Derby County

[BTRFTG]

9 hours ago, Davefevs said:

Big question, who will buy the club without the ground?

I'm tempted to say Mark Goldberg....

[Mr Popodopolous]

5 hours ago, BTRFTG said:

Caveat Emptor.

For example, there's nothing illegal in accounting practice in switching amortisation method from flatline to ERV provided one makes clear in the accounts what method one's using. After all, in the end one gets to the same place. Accounts are not designed to be an absolute, accredited statement of value/liability at a single point in time, rather give a reflective snapshot against the assumptions listed.  It's 'read the small print'.

I believe Derby did exactly the above with player values to squeeze £20m or so from one year's accounts to the next hence no surprise when 3 or 4 years later the chickens (and write-offs) came home to roost.

With most football intangibles 'True & Fair' is almost impossible to value. I'm sure most Gasheads would say their club title is worth 7 figures. As most realise that's figures AFTER the decimal point.

 

Erm, I think we're cross purposes here possibly- definitely the amortisation issue is sketchy but to the same place? Yes...unless as the EFL seemed to believe they were attempting varied wheezes to try and get the amortisation excluded from the calculations entirely- see the New Evidence cases.

I get the principle, kicking the can down the road to a more convenient time. The cases in q where the EFL seemed to believe/seem to believe that there was more to it. 

https://www.efl.com/contentassets/873a8914e09740d3b3a8848131ea10b8/efl-v-derby-county---decision-on-new-evidence.pdf

https://www.efl.com/contentassets/873a8914e09740d3b3a8848131ea10b8/efl-v-derby-county---de-novo-decision.pdf

What I was referring to though was something fairly different.

 

Club

Consolidated.

Club

Consolidated.

Strong similarity in turnover in and of itself, breakdown of said turnover. albeit some differences too..however the costs are miraculously lower. £15-16m lower.

Employees.

Club

Consolidated.

Now for FFP it all computes out as it is the consolidated accounts that the EFL would use and rightly so...

The (highly slimmed down) accounts for Club DCFC, The Derby County FC Academy and Stadia DCFC show the following to be the case...

A point that I am probably missing here is this- what is the benefit of including that revenue in the club specific accounts but the costs ultimately appear albeit not itemised in the Sevco 5112 anyway? EFL use the latter for FFP or have done, so I'm wondering what the purpose is- we can see it's clearly not under the club directly in all 3 cases.

In the year of 2018, the losses of these 3 companies ie total P&L - 2017=2018 appear to equate to not far off the gap between the club and the consolidated accounts losses- talking 2018 in isolation.

Edited September 19, 2021 by Mr Popodopolous

[Lanterne Rouge]

Not sure if I`ve missed this on the thread but Colin Murray just said on the Quest re-run that the nine point deduction for accounting issues has already been agreed with the EFL so the 21 point deduction will apply.

It looks like the `selling the club debt-free in League 1` scenario is what will happen. Still leaves them with the two year admin embargo though. I wonder (if Rooney stays) how many Man Utd youngsters will rock up on loan?

[BTRFTG]

7 hours ago, Mr Popodopolous said:

Erm, I think we're cross purposes here possibly- definitely the amortisation issue is sketchy but to the same place? Yes...unless as the EFL seemed to believe they were attempting varied wheezes to try and get the amortisation excluded from the calculations entirely- see the New Evidence cases.

I get the principle, kicking the can down the road to a more convenient time. The cases in q where the EFL seemed to believe/seem to believe that there was more to it. 

https://www.efl.com/contentassets/873a8914e09740d3b3a8848131ea10b8/efl-v-derby-county---decision-on-new-evidence.pdf

https://www.efl.com/contentassets/873a8914e09740d3b3a8848131ea10b8/efl-v-derby-county---de-novo-decision.pdf

What I was referring to though was something fairly different.

 

Club

Consolidated.

Club

Consolidated.

Strong similarity in turnover in and of itself, breakdown of said turnover. albeit some differences too..however the costs are miraculously lower. £15-16m lower.

Employees.

Club

Consolidated.

Now for FFP it all computes out as it is the consolidated accounts that the EFL would use and rightly so...

The (highly slimmed down) accounts for Club DCFC, The Derby County FC Academy and Stadia DCFC show the following to be the case...

A point that I am probably missing here is this- what is the benefit of including that revenue in the club specific accounts but the costs ultimately appear albeit not itemised in the Sevco 5112 anyway? EFL use the latter for FFP or have done, so I'm wondering what the purpose is- we can see it's clearly not under the club directly in all 3 cases.

In the year of 2018, the losses of these 3 companies ie total P&L - 2017=2018 appear to equate to not far off the gap between the club and the consolidated accounts losses- talking 2018 in isolation.

Haven't looked into it in detail but wasn't it suggested the difference in costs related to the differential accounting periods Derby decided to deploy when establishing the various subsidiaries? Again it's robbing Peter to pay Paul for short term improvement. In the end it'll all catch up.

[Waconda]

5 minutes ago, BTRFTG said:

Haven't looked into it in detail but wasn't it suggested the difference in costs related to the differential accounting periods Derby decided to deploy when establishing the various subsidiaries? Again it's robbing Peter to pay Paul for short term improvement. In the end it'll all catch up.

Neo Liberal Capitalism you could say !

[Hxj]

I am struggling to see how DCFC can survive at all, let alone until a buyer is found.  This is significantly more complex than other recent insolvency events.

Who is going to fund the ongoing cash cost of the club?

For how long are they going to do so?

Would a failure to pay the players in September result in the 3 point suspended penalty being activated?

Are MSD (who once the administrations of DCFC and the parent are formalised - which is probably a default event) going to exercise their rights to everything, including the shares in the football club? 

Can MSD recover more from a Liquidation than they can from a fire sale?

How will the football creditors be paid to allow the 'share' in the EFL to be transferred?

How much cash is the buyer or Morris going to need to stop the otherwise inevititable liquidation?  £20 million plus a £1 to 2 million a month?  £30 million plus £2 to £3 million a month?

What do you do about the onging FFP issues?

What about the 12 point penalty?

How do you keep your best (or any) players in January with a 20 point deduction?

If you really wanted a football club could you get the likes of Barnsley, Wigan, Preston, or Sheffield Wednesday for less and significantly less hassle?

 

Edited September 19, 2021 by Hxj

[chinapig]

Oh what a tangled web we weave when first we practice to deceive comes to mind. To think Morris and those Derby fans who cheered him on thought it was terribly clever.

The Administrators are going to have a hell of a job untangling that web. Is there a real possibility that there will be no club to sell and that they could end up like Bury?

[Davefevs]

This is the key bit for me:

 

@BigTone condensed version.

Cheating bastards - got caught.

 

[Hxj]

Morris just admitted on Radio Derby that resubmitted accounts breach FFP for 2017/18.

That is a watershed moment.

[Davefevs]

6 minutes ago, Hxj said:

Morris just admitted on Radio Derby that resubmitted accounts breach FFP for 2017/18.

That is a watershed moment.

[Mr Popodopolous]

Finally!!

Might listen to interview, if it's on catchup as it could be interesting.

Have read that a) The breach to 2018 was £4m. That's a 4 point deduction and b) Surely to 2019 and beyond there would be FFP/P&S issues?

I should add as well, his £1.5m per month thing is still ambiguous although I'd have to listen to the interview in case he clarifies in full.

A) Is it £1-1.5m a month in CASH losses?

B) Is it the CLUB in isolation or Consolidated to which he is referring? Remember the latter is the assessment point for FFP.

C) See point A, that doesn't distinguish between cash losses and the Profit and Loss account.

D) Also following up on B, in 2017/18- in 2015/16 the subsidiaries and Sevco 5112 weren't so relevant and in 2016/17 it was 10 month accounts for Sevco 5112, and 12 month for the club so. It's hard to get a fair comparison.

Like I said before, all the revenue of Club DCFC etc in the club, but the costs associated with said revenue in Sevco largely. I wonder if he's using that criteria for his £1-1.5m per month.

[BTRFTG]

I thought Derby had until the end of August to submit revised accounts for 3 reporting periods to the EFL. I know the were late and granted an extension but does anybody know:

Have they now been submitted?

Are they to be made public, or does the EFL have eyes only for a period and we only find out detail from their considered report?

Are the revised accounts to be filed at Companies House, or if the previously filed accounts were legal is it the case the new ones simply reflect demands required of standards by the EFL?

[chinapig]

39 minutes ago, BTRFTG said:

I thought Derby had until the end of August to submit revised accounts for 3 reporting periods to the EFL. I know the were late and granted an extension but does anybody know:

Have they now been submitted?

Are they to be made public, or does the EFL have eyes only for a period and we only find out detail from their considered report?

Are the revised accounts to be filed at Companies House, or if the previously filed accounts were legal is it the case the new ones simply reflect demands required of standards by the EFL?

From the Derby Telegraph:

The initial deadline for the club to complete this progress was Wednesday, August 18, although the EFL has now said in a statement that "constructive discussions" have led to that deadline being extended to Tuesday, August 24.

Edited September 19, 2021 by chinapig

[Hxj]

28 minutes ago, BTRFTG said:

Have they now been submitted?

Yes - along with further information

29 minutes ago, BTRFTG said:

Are the revised accounts to be filed at Companies House

Probably not - normally when submitting the accounts for the next year you would simply show all the adjustments in the previous year's figures used as comparables in the latest accounts.  So when submitting the 2019 accounts  you would adjust the 2018 accounts including all errors from all previous years and use those adjusted figures as the comparables, with a pile of notes to explain.

43 minutes ago, BTRFTG said:

if the previously filed accounts were legal is it the case the new ones simply reflect demands required of standards by the EFL?

Companies House, The Companies Acts, HMRC and the EFL all require accounts to be submitted in line with the same standards - in this case FRS102.  Derby did not comply with that standard.

[BetterRedthanBlue]

Right so they have breached FFP for possibly numerous years will they be punished for that as well as the 21 points from administration and the EFL thing.

[Port Said Red]

The important question out of all of this must be......

Have any of their fans offered @Mr Popodopolous an apology yet?

[BTRFTG]

2 minutes ago, Hxj said:

Yes - along with further information

Probably not - normally when submitting the accounts for the next year you would simply show all the adjustments in the previous year's figures used as comparables in the latest accounts.  So when submitting the 2019 accounts  you would adjust the 2018 accounts including all errors from all previous years and use those adjusted figures as the comparables, with a pile of notes to explain.

Companies House, The Companies Acts, HMRC and the EFL all require accounts to be submitted in line with the same standards - in this case FRS102.  Derby did not comply with that standard.

Thanks, though I'm still unclear whether the accounts are public (one imagines they'd need to be if a buyer is being sought)?

I also thought the accounts submitted to Companies House were compliant to that standard, though as you'll know there are many variables one may flex within the standard (for good reason) as to reporting periods, methods of valuation and assessment et al, all with the caveat you've explained what you've done and why? My understanding was Derby sought to play the 'three card trick', keeping variations in periods and methodology moving, divesting to newly created subsidiaries, splitting/transferring assets within the group such unless you're a forensic accountant it's difficult to see the wood for the trees.

I'm no accountant but struggle ,(the amortization change, for example,) to understand if the accounting standard is followed why the overall and true position wouldn't materialise eventually?  Some suggest Derby sought to omit player write downs but I've never seen an explanation as to how they would eventually be able so to do?

[Bristol Rob]

So Wycombe were royally screwed by both the EFL and Derby then.

[Mr Popodopolous]

35 minutes ago, Bristol Rob said:

So Wycombe were royally screwed by both the EFL and Derby then.

Blame Derby mainly- the EFL wanted to relegate them by their own admission- they could not get the relevant info in time for a variety of reasons, a mix of delaying tactics by Derby, in and out of lockdown, and maybe even the whole wanting to admit new info and Gibson's intervention- this all took up valuable time! Daily Mail also said Derby knew there was a race against the clock and that they were using procedural defences to stall, buy time- one possible reason for the strategy taken there would be to seek to ensure Derby can be sold as a Championship club not a League One club.

Edited September 19, 2021 by Mr Popodopolous

[Bristol Rob]

10 minutes ago, Mr Popodopolous said:

Blame Derby mainly- the EFL wanted to relegate them by their own admission- they could not get the relevant info in time for a variety of reasons, a mix of delaying tactics by Derby, in and out of lockdown, and maybe even the whole wanting to admit new info and Gibson's intervention- this all took up valuable time! Daily Mail also said Derby knew there was a race against the clock and that they were using procedural defences to stall, buy time- one possible reason for the strategy taken there would be to seek to ensure Derby can be sold as a Championship club not a League One club.

And to bring in several million in solidarity payments.

[Mr Popodopolous]

9 minutes ago, Bristol Rob said:

And to bring in several million in solidarity payments.

Good point- had forgotten about that!

[Mr Popodopolous]

1 hour ago, Port Said Red said:

The important question out of all of this must be......

Have any of their fans offered @Mr Popodopolous an apology yet?

@Hxj too, he's called things very nicely.

Matt Hughes and Kieran Maguire, possibly Nixon- a lot of doubters on their forum about this lot...and talking of their forum, some are quite bullish in varied aspects- I'm paraphrasing but.

1. Offer HMRC a settlement, which would be £10m of the £26m debt as the alternative is we go bust and you get zero.
2. MSD might yet be the new owners which means no admin.
3. Take it to court.
4. Queries as to whether Cocu and his staff would be classed as football creditors.

PS to anyone on DCFCFans who thinks I'm glad about admin, not necessarily but a points deduction is long overdue. Should have been last season really.

It also shows the importance of staying within the P&S Regs- stay within them and maybe your club won't run into issues.

I've said it before and I'll say it again but I have sympathy for the following:

1. Low paid and medium paid blameless staff. (That said, would the accounting dept at DCFC not have some degree of culpability here??)
2. The usual array of small local businesses who may well be DCFC fans- some will likely be screwed over, St Johns Ambulance too maybe- always happens with clubs who go into admin.
3. The fans- or should that be the fans who weren't revelling in the EFL on strings and so on- how can one feel sympathy for those who laud cheating?
4. Wycombe Wanderers.

Clearly no sympathy for Mel Morris, Stephen Pearce- those fans who were gloating, not only about the cash but the ways in which the loopholes were being exploited- it's difficult to feel sympathy for them with a straight face.

Not been to Pride Park before but it might be worth a trip this season.

Also forgot to add, if Gellaw Newco 202 and Gellaw Newco 204 don't go into admin then surely the administrators and MSD don't, provided repayments kept up, get to access the ground.

Some Derby fans are suggesting that he should gift it back or sell it at a low rate but can't see the EFL accepting that willingly given a) The £81.1m sale price which was defended at great length and b) The fact that there is a 25 or was it 20 year lease on it, effective from 2018/19.

Would make an absolute mockery of the initial valuation and the vehement defence of it...EFL have the right to revisit cases etc if required. I understand 3rd party vs RPTs etc but the EFL would not accept that I'm sure, maybe as part of a final settlement.

Edited September 19, 2021 by Mr Popodopolous

[RedorDead BCFC]

On 18/09/2021 at 16:00, View from the Dolman said:

Rooney in an interview with Sky Sports saying he learned of last night's developments by watching it on Sky. You'd think somebody from the board would have given him the heads up between the filing and the statement being released several hours later. 

They probably thought it would be easier for him to see it on TV so Coleen can explain it to him. 

[Lanterne Rouge]

Just reading the thread on their forum about the Mel Morris interview today on Radio Derby. It sounds a bit of a car crash.

[Hxj]

2 hours ago, BTRFTG said:

I also thought the accounts submitted to Companies House were compliant to that standard

Nope - they failed to correctly account for the amortisation on the player contracts - they used a methodology that would have been allowable in different circumstances.

 

2 hours ago, BTRFTG said:

Thanks, though I'm still unclear whether the accounts are public (one imagines they'd need to be if a buyer is being sought)?

Or the company can simply provide them along with the underlying details to the prospective buyers.

 

2 hours ago, BTRFTG said:

I'm no accountant but struggle ,(the amortization change, for example,) to understand if the accounting standard is followed why the overall and true position wouldn't materialise eventually?

The overall position for each indiviudal contract will, over the entire period of the contract (or on earlier sale), will be the same under the Derby methodology and under an FRS 102 compliant methodology.  It will simply be the difference between the purchase price and sale price.  Simplifying things slightly, Derby decided that they could charge nil amortisation on contracts until the final year when they would write the entire balance of the fee off.  On a £6 million fee over a three year contract they would gain the advantage of a reduction of £2 million in FFP losses in years 1 and 2 but suffer £4 million additional losses in the final year.

But if you buy such a player every year you effectively gain a permanent £6 million advantage, so it never reverts to the true position.

2 hours ago, BTRFTG said:

Some suggest Derby sought to omit player write downs but I've never seen an explanation as to how they would eventually be able so to do?

I suspect that it would be on the treatment of goodwill on the acqusition of teh football club by the new parent.  Haven't worked it all through.

[Mr Popodopolous]

8 hours ago, BTRFTG said:

Haven't looked into it in detail but wasn't it suggested the difference in costs related to the differential accounting periods Derby decided to deploy when establishing the various subsidiaries? Again it's robbing Peter to pay Paul for short term improvement. In the end it'll all catch up.

Interesting, would be interesting to read that further. There was definitely a 10 month for 2017 for the consolidated- Sevco 5112 vs a 12 month for the club, simply by dint of Mel Morris's takeover concluding in late August 2015.

However both club and consolidated are 12 month periods for 2018 and we see the inclusion of consolidated revenue in the club accounts but the costs only in the consolidated. That's why I used 2018 as my comparison as comparing 10 and 12 month periods and reconciling them feels harder...

2 hours ago, BTRFTG said:

I'm no accountant but struggle ,(the amortization change, for example,) to understand if the accounting standard is followed why the overall and true position wouldn't materialise eventually?  Some suggest Derby sought to omit player write downs but I've never seen an explanation as to how they would eventually be able so to do?

@Hxj beat me to it, treatment of goodwill on acquisition feels the most likely route- as goodwill is excluded from FFP calcs be it amortisation or impairment. Trying to theoretically hide some of it maybe.

On a side note, listening to the interview now- Mel Morris says he's not an accountant, never been an accountant- would Stephen Pearce be the villain of the piece here as he IS a qualified accountant?? Although he is explaining various aspects of it and defending the policy in itself.

Edited September 19, 2021 by Mr Popodopolous

[Davefevs]

Just for info, this is my crude (but fairly accurate - based on prior years accounts) view of City’s amortisation costs each year going forward.  We can argue £0.5m here or there, but shows how Nige has wiped c£5m off of our amortisation.  In 19/20 it was £11.4m (expect 20/21 to be a similar amount).  That saving carries into 22/23 as well and if we bought nobody woukd be a £10m saving in 23/24.  Can add significant wage bill drop too that as well.

 

[Hxj]

1 hour ago, Mr Popodopolous said:

Offer HMRC a settlement, which would be £10m of the £26m debt as the alternative is we go bust and you get zero.

So HMRC put you into Compulsory Liquidation and the club ceases to exist, nice outcome for DCFC!

1 hour ago, Mr Popodopolous said:

MSD might yet be the new owners which means no admin.

MSD would have to have been informed of the intention to appont an administrator, a week I think, before the notice was issued.  If they were at all interested in the club they had to time to make that clear.

1 hour ago, Mr Popodopolous said:

Take it to court.

Read the Regulations!

1 hour ago, Mr Popodopolous said:

Queries as to whether Cocu and his staff would be classed as football creditors.

Read the Regulations!  Particularly 51.6.1 and the following note!

"51.6.1 due to any other Club (or club) (including but not limited to any Transfer Fee, Compensation Fee, Loan Fee, other contributions due pursuant to the terms of any Temporary Loan Transfer, or any subsequent payments which become due under the terms of any original transfer(s), ticket monies, or other payments pursuant to the terms of any other agreement);

Examples of what are considered to be ‘other agreements’ in Regulation 51.6.1 could include compensation agreements relating to managers / coaching staff.

1 hour ago, Mr Popodopolous said:

Also forgot to add, if Gellaw Newco 202 and Gellaw Newco 204 don't go into admin then surely the administrators and MSD don't, provided repayments kept up, get to access the ground.

That will depend upon the Loan Agreement and the definition of 'Default Event' in that agreement.  As the Football Club is the tenant I would be very surprised if their insolvency wasn't a default event, given the close connection between all the parties.  That would allow MSD to recover under the charge, which covers virtually everything including ownership of the football club and the name 'Derby County FC' or any other guarantees it has.

1 hour ago, Mr Popodopolous said:

Some Derby fans are suggesting that he should gift it back or sell it at a low rate but can't see the EFL accepting that willingly given a) The £81.1m sale price which was defended at great length and b) The fact that there is a 25 or was it 20 year lease on it, effective from 2018/19.

It isn't his to sell or give away.  The ground is owned by a Company with restrictions on the disposal due to the charge from MSD.  Whilst I understand the pendantic nature of this comment, in reality given the compex situation MSD have more powers than Morris. 

 

Edited September 19, 2021 by Hxj

[BTRFTG]

1 hour ago, Hxj said:

Nope - they failed to correctly account for the amortisation on the player contracts - they used a methodology that would have been allowable in different circumstances.

 

Or the company can simply provide them along with the underlying details to the prospective buyers.

 

The overall position for each indiviudal contract will, over the entire period of the contract (or on earlier sale), will be the same under the Derby methodology and under an FRS 102 compliant methodology.  It will simply be the difference between the purchase price and sale price.  Simplifying things slightly, Derby decided that they could charge nil amortisation on contracts until the final year when they would write the entire balance of the fee off.  On a £6 million fee over a three year contract they would gain the advantage of a reduction of £2 million in FFP losses in years 1 and 2 but suffer £4 million additional losses in the final year.

But if you buy such a player every year you effectively gain a permanent £6 million advantage, so it never reverts to the true position.

I suspect that it would be on the treatment of goodwill on the acqusition of teh football club by the new parent.  Haven't worked it all through.

Interesting info but not sure if matters  aren't conflated between legal obligation to file at Companies House and the farce that is FFP.

I know there's been suggestion of complicity with Derby's auditors but surely if the accounts weren't fit to file there would have been an impairment noted, else the auditors themselves would be shown to have been negligent with one or both liable to censure? I thought I'd read there was nothing wrong with the accounts filed, per se, rather their construction and methodology would set alarm bells ringing with the blindest of Pews.

I also get the principle about short-termism re FFP but can't get my head around what one should have in 'cash & assets' and where one explains any difference between what one can demonstrate is held at any given point in time plus what's been written off? To my knowledge the entities weren't some contrived SPV swop con, so ultimately, once the cards stopped moving, the write offs become visible. Even if the intangibles are devalued 'losses' (sic) get 'written down'.

Of course one might argue that whilst Derby are duplicitous in the construction of their accounts, are City really that dissimilar? Do we for one minute believe SL's loans will be repaid in full, or he receive the face value of his stock returned once he cedes control? My money's on City's financial position improving significantly when SL (most likely his estate,) write off much of that owed him as irrecoverable debt.

[cider11]

I read this from the Sun this morning about Mel losing 200m during his time as owner. 
 

Also says no new owners would want to fund 3m losses each month. If perhaps he’d run a tighter ship and adhered to FFP rules he wouldn’t have been spunking so much money out each month. Plus spending like he was fuels other clubs to also try and keep up. 
 

artical - https://www.thesun.co.uk/sport/football/16182184/morris-spent-200m-derby-administration-owner/?utm_medium=Social&utm_campaign=sunfootballfacebook200921&utm_source=Facebook#Echobox=1632080292