A look at City’s accounts for the non-accountant

Supporters Trust treasurer, accountant Robin Daniel, takes a look at City's latest set of accounts and explains some of the ins and outs for those of us without an accountancy background...

On 3rd Nov. Bristol City released the accounts for the financial year ending 31 May 2009, which covers the 2008-09 football season (available to download from the City website). I have had a look at them and have compared them to those for Cardiff City and Ipswich Town for the financial year ended 31 May and 30 June 2008 respectively (this year’s not yet being in the public domain).

Profit and loss account
The headline figure here is no doubt the £6.6m loss, compared to a turnover of £11.7m. Last year’s loss was £2m. However, looking in depth at the figures, there is one-off expenditure for the new stadium of £1.7m. I assume this would relate to mainly architects fees and other legal costs. Removing this from the analysis, the loss would be reduced to £4.9m.

One main contributory factor to the size of the loss this year is that turnover has reduced from £12.3m to £11.7m. This reduction is somewhat surprising as season ticket sales were up during the 2008-09 season as many people renewed before the previous season’s playoff final hoping to see Premiership football. However, I believe that the decrease in turnover of £600k can be put down to appearing in the playoffs and at Wembley in the 2007-08 season and the increased revenue from POTD tickets towards the end of the 2007-08 season as games were selling out despite fewer season ticket holders than last season. As can be seen in note 2 to the accounts, football revenue (i.e. ticket sales and season tickets) fell by almost £1m due to the above, although encouragingly, stadium revenue (including income from conferences, concerts and other non-matchday events) increased by £351k.

The final main pointer towards this year’s sizeable loss is the large increase in staff costs, primarily players’ wages. Staff costs increased by £1.7m, which shows that the investment in playing staff since promotion to the Championship has considerable cost implications.

In comparison, Cardiff City lost £2.9m in the year to 31 May 2008. This is distorted by the large profit that they made on selling players of £5.5m. Ipswich Town lost £5.7m to 30 June 2008, but it has recently been reported that they lost over £10m in the year to 30 June 2009.

Auditors’ report
It is not as concerning as maybe some would think to see an “Emphasis of matter” paragraph in the auditors’ report relating to going concern. This means that the auditors are bringing to the reader’s attention that the company is loss-making and referring to Note 1, where in summary the importance of Steve Lansdown’s continued investment in the club is highlighted as crucial to whether the club can continue to operate as it does now.

Both Cardiff City’s and Ipswich Town’s accounts have auditors’ reports that also have this “Emphasis of matter” paragraph in them and also refer to the importance of their benefactors continuing to invest.

This situation is not confined to “smaller” clubs in the Championship. Liverpool also has this “Emphasis of matter” paragraph in their accounts.

Balance sheet
Last year’s accounts show that the club had net assets, i.e. the value of what it owned was more than what it owed. This year the situation has deteriorated to net liabilities. This means that if called upon to repay all of its debts at once, the club does not have enough assets in order to pay all of these debts off.

Obviously this appears bad news. However, money owed to the club from third parties, such as commercial businesses and potentially, transfer fees owed from other football clubs have reduced considerably this year and this has partially contributed to the net liability position this year. The main difference between last year’s balance sheet and this year’s is the increase in the stadium loan of £3m to £5m, meaning that the club is now borrowing £2m more against the ground than it was last year. As in previous years, this appears to be a loan owed to an entity connected with Steve Lansdown rather than bank borrowing.

Arguably though, it would be a very different, 'healthier' picture if Ashton Gate was shown in the accounts at the value that Sainsbury’s are said to be offering of £20m. The club has, however, chosen to keep the value at c. £10m (as used since 1995), rather than changing it to open market value, which under accounting standards they are entitled to do.

Still valued at its 'old' value

Taken on face value, both Cardiff City and Ipswich Town seem to be in a much worse situation regarding repayment of debt than Bristol City. City’s net liabilities (the amount the club owes in excess of the value of the things it owns) are £1.3m whereas Cardiff’s as at 31 May 2008 were £28.8m and Ipswich’s were £9.5m. However City are similar to Ipswich in terms of the total losses that have accumulated over the last few years as both have £17m as at May/June 2008 (increasing to £23m this year for City and a reported £27m for Ipswich), whereas Cardiff had £38m of accumulated losses as at 31 May 2008.

Summary
Although at first glance City’s latest accounts do not make pleasant reading, the situation may not be as bad as the headline loss figure suggests. It appears that other football clubs of similar stature have more serious concerns about their viability. However the club is dependent on the continued support of Steve Lansdown and his fellow directors.

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