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Independent Review of the Accounts of Sheffield Wednesday Plc 2009 Slide Show
1. Sheffield Wednesday Plc Independent Financial Statements Review For the year ended 31 May 2009 Prepared by Paul Holmes - Wednesdayite
2. Period of the accounts year to 31/5/09 Seven months of old regime to 31/12/08 Five months of Lee Strafford and Nick Parker at the helm Accounts approved on25 September These accounts were filed at Companies House on 3 October They have not yet been distributed to shareholders [edit] distributed 2 November 2009 Fundamental changes in culture and communication in those first five months Still a lot of work to do Now lets look at the accounts in more detail Introduction
3. Turnover down 9% to £11.170m (2008 12.317m) Operating expenses increased by £1.77m to £14.2m Operating Loss £3.078m (2008 0.162m) 2008 included a profit on player sales of £3.274m – being primarily Chris Brunt and Glenn Whelan 2009 had no such sales with a loss on player sales of £65,000 Loss before interest and tax £3.143m (2008 £3.112m profit) Interest charge £565,000 (2008 £895,000) Overall Loss £3.708m (2008 £2.217m) So has it all gone wrong , have Lee and Nick failed? Profit and Loss Account Overview
5. Why have they fallen ? Down £870,000 (12.7%) Average attendance up less than 0.6% to 21,542 from 21,418 But.................. Average for first 13 games 2008/2009 19,619 (down 10% on equivalent games 2007/2008(including Sheffield United game October 2008). It appeared attendance were in terminal decline with attendances being as low as 14,792. Season ticket sales had fallen from 14,150 to 11,967 following the 12.5% price increase. In come Lee and Nick... Average for last 10 games 24,042 – increase due to cut in ticket prices(price increase reversed) and free ticket promotions ...... But we needed to get the fans back into the stadium. Match receipts
6. Down to cup receipts?? Income from cup competitions will have been a lot lower than 2007/08 following early exit from Cups. 2007/2008 Carling Cup – Rotherham Away, Hartlepool and Everton at Home 32,000 attendance in three games FA Cup – Away tie and replay against Derby over 38,000 attendance in the two ties 2008/2009 Carling Cup – Rotherham Home (16,300) FA Cup – Fulham Home (18,377) Fall in cup attendances of over 35,000 – this could be in excess of £300,000. In addition fall in solidarity payment from Premier League of around £700,000. This is due to the number of clubs receiving a parachute payment. Match Receipts ...continued
7. Down 4.7% (256,000) Due to lower retail sales Retail cycle of replica kit....... Expect an increase this current year Decrease in retail sales offset by good match day corporate sales. Commercial Revenue
9. Includes players wages; Manager and coaching staff; Match day expenses – policing, turnstile operatives, stewarding etc. Medical staff and physiotherapists Increased by 14% £1.173m Main increase will be in wages costs – across all categories risen by £1.011m. Player and staff costs increased from £7.2m to £8.2m being 57% of all costs Unfortunately the wages costs are not split to show player wages separately. Direct football expenditure
10. Substantial increase of £488,000 -72% This increase is due in the main to the following: £150,000 paid to Deloitte for corporate finance work- prospectus to sell business Compensation to former CEO Other corporate finance expenses and stock exchange reporting costs. Note 4 to the accounts shows £70k paid to Directors’ during the year, this will be in respect of Nick Parker who replaced the former CEO. This represents 5 months package – I understand this is considerably lower than the package of the former CEO, but as he was not a Director it is not required to be disclosed. Administrative Expenses
11. Other costs have only increased by around £100,000, primarily on ground and property expenses, this may be due to some of the initial improvements the new board carried out. Interest costs show a decrease £330,000 (37%) This is due to the fall in the bank base rate – to a record low- this fall coincided with Lee and Nick coming in – perhaps they have more influence than we think! Other costs and Interest
13. What is a balance sheet? A balance sheet is a snapshot of the company’s assets and liabilities at a particular time. Sheffield Wednesday Plc’s balance sheet is drawn up to 31 May 2009 Lets look at the major components and see how they have changed from 2008. Balance Sheet at 31May 2009
14. Intangible assets represent the cost of players registrations written off (amortised) evenly over a players contract term. The cost can include transfer fees and agents fees The value of intangibles fell from £1,693,000 to £770,000 due to the amortisation charge. Note 8 shows we paid £132,000 for players in the year (O’Connor, Buxton,GrayMiller,) It also shows we sold or released players who originally cost £647,000 (Burch, O’Brien, Burton) for a total of £112,000 The £770,000 does not represent the value of the current playing squad Intangible Fixed Assets
15. The main asset is the Freehold Property -Stadium which is included in the accounts at £24.6m – this is 0.5m lower than 2008 due to the asset being depreciated (written down). £39,000 was spent on improvements in the year This was last re-valued in 2007. Long leasehold property - £135,000 – training ground Plant and machinery - £369,000, this will include office furniture, computers, shop fittings, equipment for pitch maintenance etc. £141,000 was spent on new plant and machinery in the year. Tangible fixed assets
16. Overall £400,000 (2008 £1,755,000). The main fall is due to transfer fee instalment owed (around £1m) in respect of Chris Brunt being paid in the year. Debtors
17. These total £30.1m (2008 £27.4m). The majority of this relates to debt – we will look in further detail at this later. The main increase are : “B” loan notes(£2.1m) being re-categorised as a current liability , as their due date is May 2010. Accruals and deferred income increased by £1.2m to £3.8m- the majority of this will be in respect of advance season ticket monies received prior to 31 May 2009 for 2009/10 Vat liability has increased from £136,000 to £325,000 – this will be due to the VAT on the advance season ticket income. Creditors – due within one year
18. Fallen from £5,471,000 to £3,604,000 This is due to re-categorisation of “B” loan notes to due within one year New unsecured loan from Football league of £0.5m – advance to all clubs for TV revenues Creditors -Due after one year
19. There has been no change to the issued share capital The only change to reserves is the retained loss for the year this has increased the net liabilities of the company from £3.46m to £7.2m According to newspaper reports Mr Allen transferred 275,000 shares to Ashley Carson in the spring of 2009 to reduce his holding below 10%. Based on this the major shareholders are: Share capital and reserves
23. Loans – When are they payable Bank facilities and agreements renewed September Bank overdraft £7,999,000 - repayable on demand –facility agreed until 31 December 2010 “A” loan notes £1,250,000 - 21 May 2008 “B” loan notes £2,100,000 - 21 May 2010 The accounts indicate that the loan notes can only be repaid if 75% of the loan note holders request repayment A majority of the loan note holders have confirmed they will not seek repayment for at least 12 months We also understand there is a “deed of priorities” in place, which limits the loan note holders rights to demand repayment, unless the bank debt is below £14m. Parked debt £4,806,000 - 31 December 2010, or earlier at the banks option Training ground loan £7,500,000 - on sale of training ground, or earlier at the banks option. It is unlikely the business will generate sufficient cash for the loans to be paid on their scheduled due dates therefore the facilities and loan notes will either need to be renegotiated or refinanced in the next 14 months.
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25. Annual report and accounts to be issued to shareholders [edit] issued 2/12/09 AGM – expect it to be held at the end of November [edit] 24/11/09 @St Paul’s @10:30am And so on to the current year........ Season ticket sales around 14,000 Attendances and match day revenues are well up on 2008 Retail sales are well in advance of 2008 – in particular puma kit sales. BUT – our player wages budget was increased at the beginning of the year based on average attendances being higher than we are achieving, so will we need to sell players to balance the budget. So what next
26. Amounts owed to the Bank and Directors in its various forms is around £29.5m – a huge 2.7 times multiple of total annual turnover. In simple terms this means that even if we had NO costs whatsoever, it would still take over two years and eight months of trading to extinguish these liabilities. Unless Income streams are increased it is impossible to reduce these liabilities (they will increase), save: a massive conversion of debt to equity a material debt write off a windfall asset sale (including any player sale) a significant new equity injection promotion to the Premier League a substantial cash gift revenue acceleration (season tickets – shortly on sale) Inner Circle Sports are looking for this new equity injection for us. The directors are working hard to make this club attractive to investors – Fan base, Harmony in the club, Ground Developments, etc So what next (continued)
27. Firstly for me – Paul Holmes BA(Hons) FCA – Wednesdayite Director Secondly to put in writing to the club Thirdly for the board of Sheffield Wednesday Plc , to ask at the AGM If so please email paul.holmes@wednesdayite.com Any questions
28. Thank you for listening to :Sheffield Wednesday Plc Independent Financial Statements Review For the year ended 31 May 2009