Keith Morgan Commentary on the Latest Accounts

https://www.cardiffcityfc.co.uk/news...ate-supporters

STATEMENT BY CARDIFF CITY FC

(KEITH'S RESPONSE IS BELOW, POSTED BY ENOCH MORT)

The following communication has been issued by Chairman, Mehmet Dalman and Finance Director, Philip Jenkins.

Following Board correspondence to supporters in January, we’d like to take this opportunity to offer insight into the statutory accounts for the year ended 31st May 2024 that have recently been submitted to Companies House.

The group accounts for Cardiff City Football Club (Holdings) Limited can be viewed in full here, for those who wish to see them.

Below are several highlights, with some greater detail and clarification:

Trading Results

The filed accounts show:

Operating loss of £9,957,000 which is a reduction of £1,169,000 on the prior year.

Loss before tax of £11,661,000 which is a small marginal increase of £231,000 on the loss for the prior year.

Increase in the cost of sales and administrative expenses over the prior year that has been more than offset by the exceptional income realised in the year.

Increase in the cost of sales from 2023 to 2024 of £9,473,000 driven by:

Increase in player related costs at £5,712,000.

Increase in amortisation charge from investment in our playing squad of £840,000.

Increase in running costs following investment in Academy development of £1,136,000, including provision for the one-off costs on the termination of the lease on the old Academy site.

The above account for 81.2% of the increase in the cost of sales.

Exceptional items

The results for the year have benefitted from exceptional gains of £18.4m.

The main driver therein is the £12m receivable from the sale of a “percentage” share of the ultimate proceeds from a litigation claim made by the club.

The sum receivable is non-refundable and not dependant on the ultimate outcome of the litigation case itself.

While there is potential for additional amounts to be received, dependent upon the outcome of the litigation, such “contingent asset” has not been recognised in these accounts and further will not be included in future years accounts until any such sums are awarded and received.

Balance sheet

Investment in Intangible and Tangible Fixed Assets:

Investment in our playing squad of £7,460,000 in the year shows an increase of £1,934,000 over the previous year.

Investment in tangible fixed assets of £1,665,000 in the year, includes initial payments to secure the 150-year leasehold interest in the site for the development of the new First Team Training Ground and operational base.

Loans from shareholders and connected parties:

Loans from the majority shareholder, Tan Sri Vincent Tan, and connected parties has increased in the year from the injection of net additional funding of £11,832,000.

While the loans have increased in 2024, as in previous years, there is no interest burden on the Club as while the loans accrue interest at 7%, all interest on the loans from Tan Sri Vincent Tan has been waived by the Owner.

As our chairman has previously indicated when the time is right, such loans will be either written off or converted to equity. Therefore, there is no demand or pressure on the Club for such loans to be repaid.

Loans from directors and connected parties:

Such loans have increased by additional loans received of £11,000,000, taking the resultant balance to £40,300,000.

It is the intention of the Club to start repaying these loans as soon as cash flow allows, or additional funding is received.

Summary

While the reduction in the Operating Loss for the year is encouraging, there is still a great deal of hard work ahead to continue the downward trend in the Operating Loss.

We have, however, in 2024 been able to expand our investment in the First Team squad, complete the new Academy development and lay the ground for the construction of our new purpose-built First Team training ground.

Each of these advancements will put us on a more stable and stronger footing for the future.

Mehmet Dalman (Chairman) & Philip Jenkins (Finance Director)

3rd March 2025

I've read through that update three times and I've reached the conclusion that I have no idea what any of it means.

:hehe:

Trust chair Keith Morgan gives his comprehensive verdict on the latest Cardiff City accounts for the year ended May 31, 2024.

Keith has spoken to the club to ensure that there are no factual errors in his commentary but the statement represents his own review opinions, totally independent of the club.

Cardiff City Football Club (Holdings) Limited is the parent company of its main trading subsidiary Cardiff City Football Club Limited and also Cardiff City Stadium Limited and Cardiff City Premier Seating Limited (all 100% owned). Therefore, references in this commentary are to the group.

The Headlines

The accounts were approved by the club directors on December 21, 2024 and signed off by the independent external auditors on December 23, 2024.

The group made an operating loss in the year of £10m (down from £11.1m in previous year) and a net loss of just under £11.7m (previous year £11.4m). As a consequence the balance sheet deficit at May 31, 2024 rose to £30.8m.

The directors’ report for the year again stresses that the business is heavily reliant on substantial financial support from its principal shareholder Vincent Tan who has confirmed in writing to the directors that such support will be forthcoming for not less than 12 months from the date the accounts were approved (ie until at least December 2025). This confirmation , although not strictly legally binding, gives the directors a high degree of comfort as to the business’ viability going forward and has also enabled the auditors to conclude that the club remains a going concern financially.

The level of losses incurred, particularly after allowable adjustments under the rules, indicates that the football club was compliant with the EFL Profitability and Sustainability requirements. The published minutes of meetings between club officials and elected fan representative groups confirmed this to be the case.

Statement of Comprehensive Income (the Profit and Loss account)-key figures

Turnover for the year was £23.2m, down £3.4m from the previous year. Gate receipts and match day income plus income from broadcasting actually rose slightly but sponsorship, advertising and commercial income fell by £4.3m compared to 2022-23.

Cost of sales rose significantly in the year by £9.5m to £39m.A large proportion of this was down to an increase of £5.7m in player wage payments to £19.9m. Other elements of the increase appear to relate to an increase in the accounting write down (amortisation) of the playing squad value – a normal annual cost charged over the period of players’ contracts. In addition, there was a substantial further increase in investment in running costs of the club’s Academy.

Administration expenses went up £4.4m to £12.7m. However, I understand that the 2022-23 figure benefited from some one-off exceptional credits so the true increase was only in the order of £1m.

Exceptional items - £18.4m

This has been a major financial benefit to the club in the year, offsetting all of the increased cost referred to above. It consisted of three main elements

Settlement of a contractual dispute arising in a previous year which generated £5.8m.
Release of a provision in previous accounts no longer considered required - £0.7m and (most importantly).
Sale of a share of the proceeds in a litigation case.
The only matter that I believe this can relate to is the club’s long running legal claim for damages against FC Nantes arising from the tragic death of Emiliano Salah in 2019.
There are enterprises that will buy the rights to all or parts of legal claims, but only if they believe that the claim has a very good chance of success. Therefore, it seems that it is just not the club and its legal advisors that continue to believe they will eventually succeed in their claim against Nantes but an independent third party who are willing to advance £12m - non refundable no matter what the outcome of the case.
To “an outsider looking in” this gives me increased confidence that the club will win the case. On a prudent basis , and in line with accounting requirements , the club has not included the potential future financial benefit from this source in these accounts as it is what is referred to as a “contingent asset” rather than an actual realised asset.
Profit on player sales - £760K compared to £1.7m in 2023.Players sold in the year (ie the Summer 2023 and January 2024 transfer windows) had an initial cost to the club of £6m but had been depreciated down to just £285k at the time of their disposal.

Interest payable was £2.6m (2023 £2.0m). Of this , a note to the accounts reveals that £2.1m of this interest was payable to Tormen Finance Inc. in which club Chair Mehmet Dalman has a significant involvement. This interest is stated to be at a rate of 6% per annum.

Directors Emoluments
In respect of WMG Funds the figures are not directly comparable , there is no charge for the Chairman’s time in either year but the charge is for “ other services provided by third parties “ engaged by WMG on behalf of the Club . Just happens that they were significantly reduced in 23/24 compared with 22/23. The services provided in themselves may not necessarily be “the same”. The highest paid director was paid £60k and was the only board director to receive a salary.
Statement of Financial Position – the balance sheet key figures
As stated above , the club had net liabilities as at 31 May 2024 of £30.8m.
Player values-the playing squad had a totalaccounts carrying value of £7.5m at cost less amortisation. The accounts also disclose that the club spent a further £10.5m on players between 31 May 2024 and 21 December 2024 when the accounts were formally signed off (i.ethe Summer 2004 transfer window, but excluding the January 2025 window). In the same period the club sold players for netproceeds of £5.6m
Stadium value- £84.5m.The stadium is on a 150 year lease from 2009 with the landlord being Cardiff City Council. The value of the stadium is supported by an independent professional valuation undertaken by Savills in 2023.
Debtors (money due to club)- the total of £13.6m includes prepayments, accrued income of £10.7m receivable in 2024/25 and football receivables of £2m.

Debts due within one year of balance sheet date - £137.7m
£68m of this total was due to Vincent Tan who injected a further net sum of £11.8m into the club during the year. £47.5m of this was technically interest bearing at 7% but the owner has never charged or drawn down any such interest. All of the £68m is secured by legal charges over the club’s assets.
The other major debt due is £40.3m due to directors and connected parties. £37.3m was due to Tormen Finance Inc in which Mehmet Dalman has significant interest – Tormen put new finance of £11m into the club during the year and interest on this loan was charged at 6%.

The accounts also reveal a “directors loan” of £3m from one of Vincent Tan’s sons U-Peng Tan. He is not a director of the group but had previously been a director of one of the group subsidiaries, hence the description used in this and previous year accounts.
Most of the rest of the group debt concerns accruals and deferred income. Deferred income is season ticket money received before the year end but which relates to the right to attend matches in the following season and therefore the following financial year.
After the year end in 2024 the club received further unsecured funding of £14.9m to assist with operational funding needs.

Overall Summary
The group continued to make losses in the year and there must therefore be an ongoing focus on the means to reduce and eventually eliminate such losses, including the means of replacing the benefit of the 2023-24 exceptional item, to be achieved by a combination of additional income generation and tight cost control.
However, the level of losses was such that the group did not trigger any penalties or restrictions under the Profitability and Sustainability rules. In addition, the group operational cash flow needs continued to be met by its owner (with a written commitment to continue this support) and through the group chair.

Keith Morgan, FCA,
Trust Chair

Wow
Lot to take in there.
Looks like we have Nantes over a barrel.
Interesting that Dalman's company holds such a big stake.

players wages increased from 14-19 million but that's still on the low side for the championship, so that's promising.

definitely not in the biggest 5 wage bills in the league as the chairman mentioned previously

"There are enterprises that will buy the rights to all or parts of legal claims, but only if they believe that the claim has a very good chance of success. Therefore, it seems that it is just not the club and its legal advisors that continue to believe they will eventually succeed in their claim against Nantes but an independent third party who are willing to advance £12m - non refundable no matter what the outcome of the case."

It would be interesting to know just how 'independent' the third party is...

I don’t like Tan, never have, never will but you can’t fault the guy for continuing providing the funding.

6% Mehmet!

Quote:

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Originally Posted by Former Labour leader

Wow
Lot to take in there.
Looks like we have Nantes over a barrel.
Interesting that Dalman's company holds such a big stake.

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Yeah, some very interesting points about the Nantes case there.

presumably the 5m was the amount we sued the insurance brokers for?

Quote:

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Originally Posted by Rjk

presumably the 5m was the amount we sued the insurance brokers for?

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I think so. From memory that matches the figure mentioned in the last court hearing in France.

Is this the first time the club has given a commentary to supporters on the annual accounts?

"There are enterprises that will buy the rights to all or parts of legal claims, but only if they believe that the claim has a very good chance of success."

Why would any 'enterprise' do this? What do they have to gain?

Quote:

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Originally Posted by The Lone Gunman

"There are enterprises that will buy the rights to all or parts of legal claims, but only if they believe that the claim has a very good chance of success."

Why would any 'enterprise' do this? What do they have to gain?

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They're basically gambling on making a profit. They could give you for example £10m in exchange for 20% of everything you win. If you win £100m they get £20m and a £10m profit. As Keith's commentary said, they must think there's a decent chance of winning and making a tidy sum.

Quote:

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Originally Posted by MOZZER2

https://www.cardiffcityfc.co.uk/news...ate-supporters

The following communication has been issued by Chairman, Mehmet Dalman and Finance Director, Philip Jenkins.

Following Board correspondence to supporters in January, we’d like to take this opportunity to offer insight into the statutory accounts for the year ended 31st May 2024 that have recently been submitted to Companies House.

The group accounts for Cardiff City Football Club (Holdings) Limited can be viewed in full here, for those who wish to see them.

Below are several highlights, with some greater detail and clarification:

Trading Results

The filed accounts show:

Operating loss of £9,957,000 which is a reduction of £1,169,000 on the prior year.

Loss before tax of £11,661,000 which is a small marginal increase of £231,000 on the loss for the prior year.

Increase in the cost of sales and administrative expenses over the prior year that has been more than offset by the exceptional income realised in the year.

Increase in the cost of sales from 2023 to 2024 of £9,473,000 driven by:

Increase in player related costs at £5,712,000.

Increase in amortisation charge from investment in our playing squad of £840,000.

Increase in running costs following investment in Academy development of £1,136,000, including provision for the one-off costs on the termination of the lease on the old Academy site.

The above account for 81.2% of the increase in the cost of sales.

Exceptional items

The results for the year have benefitted from exceptional gains of £18.4m.

The main driver therein is the £12m receivable from the sale of a “percentage” share of the ultimate proceeds from a litigation claim made by the club.

The sum receivable is non-refundable and not dependant on the ultimate outcome of the litigation case itself.

While there is potential for additional amounts to be received, dependent upon the outcome of the litigation, such “contingent asset” has not been recognised in these accounts and further will not be included in future years accounts until any such sums are awarded and received.

Balance sheet

Investment in Intangible and Tangible Fixed Assets:

Investment in our playing squad of £7,460,000 in the year shows an increase of £1,934,000 over the previous year.

Investment in tangible fixed assets of £1,665,000 in the year, includes initial payments to secure the 150-year leasehold interest in the site for the development of the new First Team Training Ground and operational base.

Loans from shareholders and connected parties:

Loans from the majority shareholder, Tan Sri Vincent Tan, and connected parties has increased in the year from the injection of net additional funding of £11,832,000.

While the loans have increased in 2024, as in previous years, there is no interest burden on the Club as while the loans accrue interest at 7%, all interest on the loans from Tan Sri Vincent Tan has been waived by the Owner.

As our chairman has previously indicated when the time is right, such loans will be either written off or converted to equity. Therefore, there is no demand or pressure on the Club for such loans to be repaid.

Loans from directors and connected parties:

Such loans have increased by additional loans received of £11,000,000, taking the resultant balance to £40,300,000.

It is the intention of the Club to start repaying these loans as soon as cash flow allows, or additional funding is received.

Summary

While the reduction in the Operating Loss for the year is encouraging, there is still a great deal of hard work ahead to continue the downward trend in the Operating Loss.

We have, however, in 2024 been able to expand our investment in the First Team squad, complete the new Academy development and lay the ground for the construction of our new purpose-built First Team training ground.

Each of these advancements will put us on a more stable and stronger footing for the future.

Mehmet Dalman (Chairman) & Philip Jenkins (Finance Director)

3rd March 2025

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Despitr the heading, this is not my commentary on the accounts which is set out below by Enoch Mort

Quote:

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Originally Posted by The Lone Gunman

"There are enterprises that will buy the rights to all or parts of legal claims, but only if they believe that the claim has a very good chance of success. Therefore, it seems that it is just not the club and its legal advisors that continue to believe they will eventually succeed in their claim against Nantes but an independent third party who are willing to advance £12m - non refundable no matter what the outcome of the case."

It would be interesting to know just how 'independent' the third party is...

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Totally independent Dave

Grateful to Keith Morgan for translating the info. for us.

There was a time I would castigate major shareholders for charging interest on their loans to the club.

Now, I just shrug and remind myself: he's not a fan, just a business man who wants a return on the money - which he could have invested elsewhere for a similar profit, without us benefitting from it for a time.

Quote:

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Originally Posted by Ninian1962

Totally independent Dave

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So who are they, what percentage have they bought and why did City need outside finance of this nature?

Quote:

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Originally Posted by Crisp White Lines

Grateful to Keith Morgan for translating the info. for us.

There was a time I would castigate major shareholders for charging interest on their loans to the club.

Now, I just shrug and remind myself: he's not a fan, just a business man who wants a return on the money - which he could have invested elsewhere for a similar profit, without us benefitting from it for a time.

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If Tan wants a return on his money, why would he, in effect, "cash out" on earning £100m for a much lower, guaranteed sum, if he's that certain we'd win?

Quote:

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Originally Posted by The Lone Gunman

So who are they, what percentage have they bought and why did City need outside finance of this nature?

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As frustrating as it may be , the first two questions can`t be disclosed (at least not yet) due to confidentiality agreements.

Getting this form of deal done also means the club didn`t have to seek finance from other sources which might have been interest bearing and also be repayable. In addition, the fact that someone other than the club believes it will win its claim against Nantes strengthens the case.

Quote:

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Originally Posted by Eric the Half a Bee

If Tan wants a return on his money, why would he, in effect, "cash out" on earning £100m for a much lower, guaranteed sum, if he's that certain we'd win?

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I'm not referring to Tan (or the Nantes situation). Perhaps major shareholders was a misleading phrase to use.

I'm referring to other shareholders/directors putting in large sums of money.

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Originally Posted by Undercoverinwurzelland

They're basically gambling on making a profit. As Keith's commentary said, they must think there's a decent chance of winning and making a tidy sum.

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There's so much I'd like to say about this situation, but as my identity is not a secret I'll have to tread very carefully.

Let's just think about the above for a moment....

Quote:

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Originally Posted by The Lone Gunman

There's so much I'd like to say about this situation, but as my identity is not a secret I'll have to tread very carefully.

Let's just think about the above for a moment....

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It looks like short term money to cover losses without any interest.
My non financial mind reads it as that. :shrug:

Quote:

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Originally Posted by Ninian1962

Despitr the heading, this is not my commentary on the accounts which is set out below by Enoch Mort

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Your comment followed the club statement. I've made it clearer in the original post.

Quote:

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Originally Posted by The Lone Gunman

There's so much I'd like to say about this situation, but as my identity is not a secret I'll have to tread very carefully.

Let's just think about the above for a moment....

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It's fairly common practice and completely above board. I don't think it's something to be suspicious about, assuming they've done it properly with an experienced litigation funding specialist. (Which is an assumption, admittedly!)

Quote:

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Originally Posted by Undercoverinwurzelland

It's fairly common practice and completely above board.

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Naturally.

So we now have a situation whereby an unknown third party is apparently seeking to make a large profit by gambling millions of pounds on the outcome of a court case involving the death of a professional football player.

Could this unsavoury business get any murkier? I guess we'll find out in due course.

Maybe it's Langstone.:hehe:

So basically due to income relating to the Sala case we've lost slightly less than previous years but without it we'd have lost a shedload more, or is that an oversimplification? Hardly seems like a very sustainable strategy if so.

Quote:

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Originally Posted by The Lone Gunman

Naturally.

So we now have a situation whereby an unknown third party is apparently seeking to make a large profit by gambling millions of pounds on the outcome of a court case involving the death of a professional football player.

Could this unsavoury business get any murkier? I guess we'll find out in due course.

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There were plenty of law firms who offer a "no win, no fee" guarantee wherein they offer financial support (in the form of free representation) in return for a gamble on the outcome of a case - even covering death in the workplace. There are also several companies who buy out portions of cases in order to give clients early access to the future funds (in this FYs case, it appears that the early access to the land reduces the risk for the client. Ok, this is offset by a potential reduction in the successful outcome of the csse, but it seems like a good thing for the club to be doing, given the circumstances it is in.

I can't see where the club has done anything wrong here - it's just the nature of venture capitalism. I agree, it's not a practise that I would particularly support, but that doesn't mean the club are morally wrong for having pursues it as an option. The only issue I could foresee here would be if it was being bought by someone with intimate knowledge of the case outcomes who could be sure that it was only going our way, but that seems unlikely?

Quote:

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Originally Posted by TaffsWellThatEndsWell

There were plenty of law firms who offer a "no win, no fee" guarantee wherein they offer financial support (in the form of free representation) in return for a gamble on the outcome of a case - even covering death in the workplace. There are also several companies who buy out portions of cases in order to give clients early access to the future funds (in this FYs case, it appears that the early access to the land reduces the risk for the client. Ok, this is offset by a potential reduction in the successful outcome of the csse, but it seems like a good thing for the club to be doing, given the circumstances it is in.

I can't see where the club has done anything wrong here - it's just the nature of venture capitalism. I agree, it's not a practise that I would particularly support, but that doesn't mean the club are morally wrong for having pursues it as an option. The only issue I could foresee here would be if it was being bought by someone with intimate knowledge of the case outcomes who could be sure that it was only going our way, but that seems unlikely?

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Isn't this a bit like venture capitalism? The club have a potential lucrative product (the court case payout) so the VC has bought a % for a non refundable £12m. On the good side the club has certainly recovered 60% of the transfer fee and could possibly recover more in the future. The downside is if the club was successful in court they will give up a large % of the compensation. Sounds to me like the club have decided that a bird in the hand is worth more than two in the bush.