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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.