A question for the accountants - where's the cash?

[Guest Kenny Park]

It's ironic that we acquire Robbie Fowler on a free at the same time that the club releases its accounts that show we can't afford anything else. I do not intend to bore you with all the numbers but the balance sheet is scary. Forget the "net debt" calculation; it ignores liabilities which do not bear interest. Instead focus on the excess of liabilities (what we owe) over the assets which will generate cash within a year (current assets). Maybe the accountants among you can figure out how on earth we are going to buy players without selling our those we need to keep:

 

Liabilities due within a year 69.6 million

Other liabilities 28.0

-----

97.6 million

 

Against these liabilities we have debtors and cash of 23.9 millon.

 

Amounts are as at July 31, 2005 and the total liabilities were about 22 million more than a year before.

 

Our other assets are the team and Anfield.

 

Imagine if your credit card debt exceeded your bank balance by about 3:1

 

We need new capital, but maybe I'm missing something. Come in the experts.

[Guest Kev]

I was thinking about this before.

 

If Crouch, Cisse and Nando were upto it, would Robbie have got his dream move back ? Somehow I don't think so.

 

This is not a slant on Robbie, but I am starting to believe that he was the cheapest stopgap available.

[Rushian]

It's ironic that we acquire Robbie Fowler on a free at the same time that the club releases its accounts that show we can't afford anything else. I do not intend to bore you with all the numbers but the balance sheet is scary. Forget the "net debt" calculation; it ignores liabilities which do not bear interest. Instead focus on the excess of liabilities (what we owe) over the assets which will generate cash within a year (current assets). Maybe the accountants among you can figure out how on earth we are going to buy players without selling our those we need to keep:

 

Liabilities due within a year 69.6 million

Other liabilities 28.0

-----

97.6 million

 

Against these liabilities we have debtors and cash of 23.9 millon.

 

Amounts are as at July 31, 2005 and the total liabilities were about 22 million more than a year before.

 

Our other assets are the team and Anfield.

 

Imagine if your credit card debt exceeded your bank balance by about 3:1

 

We need new capital, but maybe I'm missing something. Come in the experts.

 

Aren't you ignoring ticket revenue, Premier League and Champions League TV money, sponsorship etc?

 

This is not a slant on Robbie, but I am starting to believe that he was the cheapest stopgap available.

 

Or the best stopgap available - it's not as if you want to be spending money on a stopgap solution is it?

Edited February 5, 2006 by Rushian

[Guest Kev]

Or the best stopgap available - it's not as if you want to be spending money on a stopgap solution is it?

 

Or more than likely the best and cheapest stopgap available. We've got no money to spend after all have we, despite having a virtual full first team squad on loan.

[Spike]

and the picture no doubt would be worse is we didn't have them on loan.

[realtarragona]

If we're so skint how come we tried to sign Simao? Who wasn't exactly cheap.

[Guest Kev]

and the picture no doubt would be worse is we didn't have them on loan.

 

How ?

 

They are on loan to save us money, under the convinient description of 'getting games'. There are far too many players on loan.

[Spike]

How ?

 

They are on loan to save us money, under the convinient description of 'getting games'. There are far too many players on loan.

 

 

But at least we are saving the money Kev, that's what I'm saying. We had a near first team of expensive Ressies under GH. Instead it's a place where we are properly developing players instead of some form of harlem duffers ressies club.

[Falconhoof]

Doesn't liabilities include our wage bill ?

 

And debtors don't include our revenue from ticket sales and tv income.

 

 

So if you look at any other club it would show a simmilar alarming gap between liabilities and debtors ?

 

I'm no accountant but just working on the most obvious explanation.

[Guest Kenny Park]

Aren't you ignoring ticket revenue, Premier League and Champions League TV money, sponsorship etc?

Or the best stopgap available - it's not as if you want to be spending money on a stopgap solution is it?

 

All of the items you mention have been taken into account as at July 31. Revenue since then will be matched against our expenses. My concern lies in the trend of deepening debt and the size of it. Had we not won in Istanbul the position would have been even worse. Finally, for the supreme ivory tower comment, the balance sheet may have been better if the board had sold Stevie G - god forbid. The temptation must have been enormous and certainly would have relieved financial pressure. Having seen the balance sheet, I can better understand why we are not attracting new capital.

 

Liverpool University is home to experts on both finance and football. What do they think? The club's balance sheet will never compete with a billionaire who throws millions around like petty cash, but let's not prejudice our future by getting too deep in a financial hole.

 

I enjoy your posts and welcome your comments.

[Guest Kev]

But at least we are saving the money Kev, that's what I'm saying. We had a near first team of expensive Ressies under GH. Instead it's a place where we are properly developing players instead of some form of harlem duffers ressies club.

 

Saving money to spend on what exactly ?

[Will]

Utter gibberish analysis of our accounts all round there

[Tim]

Net Current Assets/Liabilities can send a bit of a wrong message.

 

For example. I think everyone in the UK would agree that Tesco are a successful business and would have very little chance of going bust, or have no money to spend.

 

YET they currently have Net Current Liabilities of £2.4bn (us bn). The reason why they, like us, have net current liabilities is because the current assets they generate are cash based. ie their when they make sales it is in cash, or on credit which they effectively get within the month, but it is normally after they have to get stock in.

 

When the accounts are done they are at the slowest part of the year for cash generation.

 

The club made £17m from operating activities last year. (about £7.5m less than it should have due to reebok not paying).

 

£20m was paid out on transfer fees. Players totaling £46m were bought in the year.

 

And if you are interested this is an analysis of the finances I did on RAWK

 

 

http://www.ynwa.tv/forum/index.php?s=&show...dpost&p=1186006

 

 

All of the items you mention have been taken into account as at July 31. Revenue since then will be matched against our expenses. My concern lies in the trend of deepening debt and the size of it. Had we not won in Istanbul the position would have been even worse.

 

If we didn't win in istanbul we wouldn't have had to pay out on bonuses for players and management. Would probably have saved upto £10m in wages verses a loss of only £5m from prize money and sponsorship bonus.

 

In the short term this wouldn't have harmed the club, being out of the european cup this season would have though. Although we would still have had some money to spend. Had we not won in instanbul maybe rafa wouldn't have bought Sissoko, for example.

Edited February 5, 2006 by Tim

[Guest redmilky]

The original poster hasnt properly understood the fundamentals of the accounts im afraid.

Im a chartered accountant and when i get some time i will do a proper analysis for y'all but until then my first impressions are that we are in good health.

[Rushian]

Or more than likely the best and cheapest stopgap available. We've got no money to spend after all have we, despite having a virtual full first team squad on loan.

 

Did you want us to spend 5m on a stopgap?

[Guest Kenny Park]

The original poster hasnt properly understood the fundamentals of the accounts im afraid.

Im a chartered accountant and when i get some time i will do a proper analysis for y'all but until then my first impressions are that we are in good health.

The original poster has been a chartered accountant for 32 years and looks forard to your proper analysis.

[Michael]

I'm not a chartered accountant, but I genuinely believe the reason we haven't bought the players we need is simply because they are not available in a World Cup year. Add to that that we, rightly, will not be held to ransom over stupid fees and it explains why we have not brought in the required players. After the summer's World Cup we may finally get the quality we want at a fair price.

[Guest Kenny Park]

Net Current Assets/Liabilities can send a bit of a wrong message.

 

For example. I think everyone in the UK would agree that Tesco are a successful business and would have very little chance of going bust, or have no money to spend.

 

YET they currently have Net Current Liabilities of £2.4bn (us bn). The reason why they, like us, have net current liabilities is because the current assets they generate are cash based. ie their when they make sales it is in cash, or on credit which they effectively get within the month, but it is normally after they have to get stock in.

 

When the accounts are done they are at the slowest part of the year for cash generation.

 

The club made £17m from operating activities last year. (about £7.5m less than it should have due to reebok not paying).

 

£20m was paid out on transfer fees. Players totaling £46m were bought in the year.

 

And if you are interested this is an analysis of the finances I did on RAWK

http://www.ynwa.tv/forum/index.php?s=&show...dpost&p=1186006

If we didn't win in istanbul we wouldn't have had to pay out on bonuses for players and management. Would probably have saved upto £10m in wages verses a loss of only £5m from prize money and sponsorship bonus.

 

In the short term this wouldn't have harmed the club, being out of the european cup this season would have though. Although we would still have had some money to spend. Had we not won in instanbul maybe rafa wouldn't have bought Sissoko, for example.

Tim:

I had read your review before I wrote the original post. Step back and take another look at the balance sheet. With respect, Tesco's inventory is probably carried at the lower of cost and realizable value. Ours is the team which is carried at cost less amortization and hardly represents a liquid asset.

 

Can you honestly argue that we do not need capital?

 

Is that not what Rick Parry has been seeking all over the world.

 

Now we see why.

[Tim]

Tim:

I had read your review before I wrote the original post. Step back and take another look at the balance sheet. With respect, Tesco's inventory is probably carried at the lower of cost and realizable value. Ours is the team which is carried at cost less amortization and hardly represents a liquid asset.

 

Can you honestly argue that we do not need capital?

 

Is that not what Rick Parry has been seeking all over the world.

 

Now we see why.

 

 

All inventory is carried at lower of cost and net realizable value. While players transfer fees are carried at net book value but also get impaired if the clubs view is that their value is not representative. Add to that the fact that homegrown players values are not carried on the balance sheet. As for not being liquid I suppose that all depends. I'd say that certain members of our squad are very liquid assets. The only things restricting them leaving are the fact we don't want to sell them and the transfer windows.

 

As for needing capital yes we do need capital but not for transfers. Any investment brought into the club shouldn't be used on transfers in my opinion. It should go on helping to pay for the new stadium. That would benefit the club more than spending it on transfers and being back to square one a couple of years down the road.

 

The very nature of the way the football clubs works means they get only cash in and very rarely sell's things on credit. The balance sheet is at one day, not reflecting a full financial year like the P&L and cashflow. Sorry but if you've been a chartered accountant for 32 years then you should atleast know this. Don't take one balance sheet in isolation.

 

The club generates anywhere from £15m to £25m in spare cash each season, depending on whether we are in the european cup or not. All bar a small amount is spent on transfers.

 

As for the balance sheet in general, we have £43m of net assets overall. Why don't you point that out? You want to see a bad balance sheet? Look at everton's. Now they are in the s***.

Edited February 6, 2006 by Tim

[Gravy]

Did you want us to spend 5m on a stopgap?

 

Stop gap for what thoug that is the big question. I for one have no confidence that we will stump up the cash for what is really needed. ie a top class striker and right midfielder and maybe event a left back.

 

We haven't managed to do it for the last two summers and the last transfer window so why should we be confident that we'll find the money in the summer?

[David Hodgson]

Did you want us to spend 5m on a stopgap?

 

Well, we spent 7m on Crouch. He's the long-term answer is he ?

[Kite]

Them "thoug"s are over-rated by the way.

 

Perhaps we should wait and see exactly how effective Fowler might prove to be (or not) before dismissing his value as a stop-gap?

Edited February 6, 2006 by Lenin

[Guest Kev]

Did you want us to spend 5m on a stopgap?

 

No, I want us to stump up the going rate for a long-term goalscorer and a long-term winger at least. I want us shopping in Harrods and not Lidl.

[Tones]

I for one have no confidence that we will stump up the cash for what is really needed. ie a top class striker and right midfielder and maybe event a left back.

 

We haven't managed to do it for the last two summers and the last transfer window so why should we be confident that we'll find the money in the summer?

 

Eh?? In the last 2 summers we have spent £14 on Cisse, £6m on Garcia, £10 on Alonso, £7m on Crouch, £6m Sissoko etc. Not counting the millions we have stumped up during the prebious two winters (£6m Morientes, £6m Agger etc) How have we not stumped up the cash???

[Gravy]

Eh?? In the last 2 summers we have spent £14 on Cisse, £6m on Garcia, £10 on Alonso, £7m on Crouch, £6m Sissoko etc. Not counting the millions we have stumped up during the prebious two winters (£6m Morientes, £6m Agger etc) How have we not stumped up the cash???

 

Look at the money coming in from transfers. Rafa himself dsaid if we had not sold Owen then Garcia and Alondso would not have been able to have been purchased. Add this to the pot of cash made from winning the CL and then look at the figures. Hardly big spenders are we.