Friday, February 20, 2015


The audited accounts of the club (and its owner Baton 2010 Ltd) were published on the Companies House website earlier today.

The accounts to 30 Jun 2014 reflect the final six months of the Jimenez/Slater regime and the opening six months of the Duchatelet regime (or more specifically Staprix NV, a company owned 95% by Roland Duchatelet). 

This division makes it difficult to draw very strong conclusions about what has changed financially but nonetheless some interesting observations are outlined below , with some additional interpretations of my own.

As has been the case for several years, a review of the accounts is complicated by the addition of the Baton 2010 Ltd entity which is owned by Staprix and in turn owns the club.  My comments below relate to the club’s accounts unless stated otherwise:

-          The ‘strategic report’ at the front of the accounts make reference to the lack of investment in the squad during summer 2013 and the problems with the pitch (caused by collapsed drainage) ;

-          Average attendances fell from 18,480 to 16,130 but this still placed us in the top half of the Championship attendance table – the report additionally notes it is the ‘priority of the Board’ to grow attendances to 20,000 in the Championship ;

-          The club aspires to achieve ‘Category 1’ status for its Academy ‘as soon as possible’, but this will require significant development of the training facilities etc. ;

-          Turnover increased from £11.9m to £12.7m – this was explained by an increase in Premier League ‘solidarity’ payments and matchday revenue £0.7m higher than the previous season, explained entirely by the FA Cup run to the Sixth Round  - indeed without the additional Cup revenues, matchday revenue would understandably have been down (given lower average attendances) ;

-          Commercial income was moderately higher at £1.5m as the result of ‘new sponsorship and preferred supplier contracts’ ;

-          The club made an operating loss (before transfers) of £7.2m (2013 : £7.4m) – profit from the disposal of players (which is not the same as ‘transfer fees received’) was again £1.7m, the same as the prior year ;

-          Staff costs were down slightly at £11.5m (2013 : £12.0m), of which £10.4m was wages/salaries - moreover this includes £0.3m of ‘severance costs’ relating to former employees  - once severance costs are added back, this implies staff costs equal to 88% of turnover ;

-          The above staff costs were spread across 161 employees (2013 : 146), of which 101 are on the football side – a quick ‘back of the envelope’ calculation would suggest that 75% of staff costs are accounted for by the first-team squad (say 25 players) and a further say five key coaching staff – on this basis it implies these 30 key playing staff earn approx £5k per week, which seems about right for a Championship club with no legacy Premier League ‘overhang’ ;

-          Non-staff costs (which must be approx £7m) are not broken down in enormous detail, but £2.8m relates to ‘matchday costs’ (presumably policing, stewarding, and maybe costs of goods sold), £2.2m to ‘site costs’ (presumably rates, power, security etc.) and £1.4m to ‘administrative costs’ ;

-          Intangible assets on the balance sheet (ie. The non-amortised portion of the cost of player registrations) increased by £3.3m, reflecting particularly the acquisition of Igor Vetokele just before financial year-end ;

-          Directors fees of £112.5k were paid (2013 : £150k), all of which was paid to a single director – since £150k is equivalent to £12.5k per month and 9 x £12.5k is £112.5k, then I’d be inclined to assume that this was paid to Martin Prothero for his six months work (with a further three months notice ?) – however this begs the question how Katrien Meire is being paid  since no other directors’ remuneration is disclosed ;

-          There is a new item in the accounts called ‘Interest payable on loans from ultimate parent company’ (ie. Staprix NV) – in other words the ongoing operating losses are being funded (as they must somehow) by the owner(s), but not on an interest-free basis  but at 3% ;

-          Although it does not seem very ‘exceptional’, the £89k for ‘pitch cover costs’ are included in ‘exceptional items ‘ ;

-          One of the most interesting issues concerns player transfers, or as they’re known in accounting circles ‘intangible fixed assets’ – the amount spent in fees during the year is very clear (£4.4m), and this relates mainly to the purchases of Messrs. Vetokele, Parzyszek, Nego and Ghoochannejhad.  As has been well-documented, the latter two were ‘in network’ signings and thus any fee (which may of course have been nominal) is effectively an intercompany transfer, however the rumoured fee paid for Vetokele (and to a lesser extent Parzyszek) really do appear accurate.  Whilst fans may question the long-term plan for these players within the network, £4m+ is a meaningful outlay by a Championship club without a Premier League parachute ;

-          The club only received £194k in transfer fees during the year which seems exceptionally low given it includes Stephens, Kermorgant, Button and Smith – admittedly as noted below there may be contingent payments to follow, but the sale (particularly of Stephens/Kermorgant) really does seem to have been driven by wages and a desire to earn at least some fee, rather than just let their contracts expire in the summer ;

UPDATE #2: The above instinctively felt wrong as much as it was clear from the accounts that £194k was the sum received on the sale of intangible assets.  Moreover I couldn't reconcile this amount with the 'profit on disposal of players' of £1,718k.

A review of the 2013 accounts shows a consistency of accounting treatment whereby the amount of the fees which offset any unamortised carrying value of the players sold (£194k for the year to 30 Jun 2014) is shown as cash received on the 'sale of intangible fixed assets' (because it is effectively only a balance sheet transaction), but any excess is accounted for as 'profit on disposal of players' (£1,718k) within 'cash from operating activities'.

I would thus (now) state with some confidence that instead transfer fees received (including an add-on relating to Jonjo Shelvey) were £1,718k + £194k = £1,912k.   Moreover it is likely some of this remained outstanding at year-end given the relatively large 'trade debtors' balance of £906k.  

Apologies for any earlier confusion! (the treatment really is not especially clear).

-          Contingent assets on players sold (if certain hurdles are surpassed eg. appearances) increased significantly from £3.0m to £4.2m – it is easy to assume this relates to part of Diego Poyet’s move to West Ham, but this may have been infeasible (he was out of contract after all) and anyhow belong in the following year’s accounts – instead the difference as suggested above may simply relate to the aforementioned four in-contract players who were sold for a fee ;

-          Contingent liabilities on players purchased are however only £0.4m ;

-          Between 30 Jun 2014 and the date of the accounts, player sales generated a further £891k – this in my view is more likely to relate to Poyet and Michael Morrison ;

-          £755k was added to the value of tangible fixed assets (stadium, offices etc.) which presumably includes some combination of new seats, undersoil heating, training ground improvements etc. (dependent upon the date of the works) ;

-          Amounts owed in bank loans/overdraft fell from £4.8m to £2.7m which must be seen as a positive development  - Richard Murray continues to personally guarantee an overdraft up to £650k (it’s not clear why he is still obliged to do so) ;

-          However as expected this was more than offset by an increase in ‘amounts owed to parent company’ which increased by £12.9m during the year – if my maths is correct, this can be explained in terms of : Cash outflow from operations £4.8m, Net transfer fee outlay £4.2m, Purchase of tangible fixed assets £0.8m, Bank loan repayment £2.1m, Interest £0.6m, Other/Rounding £0.4m – who’d be a football club owner ?;

-          The legacy loans owed to former directors remain at £7m as per the previous year ;

-          Finally between 30 Jun 2013 and the date of the accounts, agents fees of £327k were paid on new signings (this would include the likes of Bikey, Gudmonsson, Henderson etc.).

 A very brief summary for the less financially literate would thus be as follows :

-          The club continues to generate substantial losses ;

-          These losses are being financed by low-interest parent company loans (with no fixed repayment schedule) ;

-          The amounts owed to the bank have been cut substantially;

-          The average first-team player earns approx £5k per week;

-          Substantial transfer fees have been paid out for new players (£4m+ in the last fiscal year, which does not include Gudmonsson and others) ;

-          Transfer fees received for Stephens, Kermorgant, Button and Smith (plus an add-on for Shelvey) amounted to just under £2m.


At 5:44 PM, Anonymous Fredsbob said...

Thanks - that's a very interesting summary. This business is more complex than some people might believe.

At 6:03 PM, Anonymous Anonymous said...

The second paragraph states that these are the Accounts to 30 June 2013. Should this be 30 Jun

At 6:20 PM, Anonymous Anonymous said...

The player sales revenue after the date of the accounts may also include loan fees for Reza and Tucadean, as I understand that these loans were subject to some transfer of funds?
I cannot see the fees received for the four players only totaling £194k, so have to believe that the contingent assets also relate to forthcoming payments for some (or all) of these players too.
Great analysis NYA, many thanks!

At 6:45 PM, Blogger Phil said...

Thanks for that NYA. The average squad salary is particularly interesting and lower than I thought especially considering what it's rumoured that some of Orient's players are on !

At 6:46 PM, Blogger New York Addick said...

It should have been 30 Jun 2014, sorry

At 6:49 PM, Blogger Dave said...

Thanks NYA - good hear positive overall improvement since RD took over, although I am very surprised Kermorgant and Stephens might have gone for nought. That would make the Kermorgant loss even less understandable, especially when Katrien Meire publicly linked his sale to the cost of the new pitch....

At 10:34 PM, Anonymous Mike Barry said...

Thanks for that detailed analysis, and especially for the final layman's resume.
Puts the financial complexity of running our club (and others) into context and rather takes the wind out of some of the more trivial mutterings of late about what's right and wrong with the club.

At 12:56 AM, Anonymous Anonymous said...

13m on parent company loans is a big number! This consists operating cash flow (5m) players acquired and capex (5m) loans repaid ( mortgage 1.5m and other loans 670k), interest (550k)
As ever, the only way out is promotion to the FAPL

At 12:16 PM, Anonymous Brian G said...

Superbly explained, NYA. It does seem that substantial hard cash has been invested in both the squad and the fixed assets.

At 7:51 PM, Anonymous DannyG said...

Many thanks for this summary.
However, I don't understand why you think that Michael Morrison was included in the player sales amount, as the accounts are for year ended June 2014, and he didn't even go out on loan till months later.

At 8:13 PM, Blogger New York Addick said...

DannyG - sorry there was a now corrected typo (should have said 30 Jun 2014) but either way the accounts show as a post balance sheet item further cashflow from player sales of £891k which may include Morrison.

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