CCFC accounts: Ricoh row threatens future of the club
THE lack of a venue for Coventry City to play its home matches next season is casting “significant doubt” on its ability to continue trading, auditors have warned.
The homelessness threat is one of the key problems for CCFC’s financial future, as well as a lack of non-match day money, according to the acounts. The club’s parent company - Sky Blue Sports and Leisure Limited - recorded an operational loss of more than £1.5m in the year up to May 31, 2018 while the side were playing in League Two.
The accounts show the club still requires “significant investment” to remain competitive.
And while income from player sales rose dramatically this year, the club has seen dips in turnover and profit while wages have increased.
But the long-running row over the Ricoh Arena is at the top of list for concern.
The club is set to be homeless in May when the current rent deal runs out, with no discussions to stay because of continuing legal action against the stadium’s owners Wasps.
Auditors have warned the fact the club has not yet secured a venue to host its home football matches next season is casting “significant doubt on the company’s and groups ability to continue as a going concern”.
The English Football League has said the club must say where it is playing next season by today - or potentially face expulsion from the League at a meeting in late April.
The report added: “Management remain confident that a solution to this situation will be found and are exploring a number of options in relation to venues at which to host the football matches for the 2019-20 season.
“Nevertheless, at the date of approval of these financial statements, there remains uncertainty regarding the outcome of these negotiations.
“The lack of a venue at which to host the football matches for the 2019-20 season may also cast significant doubt on the company’s and group’s ability to continue as a going concern.
“The directors consider the going concern basis to be appropriate as they have no reason to believe that group shareholders will not provide the requires support.
“However these conditions indicate the existence of a material uncertainty which may cast significant doubt on the company’s and group’s ability to continue as a going concern.”
On the pitch, CCFC has enjoyed success this year - not least the promotion to League One, the first club promotion in 51 years, after a win at Wembley that led to an open top bus parade through the city with more than 50,000 fans lining the streets.
But the accounts state the key concern for the business remains the “partial and limited access to non-ticketing match day revenues and no non-match day turnover putting the club firmly at a competitive disadvantage relative to its peers”.
No money is however required at the moment from shareholders to prop up the club in the next 12 months.
The directors of Sky Blue Sports and Leisure, Tim Fisher, chairman of CCFC, and Laura Deering, a Sisu employee and long-term advisor to Joy Seppala, say they are “satisfied” that the “continued and on-going restructuring of the business will improve the long term on and off field performance”.
Otium Entertainment, the club’s parent company, was also due to file accounts by February 28.
They have not yet appeared on the Companies House website.
The group showed an operational loss of £1,578,378 over the 201718 period.
That was worse than the operational loss last year of £1,113,359.
During this time, direct operating costs increased from the previous year to £1,582,259 from £1,506,587- an increase of £75,672. This is partly due to additional costs for a successful run in the FA Cup. Year-on-year turnover fell by around £0.2m from £6,134,192 to £5,972,414.
That was made up from £2,428,942 from match receipts and exclusive box rentals (down from £2,461,807 in 2017) and £3,543,472 from commercial activities such as television money and the club lottery (down from £3,672,385 in 2017).
Profit also fell from £4,627,605 to £4,390,155.
One thing that did increase was wages and salaries at the group - up from £4,051,778 to £4,238,767.
The increase of £345,559 arose mainly due to the 2017 actuarial valuation on the Football League Ltd Pension & Life Assurance Scheme 2017 being finalised, resulting in a significant increase to the pension accrual being required.
But there were “significantly higher player sales” - mainly due to the sale of George Thomas.
The sale of players earned the group a total of £973,545 over the year, compared to just £252,087 last year.
Those sales meant the business recorded a loss
before interest due of £604,833, better than the £861,150 they recorded in 2017.
The club also has more cash in the bank than last year - £682,223 compared to £298,161.
But the interest payable on the group’s debts has increased from £1,858,410 to £1,872,283 because of additional witholding tax due to HMRC on the invest owed to AVRO - a Cayman Island-based Sisu-related company used to invest in CCFC.
The total debt owed to AVRO inclusive of accrued interest sits at £16,073,558. It was £14,283,853 in 2017.
The group’s net liabilities - the debts after its current assets have been subtracted - stands at £48,599,556, up from £46,122,480 in 2017.
The independent auditor states in the report: “The Board acknowledges that there are a number of risks and uncertainties which could have a material impact on the group’s performance.
“The group’s future income is affected by the club’s performance because significant revenues are dependent upon team performance in the English Football League and domestic cup competitions. In order for the team to remain competitive, significant investment is required on an ongoing basis in both financial and non-financial terms. This investment needs to be balances the with the most important Board responsibility, which is to maintain a financially secure professional football club.
“The Board maintains the financial discipline throughout the company to ensure that it is able to continue to operate within its existing facilitires.
“The group prepared annual budgets and forecasts, and maintains a close working relationship with its financiers and shareholders and is dependent on the continuing support from the shareholders.”
It adds: “Additionally the group has not yet secured a venue at which to host the 2019-20 season football matches.
“Management remain confident that a solution to this situation will be found and are exploring a number of options in relation to venues at which to host the football matches for the 2019-20 season may also cast significant doubt on the company’s and groups ability to continue as a going concern.”
No payment of a dividend to shareholders has been recommended.