Well, now we know why nobody has bought Norwich City! The annual report is, frankly, terrifying.
For a start, the auditors are not sure the business is “a going concern”. This is not some meaningless piece of accountancy jargon, or an over-cautious assessment of nebulous conditions.
It is a legally necessary, basic accounting practice.
Some assets are valued on the basis that the business will keep trading. They would have to be valued differently if the company goes bust.
A football example might be the value of a stand and its fittings. They wouldn’t be worth as much if you’ve got to flog them for scrap.
So the auditors have to make a detailed apraisal of the likelihood of business continuing. If they have doubts, they have to say so.
And Grant Thornton do say so.
They note that the directors have a cunning plan to deal with the debt but add: “There is no certainty that this action will be successful”.
Another section of the report that made me sit up and gulp was that the club have appointed Deloitte and King Sturge as advisors. They are serious companies.
Deloitte will be looking at all aspects of the business – and doing so without worrying about amorphous stuff like what the fans think, or what the club means to the community.
King Sturge are property advisors. They make sure a business “understands its real estate in a strategic context”. To me, that suggests either flogging some land or property, getting a rental income from it, or both.
I don’t think City are about to sell Carrow Road. Alarmingly, new club chairman Alan Bowkett says it is an option that cannot be ruled out, but the annual report states the strategy for survival only includes the sale of “non-core assets”.
I hope I’m right. I know many clubs who have sold their grounds and then leased them back. I don’t know one that does not regret it. It was what led Watford into penury and it was what enabled Ken Bates being to gain control on the cheap at Leeds.
But we have to realise that the overall Norwich picture – debts increasing from under £19m to just under £23m in a season that ended in relegation – is crushingly bleak.
There are some intriguing details. Glenn Roeder’s much-derided policy of using loan players did not cost as much as I expected – despite the innumerate way in which it has been reported in certain quarters. The total wage bill, including salaries of loan players, was only up £200,000 on the previous season.
It cost just £100,000 to pay off Bryan Gunn and the coaches who were sacked with him. In Championship terms, that means he was paid a pittance and did not have a very good contract.
Neil Doncaster got a £95,000 pay-off, which was considerably less than a year’s money. Again, I’d say the club got off lightly and I’d say Doncaster went quietly.
But when I talk to people involved in club takeovers, they say that Norwich City’s overall indebtedness remains the big problem. If you want to buy a football club, there are much better deals to be had.
The frightening finances confirm that Peter Cullum was trying it on when he asked Delia Smith and Michael-Wynn Jones to give him the club just over two years ago.
He was going to hand over £5 million, he said, to buy players in the January 2008 transfer window and another £20 million for players the following season (the one covered by the latest accounts).
It did not add up then and now we know that it would have been ruinous.
Even if Delia and Michael had let him have the club without receiving a penny for all the cash they have put in, he would have had to repay or renegotiate the massive debt – and then finance the hugely-increased wage bill (what the £25 million worth of players would expect to be paid…).
That was not the plan for a going concern. Norwich would not have had a football club.
So where are we now? Delia and Michael own 61 per cent of the club and their shares are worth just under £10 million – but only if someone is prepared to pay the current price at which shares are issued, which is three quid a pop.
They loaned the club £2 million last season and another £800,000 since then. Michael Foulger lent £600,000 last season and, as we know, gave the club £360,000 in the summer.
The loans are interest free and Delia and Michael and the other Michael have undertaken not to ask for their loans back while the club still owes money to the bank. At the very least, they are losing about £250,000 a year in interest and the report shows that this season Delia and Michael have personally guaranteed a new £300,000 borrowing facility from the bank.
My estimate – and it is only that – Delia and Michael have put about two-thirds of their wealth into Norwich City.
I continue to be grateful for that extraordinary largesse, and if that means that my wife and I get abused by City fans who feel differently about the majority shareholders, well, so be it.
But, hold on. On the very last page of the annual report comes some good news…
The two companies to whom Norwich owe most of the vast debt – AXA and Bank of Scotland – have agreed to defer repayments of both capital and interest. The repayments were due at the turn of the year.
They’ve been deferred until the end of this season. That is like a mortgage holiday for a cash-strapped couple.
That “mortgage holiday” is why Grant Holt and Wes Hoola-hoola-han are not leaving this January.
This board – and I include the new chief executive – must be doing a damn fine job.
Now all they have to do is find the money in May!