Coventry City - £3.3m loss

the football ‘business’ is hardly full of prime examples of running profitable enterprises.

Among the best of a very bad bunch is about the best way of summing it up.

 

Financial Accounts, and in particular football club accounts, are very poor at measuring the value of the company. The Balance Sheet is no more than the historical record of the value of assets less the historical value of liabilities. They are a picture of all that historical information at a moment in time, and are not intended as a valuation of the company because many values are understated. For example, the transfer fees paid for players are written off to profit and loss over the term of the individual contracts. It is a way of writing off a large expense over a longer term. A player who came through an academy will have no Balance Sheet value because no fee was ever paid for him, even though he may have a value in the transfer market and may not have reached the end of his contract term. Players who reach the end of their initial contract and then re-sign also have no Balance Sheet value, even though they may have a transfer value in the open market. Auditors would insist that if it was obvious that a player was no longer worth the net written down value remaining from his original transfer fee, the outstanding net written down value be reduced to his current value in the marketplace. However, there is no mechanism to revalue the Balance Sheet value of a player who is worth more than his net written down value. Those figure only become crystalised when a player is sold. Consequently, football clubs will always be worth more than their Balance Sheet values. Football clubs can, and frequently do, run out of cash, but that is cash flow and not Balance Sheet value.

When our current majority owners bought 80% of the club from the Cryne family, they paid £8m, valuing the club at £10m including the 20%. The question is this. Would the club currently be worth more or less than that figure if it was put up for sale? I think it is worth more, but I do not have any concrete reasoning for that statement.