Go figure - new blog article about City's accounts

[flyer]

Absolutely ridiculous blog, written by somebody who hasn't read the sports financial editors comments in the Sun, Star, Mirror or Mail.

Could I suggest that you keep these amateuristic opinions to yourself and not try to pretend that you understand the very complicated world of FFFP regulations and the highly respected mass media in an attempt to convince people you have a clue what you're talking about!!!

It's glory hunters like you, trying to avert City supporters from the truth of their clubs impending doom that give the red tops a bad name

Why don't you just f**k off<br /><br />-- Sun Nov 20, 2011 2:04 am --<br /><br />Can we send this blog to every sports editor please

Thanks

 

[halfcenturyup]

I am guessing the extraorindary write-down of players' registration is for RSC, Adebayor and the other usual suspects right PB? So any proceeds we get this year is pure profit no?

 

[WyongBlue]

Very good article, made things clear and understandable, compared to certain media outlets screaming figures,and misleading info...........

 

[Prestwich_Blue]

I am guessing the extraorindary write-down of players' registration is for RSC, Adebayor and the other usual suspects right PB? So any proceeds we get this year is pure profit no?

That's the way I read it too. Very clever move by City but entirely legitimate under accounting rules. In fact, not just legitimate but recommended.

 

[halfcenturyup]

I am guessing the extraorindary write-down of players' registration is for RSC, Adebayor and the other usual suspects right PB? So any proceeds we get this year is pure profit no?

That's the way I read it too. Very clever move by City but entirely legitimate under accounting rules. In fact, not just legitimate but recommended.

All these poor fans from other teams who read the press don't know what is going to hit them in the next few years. Should be fun to watch. Sustainable club, competitive prices, community based ....

 

[stonerblue]

Good stuff PB.

What i wanna know is how can a club who spend their own money, real money that isn't from a loan/mortgage, be deemed to be operating at a loss. Yet a club that's hocked-upto the eyeballs and owes hundreds of millions to un-named shadowy corporations/groups and loan interest payments be said to operating at a profit?

 

[halfcenturyup]

Good stuff PB.

What i wanna know is how can a club who spend their own money, real money that isn't from a loan/mortgage, be deemed to be operating at a loss. Yet a club that's hocked-upto the eyeballs and owes hundreds of millions to un-named shadowy corporations/groups and loan interest payments be said to operating at a profit?

There is a difference between loss and debt.

A company can make a profit, but be in debt like United, or can make losses and have no debt like City. The difference is that United make money but the Glazers take the cash generated out to pay off their debt, our owners put in new money to finance our losses. Press reports talking about City's "debts" don't understand the difference.

In a few years, the situation will be: United make profits but will still be in debt (unless they re-structure), we will be making profits and will be able to use the cash generated to buy players, for example, or further develop the club.

We should all just sit back, relax and watch everyone else explode in the next few years as we become self-sufficient.

 

[Cityfan]

I have very little knowledge of accountancy or buisness but my own limited exerience is that future problems tend to be a bit underestimated and sometimes opportunities overestimated. I think our directors will have a very tough road ahead.
With regards to a couple of things one is that if our impairment of players values is £30M that is pretty much exactly half the reported fees of Jo, RSC, Bridge and Bellamy, which is where they are in their contracts. Adebayor has not been impaired which may represent a hit in the next set of accounts, as with his wages and being half way through a contract bought at £25M I cannot see us selling him for the value he retains on our books.

With regards to wages Johnson,Zabletta and Kompany have all had an uplift and most of the high wage earners are still on our books. Given and Bellamy are the only two who have left that have been acquired since the takeover. The others are on loan and we may still need to pay a proportion of their wages
We may yet need to pay out significant sums to get some of the wage earners off our books.

Tevez is another awkward one, it is clear that he will be leaving and is on huge wage, other clubs wil not want to pay us more than they have to, he cannot even be used in the Champs League this season.
We have no idea at what value he is retained on our books Newspaper reports have suggested that we paid £40+M for him if this is what he actually cost then half way throughthe contract his retained value is £20+M, I think with his wages and behaviour this would be an unrealistic fee.

 

[halfcenturyup]

I have very little knowledge of accountancy or buisness but my own limited exerience is that future problems tend to be a bit underestimated and sometimes opportunities overestimated. I think our directors will have a very tough road ahead.
With regards to a couple of things one is that if our impairment of players values is £30M that is pretty much exactly half the reported fees of Jo, RSC, Bridge and Bellamy, which is where they are in their contracts. Adebayor has not been impaired which may represent a hit in the next set of accounts, as with his wages and being half way through a contract bought at £25M I cannot see us selling him for the value he retains on our books.

With regards to wages Johnson,Zabletta and Kompany have all had an uplift and most of the high wage earners are still on our books. Given and Bellamy are the only two who have left that have been acquired since the takeover. The others are on loan and we may still need to pay a proportion of their wages
We may yet need to pay out significant sums to get some of the wage earners off our books.

Tevez is another awkward one, it is clear that he will be leaving and is on huge wage, other clubs wil not want to pay us more than they have to, he cannot even be used in the Champs League this season.
We have no idea at what value he is retained on our books Newspaper reports have suggested that we paid £40+M for him if this is what he actually cost then half way throughthe contract his retained value is £20+M, I think with his wages and behaviour this would be an unrealistic fee.

On Jo, RSC, Bellamy and Bridge: Assuming they has been written down to nil, any proceeds we got for Jo and Bellamy plus others this year will be profit. The worst position, even taking into account salaries, is that we save the extraordinary write-down of 34 million, take the proceeds from Bellamy and Jo, and save all of Bellamy and Jo's salaries.

On Adebayor, he will be 3 years into his contract in the summer, so his unamortised value, assuming 25 million cost, wil be 10 million. I iimagine we will sell for at least that amount, so no loss there. And for his salary, we will save what Spurs are paying this year, and his full salary when we sell him.

Tevez is clearly a problem, depending on what his unamortised value is. In the worst case, assuming 45 million cost, next summer he will have a value of 18 million. We could probably recover that unless he has really imploded. His salary would be in both years, so no net effect. If we can get rid for 18 million and save his salary next year, that would be better.

As for wage increases, it is normal that wages increase as revenues are also increasing, so we can assuke they would be more than offset by higher revenues.

So I don't think any of those issues will have a major effect, and the "special" increases in revenue such as CL revenues and the Etihad deal will go immediately to the bottom line, so I guess at least halve the loss to 70-80 million.

All that before any costs which are excluded for FFP as PB said, and any other sponsorship deals. So on the whole, no need to worry I think.

Sorry ... was a long post.<br /><br />-- Sun Nov 20, 2011 6:16 pm --<br /><br />

I have very little knowledge of accountancy or buisness but my own limited exerience is that future problems tend to be a bit underestimated and sometimes opportunities overestimated. I think our directors will have a very tough road ahead.
With regards to a couple of things one is that if our impairment of players values is £30M that is pretty much exactly half the reported fees of Jo, RSC, Bridge and Bellamy, which is where they are in their contracts. Adebayor has not been impaired which may represent a hit in the next set of accounts, as with his wages and being half way through a contract bought at £25M I cannot see us selling him for the value he retains on our books.

With regards to wages Johnson,Zabletta and Kompany have all had an uplift and most of the high wage earners are still on our books. Given and Bellamy are the only two who have left that have been acquired since the takeover. The others are on loan and we may still need to pay a proportion of their wages
We may yet need to pay out significant sums to get some of the wage earners off our books.

Tevez is another awkward one, it is clear that he will be leaving and is on huge wage, other clubs wil not want to pay us more than they have to, he cannot even be used in the Champs League this season.
We have no idea at what value he is retained on our books Newspaper reports have suggested that we paid £40+M for him if this is what he actually cost then half way throughthe contract his retained value is £20+M, I think with his wages and behaviour this would be an unrealistic fee.

On Jo, RSC, Bellamy and Bridge: Assuming they has been written down to nil, any proceeds we got for Jo and Bellamy plus others this year will be profit. The worst position, even taking into account salaries, is that we save the extraordinary write-down of 34 million, take the proceeds from Bellamy and Jo, and save all of Bellamy and Jo's salaries.

On Adebayor, he will be 3 years into his contract in the summer, so his unamortised value, assuming 25 million cost, wil be 10 million. I iimagine we will sell for at least that amount, so no loss there. And for his salary, we will save what Spurs are paying this year, and his full salary when we sell him.

Tevez is clearly a problem, depending on what his unamortised value is. In the worst case, assuming 45 million cost, next summer he will have a value of 18 million. We could probably recover that unless he has really imploded. His salary would be in both years, so no net effect. If we can get rid for 18 million and save his salary next year, that would be better.

As for wage increases, it is normal that wages increase as revenues are also increasing, so we can assuke they would be more than offset by higher revenues.

So I don't think any of those issues will have a major effect, and the "special" increases in revenue such as CL revenues and the Etihad deal will go immediately to the bottom line, so I guess at least halve the loss to 70-80 million.

All that before any costs which are excluded for FFP as PB said, and any other sponsorship deals. So on the whole, no need to worry I think.

Sorry ... was a long post.

 

[Pam]

Can someone tell me why, all of a sudden, the media have been talking about fines being imposed for any breach of the Damp Squib rules rather than exclusion from the Chimps League.

 

[halfcenturyup]

Can someone tell me why, all of a sudden, the media have been talking about fines being imposed for any breach of the Damp Squib rules rather than exclusion from the Chimps League.

I am pretty sure there was some backtracking from Platini about the actions they would take at the beginning, and probably a growing realisation that exclusion wouldn't be practicable.

 

[Rammyblues]

Great read PB.<br /><br />-- Sun Nov 20, 2011 3:05 pm --<br /><br />Oh and the new shirt deal 200m that will help. :-)

 

[S04]

Can someone tell me why, all of a sudden, the media have been talking about fines being imposed for any breach of the Damp Squib rules rather than exclusion from the Chimps League.

I am pretty sure there was some backtracking from Platini about the actions they would take at the beginning, and probably a growing realisation that exclusion wouldn't be practicable.

Partly it´s because the Italian clubs have stated that they find it almost impossible to comply. Their clubs have always relied on wealthy benefactors..

 

[BlueAnorak]

Can someone tell me why, all of a sudden, the media have been talking about fines being imposed for any breach of the Damp Squib rules rather than exclusion from the Chimps League.

City will be in better financial shape than Real Maadrid, Barca and all the Italian Clubs.
The big two in Spain and the big clubs in Italy are crippled by enormous debts being repaid at ridiculously low (i.e. non market rate loans). So when FFP kicks in we will be no where near the worst offender - even if Prestwich Blue's predictions prove to be £50m out.
Knowing what I know about the Abu Dhabi wealth funds I actually think City will be in a better position than that predicted by PB in 2013 with at least another £40m commercial income from partners. The message is already out there in the world of big business - "You want to do business in Abu Dhabhi and you don't sponsor Manchester City? Are you an imbecile or merely an idiot?"

 

[Oooh Curley Wurley]

For all laymen and Platini

Accountancy is an ART not a science......

 

[AJ71]

I am guessing the extraorindary write-down of players' registration is for RSC, Adebayor and the other usual suspects right PB? So any proceeds we get this year is pure profit no?

That's the way I read it too. Very clever move by City but entirely legitimate under accounting rules. In fact, not just legitimate but recommended.

Correct, in fact wouldn't it have proved quite difficult to argue a case where an impairment of the players value wasn't necessary?

Forgive my ignorance because I haven't fully read up on the FFP regs, but wouldn't the amortisation have qualified as and "add back" in future years accounts, like the wages for pre regs purchases do? In which case is the exceptional more to do with following the correct accounting regulations, rather than trying to gain any sort of advantage by accelerating the amortisation charges into 2010-11?

Great read by the way.

 

[bluemonkey71]

Brilliant work, PB. Cheers.

What he said ^

 

[Cityfan]

On Jo, RSC, Bellamy and Bridge: Assuming they has been written down to nil, any proceeds we got for Jo and Bellamy plus others this year will be profit. The worst position, even taking into account salaries, is that we save the extraordinary write-down of 34 million, take the proceeds from Bellamy and Jo, and save all of Bellamy and Jo's salaries.

I might be wrong but I have not read any suggestion of us being paid for either player and it is a simple write off.

On Adebayor, he will be 3 years into his contract in the summer, so his unamortised value, assuming 25 million cost, wil be 10 million. I iimagine we will sell for at least that amount, so no loss there. And for his salary, we will save what Spurs are paying this year, and his full salary when we sell him.

The trouble is with Ade is his wages his market value if paid at a ormal rate may well be considerably over £10M but the suggeston is that he was offered to Real for about that and they declined. Spurs have a low wage ceiling, I suspect any transfer fee will be eaten up in paying him off and we will get virtually nothing for him.

As for wage increases, it is normal that wages increase as revenues are also increasing, so we can assuke they would be more than offset by higher revenues.

PB's assumption in the blog is that they will fall to approx £145M.
I am not wishing to criticse the blog as such which is well written and informative I am just a bit sceptical about some of the assumptions and this is one of them.

Uniteds financial results for last season showed wages as £152M. Whereas I am sceptical about some of the reported wages in the press I certainly think we are probably generous employers, there seems little doubt that part of the enticement to Nasri was pay. De Jong is apparently pressing for anincrease in pay. An asumption that the combination of uplift and success bonuses for existing players and new well waged players balancing those leaving. Leaving the wage bill at its current level about 10% higher than Utd's is maybe more realistic.
Player amortisation at £30M is I suspect on the low side if we take our current squad cost as approx £300M leaving out the deadwood and the contract length of 5 years (and some are now on four) this would suggest a rate of £60M.
I hope that we will get more players throughthe academy but even so Barcelona with the most successful academy in the world are buying players for an average of more thatn £30M / year.

A nice blog,but I suspect the commercial side is going to have to work a lot harder than the figures presented here suggest if we are to break even in the near/medium future.

 

[Leyther]

Though I know it's written off for FFP, surely for the next couple of years there'll be £50-70m a year spends on the books for the new training complex?
or is this spend by a "holding" company or subsidiary?

 

[Prestwich_Blue]

I am guessing the extraorindary write-down of players' registration is for RSC, Adebayor and the other usual suspects right PB? So any proceeds we get this year is pure profit no?

That's the way I read it too. Very clever move by City but entirely legitimate under accounting rules. In fact, not just legitimate but recommended.

Correct, in fact wouldn't it have proved quite difficult to argue a case where an impairment of the players value wasn't necessary?

Forgive my ignorance because I haven't fully read up on the FFP regs, but wouldn't the amortisation have qualified as and "add back" in future years accounts, like the wages for pre regs purchases do? In which case is the exceptional more to do with following the correct accounting regulations, rather than trying to gain any sort of advantage by accelerating the amortisation charges into 2010-11?

Great read by the way.

The impairment provision is interesting as I don't think I've ever seen it in City's accounts before. In fact I've rarely, if ever, seen it in any club's accounts before. But accounting standards recommend reviewing any intangible assets after a year and on a regular basis thereafter to ensure that the value they are shown in the accounts reflect what we could actually get for them. So we've followed FRS 10 to the letter and no one could accuse us of using trickery or bending the rules.

So Bellamy, for example, would have been on the books at £5m at 31st May 2011. But as it was clear we were going to give him a free (which we did) then we wrote that £5m off as part of the £29m.

As far as the amortisation is concerned we can add back any charged for the year on players classed as "held for sale", which is another accounting standard that FFPR follows. So that would apply this financial year to Tevez, Adebayor, Bridge & Santa Cruz. That's worth about £20m to us.

Also I think I overestimated the amount of wages we can add-back for 2011/12. I think it's £50m rather than the £80m I first thought. Means meeting FFP is going to be slightly less comfortable than I thought but still achievable, particularly if we show any profit on the sale of the players we've made the impairment provision for.<br /><br />-- Sun Nov 20, 2011 10:51 pm --<br /><br />Sorry Cityfan. didn't see your post when I replied.

The way I worked out the wages was to look at the assumed wages of players we have sold or won't be keeping and knock them off the current figure. I got a figure of over £57m to deduct but, as you say, we really don't know what the real figure is. If that's correct however, that would leave the core wage bill at around £120m. I then added on £15m for the three new players (Clichy, Aguero & Nasri) and allowed some more for new contracts.

As for the amortisation, the thing to remember is that it gets re-apportioned when players sign new contracts. So if we sign someone for £25m on a 5 year contract, we charge £5m a year. After three years their book value will be £10m but if they sign a new contract, we re-charge that £10m over the 5 years, giving a revised amortisation charge of £2m a year. I've got quite a detailed spreadsheet where I've made assumptions on who will be staying and who will be going and the figure I got for 2010/11 is quite close to the one in the accounts.