The 750k (can someone summarise)

Sorry to start another thread but I genuinely missed some of this and don't know the whole story here.
Could someone up on the finances please explain it to me.
Have they (the 80% lot) basically used the clubs money to pay the Crynes for the purchase of the club?


Thanks.

 

Yes - Barnsley football club paid £750k on behalf of BFC investments to Oakwell Holdings. The debt owed by BFC investments to Barnsley football club, in respect of the payment, was subsequently written off.

 

Thanks I thought I had got it right but I'll admit sometimes these financial tricks go over my head.

 

Basically the 80% mob claimed that they hadn't taken a penny out of the club and yet as it turns out Paul Conway paid himself a wage (quite a lot too if I remember correctly) and they took three quarters of a million quid out of the club in order to pay the crynes.

 

Funny you mention this. I had a look at Directors Remuneration the other day going back to the last full season of Patrick. There have been a significant addition of directors and changes in accounting rules given we were classed as a small company for some accounts and more recently medium, so we get to see more information on directors remunerations and pensions.

The last 2 years, directors remuneration has been significantly over £300k. Under the Crynes, directors remuneration was £130k ish and then rose to £185k (though the comparative for the same year in the next accounts stated 200k, so guessing it was an accountant error on the comparative).

I'm assuming Cryne Jr is paid through BFC Data Services, so subcontracted essentially. That would leave whoever is our CEO and Robert Zuk as working directors who arent in the ownership group.

£325k is a heck of a wedge for an FD and essentially an MD of a small company. The 2 years Ganaye was CEO, the figured jumped by about £150k.

I can see one of three scenarios. There was a very significant pay rise for execs under the new ownership. An additional director is included in that £325k (so maybe James Cryne is also paid through there too to some degree, but then I'm not sure what BFC Data Services is for, unless it just holds intellectual property) or some or all of the ownership group are taking a "nominal" contribution for their "time". But Conway had said they hadn't taking a penny out, so I'd very much hope it isn't the latter.

 

On the Director remuneration shown in the accounts from 2017 onwards the total amounts were:

2017 - £131,000
2018 - £185,000
2019 - £347,000
2020 - £327,000

These would cover all director remuneration.

 

Do we know what the Cryne family did with their share of the 750k they were paid with? So part of the money to pay the Cryne family would be theirs anyway.

 

How does this compare with the average for a Championship team?

 

The 80% owed the 20% some money they used club funds to pay for it. Pretty much based on the model that the Glaziers used on a much smaller scale.

As a business model makes sound financial sense and minimises exposure and risk just be upfront with it.

 

So if they took 750k out of the club then the Cryne family own 20% so did the 80% use 150k of Cryne family money to pay them?

 

Luton Town paid £311k, and have 8 directors listed.

Millwall around 300k and the note in the accounts says that was paid to just one director, the other 7 were unpaid.

Reading FC, £581k with 5 directors. The highest paid earning £497k.

 

So its similar to other championship clubs our size? Cryne wasn't in it to make money this lot are.

 

I would hazard a guess that the £500k earner at Reading is the ultimate owner and taking it out as salary (because they cant take dividends from being insolvent).

Probably the same at Millwall.

Its not so much the overall levels, its how many directors are being paid and which of those are operational.

I think we're also different in that we have owners and employees listed as Directors (Zuk and whoever CEO of the day is). I looked largely to see what had changed the last few years. A £150k uplift is a significant one when we have essentially had an FD and an MD/CEO as directors operationally in that time.

I'm hoping James Cryne is a third paid Director through there to account for the significant uplift. If the owner Directors (Chien & Dickson Lee, Grace Hung, Paul Conway and Nareev Parekh, as well as James Cryne) are getting paid for attendance, especially given Conways pledge (that we now know to be false anyway), then it's just a little bit more dispiriting.

 

Is there any evidence that the 80% mob have actually used any of their own money in either the purchase or subsequent running of BFC?

 

No.

We don’t know if they have used personal capital or if a fund similar to red ball corp is used to acquire the clubs they hold.

HK accounts aren’t very transparent.

 

To be honest, if Conway is working at the club and by doing so is saving the club having to pay someone else, I have no objection to him being paid. In my experience, this is quite normal. For example, he stood in as CEO following the departure of Dane Murphy and before the arrival of Khaled El Ahmad. However, what is wrong is using the club's money to pay a PMG debt.

 

I also have no issue with that BUT once that happens they have to admit that they do take money out of the club. Absolutely nothing wrong with that if they're upfront and honest about it

 

Ive no issue if acting as stand in. However, exec pay has just about doubled.

So the question remains, have directors other than Fin Director and CEO received payments given they said they’d not taken a penny?

 

If I was to hear a member of the PMG group say that they have not taken any money out of the club, I would not assume that they have not been paid for services rendered, or that they have not been paid their expenses on BFC business. I would assume that they have not taken any dividend (which they have not), and I would assume that there has been no management charge from the holding company (which there has not). I would also assume that the club has not paid a PMG debt and charged it through the P&L Account, which they have done, so even if they were right before, they are wrong now and frankly the potential for further payments is huge.

 

Massive over-simplification here and, as analogies go, not a particularly good one. For a start, Man Utd aren't failing to maintain Old Trafford to a reasonable standard and are, as far as I'm aware, not stating how the contributions of season ticket holders have made a huge difference in keeping the club afloat during difficult and uncertain financial times.

Essentially, there are 3 companies here. Company A is the investment company, based in Hong Kong, that owns all the shares in Company B, Barnsley Football Club Limited. It purchased these shares from Company C, Oakwell Holdings Ltd, which is 100% owned by the Cryne family.

Company A is 80% owned by Pacific Media Group, and 20% owned by the Cryne family.

Companies A and C are essentially investment companies which do nothing other than hold assets for their shareholders. Company B is the only one which has a tangible operation on a day to day basis, which is the operation of the football club, and it is expected to be (and has been) entirely self-sufficient in doing so since it was last purchased.

To summarise the payment issue, A owes C a debt arising from the purchase of Company B. (This debt is in dispute, so C is now suing A over the non-payment of some of this debt, but this is not directly relevant to the payment issue). The issue is that the last instalment paid to C was paid directly by B to C, and treated as a liability of B, when no such liability existed. Subsequently B then wrote off the debt due to it from A for advancing this payment on their behalf and it was treated as an expense of B in the company accounts, essentially as a cost of the football operations. Based on all normal considerations, the day to day operations of B have been adversely impacted by this, as this is a significant proportion of its day to day working capital.

I would suggest that a more appropriate analogy of the nature of this payment would be with me claiming expenses from my employer. Provided that I can demonstrate, via my expense claims, that the payments are wholly, exclusively and necessarily related to the operations of the employer then this is a perfectly normal and acceptable part of the running of the business. From my own perspective, HMRC don't treat these payments as being part of my taxable income.

The nature of the £750k payment, in terms of it's relevance to my employer, is equivalent to me using company expenses to pay off the purchase of my house.