Boro defeat hardly a shock, but the manner of it was.

CoymayLast night was one of those periodical away games that I don’t even get to listen to on the radio (I was out and so was only able to get away to catch up with things on my car radio for a few minutes at half time and then again after the match). Therefore, as most of you who get to read this will have seen and heard more of the game than me, I’ll keep this piece a lot shorter than normal and just offer a few general thoughts on our 3-1 defeat at Middlesbrough.

Firstly, while it’s frustrating that we were unable to follow up on that fine performance against Brighton on Saturday and recording successive wins seems as far away as ever, defeat to a team who had only lost twice at home in fifteen games during which they had conceded just four goals shouldn’t have come as a shock. Unfortunately, based on the snippets I’ve heard and read and the brief highlights I’ve watched, the same cannot be said about the manner of the loss.

Middlesbrough are one of a few sides (Derby and Sheffield Wednesday are others which spring to mind) who are challenging for promotion on the back of having spent very significantly on new players despite not being in receipt of relegation parachute payments – to me, it seems pretty certain that these sides have to go up if they are to escape sanctions under the FFP rules next season.

Besides the likes of Stuart Downing, Jordan Rhodes, Christian Stuani and David Nugent (who, according to some of the more conservative reports I’ve read, cost Boro something like £19 million between them), last night’s squad had a couple of players in it in Gaston Ramirez and Richie DeLaet who, surely, must be costing them a tidy sum in loan fees and wages.

Therefore, when you consider how we have been run this season in comparison to them, they should be beating us on their own patch really, but, should they be doing so by scoring three times while also affording to miss a penalty and what’s been described as a “host” of chances which fell to the expensive Rhodes (who, apart from a couple of goals for Huddersfield in a League Cup tie, has a pretty moderate scoring record against us)?

Truth is, that Boro owe their lofty position almost entirely to their vice like defence – the stats confirm my opinion that they have, by some way, the best defence in the Championship. However, despite all of their spending, they are hardly prolific in attack – we are one of ten teams in the division who have scored more goals than them this season. In fact, after a few big home wins at the start of the campaign, their recent goalscoring record at the Riverside Stadium was very poor, with only eight goals scored in their last ten matches in all competitions on their own ground – over the past four months, the tendency has been that away teams do not lose at Boro if they manage to score.

A third own own goal for Matt Connolly. Fans of Danny Malloy, a serial own goal scorer at the club in the late 50s and early 60s, say that he only scored so many of them because of a combination of his bravery and anticipation which took him into areas where it was likely he'd get the last touch on a ball destined for the net - I can see elements of this in Connolly's misfortunes this season and I'd still say that game in, game out, he's been our best defender this season.*

A third own own goal of the campaign for Matt Connolly. Fans of Danny Malloy, a serial own goal scorer at the club in the late 50s and early 60s, say that he only scored so many of them because of a combination of his bravery and anticipation which took him into areas where it was likely he’d get the last touch on a ball destined for the net – I can see elements of this in Connolly’s misfortunes this season and I’d still say that game in, game out, he’s been our best defender.*

So, when Fabio put us ahead with what was a superb first goal for the club, the opportunity was definitely there to feed on any anxiety in the home team and their supporters that had grown over a winless five game run. Sadly, City were prone to expensive individual mistakes all night which made it so much easier for their opponents to, first, get level quickly and then pull clear to record what was a big win by their standards.

Among the most culpable apparently were our usually reliable centrebacks. Matt Connolly may have been a little unfortunate when the ball rebounded off his knee on to his arm and then in to record his third own goal of the season to get Boro back on level terms, but there were unusual errors from him besides that, while Bruno Manga had one of those matches he is occasionally prone to where a player who normally makes plying his trade at this level look very easy, is suddenly sloppy in possession and unsure in his defending.

As for our left back, well, the word “enigma” could have been invented with him in mind. Scott Malone has been with us for over a year now, but I still never know what we are going to get from him from one game to the next.

When you see him at his best, those reports which claimed that Borussia Dortmund were interested in him last season seem almost believable – despite Fabio’s goal last night and his occasional quality in the final third, Malone, for me, is our best attacking full back.

Indeed, even though he was deemed worthy of only a four out of ten marking in Wales Online’s ratings for last night (not sure how reliable these were mind when you consider Fabio was given man of the match with a seven, yet David Marshall received an eight!), Malone still put over two lovely crosses which presented decent headed opportunities for Lex Immers and sub Kenneth Zohore. However, when you look at how feebly he lost possession, and then stayed down,  in the build up to the equaliser, you begin to think that the marking was a fair one.

Certainly, although I heard criticisms of other City players in the snippets of Radio Wales’ coverage that I caught, Malone was copping the brunt of it. Now I know I shouldn’t really be too critical of any player after a game that I have so little knowledge of currently, but the truth as I see it is that, based on the evidence of the last thirteen months, Scott Malone is a player who can easily go from the seven or eight out of ten performance he turned in on Saturday to the four out of ten we got last night – it’s far from the first time it’s happened and I believe that he is too inconsistent to be the sort of full back a side that wants to put in a meaningful promotion challenge can afford.

So, City move on to a home game on Saturday with a Preston side that, Burnley apart, have to be seen as the Championship’s form team with seven wins and just one loss to show from their last ten matches. The Lancashire side must now be considered credible Play Off contenders, but we showed on Saturday that we are well capable of beating such a team – the problem we are no closer to solving is that does victory on Saturday preclude the same outcome happening when we travel to Bristol City in our following game seven days later?

* picture courtesy of http://www.gazettelive.co.uk/

 

 

 

Posted in Out on the pitch | Tagged , | 10 Comments

Better financial news in City Accounts for y/e 31/5/15.

Coymay

City’s accounts for last season were filed at Companies House last week and are now available for public inspection. In previous years, I’ve presented an analysis of the figures on here, but, this time, I’m going to leave that job to someone who knows what they are talking about!

Supporters’ Trust Committee member Keith Morgan has become a pretty well known figure who the media have a tendency to turn to if they need the views of someone who can be considered an expert on football finances, so here are his views on what the latest set of accounts mean.

One thing I should say first though is that Keith explains exactly why we find ourselves under an embargo for, seemingly, breaching the FFP rules  and I agree with him in his belief that the imposition of penalties was a harsh decision in this case. When I first spoke to him about the embargo, he was confident that it would be lifted in time for the summer transfer window and I asked him on a City messageboard yesterday whether he still believed that to be the case now that he knew more about the reasons behind it – he confirmed that he still felt the same way.

Anyway, that’s more than enough from me – here’s what Keith has to say;-

“Overall position

There was an overall profit for the year of £3.9m compared to a loss of £12.0m in the year to 31 May 2014. As a result of the above profit and a £3.0m conversion of debt due to Vincent Tan into equity in the year , the overall balance sheet deficit reduced by £6.9m from £65.8m to £58.9m.

Major profit and loss account items

1)     Income

The club obviously suffered a major drop in its income levels following its relegation from the Premier League with its total revenue dropping from £83.1m to £40.3m, a fall of £42.9m even with the benefit of the first year of “parachute” payments.

To counteract this, a huge amount of effort was needed to compensate for this reduction as well as turning a £12.0m loss into a £3.9m profit – a “swing” of £15.9m. This total improvement in cost management of £58.8m (£42.9m +£15.9m) was achieved as follows.

2) Vincent Tan input

a) During the year Vincent Tan wrote off £13.0m of the debt due to him by the club with a direct consequential benefit in the profit and loss account (it is actually reduced to a figure of £9.8m on the face of the accounts by netting off the cost of £3.2m caused by the removal of OGS and his team). This compares to the cost of £2.1m from the previous season from sacking the previous manager, so an overall improvement in the profit and loss account of £11.9m (£9.8m+ £2.1m).

b) A further profitability improvement linked to Vincent Tan was an accounting adjustment of £13.4m discounting the future value of the balance of loans due to him. This adjustment, required to make the accounts compliant, with accounting rules the club is bound by law to follow, also was the trigger for the Financial Fair Play alleged breach dispute between the club and the football authorities, which I have tried to explain later in this commentary.

c) In addition to the debt write off, Vincent Tan converted £3m of his debt into equity in the year.

3) Player trading

In the 2014/15 season the club made a profit of £9.7m on player sales. Compared to a loss of £5.2m in the previous season. This was an improvement of £14.9m.

4) Wage costs

Player wage costs were reduced by £9.8m in the year, and other wages by £1.8m, giving a total saving of £11.6m compared to the cost of £53.2m in the previous year.

5) Administration costs savings

These costs reduced by £10.2m to £39.7m in the year. A large element of this was avoiding having to do an extra write down of the cost of the Ninian Stand extension (known as an impairment provision) which was a cost in the previous year of £5.5m but not having to be repeated in 2014/15.

By a combination of all of the above major factors (and some other more minor ones) the club`s management managed to overturn previous years` losses despite a huge reduction in income from the club’s relegation from the Premier League.

6) The balance sheet

The main assets in the balance sheet remained the value attributed to the playing squad as at 31 May 2015 (£12.0m, down from £25.2m in the previous year) and the football stadium (£53.5m).Other assets include “football receivables” (probably balances due in from player sales) of £7.2m and cash at bank of just over £1m.

7) The main liability in the balance sheet remains the debt due to Vincent Tan. However, the position regarding the debt has improved considerably due to three different factors:

a) The overall debt reduced from £122.8m as at 31 May 2014 to £101.6m as at 31 May 2015 as a result of the write-offs etc. I referred to above and despite VT putting about £5m of new cash into the club during the year. To clarify for various messageboard posters etc. who claim to “know” that he has taken money out of the club, the accounts clearly show that this is not the case.

b) A concern of mine in the past has been that the whole debt due to VT has been repayable on demand and was always shown as a current liability – i.e. fully repayable within one year after the balance sheet date. This is now changed, and the whole debt is now classified as a non current liability – i.e. none of it repayable within a year, but repayable between two and five years after 31 May 2015.

c) Of the total debt due of £101.6m, only £28.1m is now shown as interest bearing (all interest claimable was waived in any case up to 31 May 2015) and with conversion rights into shares at VT`s option. The rest, £73.5m, is non-interest bearing, and has no conversion rights. All of the above represent a significant improvement in the Vincent Tan loan position for the club.

8) Other liabilities include a debt due to Tormen Finance, in which Mehmet Dalman has an interest, of £8.8m (up £1.5m from the previous year) which accrues interest at just under 9%.

The debt due to Langston is shown in the balance sheet at £5.75m and is marked in a note as being disputed. I am not party to knowing what exact settlement was recently reached but it would appear from people “close” to Sam that the payment to him was less than this figure.

The issue of FFP “breach”

I now understand the reasons for the disagreement between the club and the League as to whether the club has broken the FFP rules and which has caused the current transfer embargo.

The adjustment of £13.4m referred to above as a “discount” from the balance sheet value of the debt due to Vincent Tan is an accounting adjustment which the club HAS to make or it would not be compliant with current accounting regulations and it would have been in breach of Companies Act requirements etc. The League has said that this adjustment is “artificial” and should be added back to the reported £3.9m profit to show a “real” loss of £9.5m which is in breach of the FFP rules.

I side with the club on this issue and disagree with the League`s opinion (it is an opinion rather than a specific breach as I can see nothing in the FFP Rules which specifically addresses such a situation). It does seem unfair, if not a little absurd, that a club is penalised for making an accounting entry that it is required to make by law and which improves its balance sheet position. If the aim of FFP is to dissuade clubs from imprudent trading then my opinion is that their decision in the case of CCFC goes against encouraging this principle.

There are probably several other points worth noting from the accounts , and my apologies if I have missed anything obvious or of particular interest out , but hopefully this initial summary commentary is of some use to its readers.

Significant further developments

Since having had the opportunity to review and comment on the May 2015 accounts , there has been a hugely significant development in respect of the club`s finances, as announced at a meeting on Thursday, February 11, where Vincent Tan addressed an audience of invited media and fans` representatives at Cardiff City Stadium.

The excellent news emanating from the meeting was that Vincent Tan announced that, not only was he writing off a further £10m of the debt due to him by the club, but was also converting a further total of £68m of debt into share capital, leaving a balance due to him of £40m (after the meeting, in a separate interview with the media, he stated that this balance would also be cleared by equal instalments of £8m over a five year period).

The above debt write offs and conversions this current season means that the club`s balance sheet should show a surplus of assets over liabilities as at 31 May 2016, a position which the club has not enjoyed for many years. The net liabilities at 31 May 2015 were £59m so a write off and conversion of £78m would restore the balance sheet to a net asset position even if a loss of £19m was made in the season (which is highly unlikely as the club seems to be heading for FFP compliance this season).

All of the above is very positive news in respect of the finances of the club.

Keith Morgan”

 

Posted in Up in the Boardroom | Tagged , | 2 Comments