As we look back on 2016 – a painful one in so many ways – there’s one stand out lowlight for me and I’m not talking relegation. That had a sense of inevitability when we lost so convincingly, at Bournemouth, way back in January.
No, I’m talking about “that” interview with the Times; just a matter of days before the AGM, when the majority shareholders took it upon themselves to confirm their succession planning together with the Norwich way of doing things – being both debt-free and self-funding.
I’m no accountant but the problem for me is that I’m starting to find the self-funding and debt free mantras both a little tiresome and, more importantly, a tad unbelievable.
Being “debt free” is, or should I say, was, a snapshot at a moment in time – in our case, taken from our accounts at the end of June. However, by the time the accounts are actually released several months later, they’re already effectively out of date.
As for being self-funding, clearly, it makes sense, to a point, to only spend what you’ve got.
However, what’s actually far more important to any business than being debt free is cash flow. Because, in simplistic terms, available cash inflows determines your ability to meet your outgoings.
It’s stating the obvious that relegation has a huge negative impact on cash inflows.
Just to put some perspective on this, the £68 million TV cash received last season, becomes £42 million this season, £30 million next season and, if promotion isn’t achieved by May 2018, we’ll then be in receipt of Premier League solidarity payments, plus Football League TV distributions – totalling about £6 million per annum.
That’s a meagre £500,000 a month. Or, to put it another way, that’s over £5 million a month less than we were receiving in the Premier League just last season.
Which begs the question as to whether the “self-funding” model is actually truly sustainable if the club is going to yo-yo between the Championship and the Premier League? Whichever way you spin it, the variance between TV monies of £6 million per annum and £100 million, if you’re promoted to the Premier League, is huge.
However, there’s something else puzzling me, because, if you ferret around the now fairly standard layout of the Club’s accounts, in between the Key Performance Indicators and principal business risk management objectives and policies, you’ll find ‘Business review and future outlook’. Within that section there’s a sentence not previously seen:-
“This means that aside from a working capital facility provided by Barclays and Preference shares classified as debt, the Club has no debt, either external or owed to its shareholders.”
Which rather begs the question “when is a debt not a debt?”
A quick trawl through Companies House shows that the Club has five charges outstanding – four of which have been accrued since September 2013, with the most recent being on 22 December 2016.
These charge documents all extend to twenty plus pages and require some legal insight to fully understand. However, they’re the assignment of future specified Premier League TV instalment monies by the Club to Barclays Bank.
Of course, the simple explanation may be that nearly all transfers have fees paid in instalments – absolutely nothing unusual there – and all the Club seems to be doing (at first sight) is aligning future fee instalments with future TV receipts. The buying club is also effectively receiving a bank guarantee.
The charge agreements also incorporate offset provisions, which means that future incoming receipts (for example payments from Southampton for Nathan Redmond) can be used to offset against outgoings to other clubs.
However, before this gets filed under “nothing to see here” you have to question why the first charge, which related to central funds from 2014-15 and central funds payable in August 2016 only relating 2015-16, haven’t been discharged from secured sums and is therefore still showing as outstanding?
The precise timings of the receipts Premier League TV monies has always been something of a mystery. A proper explanation may go some way to removing any doubts that exist. But, in the meantime, with all these charges outstanding, I can’t help but wonder just what will happen if the Club doesn’t get promoted before 2018 when the parachute payments cease?
There’s something for you all to ponder!
And, while you do so, may I take this opportunity to wish Rick, Gary, all fellow MFW writers and, most importantly, you, the readers, a very Happy New Year.