I think our posts crossed but have already explained @pragueaddick how the original forecast needs updating for player sales and the cup run leading to losses of £3M or £1M FFP result so I can't take your bottle but thanks These numbers are only going to move a lot if there is a big chunk of cash for Jenkinson appearances for the Gooners or perhaps a player sale before June 30th?
I replied to Airman on another thread but before we get excited about the implications of "breakeven" and horrendous cuts we need to be crystal clear about what the term means. If Duchatelet is referring to the FFP result then guess what? A win vs Sheffield United would have delivered "breakeven" in Duchatelet's first six months!
5,300 fans watching that game were pretty pissed off plus all the Addicks watching on TV - imagine how Duchatelet felt as £1.4M went up in smoke!
You might suggest I am playing with terminology but what I am seeking to do is outline the type of precise questioning which need to be asked for the Trust and wider fanbase to understand the regular communications coming out of the club - and I don't work in corporate analyst "stuff".
I'd be surprised if the thought of sacking the manager didn't enter his head!
When you update for player sales, don't forget to update for player purchases too. £700k for Polish Pete, and by some accounts not all we are liable for.
As for how Duchatelet felt when £1.4m went up in smoke at Bramall Lane, any sympathy I might have had evaporated when I was told by people who were in the directors box that day that it was clear CP knew he was a goner before the game started. While it is true that key employees in the end have to either follow the owner's strategy or leave, the smart owner nevertheless chooses his timing right before making it impossible for a key manager to function effectively.
Everything you say there is reasonable, and let's hope most of it comes to pass. However regarding mathc day revenue I'm afraid I'm sticking to my guns unless the fans see clear signs of squad building for a good go next season.
@PragueAddick This discussion is going across two threads but this appears the more apposite title. @Henry Irving Capital Projects are by their nature capital as is player acquisition and spread over the life of the project / contract - Player disposals less any intangible value in the balance sheet goes to the P&L Player acquisition goes to intangibles and is released over the life of the contract so only 25% to the P&L each year. Good information for the cashflow and balance sheet and all part of the owners strategy to add value but I don't think the annual depreciation is material to the P&L and certainly not part of the FFP numbers.
We may all have different views about the forecast numbers and FFP result for this season and we will know by December latest what these numbers are. Will the club tell us beforehand? My overall point is that it is not that high, well within the current FFP envelope and that as per last summer it is NOT the reason for any cuts in squad budget.
@PragueAddick This discussion is going across two threads but this appears the more apposite title. @Henry Irving Capital Projects are by their nature capital as is player acquisition and spread over the life of the project / contract - Player disposals less any intangible value in the balance sheet goes to the P&L
You have a great knack of repeating omissions that others have pointed out to you back to those same people as if you were aware of them all along and hadn't missed those items out in your previous calculations.
Come on, put your money where your mouth is. You can make it a pint if you are that nervous.
Even if it is £3m, how will you then get from 3m to zero next season? Of course if Poyet signs his new contract, then maybe there's your 3m. But he hasn't signed. And anyway, how will we adequately replace a player who has already been MoM several times?. Maybe a Standard loanee. But one as talented as Poyet?
What has everyone got against the previous owners?
They took over a club in a mess, cleared out all the rubbish, let Powell bring in quality. Took us up a league. Stuck by Powell when we struggled for 3/4 of a season when fans got restless that we didn't win at home on a Saturday for nearly the whole season. Let Powell strengthen a bit bringing in fuller. Then when money got tight and the club is in trouble they release players on high wages, sign up free agents and try to sell the club. They find a buyer who has a vision and sell it. I think that is a story of success for our club and I thank the previous owners and am looking forward to seeing Roland's vision.
@PragueAddick This discussion is going across two threads but this appears the more apposite title. @Henry Irving Capital Projects are by their nature capital as is player acquisition and spread over the life of the project / contract - Player disposals less any intangible value in the balance sheet goes to the P&L
You have a great knack of repeating omissions that others have pointed out to you back to those same people as if you were aware of them all along and hadn't missed those items out in your previous calculations.
@Henry Irving I am not an accounting tutor but the simple clarification is that capital expenditure is NOT part of the Profit and Loss. Never was, never will be! There are quite a few concepts like this in accounting which are about as sexy as watching paint dry... When people discuss FFP, breakeven and sustainability they are referring to the P&L, and the ability of the owners to meet any losses. If owners have spare cash or access to external grants and funding then they are free to pursue capital projects which are written off over the life of the proect. We all know that the pitch needs sorting and there has been an estimate quoted - but it will be spread over perhaps 10 years. That's £50K pa so a drop in the ocean when looking at the overall costs at CAFC. So not an ommission, just being precise about the terminology - think it helps so that everyone is talking about the same things at the same time. Your observations about capex make sense albeit they fit into a separate part of financial strategy.
Bigger picture is what does Duchatelet mean by "breakeven" and how does he plan to get there? I can't answer that for him - only the club management or comms team can answer and suggest that is where people address their questions.
PS more than happy to work with anyone offline to build an understanding of the CAFC finance and football strategy - I don't think it works too well on a forum?
Whatever the ins and outs, the way Leicester (loss £34 million) and QPR (loss, think of a number) operate makes it all a waste of time - fines need to be dished out by the FL so that it's a level playing field. I'm sure RD has a strategy and I'm sure it's complex!
I was implored to elaborate why I felt so upbeat following the last FF meeting & clearly stated ( unless I'm more deluded than normally) that Katrien had stated that RD's plan is to break even.
And I believe I'm due to be put in the dock on 23rd April for my misconduct ????
SR and HI, for clarity - the costs of the pitch will need to be paid for in the summer - out of cashflow - when the work is done, but then they are written down over c 10 years against the P&L...
I'm not too sure that RD has a 'plan' as such. It seems more like an incoherent jumble of ideas, some good and others not, loosely glued together by a dangerous mix of arrogance and naivety.
A 67 year old is only going to be in it for the medium term at best. I expect that, like the last owners he just wants to bump us up the ladder a bit and then sell on. Of course if he succeeds in doing so that would be progress for the club. But at the moment I wouldn't put money on it.
SR and HI, for clarity - the costs of the pitch will need to be paid for in the summer - out of cashflow - when the work is done, but then they are written down over c 10 years against the P&L...
(and I know very little about accountancy!)
That was my point. You can right it down over any period you like but you still need to pay for it and I doubt the firm doing it will wait 10 years
How something is paid for is separate to how that cost or capital expenditure is recorded in the profit and loss and balance sheet.
As regards cash flow the option is almost certainly to pay for it all (less a contractual retention maybe re ensuring lasting quality of works) on satisfactory completion. Now whether that is done out of reserves or borrowing is a question for the Club and / or Roland. It maybe, as an example, that Roland (or one of his companies) lend the Club the money to be repaid over an agreed period.
The benefit of major pitch work will last for more than one accounting period (an accounting period is most commonly a year) which is why such work would be capitalised rather than written off in total in the next set of accounts.
Let us assume, hypothetically, that the pitch improvements will cost £100 k and in 5 years time more work will probably need to be done as the drainage silts up once more. The £100k will be shown as an asset on the balance sheet and £20k a year shown as depreciation in the profit and loss being an annual write down of the asset over its estimated useful life of 5 years.
I'd like to hear the CFO's argument to auditors as to how the pitch repair while adding no value to the club can be capitalised given that the pitch itself is unlikely to appear on the balance sheet. FRS15.
I agree that a cost is a cost. The annual relaying of the turf is a simple annual cost. But whatever is wrong with the drainage is structural and needs a big one off cost. This could be spread over 5 or 10 years. The points made about funding are key: understanding the structure of ALL long term financing for CAFC football club and CAFC holdings is vital in terms of understanding financial and political stability. Many people including the Trust have spent some time looking into this. The first signs of instability are often revealed in the financing showing up in the annual accounts. There are professional analysts on here who are far more articulate and experienced than I who can explain what has happened since we left the Premier League but we all know that the parachute monies and sale of Darren Bent was squandered. The irony of the CAFC financial structure under the last owners was that it was relatively stable due to a complex set of loans, shareholdings and mortgage debt around Baton and the way that was set up. This year the financial structure has been centralised...rapidly! One can panic or one can look at the hard evidence of what is happening at our club?
I understand your concern about including all funding requirements. I was focused on Prefit & Loss because it is the way to compare FFP and other clubs... For instance Bournemouth have crowds of 10,000 and yet they will be paying one of their 34 year old strikers(!) a lot of money in two years time - and the FFP loss limits reduce every year.
I think what I am struggling to communicate is that there are basically four types of set up in the Championship: Clubs like QPR, Leicester and Forest whose owners are funding tens of millions of losses and breaching FFP rules Then there is Brighton, Boro and Ipswich who are trying to compete and stay within the limits by selling players - losing close to £8M after FFP deductions - Brightons losses are big but I suspect there is a lot of depreciation in there on their new stadium. Next there are Clubs with parachute payments who either restructure in the championship or go into freefall (Wolves and CAFC a few years back) and they are exempt in the first year. And finally the likes of Charlton who are simply nowhere near the limits and nowhere near the top six. But they do have the potential to accelerate squad development / player acquisition. That is buy players and lose a little more on the wages if it increases performance, entertainment and results.
In summary I believe that fans should be told the truth about finances and aspirations so as to build an honest relationship and squeeze out the rumours. It might be impossible to spell it out now but the squad which starts next season and a number of other decisions will tell us all enough about where the club is going. As many have posted on this site it is unlikely that CAFC can compete if there is too much focus on breakeven.
PS I haven't been able to access Liege or Staprix accounts as yet but the millions on income and expenditure in there will tell us a lot more about possible CAFC futures.
I'd like to hear the CFO's argument to auditors as to how the pitch repair while adding no value to the club can be capitalised given that the pitch itself is unlikely to appear on the balance sheet. FRS15.
I grant you there is indeed an arguable case for writing it all off year 1 as "repairs" although I do think a case could also be made for capitalising. The asset is a football ground of which the pitch is a fundamental part. If the drainage works are "improvements" rather than repairs then arguably they should be capitalised.
What I was trying to do above was attempt to clarify the distinction between cash flow and accounting treatment of costs or capital expenditure since there seemed to be some confusion higher up the thread.
As is my wont I appear to have made matters worse so will now withdraw from this thread.
I see that Scott Sellars has been canned as head of the Man City Academy. Heard a rumour a few weeks back that PH was being lined up to take over and that JR was going to take over our academy #just saying
Strangely, although he lives in Belgium he commutes to Charlton on Eurostar and his journey time to Charlton (two and a half hours) is less than mine from my home in Hertfordshire to Burnley. The wonders of modern transportation! "
.
Could it be that it's closer? Oh the wonders of modern geography!
I see that Scott Sellars has been canned as head of the Man City Academy. Heard a rumour a few weeks back that PH was being lined up to take over and that JR was going to take over our academy #just saying
I have heard that Hart has received two contract offers from the club which he has turned down. Man City have made an offer to him to take over their Academy, which will happen at the end of the season.
And if that is true we would have to sadly congratulate PH on his promotion, because unquestionably thats what it is. He seems to have done a very good job for us. Can someone remind me when he started? Did he work with Shelvey and Jenkinson?
The PH deal to City is a done one as far as I'm aware. Riga to move to the academy (although there is a possibility he may stay as first team manager should we stay up)
I also heard that Leeds United wanted to take Paul Hart, but for whatever reason that did not happen. I am gutted to see Paul Hart go as he has been brilliant for the academy, but I will be happy if Steve Avory stays as he has been a real mainstay for a number of years.
If PH departs then I will be gutted for us but very happy for him and wish him well. I do hope that the RD regime has the foresight to enquire of Paul whom he thinks might be right for the role after his departure although I suspect that Riga was already lined up given his miraculous arrival and availability on the day of Powell's departure.
If that is the case it does beg the question of who takes the reigns as first team coach should Jose take the academy.
Very interesting summer ahead. I think we could be in for an enjoyable ride but very dependent on our Championship survival. I would think any plans to push on would be greatly curtailed by our relegation.
Comments
Bottler :-)
When you update for player sales, don't forget to update for player purchases too. £700k for Polish Pete, and by some accounts not all we are liable for.
As for how Duchatelet felt when £1.4m went up in smoke at Bramall Lane, any sympathy I might have had evaporated when I was told by people who were in the directors box that day that it was clear CP knew he was a goner before the game started. While it is true that key employees in the end have to either follow the owner's strategy or leave, the smart owner nevertheless chooses his timing right before making it impossible for a key manager to function effectively.
Everything you say there is reasonable, and let's hope most of it comes to pass. However regarding mathc day revenue I'm afraid I'm sticking to my guns unless the fans see clear signs of squad building for a good go next season.
This discussion is going across two threads but this appears the more apposite title.
@Henry Irving
Capital Projects are by their nature capital as is player acquisition and spread over the life of the project / contract - Player disposals less any intangible value in the balance sheet goes to the P&L
Player acquisition goes to intangibles and is released over the life of the contract so only 25% to the P&L each year. Good information for the cashflow and balance sheet and all part of the owners strategy to add value but I don't think the annual depreciation is material to the P&L and certainly not part of the FFP numbers.
We may all have different views about the forecast numbers and FFP result for this season and we will know by December latest what these numbers are. Will the club tell us beforehand? My overall point is that it is not that high, well within the current FFP envelope and that as per last summer it is NOT the reason for any cuts in squad budget.
You have a great knack of repeating omissions that others have pointed out to you back to those same people as if you were aware of them all along and hadn't missed those items out in your previous calculations.
Come on, put your money where your mouth is. You can make it a pint if you are that nervous.
Even if it is £3m, how will you then get from 3m to zero next season? Of course if Poyet signs his new contract, then maybe there's your 3m. But he hasn't signed. And anyway, how will we adequately replace a player who has already been MoM several times?. Maybe a Standard loanee. But one as talented as Poyet?
They took over a club in a mess, cleared out all the rubbish, let Powell bring in quality. Took us up a league. Stuck by Powell when we struggled for 3/4 of a season when fans got restless that we didn't win at home on a Saturday for nearly the whole season. Let Powell strengthen a bit bringing in fuller. Then when money got tight and the club is in trouble they release players on high wages, sign up free agents and try to sell the club. They find a buyer who has a vision and sell it. I think that is a story of success for our club and I thank the previous owners and am looking forward to seeing Roland's vision.
I am not an accounting tutor but the simple clarification is that capital expenditure is NOT part of the Profit and Loss. Never was, never will be! There are quite a few concepts like this in accounting which are about as sexy as watching paint dry...
When people discuss FFP, breakeven and sustainability they are referring to the P&L, and the ability of the owners to meet any losses. If owners have spare cash or access to external grants and funding then they are free to pursue capital projects which are written off over the life of the proect.
We all know that the pitch needs sorting and there has been an estimate quoted - but it will be spread over perhaps 10 years. That's £50K pa so a drop in the ocean when looking at the overall costs at CAFC.
So not an ommission, just being precise about the terminology - think it helps so that everyone is talking about the same things at the same time. Your observations about capex make sense albeit they fit into a separate part of financial strategy.
Bigger picture is what does Duchatelet mean by "breakeven" and how does he plan to get there? I can't answer that for him - only the club management or comms team can answer and suggest that is where people address their questions.
I know how P+L works but a cost is still a cost and someone still needs to fund it.
:-)
This is not news after all...
I was implored to elaborate why I felt so upbeat following the last FF meeting & clearly stated ( unless I'm more deluded than normally) that Katrien had stated that RD's plan is to break even.
And I believe I'm due to be put in the dock on 23rd April for my misconduct ????
(and I know very little about accountancy!)
A 67 year old is only going to be in it for the medium term at best. I expect that, like the last owners he just wants to bump us up the ladder a bit and then sell on. Of course if he succeeds in doing so that would be progress for the club. But at the moment I wouldn't put money on it.
How something is paid for is separate to how that cost or capital expenditure is recorded in the profit and loss and balance sheet.
As regards cash flow the option is almost certainly to pay for it all (less a contractual retention maybe re ensuring lasting quality of works) on satisfactory completion. Now whether that is done out of reserves or borrowing is a question for the Club and / or Roland. It maybe, as an example, that Roland (or one of his companies) lend the Club the money to be repaid over an agreed period.
The benefit of major pitch work will last for more than one accounting period (an accounting period is most commonly a year) which is why such work would be capitalised rather than written off in total in the next set of accounts.
Let us assume, hypothetically, that the pitch improvements will cost £100 k and in 5 years time more work will probably need to be done as the drainage silts up once more. The £100k will be shown as an asset on the balance sheet and £20k a year shown as depreciation in the profit and loss being an annual write down of the asset over its estimated useful life of 5 years.
Hope this helps!
The points made about funding are key: understanding the structure of ALL long term financing for CAFC football club and CAFC holdings is vital in terms of understanding financial and political stability. Many people including the Trust have spent some time looking into this.
The first signs of instability are often revealed in the financing showing up in the annual accounts. There are professional analysts on here who are far more articulate and experienced than I who can explain what has happened since we left the Premier League but we all know that the parachute monies and sale of Darren Bent was squandered.
The irony of the CAFC financial structure under the last owners was that it was relatively stable due to a complex set of loans, shareholdings and mortgage debt around Baton and the way that was set up. This year the financial structure has been centralised...rapidly! One can panic or one can look at the hard evidence of what is happening at our club?
I understand your concern about including all funding requirements. I was focused on Prefit & Loss because it is the way to compare FFP and other clubs... For instance Bournemouth have crowds of 10,000 and yet they will be paying one of their 34 year old strikers(!) a lot of money in two years time - and the FFP loss limits reduce every year.
I think what I am struggling to communicate is that there are basically four types of set up in the Championship:
Clubs like QPR, Leicester and Forest whose owners are funding tens of millions of losses and breaching FFP rules
Then there is Brighton, Boro and Ipswich who are trying to compete and stay within the limits by selling players - losing close to £8M after FFP deductions - Brightons losses are big but I suspect there is a lot of depreciation in there on their new stadium.
Next there are Clubs with parachute payments who either restructure in the championship or go into freefall (Wolves and CAFC a few years back) and they are exempt in the first year.
And finally the likes of Charlton who are simply nowhere near the limits and nowhere near the top six. But they do have the potential to accelerate squad development / player acquisition. That is buy players and lose a little more on the wages if it increases performance, entertainment and results.
In summary I believe that fans should be told the truth about finances and aspirations so as to build an honest relationship and squeeze out the rumours. It might be impossible to spell it out now but the squad which starts next season and a number of other decisions will tell us all enough about where the club is going. As many have posted on this site it is unlikely that CAFC can compete if there is too much focus on breakeven.
PS I haven't been able to access Liege or Staprix accounts as yet but the millions on income and expenditure in there will tell us a lot more about possible CAFC futures.
What I was trying to do above was attempt to clarify the distinction between cash flow and accounting treatment of costs or capital expenditure since there seemed to be some confusion higher up the thread.
As is my wont I appear to have made matters worse so will now withdraw from this thread.
If that is the case it does beg the question of who takes the reigns as first team coach should Jose take the academy.
Very interesting summer ahead. I think we could be in for an enjoyable ride but very dependent on our Championship survival. I would think any plans to push on would be greatly curtailed by our relegation.