How are our finances? : Wed Apr 11, 2012 12:00 pm  

With the Bradford debacle going on at the moment and Wasps now begging for donations of £2m, I listened to a phone in show on one of the regional BBC radio channels. They had some sports finance expert on who said both codes have very troubled futures and that potentially half the professional sides now will not exist in 10 years. The main reason for success or failure was ground ownership. He was saying the Union Premiership can basically be divided into two, the haves who own their stadium and who are crying out for an increased cap to £6m per season (!) and the have nots who are on the verge of bankruptcy who do not own their ground. The suggestion was that at least 4 of the 12 Union clubs are likely to disappear or cost a benefactor a truly ridiculous amount of money. It was suggested that as many as 6 Union sides and 10 Super League sides are currently sat on unsustainable balance sheets which will likely see the club struggle to find new owners when the current benefactors lose interest.

Which got me thinking. What is our balance sheet like? After the rumours of big losses at the club, are we in this position? Are we totally dependant on Eamon McManus and the other directors for hand out? Or are we going to be significantly profitable in the new ground? With the cap at £1.8m and crowds averaging 15,000 it would be hard to see how we'd lose money. It's staggering to think some Union sides want an increase to £6m to compete with French Union, when presumably only Leicester average more than we do? (Excluding any attempts to add the Wembley gates to average crowds).

Re: How are our finances? : Wed Apr 11, 2012 12:05 pm  

Saddened! wrote:

Which got me thinking. What is our balance sheet like?

If you believe the press releases, shareholder loans but no bank debt.

Saddened! wrote:

Are we totally dependant on Eamon McManus and the other directors for hand out?

For the immediate term, I would say yes. It will probably take 2 or 3 full seasons before we start turning a profit. No basis for that, just a hunch on how long it will take to get the off the field business really humming.

Re: How are our finances? : Wed Apr 11, 2012 12:33 pm  

Saddened! wrote:

With the Bradford debacle going on at the moment and Wasps now begging for donations of £2m, I listened to a phone in show on one of the regional BBC radio channels. They had some sports finance expert on who said both codes have very troubled futures and that potentially half the professional sides now will not exist in 10 years. The main reason for success or failure was ground ownership. He was saying the Union Premiership can basically be divided into two, the haves who own their stadium and who are crying out for an increased cap to £6m per season (!) and the have nots who are on the verge of bankruptcy who do not own their ground. The suggestion was that at least 4 of the 12 Union clubs are likely to disappear or cost a benefactor a truly ridiculous amount of money. It was suggested that as many as 6 Union sides and 10 Super League sides are currently sat on unsustainable balance sheets which will likely see the club struggle to find new owners when the current benefactors lose interest.

Which got me thinking. What is our balance sheet like? After the rumours of big losses at the club, are we in this position? Are we totally dependant on Eamon McManus and the other directors for hand out? Or are we going to be significantly profitable in the new ground? With the cap at £1.8m and crowds averaging 15,000 it would be hard to see how we'd lose money. It's staggering to think some Union sides want an increase to £6m to compete with French Union, when presumably only Leicester average more than we do? (Excluding any attempts to add the Wembley gates to average crowds).

People will talk about our increased debt to build the stadium, but from a balance sheet perspective, those long term liabilities will be cancelled out by the increase asset value oif the new stadium over the old, and that's before you consider the jiggery pokery that will go on in order to convert the personal loans into shares, instead of paying them back.

We've only been in the new stadium for a few months, you need a full financial year to make a judgement. I'm not sure whether saints run their year jan-dec or april-march, but until they've had a full year trading from the new facility, you'll be hard pressed to tell how we're doing at a glance.

Re: How are our finances? : Wed Apr 11, 2012 12:37 pm  

Offside Monkey wrote:

We've only been in the new stadium for a few months, you need a full financial year to make a judgement. I'm not sure whether saints run their year jan-dec or april-march, but until they've had a full year trading from the new facility, you'll be hard pressed to tell how we're doing at a glance.

Yup, I appreciate that, but what is the starting point? How bad had it got before the move?

Re: How are our finances? : Wed Apr 11, 2012 12:52 pm  

Saddened! wrote:

Yup, I appreciate that, but what is the starting point? How bad had it got before the move?

A quick check shows we lost £1.3 million pounds in the finacial year that ended 31st October 2010.
That's the last figure I can see available. I wouldn't be suprised to see a similar (or worse) figure when the numbers for the year ending Oct 2011 come out, given us playing at Widnes infront of reduced crowds, as well as some set up fees for the new regeime.

The figures for year ending October 2012 is what you need to see, but you'll not be able to get hold of them until about 2013.

Leeds definately seem to be the money bags, although its difficult to be completely sure as they have a few companies, Leeds Rhinos RUgby League, Leeds Cricket, Footbal and Athletic company, etc.

If its any comfort to you, McManus has just gone through an awful lot in order to build a new stadium. He's not going to walk away now he's done all the hard work.

Re: How are our finances? : Wed Apr 11, 2012 12:59 pm  

I could have sworn someone mentioned that when Big Mc announced the refinancing for the debts with regard to the stadium, that all debts were effectively 'wiped out', with the moneymen on the board taking the hit in terms of the shares etc?

Re: How are our finances? : Wed Apr 11, 2012 1:06 pm  

Carlos Alberto wrote:

I could have sworn someone mentioned that when Big Mc announced the refinancing for the debts with regard to the stadium, that all debts were effectively 'wiped out', with the moneymen on the board taking the hit in terms of the shares etc?

Yes there was a long thread about this on 18th Oct last year. Fear The Vee has also posted extensively about this.

This was my "take" on this as I work in the murkey world of financing:

I don't think Coleman has blown it at all. He is a fantastic saints fan but he hasn't donated £6M for no return. He has a loan which is likely to be very favourable to Saints but it will not be interest free. He also has a £3M bond which will have a coupon/interest rate - again probably very low but he has the option at some stage to convert this into shares.

In 2010, as a measure of their commitment to Saints some £725K of directors loans were converted to shares at a value of £15.15 per share and assuming the most recent £850K loan was converted at the same rate this would mean 56,105 new shares with the balance to share premium, giving a current share capital of 331,938.

If Mike Coleman is able to convert at the same conversion rate is he could end up the proud owner of an additional 198,000 shares to go with 4950 shares he is getting from his part in the directors' loan conversions. If this is the scenario he is on tract to own around 38.3% which given his commitment he would fully deserve!
The other good thing would be that as the biggest shareholder (Mac and family would be diluted to around 15% of the club) Mike Coleman unlikely to want to call in his £3M loan as would owe it largely to himself.

I would also like to make the point that we should also thank the other directors who converted their loans to shares; Fergus Lyons, Andrew Bell and Kevin Marren.

One other thing is the questions earlier in this thread about whether this new debt is additional or replacement, the answer appears to be without much doubt that it is replacing existing debt. This is shown as £850K of directors debt is being converted into shares and Mac's statement that there will be NO bank debt. The ONLY other debt is the remains of an old brewery loan of only £8K.

It does transform our balance sheet as will the stadium asset. This fantastic gesture by Mike Coleman and his fellow directors gives the club real stability which few if any other clubs have.
It s now up to Saints fans everywhere to repay this vote of confidence by buying season tickets where they can and for those who can't coming ot as many home games as possible.
COYS !!!

Re: How are our finances? : Wed Apr 11, 2012 1:13 pm  

Carlos Alberto wrote:

I could have sworn someone mentioned that when Big Mc announced the refinancing for the debts with regard to the stadium, that all debts were effectively 'wiped out', with the moneymen on the board taking the hit in terms of the shares etc?

Yep, I think the debt from the personal loans were to be gradually converted into shares, essentially wiping them out. This will reduce the long term liabilities on the balance sheet and therefore increase the value of the club and therefor its security against debt being called in.

It won't, however, affect the general operating profit of the club in its new stadium. You could still make a profit, even if you're a million pounds in debt. It would just mean that by the end of the year you'll owe less than you did.

Whilst wiping the debt will give us security, the operating profit is one we need to get right in order that we are no longer a drain on our directors finances and therefor not at the mercy of board members losing interest and withdrawing the support.

As I say,we'll not know anything for sure until we can see the october 2012 figures, which won't be available until about August 2013.

Re: How are our finances? : Wed Apr 11, 2012 1:23 pm  

saint at wire wrote:

Yes there was a long thread about this on 18th Oct last year. Fear The Vee has also posted extensively about this.

I don't think the bit you quoted was written by me, but is an interesting refresher nonetheless!

Re: How are our finances? : Wed Apr 11, 2012 1:29 pm  

In an attempt to cheer me up, one of my accountant friends from back home did some research (in his own time of course) and emailed me that of the 30 professional rugby (both codes) clubs in England only 2 have made any sort of profit (in admittedly terrible economic conditions) in the last few (available) years.

These being Leicester Tigers and the Leeds holding company. The other 28 have all posted losses.

Obviously you guys should be well placed now and moving forward with someone who has taken the long view and absorbed some short -term debt.