff numbers and costs much lower. However ACL is not responsible for staffing the Casino, and it is Delaware North that staffs the stadium & hotel recharging costs to wasps through IEC
To sell the stadium and move may at first sight seem a good idea. The proceeds would be applied to the bond debt £35m first. However the sale value is unlikely to be the £51m for the lease because part of the lease value is based on wasps being there (rugby club have a 50 year lease) - if they are not going to be there no one would pay full value stated in the financials. If they dont clear the bond then they would in effect be bust, there would be no funds for a ground near the Stoop. The move would be costly, to buy a freehold or long lease would be more expensive the nearer to London you are, but there are the hidden costs of relocating staff and players etc let alone the obvious ones of building a smaller "rugby arena". Who is going to pay for that?
Moving might also mean actually paying out a rent. At the moment any rent charge stays within the group because its paid to ACL. Move to someone elses ground it wouldnt
Cant comment on player savings, not really interested. other than to say wages costs are too high and are a real danger financially. they are still going to have many of the wages costs if they move which takes up most of their income (biggest element being the players of course)
Selling up and moving out doesnt solve their problem.
Often companies do sell their main asset however to lease it back. Could this be an option? Gets full value on the long lease, clears the bond, maybe other debts too, could contribute to training ground ? Might mean a cost for access to other incomes though and the rent paid to 3rd party not internally. Does mean that wasps stay at the ricoh
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