Post by QPR Report on Mar 31, 2010 7:09:21 GMT
David Conn/The Guardian
Previous Blog home Hull City owner Russell Bartlett trades £4m loan deals with the clubWith auditors issuing a stark warning, the club is paddling to catch up with money already paid out
Ever since Hull City's financial results were published this month the club's predicament has been the focus of bewildered head-scratching by keen watchers of football turmoil. The figures, for the year to 31 July 2009, look distinctly un-Portsmouth-like, even healthy: turnover at £51m, wages £34m, a £1m profit – a decent effort for any Premier League club – and bank debt down to only £4.6m.
Yet the club's auditors, Deloitte, for the second year running slapped an alarming warning all over the accounts. City face a severe financial shortfall, they said: £16m even if they stay in the Premier League and, a much more severe prospect, £21m if they go down. "These matters represent a material uncertainty that may cast significant doubt over the [club's] ability to continue as a going concern," was Deloitte's stark judgment.
The key to the conundrum, between apparently flourishing finances and a forecast of doom, can be extracted from a headache-inducing scrutiny of the accounts, across four separate companies which now control Hull City and the KC Stadium.
Contrary to the impression given when Hull won promotion to the Premier League in 2008, the club's new owner, Russell Bartlett, had not invested significant money into the club. In fact, £4.4m had gone out of the club and stadium company to Bartlett's holding companies in loans, at least £2.9m of it towards helping him buy the club in the first place. A further £560,000 was paid by the stadium company to Bartlett's holding companies in management fees and at least £1m was owed to him personally as a salary.
During that year, in fact until January this year, Bartlett had loaned only £1m in return, to the KC Stadium company from his own property company, R3 Investment Group. Then, following the first warning given by Deloitte in the 2007-08 accounts, Bartlett redressed the balance in January this year, lending the club a further £4m.
After City won promotion and tore tigerishly into Premier League life the former chairman, Paul Duffen, told the Guardian that Bartlett had "provided the funding" to get the Tigers up. That was taken to mean that Bartlett was a wealthy new backer who, after buying City from Adam Pearson and Pearson's financial backer Peter Wilkinson, had ploughed investment into the club.
However, a close reading of the accounts for the club itself, the KC Stadium management company, and a holding company for each which Bartlett set up, establishes that he had not. The club financed a £7m increase to the wage bill in the Championship by making a £10m loss that season. Overall nearly £5m left the club to Bartlett and his companies, in two loan payments totalling £4.4m, and £560,000 in management fees.
Bartlett, who runs his property investments from offices in Shenfield, Essex, bought City from Pearson and Wilkinson in 2007 for a sum reported to be £13m. They had steered the club from administration and League Two to the Championship and a new stadium and were looking to sell at a profit and find a buyer who would provide new investment. There was then no debt on the club or the stadium, which City lease ultimately from the local authority, who built it with £43.5m of public money.
After Bartlett took over, the holding company he formed to buy Pearson and Wilkinson out of the stadium lease borrowed £3.4m from the Royal Bank of Scotland to do so. The stadium lease was mortgaged to RBS, Bartlett personally guaranteeing the loan. The football club themselves, still in the Championship, immediately paid out £3.2m as a loan to Bartlett's other holding company, Tiger Holdings Limited.
Bartlett's group company accountant, Andrew Redman, confirmed this week on Bartlett's behalf that City paid that money out to help Bartlett meet his instalments to Pearson and Wilkinson. "£2.9m of the £3.2m paid by Hull City AFC to Tiger Holdings Limited formed part of the purchase consideration due to the previous owner," Redman said.
That means the club's own money, from fans buying tickets, and TV and sponsorship income, was loaned out for Bartlett's use, to pay for him to buy the club in the first place. The KC Stadium management company, which makes its money from rent paid by the club, also loaned a further £1.2m to the stadium holding company, described in the 2007-08 accounts as "financial assistance".
So £4.4m went out of Hull City and the KC Stadium company during the season to Bartlett's companies in loans, but Redman did not explain what that £1.2m payment was for. The stadium holding company's 2007-08 accounts also stated that it owed £1m to Bartlett personally. That, Redman explained, was Bartlett's salary, saying: "There are no payments from the companies to RD Bartlett other than salary." The club's more recent accounts, for the year to 31 July 2009, record the highest paid director receiving a £1.035m package. Redman would not confirm whether that director was Bartlett. "Salary information is confidential," he said.
In 2007-08 Bartlett's company, R3 Investment Group, loaned £1m to the KC Stadium company, meaning that around £4m more had gone out of the club since Bartlett took over than he had put in.
After promotion had warmed hearts in an English game glazing over with billionaires, Hull borrowed £22m from a bank, Investec, to finance the signings Bartlett and Duffen wanted to have a go at keeping the club up. Investec took a mortgage on the TV money Hull were due to receive, and personal guarantees from Bartlett.
Here lies the reason why Deloitte slapped their warning over the club's very future: Hull arrived in the Premier League having made a £10m loss in the Championship and having paid out millions to Bartlett's companies. They then increased the wage bill by almost £20m, to £33.6m. The more recent accounts, to 31 July 2009, show borrowings down to £15m, suggesting that Investec reduced its loan by £7m.
So Hull are committed to paying Premier League wages but paddling continually to catch up with money already paid out. Although the debt is now down to £4.6m, with another £7m due to be borrowed, it has to be repaid in August and the wage bill must still be met.
Hence Deloitte's warning that particularly if the club is relegated to the sparser TV climes of the Championship, it must find £21m extra to meet its liabilities, a "material uncertainty" about whether the club can "continue as a going concern." After that warning was issued Bartlett provided the club with a £4m loan in January. That brought him and his companies about even, in money in and out since he took over at Hull. It is all rather different from the impression created when he took over from Pearson – now back at Hull to sort the club out – that Bartlett was the wealthy backer who would provide the investment to launch the Tigers into the big time.
www.guardian.co.uk/football/david-conn-inside-sport-blog/2010/mar/31/hull-city-russell-bartlett-tigers
Previous Blog home Hull City owner Russell Bartlett trades £4m loan deals with the clubWith auditors issuing a stark warning, the club is paddling to catch up with money already paid out
Ever since Hull City's financial results were published this month the club's predicament has been the focus of bewildered head-scratching by keen watchers of football turmoil. The figures, for the year to 31 July 2009, look distinctly un-Portsmouth-like, even healthy: turnover at £51m, wages £34m, a £1m profit – a decent effort for any Premier League club – and bank debt down to only £4.6m.
Yet the club's auditors, Deloitte, for the second year running slapped an alarming warning all over the accounts. City face a severe financial shortfall, they said: £16m even if they stay in the Premier League and, a much more severe prospect, £21m if they go down. "These matters represent a material uncertainty that may cast significant doubt over the [club's] ability to continue as a going concern," was Deloitte's stark judgment.
The key to the conundrum, between apparently flourishing finances and a forecast of doom, can be extracted from a headache-inducing scrutiny of the accounts, across four separate companies which now control Hull City and the KC Stadium.
Contrary to the impression given when Hull won promotion to the Premier League in 2008, the club's new owner, Russell Bartlett, had not invested significant money into the club. In fact, £4.4m had gone out of the club and stadium company to Bartlett's holding companies in loans, at least £2.9m of it towards helping him buy the club in the first place. A further £560,000 was paid by the stadium company to Bartlett's holding companies in management fees and at least £1m was owed to him personally as a salary.
During that year, in fact until January this year, Bartlett had loaned only £1m in return, to the KC Stadium company from his own property company, R3 Investment Group. Then, following the first warning given by Deloitte in the 2007-08 accounts, Bartlett redressed the balance in January this year, lending the club a further £4m.
After City won promotion and tore tigerishly into Premier League life the former chairman, Paul Duffen, told the Guardian that Bartlett had "provided the funding" to get the Tigers up. That was taken to mean that Bartlett was a wealthy new backer who, after buying City from Adam Pearson and Pearson's financial backer Peter Wilkinson, had ploughed investment into the club.
However, a close reading of the accounts for the club itself, the KC Stadium management company, and a holding company for each which Bartlett set up, establishes that he had not. The club financed a £7m increase to the wage bill in the Championship by making a £10m loss that season. Overall nearly £5m left the club to Bartlett and his companies, in two loan payments totalling £4.4m, and £560,000 in management fees.
Bartlett, who runs his property investments from offices in Shenfield, Essex, bought City from Pearson and Wilkinson in 2007 for a sum reported to be £13m. They had steered the club from administration and League Two to the Championship and a new stadium and were looking to sell at a profit and find a buyer who would provide new investment. There was then no debt on the club or the stadium, which City lease ultimately from the local authority, who built it with £43.5m of public money.
After Bartlett took over, the holding company he formed to buy Pearson and Wilkinson out of the stadium lease borrowed £3.4m from the Royal Bank of Scotland to do so. The stadium lease was mortgaged to RBS, Bartlett personally guaranteeing the loan. The football club themselves, still in the Championship, immediately paid out £3.2m as a loan to Bartlett's other holding company, Tiger Holdings Limited.
Bartlett's group company accountant, Andrew Redman, confirmed this week on Bartlett's behalf that City paid that money out to help Bartlett meet his instalments to Pearson and Wilkinson. "£2.9m of the £3.2m paid by Hull City AFC to Tiger Holdings Limited formed part of the purchase consideration due to the previous owner," Redman said.
That means the club's own money, from fans buying tickets, and TV and sponsorship income, was loaned out for Bartlett's use, to pay for him to buy the club in the first place. The KC Stadium management company, which makes its money from rent paid by the club, also loaned a further £1.2m to the stadium holding company, described in the 2007-08 accounts as "financial assistance".
So £4.4m went out of Hull City and the KC Stadium company during the season to Bartlett's companies in loans, but Redman did not explain what that £1.2m payment was for. The stadium holding company's 2007-08 accounts also stated that it owed £1m to Bartlett personally. That, Redman explained, was Bartlett's salary, saying: "There are no payments from the companies to RD Bartlett other than salary." The club's more recent accounts, for the year to 31 July 2009, record the highest paid director receiving a £1.035m package. Redman would not confirm whether that director was Bartlett. "Salary information is confidential," he said.
In 2007-08 Bartlett's company, R3 Investment Group, loaned £1m to the KC Stadium company, meaning that around £4m more had gone out of the club since Bartlett took over than he had put in.
After promotion had warmed hearts in an English game glazing over with billionaires, Hull borrowed £22m from a bank, Investec, to finance the signings Bartlett and Duffen wanted to have a go at keeping the club up. Investec took a mortgage on the TV money Hull were due to receive, and personal guarantees from Bartlett.
Here lies the reason why Deloitte slapped their warning over the club's very future: Hull arrived in the Premier League having made a £10m loss in the Championship and having paid out millions to Bartlett's companies. They then increased the wage bill by almost £20m, to £33.6m. The more recent accounts, to 31 July 2009, show borrowings down to £15m, suggesting that Investec reduced its loan by £7m.
So Hull are committed to paying Premier League wages but paddling continually to catch up with money already paid out. Although the debt is now down to £4.6m, with another £7m due to be borrowed, it has to be repaid in August and the wage bill must still be met.
Hence Deloitte's warning that particularly if the club is relegated to the sparser TV climes of the Championship, it must find £21m extra to meet its liabilities, a "material uncertainty" about whether the club can "continue as a going concern." After that warning was issued Bartlett provided the club with a £4m loan in January. That brought him and his companies about even, in money in and out since he took over at Hull. It is all rather different from the impression created when he took over from Pearson – now back at Hull to sort the club out – that Bartlett was the wealthy backer who would provide the investment to launch the Tigers into the big time.
www.guardian.co.uk/football/david-conn-inside-sport-blog/2010/mar/31/hull-city-russell-bartlett-tigers
