BFC - Finances last 16 years

With lots of focus on the financial position and how the club perform off the pitch I thought I'd have a trawl through the accounts since 2005. It was @Deputy Dawg and @Loko the Tyke set me thinking so I've put together a summary of the main events through to the last set of accounts to May 2020.

The analysis goes back to the 2004/5 accounts when Patrick Cryne, in the form of Oakwell Holdings Ltd, took over for that well renowned footballing financial genius Peter Ridsdale and Round Objects Ltd.

The ownership transferred on 23 December 2004. The club was languishing in the first division and the accounts had a negative net asset position of £4.9m, this was sustained by loans from Patrick Cryne. The following years, although eventful for promotion, have minimal information on the finances as the club filed abbreviated accounts. A small loss of £0.2m in 2006, offset by a profit of £0.3m in 2007.

The position gets clearer in 2008 when the reporting is more detailed, I have summarised below the key metrics in each year.



In 2008 loans totalling £4.9m from Patrick Cryne (£4.4m) and Oakwell Holdings (£0.5m) were written off. The accounts show a profit for that year but that is after the write offs which are treated as exceptional items.
In 2009 £1m was injected in to the share subscription account and a further £2.9m loaned
In 2010 £2.25m was donated to the club by Patrick Cryne
In 2012 A further £500k of loans were put in by Patrick Cryne
In 2014 £840k was donated to the club by Patrick Cryne
In 2015 A further £2.9m was injected in to the share subscription account.

What is slightly frustrating is the lack of detailed accounts for 2016 as quite a few things happened in this year. A further donation of £402k from Patrick Cryne, the £3.9m sat in the share subscription account was converted to debt along with the addition of a further £900k. This explains the sudden reduction in net asset value at the end of 2016 as equity subscription was converted to debt. Total debt outstanding at this point is around £7.4m which ties in with the amount which turns up in Oakwell Holdings accounts post the sale.

In context the amount of donations put in to the club over the ownership of Patrick Cryne was £3.5m, £4.9m of loans written off and a further £7.4m of debt which was repaid as part of the transaction price. The remaining installments just about cover the donations, if the installments get paid. That leaves a hole of £4.9m for the written off loans. Running a football club is not good for your finances.

The biggest events outside the support of the owners was the initial John Stones money received in 2013 and the follow up in 2017.

The new ownership structure has seen total losses of £3.3m and £750k being used to fund the deferred purchase amount. This has been over a period of consistent gains from player sales. Running a football club is certainly not an easy task.

 

Thanks mate….which begs the question that I’ve always asked……why buy our club if you’re a supposed ‘billionaire’

don’t worry, I think I know the answer…

 

@Loko the Tyke The additional John Stones money was £10m and is set out as a post accounting period note in the 2016 accounts. That remained with the club and explains why the net asset position recovered from -£9.6m to £3.3m over 16/17. The asset position was further improved the following year when £6.3m of loans were converted to share premium account. That explains why the net asset position was so strong at £9.4m at the end of 2018. Stones installment plus all debt converted to share premium account.

 

A perfectly timed post, as it's saved me a job of digging out the player trading figures in recent years to follow up a link that @Loko the Tyke posted in the £750k thread. One of the linked tweets shows the total player trading profits for the Championship over the last few years, as follows



So, since 2017, the Championship has averaged a player trading profit of £238m per season, so essentially £10m per club, per season.

Over that period, we've averaged a player trading profit of £4.45m per season, which includes a massive one-off hit from John Stones sell-on fee following his move from Everton to Man City. Without this, we're more in the region of generating circa £2m a year from player trading.

Even allowing for a bias towards the bigger clubs, our player trading P&L is way below the average for a Championship club, which supports the long-standing viewpoint that we're great at being taken advantage of in the transfer market. We've consistently hidden behind the "undisclosed" fees and "retaining an interest in their future" but the return has been typically poor. We quite often make reference to how a team like Peterborough always seem to get great value when they sell players, while our much relied upon aim of buy low, sell high isn't actually generating that significant an income, relative to the teams around us.

Ideally, I'd be intrigued to look at the accounts of other teams with similar budgets to ours to see what they've generated as a comparative figure, but just looking at our own figures (thank you @Archerfield) compared to what is typical in the division shows that there's a big shortfall against the average in what our business model ultimately intends to be the main method of cash generation for the club.

Helik is probably our most saleable asset at the moment, and I fully expect him to depart in the January window, but what's our honest expectation of what we'd get for him as an initial transfer fee? Currently, I'd say £2-3m was ambitious, whereas I'd have been arguing he was a £5m player at the end of last season in a successful team. Styles, Brittain, Woodrow, etc would also be similarly devalued at the current time, simply due to their performances in a losing team this season. Short of selling half the squad, and not spending any money on replacements, I'm struggling to see how we get anywhere close to the £10m average figure on player trading in the near future.

Really useful post from Archerfield in general, and there's plenty to analyse within it. The transfer trading is just one aspect of it that I'd already planned to look at after reading the twitter thread that Loko had linked to earlier.

 

First Thanks to Archerfield ,Red Rain ,Sheriff and the others who have given us a view into the internal workings of the club


Have any of you any idea from a accounting point of view what there investment strategy is ?
i think everyone agrees clubs are money pits losing millions is perfectly normal
and based on your snooping !! even with trying to run a club so called "properly" its virtually if not impossible to make a profit even with the odd big money transfer, over the long run your still way way down

They buy basket case clubs heavily in debt ,or clubs that need or have been looking for a buyer desperately.
buying into club/s at well below there real market value ,so that's a way in investment wise.
The clubs on the face of it seem to have no real chance of any success buying teams in French Austrian etc 2nd divisions
So its got to be heavily tax based strategy yes/no ?
maybe also the buying and selling of players in the transfer market moving money around to pay debts off

i don't believe at least in Conway and Chiens case they have zero interest in football its a football club but could be anything its just a asset to them.

Am i correct in saying because they are non domicle they can write off part of there tax on other businesses ?
They get a loan or the club payments !! and they can be paid off with money that they would lose paying tax anyway

if say billy beane earns 1 million dollars a year (i believe its around 700,000) and has to pay 50 % tax instead of paying that tax it can be used on a secondary business of his.
so its money they never had or would lose anyway you could say.

also i read don't know if the loophole has been closed that its perfectly legal to loan ,get a loan or donate untaxed money from offshore banks / personal accounts and when that money is repaid that money is classed as taxed by the inland revenue and can be put in your local bank.

reading Apple borrows amounts ranging from 5 billion to 25 billion per year and pays those loans back from there untaxed offshore accounts
literally printing money,
pay a couple of percent interest rate on the loan or 50 % whatever rate it would be in tax .

Any clue guess how/ what they trying to achieve
its obviously not football success based
The chances of that happening is just not reality, based on a short time based investment.

 

If we have a low trading profit compared to other teams doesn't that indicate we spend a greater % of our incoming transfer fees on new players compared to other clubs?

Isn't that what we'd hope for?

 

@Deputy Dawg I can only guess what their aim is, just like the rest of us.

I actually think that they thought that the application of data would allow a global trading empire of football clubs to be built. The focus being on bringing in young talent, developing and selling on. The different clubs would be at varying points of the football pyramid to enable loan deals and transfers to showcase the players in more lucrative markets.

This potentially works and I’m sure could be sold to investors as a new way of tapping in to football and turning a profit.

However, the business model is predicated on the model giving you competitive edge, if all clubs are now running data algorithms the competitive edge disappears, it’s a bit like arbitrage being squeezed out in an efficient market. Then there’s Brexit, that really does make the UK an outlier, particularly when you are not looking in the premium players who can still easily move between markets.

Just a guess, but until Conway et al come out and say what their aims are, we will be in the dark.

 

@Archerfield

I would just add to your post that COVID has ruined the market for most of our players. The Premier League shops for players from all over the world. If Barnsley is to tap the big money that is available there, we need players with a special talent, and frankly, they are few and far between. Most of our sales will be below that level, but every club in the Championship has gone through a bad time recently, and there is just not that much money about. I believe that it is this, rather than us playing the wrong sort of football last season, or the players playing with reduced success this season that is the problem. As your figures showed only too well, BFC has to sell players to survive. It has always been that way. The new owners have not re-invented anything. They have simply adopted the framework that we have always had, and have called it new. Will they make a profit when they sell the club, as surely they must eventually? I doubt it, but they do not seem to lack confidence in their negotiating ability. The problem is, they now find themselves at the other side of the negotiating table, the side with a company/club they want to sell, and that is much harder to come away from still smiling.

 

The outstanding player in the division cost £27M three years ago. And the three teams clear at the top of the table are the three with the most recent Premier League experience. The impossible dream achieved in 1997 now looks, well.... impossible. Even stability in the Championship seems an elusive goal at present.

Against the financial history set out so well above, what have the owners brought to the club? There is a messy dispute about ownership and purchase of the club, and a separate one about the ground and facilities. The ground is seemingly in a state of decay. The team has not been developed and improved, but has rather been milked and renewed with recruits of variable quality, as Loko hints above. Behind the scenes several talented and long-serving staff have departed. Do we still have a reputation for developing talent, or are we more akin to human traffickers? Either way, few now come to the club with the intention of remaining here, whether player or coach. The reputed financial resources of the owners have made not a shred of difference, as Red Rain intimates. My personal engagement with the club is limited to following on TV whenever that does not involve contributing money to the owners. And it won't be changing until this lot move on, and the next chapter begins.

 

I suppose it also helps their negotiating position if they haven't actually paid for the purchase of the club. A little easier to make a profit from there I'd say.

 

good post

 

Barnsley Football Club is my team. It always has been , and it always will be. I was born in the town and I have live here all my life. That does not mean that I am blinded to the economic problems that the town has, and I know that those economic problems have been passed along to the football club. That does not mean that the town and the team are alone in the fact that they have problems, but it does put the club under extreme difficulty where trying to compete with the clubs that are better economically sited. Faced with these problems, an owner could inject money through loans / increases in share capital or through gifts. The loan or share capital route carries the advantage that the owners could see their capital repaid one day, but it means that the club loses money, bring the club under the glare of EFL scrutiny under their FFP legislation, potentially with points deductions. Gifts goes into the P&L, and put right those losses, but the owners have lost those tax losses and although the club is better off, potential new owners will know the reason why, and will not be fooled. Our owners have adopted a different strategy. They have elected to run the business as it has been run for the great majority of its existence. They have elected to make the club finance itself from its profits, and inevitably that means that its trading losses have to be financed by selling players and coaches when possible. I would argue that this strategy reflects the objectives of most of those concerned. The players and staff want to move on in order to maximise their career earnings. The club want them to do well, so they increase their value in the marketplace. The only party that are not happy are the fans, and that is particularly true when the fans are results driven to the exclusion of everything else.

The process of Administration affected me deeply. I realised that I could have lost my club, but for the timing of the sale of Patrick Cryne's other business. That single event has coloured my instincts as a fan, and it has provided me with the evidence that results are not everything. That the continued existence of my club is the most important thing. Our ownership might not be ideal, and the misappropriation of £750k is the biggest single piece of evidence in that statement, but there is no evidence that better owners are waiting around the next corner, and until I see evidence of better owners, I will continue to believe that our current owners were the only ones interested when PC sold up. None of these things make any difference to me though, because I support the club, and not the owners, whoever that might be.

 

A perfectly valid alternative view, and one which you have consistently held. And I believe that it is one that is shared by a majority of the fans. But there is the problem. That enables the owners to do as they wish without fear of elasticity of demand - including with the 750K! I suspect that "the club" means something different to the owners compared to what it means to you.

 

It does indeed mean something different to them, and I would not expect it to mean the same. By definition almost, they will have a different motive for ownership, and that is likely to be a profit motive. However, they will get their return on their investment by eventually selling the club on. To them, I am just cash flow. Nevertheless, it does not take away from me the fact that as well as belonging to them, in a different sense, the club belongs to me and my town, and I cannot see why that should be any different now than it has ever been.

 

Its a good question and one I've thought about on and off for 4 years.

I'd say there are 3 motives for owning a football club. Vanity. Sporting success. Or financial gain. The motives could overlap and strategies for attaining the outcomes vary.

Though I suspect there is some vanity in owning these clubs, that isn't the driver. Sporting success doesn't seem to be a significant driver either, certainly not a swift one. So we're left with financial gain.

They could gain financial return by selling clubs at a profit. They could gain financial return by developing a model that runs across all clubs, uniting them and selling them as a whole as say a red bull model (though I'm not sure thats viable under separate governing bodies and brexit has likely muddied waters too). They could as you say, and like Leicester did, use losses as a tax write off. Given our losses are so modest and mainly generated in one period, and that the owners haven't put a penny in, I doubt this as an option too.

They could use the clubs they own to push their other organisations through sponsorship and raising awareness to a UK market. Given what live ventures they still have, thats now a seemingly no go.

I wonder at this point if one of our accountants on here tried to have a look at some of their other clubs accounts (if accessible)? I'd be interested if disclosed, to see what happens to the directors remuneration post acquisition. We saw a big jump here. If that happens at other clubs, it could well be a case they are paying themselves a "modest" salary at each club. Across 6 clubs, that could give them a tidy passive sum in excess of £100k a year.

If you look at all the clubs they've bought into, they only acquire a controlling interest of 80% and leave some of the old guard in place. At Nice, there was a very strong campaign to oust them after a very curious loan that created an existential threat to OGC Nice. It could have come about by design or just as the dice landed, but that generated an intense need for the club to be taken from them and saved. That netted around an 80m euro profit for them or their funders.

It could therefore be that they aim to agitate a dispute to leverage a buyback from part of the original ownership structure. We're seeing agitation at BFC between the new and old ownership groups currently. So in the two clubs they owned the longest, we've seen disputes.

When they first arrived, they said they'd be here a long time. They repeated in to excess which made me doubt that was their true intent. In a way, covid has both hindered and accelerated some aspects of football. Indebtedness has bit hard. It could well be, as was slightly eluded to, that the consortium believe TV rights are hugely undervalued. By simply holding the asset for a lengthy time, they may hope that TV revenues increase and that attracts a significant uplift in value of their clubs. or it could be that they assessed indebtedness and saw it as an opportunity to rise from the EFL ashes if many other clubs collapsed or breached.

The final aspect to touch on is the transfer cycles. Covid and high indebtedness has seriously bit here. Most of our transfers out under their tenure have been pretty average. We've not had a huge transfer out and £2m ish seems more of the norm for the higher outbound players we've secured a fee for. At first glance, the change in contracts was a welcome one. 3 and 4yr deals with a year option would have assisted us back in the time of Winnall, Hourihane et al. The ironic factor now, with hugely indebted clubs, embargoes and the hangover of covid, our usual market of the championship is no longer fertile and as such, sale values are likely to be suppressed for some time. And as we've seen with say Schmidt, 4 years for a player not deemed good enough is a waste. We could well see other ConLee clubs picking off our failures on the cheap. It could well be they subsidise BFC excessively and the club they go to pays over the odds. Its hard to say at the moment. But what we haven't seem to date is a stream of high value sales to generate value for the owners to extract or to hugely enhance the quality of the player incoming.

My gut feeling is that these owners want to sell BFC and will likely then buy a small scottish club, as they aren't allowed to own both at present. They've run their course, the fans have largely turned, multiple questions are going unanswered or being obfuscated and they've held BFC for 4 years, around the time they held Nice.

But I think they'll hold the club until they get what they want. I'd be surprised if they didn't want £20-25m. The question is, what will they do to try and achieve that?

 

I agree with most of what you say RR....i do believe it is our right to question certain motives and to continue to do so in a challanging but proffesional manner.
Their / our ceo made point of the use of how transparent the club would be as part of their principles...lets hope they adhere to the promise.

 

A very well thought out and informative post Dwlc...found myself nodding as i read your post.

 

Whereabouts in wonderful Canada?