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Thread: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

  1. #1

    Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    The following has just been sent out to Trust members.


    "Cardiff City's Latest Accounts: Trust Chair Gives His Analysis

    Trust chair Keith Morgan, accountant and football finance specialist, presents his present expert analysis of the latest audited accounts for the year ended May 31, 2020, submitted by Cardiff City Football Club (Holdings) Limited.


    Summary


    The club made a net loss for the year of £12.2m in its first season following relegation from the Premier League


    As at May 31, 2020, it had net liabilities in the balance sheet of £24m

    The directors have received a letter of support from the club`s principal shareholder in terms of his future intentions to provide funding for the club to enable it to continue operating for the foreseeable future.


    The directors have expressed their strong confidence that the club continues to be compliant with the financial requirements of Profitability and Sustainability Rules (Financial Fair Play).


    The club will continue to receive a “parachute payment” in financial year 2020-21 but not beyond that which will have an adverse impact on income of around £30m.



    Financial Result For The Year – Statement Of Comprehensive Income


    The club made an operating loss for the year of £23.8m compared to a small operating profit of £2.2m in the previous year to May 31, 2019. After accounting for a substantial profit on player sales and interest the loss for the year was reduced to £12.2m (2019 loss £755k).


    The principal reason for the increased losses was the huge decline in income following the club`s relegation from the Premier League. Turnover fell from £125.2m in 2019 to £46.0m in 2020, largely due to a fall in broadcasting income of £70m from £107m to £37m. Gate receipts fell by £4m due to lower attendances at Championship level, and sponsorship, advertising, etc. also fell by £5m.


    In addition, the club was badly impacted by Covid restrictions towards the end of the financial year. The postponement of the end of the season and its non-resumption until June meant that some £8.8m of TV revenue was deferred until the following financial year. Also, some £2.1m had to be repaid in respect of the club`s share of EPL refunds paid for matches not played under the overseas broadcasting agreement. Without these two amounts, totalling £10.9m the club would have shown almost a breakeven position for the year.


    Despite the obvious great efforts by the club to reduce costs in the year (see below), to cover such a fall in income was virtually impossible but big savings were made, including the following:


    Player-related wage costs were reduced by £14.6m from £42.5m to £27.9m. This accounted for a significant proportion of the overall saving in cost of sales of £34.8m.

    Administrative expenses fell by £26.7m from £62.1m to £35.4m. This was largely due to the fact that the 2019 figure included a provision of over £19m in respect of the legal case surrounding the Emiliano Sala transfer dispute with FC Nantes. In addition, a reduction in player impairment charges of £11.6m was enjoyed compared to 2019.
    In the year to May 31, 2020, the club made a significant profit on the sale of players of £13.7m. In 2019 there was a much smaller profit made of £2.1m.



    The Statement Of Financial Position as at May 31, 2020


    As a result of the net loss of £12.2m in the year and a technical tax adjustment of £271k, the overall net liabilities of the club increased to £24.0m (assets of £123.8m and liabilities of £147.8m). The main assets and liabilities were as follows:


    The value of the playing squad was £24.2m, very similar to that in 2019. £18.5m of player cost was added to the squad in the year and players initially costing £14.6m were disposed of, but those players had been depreciated down to a net nil value at the time of disposal (hence the large player transfer profit referred to above in the profit and loss account). Overall, player value was written down by £17.8m in the year (amortisation).


    The Cardiff City Stadium was valued (based on an independent professional valuation carried out in 2018) at £81.0m, with other fixed assets such as fixtures and fittings having a value of £1.2m and training ground improvements of £314k.


    As at May 31, 2020, the club was owed £14.4m by various debtors, most of which (£13m) related to future instalments due on player sales. It also had £2.4m of cash at bank and £207k of stocks.


    Technically, the club had £118.6m of liabilities as at May 31, 2020, which were payable by May 31, 2021, or earlier. However, in reality, much of this didn`t have to be repaid in that timescale as explained in the following breakdown of some elements of that total figure


    £45.9m was due to Vincent Tan and £3m due to his son U-Peng and as principal shareholder, this sum is unlikely to be required to be repaid in the short term. In fact, during the year Vincent Tan put a further net amount of £8.8m into the club by way of loans. There was no debt write-off or conversion of debt to shares in the year. All Vincent Tan loans are secured against all the assets of the club.


    There were £37.9m of other loans made to the club as at the year-end, stated to be secured against guaranteed future income streams. This would include future broadcasting money, plus future instalments due from other clubs arising from player sales. There are no charges registered at Companies House other than two in favour of Vincent Tan so it is assumed that the security for these loans is by means of an agreement with Vincent Tan through the security that he holds and has registered.

    The club owed £3.9m in future instalments of transfer fees for players bought.

    There is a figure of £20.2m for accruals. This included a sum of £8.8m which relates to parachute income and EFL basic award money which (because of the Covid-19 deferment of the season) did not take place until the following financial year which started on June 1, 2020. Also included is £2.1m relating to an EPL rebate due as the club`s share of broadcasting income refunded as a consequence of the deferral of matches at the end of the season.


    A sum of £5.9m was due to other parties but not repayable for over one year after May 31, 2020, – secured as referred to above.

    There remains a provision in the club`s accounts (as there was in the previous year) in respect of the ongoing legal dispute over the Emiliano Sala transfer. The figure is £20.7m but, as the accounts clearly note, no such sum is considered payable and will be extinguished after a subsequent hearing of the case by the Court of Arbitration for Sport. However, to comply with prudent accounting requirements, full provision continues to be made in the accounts.


    Events After The Balance Sheet Date

    The year to May 31, 2021, is also going to be very difficult financially for the club as Covid-19 has continued to have a major adverse impact on football generally for the whole of the 20-21 season. The continued cash flow support of Vincent Tan and other funders was mentioned at a recent meeting with fans` groups and the media and there is also some reference in the accounts (Note 29) to further funding of £34.8m received by undisclosed parties between May 2020 and the April 2021 signing of the accounts at interest rates of up to 9%. The same accounts note reveals that part of these funds was used in that period for the acquisition of new players at a cost of £5.2m.


    The accounts were approved by the board of directors on April 19, 2021, and signed off as approved by the independent extern"

  2. #2

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    That seems - not terrible?

    Here are some of the other clubs in the division for context.

    E2xoFTgXoAA8K5a.jpg

    Taking the ones in the same financial year (the yellow ones) it could certainly be worse (especially if you look at Stoke!)

  3. #3

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    How is the debt to equity conversion coming along? Vinnie also said the club would be debt free by 2021. Any news on that?

  4. #4

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Captain_Sensible View Post
    How is the debt to equity conversion coming along? Vinnie also said the club would be debt free by 2021. Any news on that?
    There have been substantial debt to equity conversions in recent years but very difficult to do so in 2020 as the club needed loan cash in to fund its operations. The same will undoubtedly be the case for financial year 20/21 due to Covid so I don`t anticipate further conversions or debt write offs until at least 2022. However I do regard this as a deferral of the intention to convert rather than an abandonment.

  5. #5

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Captain_Sensible View Post
    How is the debt to equity conversion coming along? Vinnie also said the club would be debt free by 2021. Any news on that?
    it mentions that there was no more debt to equity, and gross debt is still high compared to other clubs in the league.

  6. #6

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Captain_Sensible View Post
    How is the debt to equity conversion coming along? Vinnie also said the club would be debt free by 2021. Any news on that?
    Maybe covid hasn't helped

  7. #7

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Very thorough report from Keith. Not as bad as I thought, I suppose the transfer money came from Manga, Zohore and Decordova-Reid, which was about £21.5 m in my estimation.

    Thanks Goodness it is a year until he next set of accounts!

  8. #8

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by cardiff55 View Post
    Very thorough report from Keith. Not as bad as I thought, I suppose the transfer money came from Manga, Zohore and Decordova-Reid, which was about £21.5 m in my estimation.

    Thanks Goodness it is a year until he next set of accounts!
    I am always hopeless at remembering which players we sold when but the reported profit on sale of players of £13.7m would have been from the July 2019 and January 2020 transfer windows , so who did we sell then?

    The cash from player sales follows a different pattern as these things are often in instalments. So for year 2019/20 we only received £2.3m in cash from player sales (paid out £24.7m in cash in the same period).

    Partly because of the £11m adjustment I mention in my commentary , I don`t think 2020/21 results will be as bad in profit and loss terms as might otherwise be expected. However, in cash terms there will undoubtedly have been a need to borrow money to pay month to month wages and other running costs prior to receiving parachute monies. Note 29 in the 2020 accounts support this as it says that £34.8m of funding was received between May 2020 and April 2021.

    In terms of being "profitability and sustainability" compliant under EFL rules , we should be OK as for both 2020 and 2021 as the EFL has allowed a Covid adjustment to reported losses as well as the normal £13m average "allowed" loss. This adjustment has to be audited before submission to EFL.

  9. #9

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Christ, Stoke are in the shit aren't they!

  10. #10

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Ninian1962 View Post
    I am always hopeless at remembering which players we sold when but the reported profit on sale of players of £13.7m would have been from the July 2019 and January 2020 transfer windows , so who did we sell then?

    The cash from player sales follows a different pattern as these things are often in instalments. So for year 2019/20 we only received £2.3m in cash from player sales (paid out £24.7m in cash in the same period).

    Partly because of the £11m adjustment I mention in my commentary , I don`t think 2020/21 results will be as bad in profit and loss terms as might otherwise be expected. However, in cash terms there will undoubtedly have been a need to borrow money to pay month to month wages and other running costs prior to receiving parachute monies. Note 29 in the 2020 accounts support this as it says that £34.8m of funding was received between May 2020 and April 2021.

    In terms of being "profitability and sustainability" compliant under EFL rules , we should be OK as for both 2020 and 2021 as the EFL has allowed a Covid adjustment to reported losses as well as the normal £13m average "allowed" loss. This adjustment has to be audited before submission to EFL.
    Cheers Keith, it was the three players I mentioned, but obviously all the cash may not have been received in one go/ Zohore and Manga went in summer 2019, Devordova-Reid sale was in January 2020. In the same period we brought in Vaulks, Flint, Whyte, Pack, Glaztel and Vassell. So a small overall profit on sales I think.

    Last season incoming was Moore, Phillips,. Watters and NG, so not much there in the way of fees. Only outgoing fees were Etheridge and Paterson.

  11. #11

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    I think the loans may be covid support from EFL?
    If that's correct any idea what repayment schedule is?

  12. #12

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by cardiff55 View Post
    Cheers Keith, it was the three players I mentioned, but obviously all the cash may not have been received in one go/ Zohore and Manga went in summer 2019, Devordova-Reid sale was in January 2020. In the same period we brought in Vaulks, Flint, Whyte, Pack, Glaztel and Vassell. So a small overall profit on sales I think.

    Last season incoming was Moore, Phillips,. Watters and NG, so not much there in the way of fees. Only outgoing fees were Etheridge and Paterson.
    The cost of the players we sold that year was written down to zero in the accounts. They had originally cost £14.6m but had been fully depreciated/amortised. The figures then reconcile. We made a profit of £13.7m from selling them so the total selling fees came to £13.7m as we had a nil book value for them. In cash terms we got £2.3m of cash for them in the year and were owed £13m in cash from player transfers instalments at the year end (I am assuming the small difference was a balance of money from transfers made in the previous year).

    According to the accounts , the total cost of the players you list who were acquired in the year 2019/20 was £18.5m

  13. #13

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Former Labour leader View Post
    I think the loans may be covid support from EFL?
    If that's correct any idea what repayment schedule is?

    The loans were from other parties (bank etc).

    £32.5m of the "other" loans of £43.5m (£37.6m repayable by 31 May 2021 and £5.9m payable after that) was secured against guaranteed future revenue streams - i.e. parachute monies - so would have been repaid when those were received after the year end. A further £10.9m was secured against future instalments receivable in transfer fee instalments so would have been repaid/will be repaid when those are received.

    So the above were effectively cash flow loans , most of which won`t/can`t be borrowed in the future as we will not have the parachute payment money available to secure them.

  14. #14

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Ninian1962 View Post
    There have been substantial debt to equity conversions in recent years but very difficult to do so in 2020 as the club needed loan cash in to fund its operations. The same will undoubtedly be the case for financial year 20/21 due to Covid so I don`t anticipate further conversions or debt write offs until at least 2022. However I do regard this as a deferral of the intention to convert rather than an abandonment.
    I think VT's businesses in Malaysia will have to recover before there can be any further debt to equity conversions. The "deferral" is likely to be for several years and who can blame VT for that?

  15. #15

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Vindec View Post
    I think VT's businesses in Malaysia will have to recover before there can be any further debt to equity conversions. The "deferral" is likely to be for several years and who can blame VT for that?
    The usual suspects elsewhere.

  16. #16

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    As long as Vincent Tan remains committed to the club (and there’s no sign of any change to that), then the debt to equity subject is really a non-issue.
    If another party wanted to acquire the club, they would either have to pay for the equity of the club (if a full conversion had occurred) or the club at its current value plus the debt, so it’s semantics in the end.

  17. #17

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Ninian1962 View Post
    The cost of the players we sold that year was written down to zero in the accounts. They had originally cost £14.6m but had been fully depreciated/amortised. The figures then reconcile. We made a profit of £13.7m from selling them so the total selling fees came to £13.7m as we had a nil book value for them. In cash terms we got £2.3m of cash for them in the year and were owed £13m in cash from player transfers instalments at the year end (I am assuming the small difference was a balance of money from transfers made in the previous year).

    According to the accounts , the total cost of the players you list who were acquired in the year 2019/20 was £18.5m
    Thanks for clarifying Keith.

    Tony

  18. #18

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by the other bob wilson View Post
    The following has just been sent out to Trust members.


    "Cardiff City's Latest Accounts: Trust Chair Gives His Analysis

    Trust chair Keith Morgan, accountant and football finance specialist, presents his present expert analysis of the latest audited accounts for the year ended May 31, 2020, submitted by Cardiff City Football Club (Holdings) Limited.


    Summary


    The club made a net loss for the year of £12.2m in its first season following relegation from the Premier League


    As at May 31, 2020, it had net liabilities in the balance sheet of £24m

    The directors have received a letter of support from the club`s principal shareholder in terms of his future intentions to provide funding for the club to enable it to continue operating for the foreseeable future.


    The directors have expressed their strong confidence that the club continues to be compliant with the financial requirements of Profitability and Sustainability Rules (Financial Fair Play).


    The club will continue to receive a “parachute payment” in financial year 2020-21 but not beyond that which will have an adverse impact on income of around £30m.



    Financial Result For The Year – Statement Of Comprehensive Income


    The club made an operating loss for the year of £23.8m compared to a small operating profit of £2.2m in the previous year to May 31, 2019. After accounting for a substantial profit on player sales and interest the loss for the year was reduced to £12.2m (2019 loss £755k).


    The principal reason for the increased losses was the huge decline in income following the club`s relegation from the Premier League. Turnover fell from £125.2m in 2019 to £46.0m in 2020, largely due to a fall in broadcasting income of £70m from £107m to £37m. Gate receipts fell by £4m due to lower attendances at Championship level, and sponsorship, advertising, etc. also fell by £5m.


    In addition, the club was badly impacted by Covid restrictions towards the end of the financial year. The postponement of the end of the season and its non-resumption until June meant that some £8.8m of TV revenue was deferred until the following financial year. Also, some £2.1m had to be repaid in respect of the club`s share of EPL refunds paid for matches not played under the overseas broadcasting agreement. Without these two amounts, totalling £10.9m the club would have shown almost a breakeven position for the year.


    Despite the obvious great efforts by the club to reduce costs in the year (see below), to cover such a fall in income was virtually impossible but big savings were made, including the following:


    Player-related wage costs were reduced by £14.6m from £42.5m to £27.9m. This accounted for a significant proportion of the overall saving in cost of sales of £34.8m.

    Administrative expenses fell by £26.7m from £62.1m to £35.4m. This was largely due to the fact that the 2019 figure included a provision of over £19m in respect of the legal case surrounding the Emiliano Sala transfer dispute with FC Nantes. In addition, a reduction in player impairment charges of £11.6m was enjoyed compared to 2019.
    In the year to May 31, 2020, the club made a significant profit on the sale of players of £13.7m. In 2019 there was a much smaller profit made of £2.1m.



    The Statement Of Financial Position as at May 31, 2020


    As a result of the net loss of £12.2m in the year and a technical tax adjustment of £271k, the overall net liabilities of the club increased to £24.0m (assets of £123.8m and liabilities of £147.8m). The main assets and liabilities were as follows:


    The value of the playing squad was £24.2m, very similar to that in 2019. £18.5m of player cost was added to the squad in the year and players initially costing £14.6m were disposed of, but those players had been depreciated down to a net nil value at the time of disposal (hence the large player transfer profit referred to above in the profit and loss account). Overall, player value was written down by £17.8m in the year (amortisation).


    The Cardiff City Stadium was valued (based on an independent professional valuation carried out in 2018) at £81.0m, with other fixed assets such as fixtures and fittings having a value of £1.2m and training ground improvements of £314k.


    As at May 31, 2020, the club was owed £14.4m by various debtors, most of which (£13m) related to future instalments due on player sales. It also had £2.4m of cash at bank and £207k of stocks.


    Technically, the club had £118.6m of liabilities as at May 31, 2020, which were payable by May 31, 2021, or earlier. However, in reality, much of this didn`t have to be repaid in that timescale as explained in the following breakdown of some elements of that total figure


    £45.9m was due to Vincent Tan and £3m due to his son U-Peng and as principal shareholder, this sum is unlikely to be required to be repaid in the short term. In fact, during the year Vincent Tan put a further net amount of £8.8m into the club by way of loans. There was no debt write-off or conversion of debt to shares in the year. All Vincent Tan loans are secured against all the assets of the club.


    There were £37.9m of other loans made to the club as at the year-end, stated to be secured against guaranteed future income streams. This would include future broadcasting money, plus future instalments due from other clubs arising from player sales. There are no charges registered at Companies House other than two in favour of Vincent Tan so it is assumed that the security for these loans is by means of an agreement with Vincent Tan through the security that he holds and has registered.

    The club owed £3.9m in future instalments of transfer fees for players bought.

    There is a figure of £20.2m for accruals. This included a sum of £8.8m which relates to parachute income and EFL basic award money which (because of the Covid-19 deferment of the season) did not take place until the following financial year which started on June 1, 2020. Also included is £2.1m relating to an EPL rebate due as the club`s share of broadcasting income refunded as a consequence of the deferral of matches at the end of the season.


    A sum of £5.9m was due to other parties but not repayable for over one year after May 31, 2020, – secured as referred to above.

    There remains a provision in the club`s accounts (as there was in the previous year) in respect of the ongoing legal dispute over the Emiliano Sala transfer. The figure is £20.7m but, as the accounts clearly note, no such sum is considered payable and will be extinguished after a subsequent hearing of the case by the Court of Arbitration for Sport. However, to comply with prudent accounting requirements, full provision continues to be made in the accounts.


    Events After The Balance Sheet Date

    The year to May 31, 2021, is also going to be very difficult financially for the club as Covid-19 has continued to have a major adverse impact on football generally for the whole of the 20-21 season. The continued cash flow support of Vincent Tan and other funders was mentioned at a recent meeting with fans` groups and the media and there is also some reference in the accounts (Note 29) to further funding of £34.8m received by undisclosed parties between May 2020 and the April 2021 signing of the accounts at interest rates of up to 9%. The same accounts note reveals that part of these funds was used in that period for the acquisition of new players at a cost of £5.2m.


    The accounts were approved by the board of directors on April 19, 2021, and signed off as approved by the independent extern"
    We can never know what might have been but since VT rescued us he has stood by us. Thankfully it seems that he intends to continue to do so.

  19. #19

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by BLUEAWAY View Post
    We can never know what might have been but since VT rescued us he has stood by us. Thankfully it seems that he intends to continue to do so.
    What is Tan's motive for doing so these days though, I wonder.

  20. #20

    Re: Cardiff City's Latest Accounts: Trust Chair Gives His Analysis.

    Quote Originally Posted by Taunton Blue Genie View Post
    What is Tan's motive for doing so these days though, I wonder.
    The alternative would be that he’d lose his existing investment and more importantly, his credibility.

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