Friday 11 March 2016

A short analysis of Charlton Athletic's Financial Accounts

As flagged yesterday, the financial report and accounts for Charlton Athletic for the year ending June 2015 are now available at Companies House.


The group consists of three entities:-

1. Baton 2010 Limited, the holding company
2. Charlton Athletic Football Company Limited, the company that operates the football club
3. Charlton Athletic Holdings Limited which is a property holding company


I use Baton 2010 Limited to give a proper overall view of the club’s finances as it encompasses the results of all the subsidiaries and includes all of Charlton’s activities.  This was the original vehicle set up by Richard Murray to rescue the club.

General Comments
The loss for the year was £4.4m (compared to £5.9m last year) rather than the widely reported £3.78m which only accounts for the football subsidiary.

Turnover was down in all areas, despite a small increase in crowd attendance.  The outsourcing of the catering to Delaware North explains most of the drop in match day income.  The deal is similar to the Nike deal with the superstore in that the club does not take the risk of purchasing and selling foodstuffs but takes an agreed percentage of turnover.  This results in a reduction in both turnover and costs but hopefully an improved profitability.

Staff & Player Costs
The cost of player salaries remained flat at around the £10.2m mark

Noticeably the number of non-football staff fell from 60 to 45 and the temporary match day staff has fallen from 306 to 112.   The fall in the latter number is probably due to the catering being outsourced to Delaware North.  I would expect this figure to fall even further next year as the automated entry system no longer requires the gate booths to be manned.

The book value of the squad remained flat.  Bauer and Ba were acquired in June (other players were purchased after the financial year end) but their cost was offset by player amortization in the profit and loss account.

The club benefitted from player sales to the tune of £4.4m.  This was mainly from the sale of Gomez and Poyet.   As these two players came from the academy and so would have been carried the books at zero cost so the entire transfer fee would be accounted for as profit.  As expected, it looks like the club sold Morrison for a pittance but surprisingly it looks like they managed to make a little bit of money of Lepoint too.

The club continues its policy of applying add on fees for players sold (based on appearances, call ups to the England squad etc).  This contingent revenue increased by £2m over the year.  However, the club also looks like it is trying to reduce the upfront costs of players it acquires by agreeing to pay contingent fees too as these roughly rose by £1.3m.  As they are contingent we do not know if and when these might be received or paid.  Poyet’s current form would seem to rule out further payments from his sale, although I suspect we will see more money from the Gomez deal once he is fit again.

There are no directors’ fees shown in the accounts.  The only director probably taking a salary is Katrien Meire and it’s probably coming from Staprix or another part of Duchatelet’s organisation.  It is reasonable to expect her to take a salary even though we might question her experience for the role but this move takes out a level of transparency that we would expect.

Club Financing
As we all know, the club is mainly financed by its parent company Staprix NV which is Roland Duchatelet’s holding company.  However, rather than putting money in as equity it has been lent to the club at a rate of 3%. These loans increased during the year from £28.5m to £38m.  This covers the club’s losses, capital investment and repayment of some of the bank debt.

Interest of £955,000 was charged on these loans during the year.  While the rate is a very reasonable commercial rate it misses the point in that it is paying the owner.  If this was equity then it is unlikely that a dividend would be paid out owing to the losses incurred by the club.  This makes Staprix a creditor rather than a shareholder which puts Duchatelet’s money on par with the milk bill.

The only reason I can think for this is that interest is tax deductible and the money is being recycled anyway in additional loans.  However, you can only claim the tax back if you actually pay tax in the first place and the company needs to be profitable first before it can offset this.

The Future
The focus on next year’ accounts (to June 2016) will be on player costs and turnover.  We brought in a number of players in the summer and a lot of players on short term loans and contracts in January.  This, combined with new contracts for Gudmundsson in the summer and more recently for Lookman are bound to increase the wage bill.  This will probably be partially offset by the sale of Lookman to a Premier League club.

I expect turnover to be down on the basis of falling attendances as results on the pitch failed to live up to expectations.  It will be interesting to see the impact of the Charlton Card campaign too.  The rumours are that Delaware North are not happy with how things have turned out on their contract.



#support the team not the regime



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