Hxj

As I said on the FFP thread:

"So I'm a Guardian journalist and I am bored so I will write a non-story and dress it up as something else.  I can't read and understand what is detailed on Companies House, but I use that as a source to justify my meaningless conclusions.

"That makes it difficult not to conclude that just to pay for ALK to take over, the club is now approximately £90m worse off, with interest to pay"

Or as an alternative the club is utilising it's cash resources by getting a far better rate of return than it was under the old management, so in fact the company is better off.  But that doesn't suit me as a Guardian journalist so I won't explain how that may have happened."

1 hour ago, Davefevs said:

 

So I'm a Guardian journalist and I am bored so I will write a non-story and dress it up as something else.  I can't read and understand what is detailed on Companies House, but I use that as a source to justify my meaningless conclusions.

"That makes it difficult not to conclude that just to pay for ALK to take over, the club is now approximately £90m worse off, with interest to pay"

Or as an alternative the club is utilising it's cash resources by getting a far better rate of return than it was under the old management, so in fact the company is better off.  But that doesn't suit me as a Guardian journalist so I won't explain how that may have happened.

48 minutes ago, AnotherDerbyFan said:

I should point out, that I think the figures stated in the accounts include add-ons (I certainly hope so!). Total potential add-ons in 17/18 about £13m. I would therefore assume that our amortisation in following years should be lower than estiamte due to not paying out on promotion bonuses and appearance fees? That may explain why the Hearing Decison Document stated amortisation is £25.1m for 19/20 as we had to calculate a 'worst case scenario' - meaning paying out for promotion? It'll still be above £15m either way

The original intangible cost figures in the accounts for new signings in the year won't include any add-ons potentially payable, only the original fee.  The figures in Note 20 of the accounts you refer to are not in the intangible cost figures in the accounts presented, they are known costs, but they may not occur in part or in full so are included as 'Contingent Liabilities'.

As to the numbers above the following intangible additions are shown in the accounts (in £ millions), these include the fees and levies, and any add-ons paid out in respect of previous year transactions.

2015/16 - 29.96

2016/17 - 21.15

2017/18 - 15.0

These are the figures which will need to be written off through amortisation, subject to any disposals of those players.  The difference to your figures appears to be significant, and at fisrt glance probably accounts for the difference that you have with Kieran Magurie.

The provision should be in the FFP figures as it is in the accounts as a deduction and doesn’t fall within the list of necessary adjustments.

25 minutes ago, JoeAman08 said:

Thanks. How does that work then? It doesn’t seem likely Brighton gave us 20m cash for Webster up front did they? 

The accounts reflect the full value of transfer fees agreed in the year.

Any unpaid fees receivable are shown in Debtors, see Note 16 to the accounts.  Any unpaid fees payable are shown in Creditors see Note 18 to the accounts.   These show that the club is owed £24 million in unpaid fees and owes £17 million in unpaid fees, so a net £7 million in cash is due.

Where the transfer agreement contains terms such as additions on appearances or promotions then the estimated value of these is included in contingent assets or liabilities, so do not effect the current financial performance, see notes 27 and 28.  Amount sdue from sell on clauses won't feature in the accounts until the player is sold on.

In any season if a club returns a profit for FFP purposes there are no further tests.

So any club which makes an FFP profit of £1 in 2022 will automatically meet FFP regardless of performance in previous years.

On 08/01/2021 at 19:19, Mr Popodopolous said:

Agree @Hxj like that argument a lot with respect to Sheffield Wednesday and their accounts.

Maybe that is the precise or at least the broad nature of the delay to their accounts- could the EFL be pushing back with that very line of argument about inclusion of it in 2018/19 accounts? Be it at Companies House or for FFP purposes.

I'd expect the EFL under Rick Parry to take that stance for sure or explore it- unsure about under Harvey?

 

I would take the line that these are the submitted accounts for 2018 AP and so they fall within regulation 1.1.3 of the FFP regulations.

Accounts can be restated where there is a material omission or mis-statement in those accounts, materiality is relevant but the stadium transfer is clearly material.

FRS 102 states that an error that needs accounts to be restaed arise as follows: 

‘Omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

(a) Was available when financial statements for those periods were authorised for issue and

(b) Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.’

In the SWFC case the auditor clearly decided that the adjustment in respect of the stadium sale should be made and therefore the informatiom was both available and taken into account, it was hardly hidden or not discussed.

All in all that makes it tricky to argue that a prior year adjustment is appropriate, in which case SWFC may well have stuffed themselves.

There is an argument for Sheffield Wednesday, which I particularly like, which goes along the lines of -

You have claimed the ‘profit’ in a set of accounts - what provision in the regulations allow you to claim it in another period?

My initial view on Millwall is actually how little impact Covid-19 has had on their results.

Probably because they have relatively low commercial income and 10 months of the period including Christmas had already passed.

The case against Derby will be - is a Private Equity Hedge Fund lending money acting in the ordinary course of banking.

I am sure that loads of legal fees will be spent on that one!

12 hours ago, Mr Popodopolous said:

• Author

•   On 24/11/2020 at 12:07, Davefevs said:

I haven’t read past the first few pages....how is that not an aggravated breach?

Your guess is as good as mine. If we look at Birmingham...

Because the EFL did not contend for an aggravated breach at the Sanctions Hearing see paragraph 20 efl-v-sheffield-wednesday---decision-on-sanction.pdf  

4 hours ago, Mr Popodopolous said:

Sheffield Wednesday written reasons released- well last week, just discovered them myself.

https://www.efl.com/siteassets/efl-documents/youth-alliance/201104---sheffield-wednesday-fc-v-efl-appeal---decision-final-201116.pdf

Few might be interested- @Davefevs @downendcity @BTRFTG @Coppello @Hxj

About to have a quick look myself.

Thanks - interesting read.

Provides some useful insight into the process.

Evening @Mr Popodopolous

There is a new charge in there over the training ground - Mel must be getting very short of money!  Having seen them play yesterday I think finances are the least of the club’s problems.

On 30/09/2020 at 16:24, Mr Popodopolous said:

Thanks. Maybe I've misread it a bit then.

I'm assuming that the rollup means that the 3 years to 2020 wouldn't be assessed in isolation and those look like the headline figures- maybe the segmented results are the ones to look for, well I've done that anyway.

If anyone is interested the accounts are available at https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0930/2020093001616.pdf

The loss for the company and subsidiaries is £26.5 million or thereabouts.  The reported loss for the football club is as per @Mr Popodopolous at £18.5 million.  If I was the EFL  would also be looking at the £8 million of unallocated central costs to see which ones related to football.

As to all reporting to the EFL my understanding is that all the current reporting rules apply as do all the sanctions, so if your are in, or potentially in breach, you can still for example be handed transfer embargos.  The final reckoning and any actual breach of FFP can't happen until the final 2020/21 position is agreed.

Well the DCFC website claims 4 goalkeepers and six defenders - and people complain about our squad - plus Rooney is a year older - even easier for someone to close him down so he passes backwards.

I do agree that some of the SWFC and DCFC fans are more than delusional.

However the 12 point deduction for SWFC and the current mutilation of the DCFC squad is sufficient recompense from my perspective 

The agreed valuation of Pride Park may well be complete nonsense - but until the EFL firstly follow the correct EFL processes and secondly appoint real experts they cannot argue otherwise.

My argument would have been - would an open market purchaser pay £81.1 million for an asset achieving a guaranteed gross rent of £1.1 million a year?  But then again I don't work for the EFL. 

As regards other rents and income I would be looking for a real history.

Firstly - although I know that you will not accept it - the value of Pride Park has been agreed for FFP purposes - it really has.

Secondly - I think that the EFL missed a valuation issue on Pride Park - I would have expected the valuation to also be challenged on the basis of the rental value from DCFC - I doubt that in open market terms that the agreed rental value equates with the capital value given the over-riding dominance of the DCFC lease.

Thirdly I would expect in future that the EFL would appoint experts who are really experts - or maybe not.

Finally the EFL will lose their appeal.

1 hour ago, Mr Popodopolous said:

Finally read the report in full!

Pride Park, this was at the time it was built one of many similar grounds built between mid 1990s-early 2000s. The construction cost in 1997 was quite cheap and cheerful. Wiki says £28m.

£3k per seat x 33k? Depreciation by 1/3 wasn't it then land value added in. About £70m? Granted the range was £3-3,500 per seat. 

I'm no valuer but some of his examples were puzzling! Leicester's valuation feels a very good comparable, Coventry? Stoke's ground was built in 1997 and isn't a much lower capacity.

Under £50m, £51m (was £60m until naming rights went) and under £50m respectively. Land value may well be cheaper in these places of course.

'Facilities of AG inferior to Pride Park'?? Don't see it myself! That's a laugh and a half. The lack of corners surely is a factor though, as well as lower capacity.

On the flipside, land value in Bristol exceeds that of Derby. The roof is a hypothetical and still hasn't AFAIK moved forward so irrelevant.

 

Simply put the expert appointed by the EFL to value the stadium wrote a poor expert report and was poorly prepared for the hearing.  That is the EFL's fault.

24 minutes ago, AnotherDerbyFan said:

1. The EFL can't appeal based on them not choosing good enough 'experts'.
2. Again, the can't appeal based on that. As was proven, based on their 'expert', their stadium valuation of £50m was far too low.
3. I was surprised the legal and bias claims were dismissed so easily. The fact we didn't even have to rely on them, with the facts doing the talking just shows how wrongful the charges were. I also expected comments on the lack of outside investment and player recruitment was significantly impacted as a result.
4. Confirmed P&S profit/loss from what I can see are:
   • 2017 = -£13.407
   • 2018 = £7.207
   • 2019 = -£31.517
   • 2020 therefore must not exceed £14.69m. My revised estimates suggest we are about £5m over that. However, we would have sold at least one player by now if that was the case.
   • Seems clubs approved a new P&S rule last week. We're moving from a 3 year cycle to 4 years. Losses for 19/20 and 20/21 are averaged (presumably to minimise the coronavirus impact) and use with the 17/18 and 18/19 seasons. It means Our combined losses for 19/20 and 20/21 therefore must not exceed £29.38m. I'm not sure if this replaces the 2020 or 2021 P&S period.

Here's a summary table of the losses based on the Decision document:

If you apply my earlier comment on appeals generally, I agree that the EFL have no hope of succeeding on appeal.

As to the revised methodology the revised wording, plus the actual measurement periods will be important.  l still expect the club to fail 2020/21 by a large margin based upon the information available.  The club is clearly burning huge amounts of cash, and whilst not a measure of profit it is a good indication that things are not healthy.

If such a revised system is in operation it will likely depress transfer values as clubs have to deal with a lack of income and that impact on losses for some time.  This could have a significant impact on the club as the residuals will drop as well, all of which will need to be reflected in the relevant accounts.  Other clubs, which use a straight line method, will be significantly less impacted by a drop in residuals.

9 hours ago, AnotherDerbyFan said:

Charge 1 - Stadium
The independent panel reaches the conclusion of fair value. £81.1m falls inside their concluded fair value range of £74.4m to £89.5m. 

Charge 2 - Amortisation
Concluded that the policy wasn’t made clear in the accounts. Review of the policy actual revealed it is acceptable and meets the relevant accounting standards. 

The EFL don’t have a leg to stand on any appeal. Especially when you look at one of their key experts, Mr Messenger using stadiums such as Burton, Shrewsbury, Colchester, Chesterfield and Doncaster to draw accurate comparisons. He got mixed up between capacity, number of seats and square meters!

There were the four main issues highlighted in the decision from my perspective:

1.   The EFL appointed 'Experts' who frankly were not up to their roles.  An 'academic' accountant and a partner in a four partner practice would not be my choice.
2.   The EFL jumped to the main charge too early, which caused them difficulties.  They should have got an adjusted stadium valuation agreed by the EFL Board first as a first step.  
3.   All of DCFC's and Morris' rants claims around bias and injustice were totally dismissed with minimal words. 
4.   Derby will be back in front of the EFL Disciplinary Commission very shortly based on the current rules.  If the FFP losses exceed £12 million for 2019/20 the club is in default, if the combined losses for 2019/20 and 2020/21      exceed £5 million (unless a profit is made in 2021) they will be in breach for that year as well.

2 hours ago, AnotherDerbyFan said:

Not sure how you've reached that conclusion. 

From the same place as you I think

2 hours ago, AnotherDerbyFan said:

The next two sets of accounts to be released won't be pretty - I wouldn't bet against c£25m losses in those years  (I estimated abour £24.8m and £27.2m) 

Your guess was £52 million mine is £50 million

Although we now know fromthe decision that the FFP figures for 2018 was a £7 million profit and predicted for 2019 a £34 million loss!

I can see points deductions for 2019/20 and 2020/21 with all those intangibles to deal with.

There is nothing wrong with the loans from Rams Investment Limited (Gabay) and MCD (Dell), they are both third parties.  The amounts, unless converted into equity, cannot be used for FFP purposes. 

Having lent all that cash the lenders have security with the charges over all the assets of the companies, that is not unusual, and no different from the arrangements for a house mortgage.

It continues to look like Morris has had enough though, he is no longer funding the club.

As to the disciplinary panel decision best to await a copy of the decision and the outcome of any appeal before commenting.

A quick look at the accounts for 2018 show that the position is still dire.  At 30 June 2018 the football club lost £26 million before the stadium transfer, and there is no indication that matters have improved in 2019 and 2020.  They also had £50 million of intangible assets on the balance sheet, those will need to dealt with through the Profit and Loss account at some point in time.

So let's say £25 million a year loss for 2018, 2019 and 2020, so £75 million, less the profit on disposal, gives you £35 million.  Disposals of players will not benefit the club to the same amount as others for the reasons already stated.

40 minutes ago, BOSRed said:

Seems on Twitter, derby have escaped any fine/points deduction etc for any wrongdoing. Shambles if true. Just sets a precedent for all others to get away with bad financial management

Yep - it's official

https://www.efl.com/news/2020/august/efl-statement---derby-county/

1 hour ago, Mr Popodopolous said:

With respect to Derby County, we are still awaiting accounts for the following entities, at CH. Will write due date next to them!

For clarity purposes, Club DCFC is event catering, Stadia DCFC is classified as "Other Sports Activities", the Academy and Football ones- self-explanatory.

Sevco 5112 is the parent company for Club DCFC, Stadia DCFC and The Derby FC Academy Limited.,

Gellaw Newco 203, this would be the ultimate company in the group- it is directly both above the Club and Sevco 5112. Quite why the separations is unclear as most if not all of this would be consolidated for FFP purposes anyway- or should be!

Gellaw Newco 203 was incorporated on 28th June 2018 and became the Parent of Sevco 5112 on 28th June 2018- as per CH. "Took over" Derby on 28th June 2018, became the Person with Significant Control on this date- this shifts the controlling party from Sevco 5112 in the prior year and the "Person with Significant Control" is no longer Mel Morris- except it is really as he owns the lot!

EDIT: A quick search and Kieran Maguire 2 years ago suggested Stadia DCFC Limited was related to sponsorship and broadcasting.

The Derby County Group went through a complex reorganisation which was structured for legal and tax reasons (so at least one owner knows the value of advice!), but resulted in a fairly simple outcome.  The split resulted in three parts, the 'Football Part (GN203)", the "Stadium Part (GN204)" and the "Debt Part (Sevco 5113)", all owned by Morris but in separate chains. 

The latter is actually interesting in that Morris effectively wrote off £55 million that he had lent the club, possibly as part of planning for the disposal of the "Football Part" and the "Stadium Part"?