Cardiff City - £12m loss

Cardiff City have just filed accounts for the year 2019/20 which show a loss of £12m for the year.

Total turnover of £45m (£8m of their parachute payment deferred to the following year as receipt was deferred). £38m central distribution and £8m from matchday revenue and sponsorship (similar to BFC)

Total wage bill of £36m of which £28m is player costs. (Not similar to BFC)

Administrative expenses of £34m, this includes £18m of player cost amortisation.

Overall operating loss of £23m. Some of these loses were recovered by profit on player sales of £14m but they pay £2m of interest on loans. This is a loan of £19m with interest at 7%. The remaining loans are interest free.

Over the year the loss was £12m.

A couple of interesting points, the club owes around £172m to the owners and they claimed furlough payments of £424k.

When you look at other clubs I’m quite happy with the approach BFC are taking. On the negative side none of these clubs will be sanctioned under FFP for 19/20 as the EFL are taking a four year view combining accounting results for 19/20 and 20/21.

 

At least for Cardiff, the wage bill is(currently, thanks to the parachute payments) well under their turnover, which is going to be thing that eventually bursts the Championship financial bubble, in my opinion. Once that parachute money dries up though, their wages to turnover will be around 100%(if I have read your post correctly!).

I think it's about time we dropped FFP altogether and simply limit wages to a certain % of total turnover.

 

I used to worry about FFP, but let's just let the other teams do what they want. We know we can compete in this league now, because we've just done it.

 

I can't agree with that personally. We have had one good season, which came after a season when we stayed up thanks to a club being a financial basket case. We have no idea yet if this season's performances were heavily influenced by the lack of pressure from the stands or if everything just clicked and the whole was greater than the sum of it's parts(very similar to Wilson's promotion team) and could be affected by a single player leaving(as examples).

I think we all need to worry about it for the long-term health of the game. Brentford are the latest team to be bankrolled to allow them to recruit well beyond their means(their turnover to wages ratio was eye-watering, which included all the money they made from player trading) and have gone up. All it will serve to do is encourage more owners to spend further and further beyond their means to achieve promotion. If the power that be can punish them and dock points/set a transfer embargo then that is fine and levels the playing fields somewhat.

 

The most worrying thing in that post is the last sentence. The thing that will go under the radar is that even with what equates to nominal losses of revenue (in the scheme of things) through the pandemic, all of these clubs would have made massive losses regardless.

Covid didn't suddenly treble wages and transfer fees and thats what all this is built on. Absolute folly.

 

Just a quick aside. The directors of these clubs (if owners or not) are turning a blind eye to this huge build up of debt year on year, excessive expenditure and turning clubs into insolvent entities. Directors have a duty of care under law as set out in the Companies Act. I'm not sure if people outside a company can look at proceedings to have directors struck off or charged (I'd guess not as it could get very petty if there were disputes over sales/service) but surely there must be some breaches of director responsibilities in all of this.

 

That is a very good point!

I'd imagine the issue would be that a lot of the time, they are just puppets of the actual owners and could be replaced with another puppet. Also, I'd think that most of the debt these clubs run up is underwritten(if that's the right word) by the owner, so if the debt becomes unserviceable, they can convert it into equity to wipe it out. That's why we need the league/FA to grow a pair and actually punish clubs with points deductions if the level of "investment" goes over the accepted limits.

 

in the majority of these cases the ability of the auditor to sign off the accounts is dependent on the ongoing support from parent/owner. if the directors can rely on this support their running of the business is not negligent.

 

Theres more to it than just the debt aspect. Directors, even though there can be personal conflict if owner too, are supposed to show independent judgement for the trading success of the company and promote it accordingly.

Directors' duties and responsibilities | Institute of Directors | IoD

Its generally a rule of other directors or stakeholder/shareholders seeking actions, and I'd be interested if any of our legal posters can shed light on to this, who could pursue a challenge and if it would make the slightest difference.

 

Didn't BHP qualify SWFCs accounts this time round? Can't recall if they were actually qualified or just strongly worded without going that far. Are there not implications for making up fake sponsorship deals and selling a ground to yourself/ or party with interest?

 

Not that old chestnut again.

We stayed up because we followed the rules and got more points than 3 other teams. More teams will self implode if they don't reign in their spending soon. We're doing it the right way and are going in a general upwards direction. Will we get in the playoffs next season? Who knows, but I'd rather be Barnsley than half the teams in the Championship fudging the accounts etc.

 

That is what I don't understand. There must to rules in place for things like that, or getting around FFP would be the easiest thing in the world. They could just form a one-man company who's sole customer is the rich owner, and their business model is to charge £100m per year to open a window in an office. It then buys a 1mx1m advertising board at the ground for £999,999,999 per season. That's now £100m "legally" in the clubs bank(legally as in football terms, not sure about the "real" world).

 

No auditor should sign off on accounts which contain falsified or non market related financial transactions.

The ground issue which tripped up Wednesday was the timing of the transaction. The bigger issue for me is the value placed on these transactions. Cardiff currently book their ground at £83m.

 

No idea what happened to that post. I'll try again!!

 

But if there was no FFP, Wigan would not get docked and we would have gone down. That was my point.

And I totally, 100% agree with you. After going through the last admin and nearly losing the club altogether, give me a club that runs within it's means. We will have good seasons, we will have atrocious seasons, but we will still have a club.

 

I get your point now, we definitely need FFP What I was trying to say (and didn't put it very well) was let other teams spend what they want/can on players because they seem to just think that throwing money at it is the answer (SW, Forest, Reading, Stoke, Bournemouth etc.) It isn't as we have just proved

 

No auditor should do that.. you're right ;-) But its pretty well known about the antics of Chansiri, and he's still there, as sole director, with no charges that i'm aware of.

And agree with you on the point of ground values too. It's generally the P&L losses that attract the headlines, not the attempts to shore up a balance sheet to offset or minimise the appearance of those losses.

 

There supposedly are rules in place on values of sponsors. But like so many other things, they don't seem to stand up to the rule of law once outside the bubble of football.

And while there have been some bizarre transactions and accounts of said transactions by some clubs, there are a handful of clubs where the directors are acting in a way that seems to suit themselves now not losing the asset they've frittered money on rather than preserving its longevity. And thats the bit that surely should be attracting interest and assistance from regulatory powers, hence why i asked more about the companies act and director responsibilities.

 

Just taken from the snippet from IoD directors responsibilities sections and possible penalties against directors.

Company Directors’ Disqualification Act 1986

The circumstances in which an application may be made for the disqualification of a director are as follows:

• the director has been guilty of three or more defaults in complying with companies legislation regarding the filing of documents with the Registrar of Companies during the preceding five years;
• he or she is, or was, a director of a company that has at any time become insolvent and that his/her conduct as a director of that company makes him/her unfit to be concerned in the management of a company;
• the director is found to be guilty of wrongful or fraudulent trading as defined in the Insolvency Act 1986 (see below).

Insolvency Act 1986

Wrongful Trading

If a company has gone into insolvent liquidation and before that liquidation took place a director knew, or ought to have known, that there was no reasonable prospect that the company could avoid the liquidation, then the court may declare that the director make a personal contribution to the company’s assets.

However, the director will not be made personally liable in circumstances where the director can show that every step was taken prior to the liquidation to minimise the potential loss to the company’s creditors.

Fraudulent Trading

Under this heading the court may also require a director to make a contribution to the company’s assets if, in the course of the winding up of a company, a director was knowingly a party to the carrying on of the company’s business with the intent to defraud the creditors.

 

And the MSM are lauding Brentford with comments like, “it goes to show what a small well run club can achieve”.