Financial Fair Play

[Snowflake Royal]

Very worried the club has been split from the ground. That does not bode well at all.

[maffff]

This was also our first year without parachute payments - hence the huge income drop. Looks like the Chinese are getting too balance that income reduction - loans paid off, considerably less interest paid in the year. Ffp wise, because of the profit in the p/o final year, we're OK for this season, but next season that loss could be a huge chain around our necks. Season after and it clears hopefully we're in a more sustainable position.

[Zip]

Very worried the club has been split from the ground. That does not bode well at all.

Me too. This makes us much more vulnerable.

[Zip]

Just started to take a look through the accounts for both the football club and Renhe Sports Management (its formal UK parent company). Here are some key points coming out for me

1. While we lost £21m (which including a net spend on players of £6.8m), the club actually burnt through £27m in cash. This was basically funded by new shares of £15m plus £12m of loans from the parent company (Renhe Sports) to the RFC company
2. The stadium has been moved from RFC to Renhe Sports. Basically, the football club no longer owns its own ground. I assume that is in consideration for the £27m of cash thrown at the football operations.
3. As a consequence of 2) the club now has to pay rent to Renhe Sports of £750,000 per year until 2043.
4. The club bought players totaling £19m in the year to 30 June 2018
5. The club potentially owes a further £12m on player registrations (these will be the performance / appearance related type elements of the transfer fees)
6. The club received £10m of grant income. No idea what this relates to as the accounts are silent
7. £8m of the £21m loss relates to amortisation of players fees/contracts (more than double the previous year)
8. The women's team lost £841k last year
9. The club owes £61m to Renhe Sports, £3m more than last year
10. After 30 June 2018 we acquired players for a cost of £4.75m
11. Renhe Sports owns 25% of RFC Prop Co, which is the entity which owns the land around the Madejski Stadium and still has 4 Thais as directors, plus Nigel Howe
12. The training ground at Bearwood is owned in another company, RFC Bearwood. The value of that asset is now £13m. Most of the development costs have been through group funding so some of the money poured in by the Chinese owners (approx £10m) has gone onto the training ground

So how does this work with the Stadium? When the Chinese owners bought the club presumably they then owned the stadium. Is that correct? To see us as a club having to pay what amounts to the best part of £20 million rent until 2043 is taking the piss. As a club we are paying a very heavy price for some crappy owners over the past 6 or 7 years.

[Elm Park Kid]

Just started to take a look through the accounts for both the football club and Renhe Sports Management (its formal UK parent company). Here are some key points coming out for me

1. While we lost £21m (which including a net spend on players of £6.8m), the club actually burnt through £27m in cash. This was basically funded by new shares of £15m plus £12m of loans from the parent company (Renhe Sports) to the RFC company
2. The stadium has been moved from RFC to Renhe Sports. Basically, the football club no longer owns its own ground. I assume that is in consideration for the £27m of cash thrown at the football operations.
3. As a consequence of 2) the club now has to pay rent to Renhe Sports of £750,000 per year until 2043.
4. The club bought players totaling £19m in the year to 30 June 2018
5. The club potentially owes a further £12m on player registrations (these will be the performance / appearance related type elements of the transfer fees)
6. The club received £10m of grant income. No idea what this relates to as the accounts are silent
7. £8m of the £21m loss relates to amortisation of players fees/contracts (more than double the previous year)
8. The women's team lost £841k last year
9. The club owes £61m to Renhe Sports, £3m more than last year
10. After 30 June 2018 we acquired players for a cost of £4.75m
11. Renhe Sports owns 25% of RFC Prop Co, which is the entity which owns the land around the Madejski Stadium and still has 4 Thais as directors, plus Nigel Howe
12. The training ground at Bearwood is owned in another company, RFC Bearwood. The value of that asset is now £13m. Most of the development costs have been through group funding so some of the money poured in by the Chinese owners (approx £10m) has gone onto the training ground

So how does this work with the Stadium? When the Chinese owners bought the club presumably they then owned the stadium. Is that correct? To see us as a club having to pay what amounts to the best part of £20 million rent until 2043 is taking the piss. As a club we are paying a very heavy price for some crappy owners over the past 6 or 7 years.

It doesn't matter if the 'club' is paying a rent to the other company - if the other company is then just giving the club massive loans to cover it. It's mainly just moving figures around on a spreadsheet - the fundamentals don't change.

This isn't like a 'Blackpool' situation where the owners are milking the club dry or a 'Leeds' situation where the's clubs assets are being gambled on success. This is a group of very, very rich people who are piling a lot of money into a club (unsuccessful at the moment) and getting their accountants to mitigate risk as much as possible.

[3points]

All the time the Chinese are the owners of both companies then no real issue. A bit of moving the deck chairs around. In essence the rent repays the investment of £27m into the club last season over a 20 year period. If they decide to sell the club, it will then be interesting to see whether a new owner buys just the football club, or pays £26m for the stadium as well.

It raised my eyebrows because it happened at Portsmouth and it wasn’t pretty down there. Also I think Oxford are having difficulty with their landlord at the moment too.

[Nameless]

Wasn’t Pompey’s problem that there were several different owners of bits of land. The ground was owned by one person but the car parl by a different person which meant redeveloping the ground was impossible as the car park was needed for the expansion.

I thought the playing element of RFC and the ground were already seperate entities under the RFC Holdings umbrella. I think a while ago Star untangled the web of companies involved.
There are advantages in separating them. It’s usually the playing side that goes bust and if the ground is owned by the playing side it can be sold off. If it is seperate the holding company liquidates the playing side, reforms it and keeps ownership of the ground.
In terms of renting the ground it would be interesting to see how the lease is drawn up. If the football side pay a fixed 750k and Renhe pay for maintenance, development and other expenses it may actually be a cheaper deal for the playing club.
I tend to agree with Elm Park Kid that much of this is spreadsheet stuff BUT would hope STAR have someone with proper accounting knowledge keeping an eye on it. Spotting something with a real downside now and flagging it is better than ending up like Coventry ....

[3points]

Wasn’t Pompey’s problem that there were several different owners of bits of land. The ground was owned by one person but the car parl by a different person which meant redeveloping the ground was impossible as the car park was needed for the expansion.

I thought the playing element of RFC and the ground were already seperate entities under the RFC Holdings umbrella. I think a while ago Star untangled the web of companies involved.
There are advantages in separating them. It’s usually the playing side that goes bust and if the ground is owned by the playing side it can be sold off. If it is seperate the holding company liquidates the playing side, reforms it and keeps ownership of the ground.
In terms of renting the ground it would be interesting to see how the lease is drawn up. If the football side pay a fixed 750k and Renhe pay for maintenance, development and other expenses it may actually be a cheaper deal for the playing club.
I tend to agree with Elm Park Kid that much of this is spreadsheet stuff BUT would hope STAR have someone with proper accounting knowledge keeping an eye on it. Spotting something with a real downside now and flagging it is better than ending up like Coventry ....

I am a proper accountant and do financial and operational restructuring for a living. There aren’t many things I haven’t seen when it comes financial manoeuvring in accounts. You also have to remember that the car park is owned by a different (and now a largely unrelated entity)

[Nameless]

Wasn’t Pompey’s problem that there were several different owners of bits of land. The ground was owned by one person but the car parl by a different person which meant redeveloping the ground was impossible as the car park was needed for the expansion.

I thought the playing element of RFC and the ground were already seperate entities under the RFC Holdings umbrella. I think a while ago Star untangled the web of companies involved.
There are advantages in separating them. It’s usually the playing side that goes bust and if the ground is owned by the playing side it can be sold off. If it is seperate the holding company liquidates the playing side, reforms it and keeps ownership of the ground.
In terms of renting the ground it would be interesting to see how the lease is drawn up. If the football side pay a fixed 750k and Renhe pay for maintenance, development and other expenses it may actually be a cheaper deal for the playing club.
I tend to agree with Elm Park Kid that much of this is spreadsheet stuff BUT would hope STAR have someone with proper accounting knowledge keeping an eye on it. Spotting something with a real downside now and flagging it is better than ending up like Coventry ....

I am a proper accountant and do financial and operational restructuring for a living. There aren’t many things I haven’t seen when it comes financial manoeuvring in accounts. You also have to remember that the car park is owned by a different (and now a largely unrelated entity)

I wasn't suggesting you were an improper accountant ! There is no way of telling who is commenting with the advantage of professional knowledge and who is just winging it !
The Pompey car park and our car park are rather different as we still own the land around the ground so could expand if needed and I believe we still own access routes so can't be held to ransom (would need confirmation on that and it may just be one route rather than both although it would have been crazy to not have secured those when the sale took place.

[3points]

Wasn’t Pompey’s problem that there were several different owners of bits of land. The ground was owned by one person but the car parl by a different person which meant redeveloping the ground was impossible as the car park was needed for the expansion.

I thought the playing element of RFC and the ground were already seperate entities under the RFC Holdings umbrella. I think a while ago Star untangled the web of companies involved.
There are advantages in separating them. It’s usually the playing side that goes bust and if the ground is owned by the playing side it can be sold off. If it is seperate the holding company liquidates the playing side, reforms it and keeps ownership of the ground.
In terms of renting the ground it would be interesting to see how the lease is drawn up. If the football side pay a fixed 750k and Renhe pay for maintenance, development and other expenses it may actually be a cheaper deal for the playing club.
I tend to agree with Elm Park Kid that much of this is spreadsheet stuff BUT would hope STAR have someone with proper accounting knowledge keeping an eye on it. Spotting something with a real downside now and flagging it is better than ending up like Coventry ....

I am a proper accountant and do financial and operational restructuring for a living. There aren’t many things I haven’t seen when it comes financial manoeuvring in accounts. You also have to remember that the car park is owned by a different (and now a largely unrelated entity)

I wasn't suggesting you were an improper accountant ! There is no way of telling who is commenting with the advantage of professional knowledge and who is just winging it !
The Pompey car park and our car park are rather different as we still own the land around the ground so could expand if needed and I believe we still own access routes so can't be held to ransom (would need confirmation on that and it may just be one route rather than both although it would have been crazy to not have secured those when the sale took place.

I genuinely don’t know the answer about our car park land. I do know from the info at Companies House that RFC owns 25% of the company (RFC Propco) which owns the land surrounding the ground. The remaining 75% is owned by the Thais. So we do have some interest in it, which I guess is helpful and is probably a blocking vote in case the Thais try to do anything untoward

[Maneki Neko]

Just started to take a look through the accounts for both the football club and Renhe Sports Management (its formal UK parent company). Here are some key points coming out for me

1. While we lost £21m (which including a net spend on players of £6.8m), the club actually burnt through £27m in cash. This was basically funded by new shares of £15m plus £12m of loans from the parent company (Renhe Sports) to the RFC company
2. The stadium has been moved from RFC to Renhe Sports. Basically, the football club no longer owns its own ground. I assume that is in consideration for the £27m of cash thrown at the football operations.
3. As a consequence of 2) the club now has to pay rent to Renhe Sports of £750,000 per year until 2043.
4. The club bought players totaling £19m in the year to 30 June 2018
5. The club potentially owes a further £12m on player registrations (these will be the performance / appearance related type elements of the transfer fees)
6. The club received £10m of grant income. No idea what this relates to as the accounts are silent
7. £8m of the £21m loss relates to amortisation of players fees/contracts (more than double the previous year)
8. The women's team lost £841k last year
9. The club owes £61m to Renhe Sports, £3m more than last year
10. After 30 June 2018 we acquired players for a cost of £4.75m
11. Renhe Sports owns 25% of RFC Prop Co, which is the entity which owns the land around the Madejski Stadium and still has 4 Thais as directors, plus Nigel Howe
12. The training ground at Bearwood is owned in another company, RFC Bearwood. The value of that asset is now £13m. Most of the development costs have been through group funding so some of the money poured in by the Chinese owners (approx £10m) has gone onto the training ground

So how does this work with the Stadium? When the Chinese owners bought the club presumably they then owned the stadium. Is that correct? To see us as a club having to pay what amounts to the best part of £20 million rent until 2043 is taking the piss. As a club we are paying a very heavy price for some crappy owners over the past 6 or 7 years.

It doesn't matter if the 'club' is paying a rent to the other company - if the other company is then just giving the club massive loans to cover it. It's mainly just moving figures around on a spreadsheet - the fundamentals don't change.

.

[Maneki Neko]

this may all be well now, while we have seemingly benevolent owners, willing to invest and lose money.
the instant they decide enough is enough and they have to sell, this becomes a huge worry

[Platypuss]

Very worried the club has been split from the ground. That does not bode well at all.

Me too. This makes us much more vulnerable.

Hasn't that been the case for ages though?
Seem to recall that was also the situation under Madejski.

[paddy20]

I'm guessing that if the club went into liquidation or administration the ground would be protected???

[Nameless]

Very worried the club has been split from the ground. That does not bode well at all.

Me too. This makes us much more vulnerable.

Hasn't that been the case for ages though?
Seem to recall that was also the situation under Madejski.

As I said earlier I thought this was the case. Don’t know the company’s names but fairly sure RFC holdings owned RFC Ltd and Madejski Stadium Ltd. certainly in discussions with London Irish fans they were always convinced that they were not the tenants of the football club but we were both tenants of the holding company. Not sure I’d accept that as proof in law but is consistent with the splitting of the playing club and the ground. As long as both are owned by the same person long term it’s not an issue, andeven if the club did own the ground directly it could be split off easily if an owner decided they wanted to do so. As soon as there’s was a sole owner with total control it meant that person can effectively do what ever they want. We are reliant on them being a benevolant owner sharing the same aims as the fans for the club.
If we think the owners do not have the best interests of the club at heart we should be looking at doing what anumber of other clubs have done and buying and running the club ourselves. Can’t see any issues with that !

[Zip]

Very worried the club has been split from the ground. That does not bode well at all.

Me too. This makes us much more vulnerable.

Hasn't that been the case for ages though?
Seem to recall that was also the situation under Madejski.

You may be right but I certainly wasn’t aware of it.

[One87One]

I'm guessing that if the club went into liquidation or administration the ground would be protected???

STAR saw to it that the Madejski Stadium was registered as a Community Asset and therefore protected, however what that means when the football club relinquishes ownership of it I don't know. All very unsettling I must admit.

What happens now with regards to stadium naming rights? I take it RFC would no longer benefit from any such deal? (Discussions have taken place with several parties over the last 20 months with regards to the naming rights. We could well have 'The Macron Stadium' next season, unless this change changes things.)

[URZZZZZZZZ]

Quite a bit of character assassination of Stam from trawling trough the thread, which goes against what I’ve heard from some of the people I know at the club.

I appreciate it’s easy to tar Stam with the same brush as Gourlay, but this couldn’t be further from the truth. A lot of the signings in summer 17 and 18 were undertaken without Stam’s knowledge, whether this was through dodgy RG dealings or otherwise is a different conversation.

On face value, Jaap oversaw a transfer spree where we forked out £20 million, but the reality is he was privy to very little. In addition, it’s hard to argue that we got players to the value of £20 million, despite spending that amount.

Gourlay was always the issue here, but we should be in no doubt that under Howe we can slowly begin to turn the ship round.

[Elm Park Kid]

It's important to repeat that with this kind of ownership model, everything is dependent on the finances and desires of your owner. The day to day state of your finances or what the clubs owns/owes or doesn't isn't that important.

I mean - obviously it makes a difference to our long term security if the club is generally running at a profit or loss. The more money we make the more likely the owners will be committed to our survival and more likely we could be sold on if they weren't.

But we could be the most profitable club in the world - with billions of assets - and tomorrow morning the owners could take it all away - sell the stadium to some Russians for £1 and shut everything down. It's entirely up to them.

[muirinho]

It's important to repeat that with this kind of ownership model, everything is dependent on the finances and desires of your owner. The day to day state of your finances or what the clubs owns/owes or doesn't isn't that important.

I mean - obviously it makes a difference to our long term security if the club is generally running at a profit or loss. The more money we make the more likely the owners will be committed to our survival and more likely we could be sold on if they weren't.

But we could be the most profitable club in the world - with billions of assets - and tomorrow morning the owners could take it all away - sell the stadium to some Russians for £1 and shut everything down. It's entirely up to them.

This * 1000

It makes no difference either if the stadium is owned by the club or not. If we have good owners, then that's shuffling around assets probably for tax reasons. If we have bad owners, then they could sell the stadium ground directly to a housebuilding company, and groundshare at the Kassam - they don't need to put it into a separate company first.

We've actually been lucky - except for Anton, who was an eejit. Had Madejski for yonks, the Thais definitely meant well, so far the Chinese have done right by us too. The only bad move they made was to bring in Gourlay - but at least they then got rid of him. If we stay up this season, the damage he did can be undone.