oldskyblue58
CCFC Finance Director
Have got a bit fed up with seeing some of the comments here - too many think it will be ok under GH, that throw money at it and there are no consequences, see a transaction as one sided. Just wanted to explain a few things regarding the finances, putting money in to the club etc. It isnt really about SISU or GH - I have little faith in either for different reasons - this is about the mechanics of certain actions hoped for by many fans
I am starting from the assumption that our losses are in the region of £3m at least. Dont have any proof of that but I think we can agree that we are not in profit. I am assuming also that the objective is a long term future for this club based on decent finances (i didnt say a profit every year - but over a number of years it has to even out)
Putting money in
lets be clear any money put into the club by investors be it SISU, GH investors or anyone else will almost certainly be by way of a loan. That means that it either replaces or increases the level of debt we currently have. The only way that decreases is if it gets repaid or written off. GH is trying to get SISU to write most of theirs off and promising (per first bid) £30m new funding - that new funding replaces the loan written off by SISU, it doesnt actually improve our financial debt position. Improvement what improvement in cold monetary terms?
Stadium purchase
Everyone says we have to buy the stadium - with what exactly? ONly way we can do that is by loans from investors or a mortgage. Yes the asset situation improves but so equally does the liability level. If it is a commercial mortgage or even if the investors choose to there might be interest and other financial charges - which gets added to any losses. Say cost of stadium is £50m then interest at 5% is £2.5m - yes it maybe offset by some income but ACL only makes 500k per year so that purchase increases our loss by £2m. (yes we may lose the rent to pay but ACL lose it to receive in that case). Thats interest every year and ignores the cashflow implication of paying off some of the capital. So what is the improvement in cold monetary terms aside from FFP rules re total turnover ?
Players
Original bid GH had apparently £10m to spend on players set aside. So he spends £10m on new players on 3 year contracts that means we write off those contracts at £3.3m each year for 3 years = an extra £3.3m loss each year before paying one penny in wages!!!. Or say it is split between cost of the players and their wages or loan wages - any cost would be written off over the term of the contract, the wages would simply increase any loss and couldnt be above the FFP % age of turnover agreed. Thats wages every year, so increased losses every year unless income improves. So should we even be thinking GH should spend to that level ?because without success it puts the club more at risk
Fans
An increase in average gate of 1000 would probably net the club something like £15k per game or £360k per annum. So add an average of 5000 per game and that equates to £1.8m then go back and look at the above extra costs some fans want are we better off ?
Cashflow
Lets be clear losses have to be funded. The commitment to putting say £30m in is not the end of it. What about the losses in subsequent years who funds that? What happens if the team is not successful and crowds do not flock back. Mid table medicrity is not going to get enough fans back at the Ricoh. Some of what is suggested will add significant cost to the business so how is that matched by income increase?
I think some folk need to temper and lower their expectations a lot. There are two sides to every transaction in financial terms and simply looking at the addition of assets (stadium, players income streams) is no good unless you look at the costs and implications of doing it. Perhaps the best way is to build from the bottom up. Still going to need a huge amount of luck to be successful right now the only way CCFC survives is to limit the losses but that has consequences for the team/squad.
If it were easy then the supposed take over would have happened by now, it isnt just SISU's reluctance to walk away holding this up. Any owner is going to have to look at the core of how the finances work, reduce costs, maximise income and balance the books. It is going to be a rough ride who ever is the owner with a lot of broken promises and disappointed expectations.
So we start at £3m loss - still think it will be that low if we buy the stadium and spend millions on players ?
I am starting from the assumption that our losses are in the region of £3m at least. Dont have any proof of that but I think we can agree that we are not in profit. I am assuming also that the objective is a long term future for this club based on decent finances (i didnt say a profit every year - but over a number of years it has to even out)
Putting money in
lets be clear any money put into the club by investors be it SISU, GH investors or anyone else will almost certainly be by way of a loan. That means that it either replaces or increases the level of debt we currently have. The only way that decreases is if it gets repaid or written off. GH is trying to get SISU to write most of theirs off and promising (per first bid) £30m new funding - that new funding replaces the loan written off by SISU, it doesnt actually improve our financial debt position. Improvement what improvement in cold monetary terms?
Stadium purchase
Everyone says we have to buy the stadium - with what exactly? ONly way we can do that is by loans from investors or a mortgage. Yes the asset situation improves but so equally does the liability level. If it is a commercial mortgage or even if the investors choose to there might be interest and other financial charges - which gets added to any losses. Say cost of stadium is £50m then interest at 5% is £2.5m - yes it maybe offset by some income but ACL only makes 500k per year so that purchase increases our loss by £2m. (yes we may lose the rent to pay but ACL lose it to receive in that case). Thats interest every year and ignores the cashflow implication of paying off some of the capital. So what is the improvement in cold monetary terms aside from FFP rules re total turnover ?
Players
Original bid GH had apparently £10m to spend on players set aside. So he spends £10m on new players on 3 year contracts that means we write off those contracts at £3.3m each year for 3 years = an extra £3.3m loss each year before paying one penny in wages!!!. Or say it is split between cost of the players and their wages or loan wages - any cost would be written off over the term of the contract, the wages would simply increase any loss and couldnt be above the FFP % age of turnover agreed. Thats wages every year, so increased losses every year unless income improves. So should we even be thinking GH should spend to that level ?because without success it puts the club more at risk
Fans
An increase in average gate of 1000 would probably net the club something like £15k per game or £360k per annum. So add an average of 5000 per game and that equates to £1.8m then go back and look at the above extra costs some fans want are we better off ?
Cashflow
Lets be clear losses have to be funded. The commitment to putting say £30m in is not the end of it. What about the losses in subsequent years who funds that? What happens if the team is not successful and crowds do not flock back. Mid table medicrity is not going to get enough fans back at the Ricoh. Some of what is suggested will add significant cost to the business so how is that matched by income increase?
I think some folk need to temper and lower their expectations a lot. There are two sides to every transaction in financial terms and simply looking at the addition of assets (stadium, players income streams) is no good unless you look at the costs and implications of doing it. Perhaps the best way is to build from the bottom up. Still going to need a huge amount of luck to be successful right now the only way CCFC survives is to limit the losses but that has consequences for the team/squad.
If it were easy then the supposed take over would have happened by now, it isnt just SISU's reluctance to walk away holding this up. Any owner is going to have to look at the core of how the finances work, reduce costs, maximise income and balance the books. It is going to be a rough ride who ever is the owner with a lot of broken promises and disappointed expectations.
So we start at £3m loss - still think it will be that low if we buy the stadium and spend millions on players ?
imp: