BWFC Release Their Financial Reports for 2014/15 Season

last week Ken Anderson released the accounts for Burnden Leisure Ltd (http://www.bwfc.co.uk/documents/burnden-leisure-signed201-3565779.pdf), along with a statement setting out his views on the escalating dispute between him and Dean Holdsworth. The three operating companies that make up BWFC have filed accounts for year ended 30 June 2015 at Companies House and can now be viewed on Companies House website (http://beta.companieshouse.gov.uk).

The three main companies are:

• Burnden Leisure Limited: this is the group holding company and is 95% owned by SSBWFC (Mr Holdsworth) & ICI (Mr Anderson) and 5% from the old public issue with around 6500 individuals still holding shares.
• Bolton Wanderers Football & Athletic Company Limited: this is the football club registered at Companies House in 1895 and the registered holder of the EFL golden share that enables us to take part in the EFL. Most of the assets, liabilities, and losses sit in this company. It is 100% owned by Burnden Leisure Ltd.
• Bolton Whites Hotel Limited: the hotel and conferencing facility and is 100% owned by BWFA&Co Ltd

The accounts should have been filed, by company law, on 31 March last year (nine months after the year end) but complications associated with takeover and ongoing funding are believed to have frustrated attempts to get them audited and filed earlier. Companies House, the regulator of UK companies, makes it an absolute responsibility for company directors to file accounts on time and the reasons for our delay are unlikely to be viewed sympathetically. Any delays in Companies House filings in the future will carry great risks for the directors personally. The late filing of accounts is also contrary to EFL rules and can carry sanctions from them.

The club chairman has already warned us that the accounts will not make good reading. This is not a surprise to those of us who follow these things and indeed the chairman was partly right when he said that the accounts relate to the previous ownership. So much has changed since then – the takeover, the write off of large chunks of debt, and relegation – that it is easy to dismiss the accounts now as being irrelevant.

However, the nuances of company reporting and accounting rules mean that there is some vital information contained within the filed accounts that relate to the here and now and also to the immediate future financial issues.

Firstly, significant post balance sheet date happenings have to be disclosed and clearly the takeover and financial restructure in March 2016 falls into this category. There is a note to this effect in the Directors Report and at the back of the accounts.

Then, the directors themselves have to make an assessment of the ongoing viability of the companies for at least the next 12 months. This is the “Going Concern” assessment and has big implications for the valuation and classifications of assets and liabilities. Based on this assessment, the accounts are drawn up by the directors and presented to the auditor for the review, audit checks & validations, and for their opinion. The Auditor Report is also something that tells us about the here and now and the financial warnings, if any, about the next 12 months.

What Does All This Mean?

The Trust members are likely to have many questions about the past financials, the current situation, and what that means for the future. This article is based solely on an initial review but hopefully helps give an immediate understanding of where the club is at the moment and to help focus questions for future enquiry.

Financial summary of 2014/15 accounts

• Revenues £30.6m
• Wages £29.4m
• Break even position in the non football companies
• Profit on player trading £2.1m
• Reported loss £4.6m but the underlying loss is higher at £16m; the group benefited from a write off of interest previously accrued but not paid. When Eddie Davies wrote of the debts and accrued interest in March 2016 the club “wrote back” the accrued interest. This did not generate any cash and it is only a bookkeeping adjustment.
• Gross Debt £199.7m with £185.5m owing to the Eddie Davies offshore company and £14.2m to other lenders.
• The group borrowed an additional £19.2m in the year.

The Takeover and “Subsequent Event” – March 2016

The takeover by Mr Holdsworth’s and Mr Anderson’s corporate vehicles bought out Eddie Davies’s shares for £1. In return, Mr Davies wrote off around £170m of his loans to the club but Mr Holdsworth and Mr Anderson would need to fund the ongoing working capital and investment needs of the club. In the few months before the takeover the club raised £11.25m selling the Euxton training facility, and through loans and financing with Prescot Business Parks Limited (PBP). This helped fund working capital in that time, repay back maturing loans, and may have left cash in the bank to be used after the takeover.

SSBWFC borrowed £5m from Blumarble at 24% interest on a short-term basis. According to the accounts disclosure this was repayable in March 2016 and is therefore now past due. From current events it is fair to assume that the lender is continuing to forbear and allow the club to keep operating. Companies House records show that the loans are secured throughout the group companies. The accounts report this as a source of dispute between Mr Anderson and Mr Holdsworth, with reference in the accounts that £4m went into the club and the difference used to fund fees and costs associated with the takeover and financing. These items are reported as being disputed on the basis of different interpretations of the contracts between the shareholders individually and with the club.

There is also a reported employment contract dispute following the termination of Dean’s employment with the club.

The Current Position – “Here and Now”, “Going Concern” and Financial Issues

Recent local press reports and social media releases from Mr Anderson, as chairman, and Mr Holdsworth in his personal capacity, have thrown some light on the question of how much Mr Anderson has put into the club. Last year, it was reported that Mr Anderson made a commitment of £2.5m initially with a further amount of follow on funding. Over the past few months Mr Anderson has hinted that he has put significant money into the club. These accounts seem clear this up; at the filing date (6 Feb 2016) Mr Anderson had injected in aggregate £3.5m but no amount was outstanding to him. In other words he has withdrawn £3.5m in aggregate.

From the disclosures in the Directors Report, Strategic Report and Note 1: Accounting Polices (Going Concern section) the following facts emerge:

• the directors report that the club does not have access to sufficient facilities to meet the working capital needs of the club or pay back debts as they fall due;
• current losses are running at £11m now and for the foreseeable future;
• the loan to PBP and the loan to Blumarble are past due for repayment and there is no present resolution with either lender;
• debt due for repayment between now and the end of next season is in the region of £13m to £16m
• Mr Anderson has provided short term funding when needed but withdraws it when funds allow (something like an overdraft type arrangement). An amount of £3.5m is disclosed as the aggregate amount injected but without stating how much went in, when, and when it was withdrawn.
• the sale of Rob Holding and Zach Clough brought in £5.3m

These disclosures raise questions about the solvency of the club. The directors use the words “hope” and “hopeful” in securing additional funding, through it is clear they concede that there is no funding available right now.  From the evidence in the accounts it seems possible that the pecking order for funding so far has been something like:

• use the surplus cash left behind by Eddie Davies / Trevor Birch restructuring;
• use the £4m working capital provided from the Blumarble loan
• sale of Rob Holding
• periodic top up of cash from Mr Anderson but withdrawn as soon as there is enough to take out;
• sale of Zach Clough.

Are the directors statements of “hope” warranted and can we draw comfort?

Well, the Audit Report may offer clues on this. Deloite have reserved their right not to express an opinion. They also report being unable to get satisfactory evidence and explanations from the directors. The directors hope that they find future funding and their intention not to liquidate or cease trading is the basis for their assessment that the club is a going concern. The Auditor states that the shortcomings are “material and pervasive”, in accountant speak, which means the auditor concerns are significant and they cannot agree with the directors.

Further, the auditor disclosures that they were unable to determine whether adequate accounting records had been kept.

What could we conclude?

What we have been presented with are official accounts that show the club is losing a lot of money. That comes as no surprise.

However, the lack of sufficient funding to meet the weekly and monthly cash flow shortfalls, the past due debts, reliance on lender forbearance, and the auditor not being able to validate the going concern assumptions of the directors puts us on notice that the issues may be bigger and more urgent than we were led to believe. Many questions still exist. How far do current cash reserves stretch? Do we have sufficient funds to get to the end of the season and to the end of the year? How much do we need to get to the end of next season?

The shareholders and directors have to resolve these matters quickly but their options may be limited. Normally, a company in this situation would need to secure immediate funding to continue, sell assets, restructure debts, and if this is not possible in the short term, consider alternative options. Given the disclosures in these accounts, additional borrowing would seem unlikely, leaving the choice between the shareholders injecting cash as permanent equity or subordinated and long term loans, or to immediately conclude a sale of the club.

Is a bale out by the Supporters’ Trust possible?

The Trust has the legal permissions and abilities to raise money from members but no Trust has faced a problem of the scale of that facing BWFC. The larger trust-led rescues at Hearts and Portsmouth, both from Administration, required funding of around £5m. BWFC currently appear to need somewhere between £25m and £30m to get to the end of next season. The Trust has consulted with community institutions and with lenders but we recognise that there would still be a significant shortfall. We will continue to explore all available options for community funding initiatives, but we cannot hide that fact that the sums involved are far beyond those raised in similar situations. All options remain under consideration, and as an illustration, 5000 supporters contributing £35 a month for two years would raise just over £4m. 10,000 supporters contributing £50 a month for the next two years would result in £12m being raised. These figures are illustrative and are meant to convey the scale of the current financial situation.

The aim of the BWFCST will always be to represent our members in having a say in the long term stability and sustainability of our club. As previously reported to our members, we did meet with Mr Anderson on 14 January 2017. We were informed at that meeting that there was limited information that could be given to us at that time, but that Mr Anderson was hopeful that he would be in a position to give us more detail when we next met. We do have a pre-arranged meeting with Mr Anderson on 14 February and at that meeting will attempt to gain more insight into what are his immediate plans and available options.