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Cardiff City record £12.2m losses following Premier League relegation as Bluebirds’ finances explained

Cardiff City made loss of £12.2million following relegation from the Premier League, the club accounts tell us.

The club’s debt remains in excess of £100m, with the bulk of that figure owed to the Bluebirds’ Malaysian owner Vincent Tan.

The audited accounts for the year ending May 31, 2020 do not take into account the struggles the Bluebirds have had since, with Covid-19 badly eating into the finances.

Tan’s leisure empire has also taken a huge hit and he is reportedly putting £2m a month into the club to pay the wage bill and ongoing costs.

Full details of that will be released when next year’s accounts are filed. For the time being, Cardiff City Supporters’ Trust chairman and finance expert Keith Morgan presents some of the headline acts from the figures just recorded.

This is Keith’s take…

The club made a net loss for the year of £12.2m in its first season following relegation from the Premier League.

As at May 31, 2020, it had net liabilities in the balance sheet of £24m.

The directors have received a letter of support from the club’s principal shareholder (Tan) in terms of his future intentions to provide funding for the club to enable it to continue operating for the foreseeable future.

The club will continue to receive a “parachute payment” in financial year 2020-21 but not beyond that, which will have an adverse impact on income of around £30m.

The club made an operating loss for the year of £23.8m compared to a small operating profit of £2.2m in the previous year to May 31, 2019. After accounting for a substantial profit on player sales and interest, the loss for the year was reduced to £12.2m (2019 loss £755k).

The principal reason for the increased losses was the huge decline in income following the club’s relegation from the Premier League. Turnover fell from £125.2m in 2019 to £46m, largely due to a fall in broadcasting income from £107m to £37m.

Gate receipts fell by £4m due to lower attendances at Championship level, and sponsorship, advertising and other things also fell by £5m.

The club was badly impacted by Covid restrictions towards the end of the financial year. The postponement of the end of the season and its non-resumption until June meant that some £8.8m of TV revenue was deferred until the following financial year.

Also, some £2.1m had to be repaid in respect of the club’s share of Premier League refunds paid for matches not played under the overseas broadcasting agreement. Without these two amounts, totalling £10.9m, the club would have shown almost a break-even position for the year.

Despite the obvious great efforts by the club to reduce costs in the year (see below), to cover such a fall in income was virtually impossible but big savings were made.

Player-related wage costs were reduced by from £42.5m to £27.9m. Administrative expenses fell from £62.1m to £35.4m. This was largely due to the fact that the 2019 figure included a provision of over £19m in respect of the legal case surrounding the Emiliano Sala transfer dispute with Nantes.

In the year to May 31, 2020, the club made a significant profit on the sale of players of £13.7m. In 2019 there was a much smaller profit made of £2.1m.

As a result of the net loss of £12.2m, the overall net liabilities of the club increased to £24m – assets of £123.8m and liabilities of £147.8m.

The value of the playing squad was £24.2m, very similar to that in 2019. £18.5m of player cost was added to the squad in the year and players initially costing £14.6m were disposed of, but those players had been depreciated down to a net nil value at the time of disposal.

Cardiff City Stadium was valued (based on an independent professional valuation carried out in 2018) at £81.0m, with other fixed assets such as fixtures and fittings having a value of £1.2m and training ground improvements of £314k.

As at May 31, 2020, the club was owed £14.4m by various debtors, most of which (£13m) related to future instalments due on player sales. It also had £2.4m of cash at bank and £207k of stocks.

Technically, the club had £118.6m of liabilities, which were payable by May this year or earlier. However, in reality, much of this didn’t have to be repaid in that timescale as explained in the following breakdown of some elements of that total figure

*£45.9m was due to Tan and £3m due to his son U-Peng and as principal shareholder, this sum is unlikely to be required to be repaid in the short term. In fact, during the year Tan put a further net amount of £8.8m into the club by way of loans. All Tan’s loans are secured against all the assets of the club.

* There were £37.9m of other loans made to the club as at the year-end, stated to be secured against guaranteed future income streams. This would include future broadcasting money, plus future instalments due from other clubs arising from player sales.

*The club owed £3.9m in future instalments of transfer fees for players bought.

*A sum of £5.9m was due to other parties but not repayable for over one year after May 31, 2020 – secured as referred to above.

*There remains a provision in the club’s accounts (as there was in the previous year) in respect of the ongoing legal dispute over the Sala transfer. The figure is £20.7m but, as the accounts clearly note, no such sum is considered payable and will be extinguished after a subsequent hearing of the case by the Court of Arbitration for Sport. However, to comply with prudent accounting requirements, full provision continues to be made in the accounts.

Moving forward

The year to May 31, 2021, is also going to be very difficult financially for the club as Covid-19 has continued to have a major, adverse impact on football generally for the whole of the 20-21 season.

The continued cash flow support of Tan and other funders was mentioned at a recent meeting with fans’ groups and the media and there is also some reference in the accounts (Note 29) to further funding of £34.8m received by undisclosed parties between May 2020 and the April 2021 signing of the accounts at interest rates of up to 9%.

The same accounts note reveals that part of these funds was used in that period for the acquisition of new players at a cost of £5.2m.

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