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BCFC Finances; what the Daily Mail got wrong
There’s been some consternation about the Blues online world about this piece written by Neil Moxley and released late on Wednesday night about Blues finances. In the piece Moxley opines that if Blues aren’t promoted to the Premier League this summer then they will face administration. Now, I’m not going to slate Mr Moxley the way that some have in the comments; whenever I’ve dealt with him he’s been a good guy. However, it’s my belief that this piece is sketchy at best.
The biggest problem I have with the piece are the figures he’s given. As no one has seen the accounts, I’d consider it very difficult to have any idea except a wild guess as to what they say. To say that the accounts include the sales of players is misleading also; particularly as the sales of Beausejour and Ridgewell occurred in January 2012, about seven months after the accounting period that he is talking about ended. Indeed, it would be difficult for the sale of Roger Johnson to be included as he signed for Wolves on July 13, – ie two weeks after the end of the accounting period. To make such mistakes shows poor journalism.
However, one thing that he has got right is that there is a debenture against the club, placed by HSBC which prohibits the club mortgaging anything out including the stadium to anyone else. This isn’t news though – I revealed this last year on this website on December 19 – and it’s not really bad news either. Whilst it means effectively the bank have Blues by the short and curlies should anything go wrong, it also means the club are secure that loans won’t be made against future season ticket sales for instance like has happened up at Rangers.
The fact is, it’s not about loss-making no matter what anyone tries to tell you. Our brethren across the expressway released accounts that showed that they had lost £54million in the past year – which will dwarf any loss I believe Blues can make. The reason that their accounts were okayed though was because Randy Lerner is still willing and able to pump in funds; it would appear that Blues are not in that position.
The last accounts available for BIH are the interim accounts for the period ending 31 December 2010 (pdf link) – ie the first half of last year’s accounts that are delayed. The company then had to make a clarifying announcement (pdf link), which had this statement in that I have copy/pasted for your benefit:
“This situation indicates the existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern and therefore, the Group may not be able to realise it’s assets and discharge it’s liabilities in the normal course of business”
It then goes on to state how the Group would rectify this: a) by a share issue and b) Carson’s mortgage on his house. Based on that, the group could continue as a going concern.
However, we know that in the second six months various problems have arisen. Firstly, the share isssue failed, raising less than a third (pdf link) of what they hoped to; subsequently due to Carson’s arrest the shares are now suspended and thus a share issue cannot be placed in that manner. The only way they have managed to sell a stake of equity in the Group is to an investor who has charged a massive rate of interest.
Secondly, whilst Carson did manage to mortgage his house, he can’t mortgage anything else (or it would appear service the debts he does have) thanks to the assets freeze order placed upon him.
Thus when the full set of accounts would have come to the auditors to be signed off, particularly bearing in mind the writedowns on goodwill, players registrations and other intangible assets that were going to have to happen on the balance sheet, would the auditors have been able to say that they were happy that the Group could continue as a growing concern knowing that the Group are finding it exceptionally difficult to raise cash? My belief is that they would not be able to.
To my mind it’s not the figures that are important. I’m of the belief that the club itself is as well run as it can be and that debts are at a manageable level. However, they have this millstone around their neck in Hong Kong which isn’t functioning as it should – I believe partly through massively overvaluing the club at point of purchase – and because of that the small injections of cash required to get through the “lulls” in the lumps of money received isn’t forthcoming. Ask any decent businessman and they will tell you cashflow is king – and this is why the club has suffered and has had to sell players and make cuts.
The club have told us to wait for the accounts. I’m willing and prepared to do that – however, as I’ve stated on here before I think Carson is drinking in the last chance saloon. If Blues don’t go up, I’m fairly sure that they would manage to survive a bit longer than has been stated by the mail without going into administration. However – BIH may be in much deeper trouble. How much we will not know until the end of the season happens, despite what anyone says.
Tags: Accounts, Neil Moxley
43 Responses to “BCFC Finances; what the Daily Mail got wrong”
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The Carson thing will be unfortunate, but my bigger worry is that Blues will be at that very saloon as well…
Have you seen todays Birmingham Mail front page about a secret deal with HSBC? Or did I dream that?
Re-read the third paragraph you fruitcake
I did kidda, but the original article was just about the debenture as an umbrella agreement, little else. More about us owing HSBC money should loos making become an issue.
I think there is a little more info in todays article? Like that HSBC will effectively own us if things go wrong…which stops us going into administration…and although not ideal, could actually be a good thing.
HSBC Hong Kong Shanghai Banking Corporation …. seems everything is connected to Hong Kong…coincidence or just unlucky?
I saw that report in the Daily Mail and was very worried if it was true. Im glad to say that you have put my mind at rest a little. I cant even begin to think what Rangers fans must be going thru cause of so much uncertainty but it just proves that if it can happen to them then it can happen to anybody. These are dark days football and which to a certain extent they have brought upon themselves due ridiculous gate prices and wage demands. I fear more clubs in the coming months will go the same direction as your Rangers and quite possibly be liquiddated.
shock horror! The charmless and incompetent neil moxley with yet another anti – blues scare story. If the very worst happens & carson & BIHL go belly up we would not go into administration, because of the debenture it would not be in the banks interest to do so. HSBC wiould effectively own and run the club, iit would then I’m sure strike a deal with a new buyer. Moxley needs to cast his one eye over witton way where I think the natives will be more receptive to his bulll***t negativity.
Why stop the truth getting in the way of a good story, Moxley is a typical parasitic journalist, and maybe we should start spreading untrue rumours about him!
These villa fans make me laugh but all is not rosy at villa park. They are just lucky that Randy Lerner has the money to prop up the club. What with the money he has lost in the USA then he surely cant afford to keep losing money at villa like they have just announced. They have a manager who the fans dont want and they have had a poor season.
And you say Moxley doesn’t make things up…. he’s the worst kind of journalist feeding on insecurity and doubt, then just making up stuff without any checks. He would be better off at the Star or the Sun. If people started spreading untrue gossip about him, he would soon whinge!
All good stuff except for the use of the word brethren.
Moxey is second guessing this, he probably has a good chance of being right… Then again 6 months ago chumps like him were saying administration was a certainty in weeks!!!
Our income for this season from Sky parachute monies will be identical to last. Another £16m… It drops to £8m on season 3 that’s the deal breaker. In fact we will probably have released or moved on further big earners by August means we will be better off
I do understand the concern over the finances and the agree don’t help but I believe we have been on the tv more this season than ever I can remember nearly every euro game was shown on tv at least 4 games of the Fa cup have been on tie this with good cup runs player wages reductions, parachute payments and the number of games we’ve played at home I’d say it’s got to be close to record turnover at blues so I’m not as pessimistic as others seem to be over this
Very good point re: tv appearances. The only thing we have had lately that is evidence that the media DONT have a grudge against us. Especially when we get the odd Sunday afternoon BBC1 championship game…outside of the cups…
there is no way it will be a record turnover with £24 million less in tv money, less in sponsorship deals plus a 25% fall in gates.
players have been sold to counter this but we will not have recieved all of that transfer monies this season, it will be paid over the next two seasons probably.
Whilst most of your article was already known,!!. You have ” crystalised succintly “, — Thank you,!!.
There are no doubts we still have some fears in the months ahead, but your clarification regarding the banks first charge on us, makes for some reassurance in that they will treat us with a view of re-couping their monies and make damned sure any buyers will be sound at least,!!.
Again, well done mate, — keep up the good work,!!.
I entirely agree that it’s the size of the whole and the lack of an investor who can fill it that are the big concerns here. The accounts, when they finally come out, will shed more light on the former but the latter problem seems unlikely to go away anytime soon.
In the meantime there’s an important factor I think everyone is missing and Mr Moxey has got wrong. i.e. I believe we must now be trading at a not insignificant profit. This is a bit fag packet, but I reckon it goes like this
*20,000 average gate @ £20 a throw x 30 games = 12 Million income
*para payment = 16 million
*Most clubs make almost as much in commercial revenue as they do in gate receipts so call it £10 million (and see Brum post article last week re villa, wolves and WBA accounts if you don’t believe me)
* 3 million from TV
* there might be extra cos of europa and FA cup, but let’s assume not.
* so total turnover this season must be c £40M.
The main cost is players wages. we’ve got 22/23 pro’s, and, to be fair, they are almost all gonna command low end prem or high end championship wages. SO call it 15,000 a week average, worst case. Add in some extra for Mr Zigic and absolute tops we’re looking at £20Milliom outgoings.
So maybe, just maybe we’re now trading with players wages @ 50% of turnover. My understanding is that very few if any clubs have a ratio that low, so we must surely now be trading at a profit and making in roads into the debt?
And by the way, I’m not an accountant – just a nerd with nothing better to do in my dinner hour !
I’d be honestly surprised if we turned over more than £30mil this year.
SO would I ! My numbers are indicative of what we should be achieving, rather than what we actually are. If it is nearer £30MillMr pannu and the Commercial Dept need to take a long hard look at themselves. My worry is that Mr Pannu, for all his strengths is a commercial lawayer from China and therefore is out of his depth when it comes to developing income streams in a UK business which is totally different to what he’s used to. Say what you like about Brady, she was brilliant at sorting out the commercial side – Lord Sugar does not employ muppets !!! a pricing policy which is causing gates to fall and a kit deal that left the club shop bereft of kids shirts by a month before Xmas 2 good examples of where we seem to be falling short…..still, as Pannu pointed out in his programme notes, we’ve got lots of facebook likes so maybe everything will be OK after all (not)
Alex, you may have forgotten the prem wages we were paying players before they were sold up to august and players out of contract had to be paid a months wages in lieu, plus transfer fees we owed from previous years all of which was probably another few million.
then all the palyers we signed would have had a signing on fee.
though this was probably covered by the first installments of transfer fees for all those that left in the summer.
also for most of the season we have only had around 8000 to 10000 paying fans as the season ticket monies collected were probably spent in the summer as there is no other income (except for transfers).
It has been alleged that the Moxley family have been Villa supporters for the third generation. If this is so, then it is not surprising that his articles have a bias towards Witton.
I’m no apologist for Mr Moxey, but I’ll tell you this FACT. I was at school with Moxey and his younger brother was in the year above me. This was late 80’s when we were shit. I went to all blues home games and about half the away games. Moxey’s younger brother was at almost all of them. So I can tell you for a fact that the Moxey family are not ALL villa fans.
I met him long before he was a journo and can tell you he is a Blue.
Its hard not to be negative. We will certainly have the second wave of selling at the end of the season if we dont go upt. Burke, Davies, Redmond Mutch etc will all be gone. And lets be honest Houghton wont hang around. With that lot gone, we might as well be in administration and get rid of Carson.
I slightly disagree with you that CH would necessarily leave. Good managers know how to rebuild from scratch and CH is capable of doing that. He is aware of players playing in leagues most of us have not heard of that are decent players and he knows how to pick up bargains from lower leagues and sell them on.
However, if a bigger club came a knocking, thats a different matter but it would never be financially driven for him. It would be more about whether the chairman of another club is someone that he felt he could work comfortably with, so I think he might be more loyal to Birmingham than we might all imagine
CH owes us nothing. His managerial expertise has received national coverage on numerous occasions. He will be in high demand when the curtain falls on this season. I doubt he will be here whether we go up or not.
Correct me if im wrong but doesnt he have a 1 year rolling contract, and if so why has no attempt has been made by either Blues or CH to put a proper contract on the table?
If we fail to go up do you really think he will stick around and watch the club get raped for the second season running? There will be numerous job opportunities in the summer, wolves, wigan, Bolton possibly villa & west ham etc He can take his pick. Rebuild Blues with what?
Correct me if im wrong but doesnt he have a 1 year rolling contract, and if so why has no attempt has been made by either Blues or CH to put a proper contract on the table?
It could just be that he’s happy with that deal and the club are happy with that deal…
Rolling contracts are quite standard in managerial positions in football.
I’ve no doubt he is very happy with rolling contract. He can walk away in June a very proud man with head held high. Bottom line is promoted or not we don’t have any money. There will be no investment, more likely a second wave of selling to keep the club afloat. Then when there’s nothing left to sell how do we keep going? The answer is we don’t. Can you see it going any other way than administration?
Yes Moxley is a journalist but he is a Blue. Fact. I maybe naive but i honestly don’t think he’d write that without reason.
Btw a fantastic site your running here. Keep it up, it’s the first place I look online when reading about Blues.
Thanks for your kind words.
Just to confirm, a rolling contract means Hughton is contracted to the club for a year at any point. Thus if he was to walk away in June with his head held high, it’d cost him a year’s salary.
He most certainly would not be so stupid as to cross the divide to Villa because after building a solid reputation he would realise that reputations dont cut it when you move to the archest of enemies when it comes to football. Much in the same way as he would most likely never take the jobs at Sunderland or Arsenal, even though he would not be offered them anyhow
No offence to any club in trouble but al lot of it is of their own making. Birmingham is is slightly less of their own making in that they couls not have forseen the rumblings of of the Carson case in the far east.
However, with Prtsmouth Ranger and now Port Vale all having floundered this year, I couldnt help but read the BBC website on the plight of Ranges when I saw a headline about Motherwell sitting third in the Scottish premier league posting profits of half a million pounds and their star player and asset Jamie Muphy turning down the chance to join Blackpool.
I had a look at their gates and they average around 4,000. This goes to show that a club can be run well on a low budget and still have sucess on the field because they will now probably play in the Champions League next year.
Now I know the Standard in Scotland is not exactly the English premiership but gates of 4,000 is very very low, so I think it must be possible to find people to run a football club successfully without putting it in financial jeopardy.
The target for football clubs should be to find those people instead of giving jobs to friends and former player who know absolutely nothing about finance or running a business
Mr “Often Partizan” that is one of the BEST pieces you have ever written. Very Clear and to the point and I am sure sums up perfectly just where we are.
It is not the figures related to Blues that matter, it is those “annoying”, but necessary, regulations on Accountants/Auditors to say it like it really is (and I am not an accountant so only have laymans knowledge like most people).
I know you don’t like the “Carson” song, but I reckon we need to change the final line to:-
“All we care about is HSBC!!!”.
Being a Swede living in Hong Kong I have no idea who this Moxley is. But I was a business journalist in Sweden for 25 years, and have been a Blues supporter for longer than that :-) I think Moxley is just trying to do his job, but Almajir is actually doing a much better job in trying to find out what is going on behind the closed curtain of the so silent owners.
My main worry is that the 2010-2011 report is delayed because the owners don’t want to reveal it since it could be so poor that it would mean we would go into administration.If so, my theory is that they are delaying it only to hope for that Birmingham will get promoted and with all the television rights millions nobody would then try to accuse them or get them into about administration.
We don’t care about HBOS… we don’t care about Lloyds…. all we care about is HSBC………
Like it! …. let’s wait till we hit the iceberg before we start panicking!
I don’t think anyone should get excited about the prospect of HSBC owning our club by default, they would appoint and administrator to run the club while a buyer is found…..that is the way banks operate.
Whatever will be, will be i will always support birmingham city !
Me i am not going to worry untill the accounts are published and just get on with supporting ch and the team who are doing a good job regardless.
I have said it before the alarm bells should have been ringing when carson first tried to buy the club and couldnt raise the money but a lot of fans were to obsessed with getting rid of sullivan. k.r.o.
To be honest, if I picked up the Daily Mail and read the date, I’d check it elsewhere before I believed it.
If HSBC are looking after us now, maybe they can sponsor us……
Top quality blog Almajir.
This is the sort of diligence we need to keep track of some of the bullshit nonsense that seems to enter the circus arena which has become the finances of our club.
CY’s dream has rapidly descended into a nightmare, and the chances are he will have to or be forced to relinquish power in the forseeable future. He obviously thought great achievements also carry great risks, and this, as you state, stems from paying way too much for the club.
What a shame.
all this hsbc nonsense is no different to people who borrow secured loans to the hilt on your mortgage, car, house improvement etc.
the banks own everything till you’ve paid off the loan, but while blues keep paying the interest and repayments then they will leave us to get on with running the club, as long as we run it on an even keel.
our credit rating maybe poor so no-one else will lend to us as we don’t have any more collateral , but that maybe a good thing as it means the club has to run without further debt.
Football in this country is in a financial mess, there are Prem clubs in a worse financial state than Blues. Sky along with indecent amounts of money paid to players has ruined the game. There is far worse to come unless things change within the game.
Cracking blog Almajir — like one of the commenters said, this is one of your best. What I don’t quite get is BIH saying in its accounts to the end of 2010 that “This situation indicates the existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern and therefore, the Group may not be able to realise it’s assets and discharge it’s liabilities in the normal course of business”. That statement was made for the six months to the end of 2010, but surely, even despite relegation, the group HAS been able to continue as a going concern. I mean, matches are being played, players being paid etc So what is the big problem?