In the second of this two-part look at Blackpool FC’s finances from the financial year ending May 31 2010 we’ll examine more of how the club has conducted its business, and how the influx of Premier League money will impact the club in the future. Last time out we focused on:
- Losses and Negative Net Worth
- Increasing Turnover
- Stadium Development
- Player Wages
- Influx of Premier League Money
- The Future
The group’s total debt has obviously sharply increased from 2008/09 (£15.4m) to 2009/10 (£27.2m), but in order to understand this it is necessary to drill down into the debt in more detail. Creditors are separated into two categories in the accounts – debts due within one year (current liabilities) and debts due after more than one year (long-term liabilities). First we’ll analyse the current liabilities – these are shown below.
An increase in the group’s current liabilities from £10.9m to £19.4m at first seems alarming, but on closer examination isn’t perhaps so bleak, not least because the incoming Premier League money dwarves this figure. Included in the current liabilities is the aforementioned £5m promotion bonus, which while accrued during the 09/10 season was infamously not paid until August 2010, much to the chagrin of the playing staff who got the PFA involved to settle the dispute.
Another Oyston backed company is also owed money by the club – Zabaxe Limited – and the story surrounding this debt is not straightforward either. Zabaxe is owed in the region of £944k, a debt stretching back more than a decade. In 2000 this debt was converted to share capital in Segesta Limited, but in the past financial year this transaction was deemed to be avoided – essentially it has been decided that for whatever reason this should not have been allowed. Therefore the original debt has been reinstated, and the share capital reduced. The accounts state that this debt of £944k was due to be paid in 2010/11.
An increase in trade creditors – other football clubs – due within the next year has also increased by around £800k with the various transfers, which are often paid in installments. The club has also called upon Valeri Belokon’s Baltic International Bank for a loan of £800k at an interest rate of 8%, which was due to be repaid on June 30th 2010. A separate loan for around £500k was received in the financial year from Belokon’s VB Football Assets Ltd, which one would expect was the vital contribution which secured the signing of Charlie Adam. This particular loan has also been repaid since the turn of the financial year, specifically on 2nd December 2010.
Albeit not an external creditor, Blackpool Football Club Limited continues to repay a debt to the parent company Segesta Limited at a rate of £435k per year – the amount receiver from the occupiers of the North and West stands, less a 10% administration fee. As of 31st May 2010, the remaining debt stood at £2.7m. Repaid at the current rate it will be cleared in six years, but whether the influx of Premier League money might see the parent company recoup the debt more quickly remains to be seen.
Looking to the longer term, the chart below shows the group historical long term liabilities.
The bulk of the long term liabilities during 08/09 was comprised of the loan owed to Protoplan, and with that becoming a current liability in 09/10, and now paid of as of September 2010, the long term debt in the 09/10 accounts comes from a different source.
Almost £7.5m is owed to Blackpool’s Latvian investor, in one form or another. Two significant outstanding loans remain – one of £4.75m to Valeri Belokon’s VB Football Assets Limited, and the other a £2.7m loan to Miss Vlada Belokon, the Club President’s daughter. One can only speculate why this personal loan comes from his daughter and not Mr Belokon himself, but it does show the influence the Latvian investment has had on the club. According to the club’s accounts, it is intended that these loans will be repaid from revenue received from the South and South West corner, suggesting that it was indeed Valeri Belokon who put up the money to get the stadium improvements back on track.
A personal loan in the region of £275k is also owed to Owen Oyston, but it is unclear how and when this loan will be repaid. The accounts state that Mr Oyston will not seek repayment in the current financial year, but with money flooding into the club’s coffers following promotion, it wouldn’t necessarily be a surprise to see this debt cleared sooner rather than later – the same might also be said for the loans to the various Belokon-related creditors.
Overall the club’s debts, albeit a little complex, won’t be giving anyone any sleepless nights. The incoming Premier League money ensures that the clubs are in a fine position to meet their debts as they fall due, and if the club wants to loosen its shackles, can even pay them off early. The fabled £90m figure for one season in the Premier League and four years of parachute payments will, if nothing else, mean that the club is virtually debt-free going forward – an achievement not to be underestimated in the current climate. Once the debts to the Oyston and Belokon families are cleared, this would also surely mean that the club can really start to benefit from the various letting units in the stadium, on top of its football income.
Influx of Premier League Money
Returning to football income, the latest set of published accounts paint a story far removed from the current situation Blackpool FC finds itself in. With the prestige of top flight football comes the riches to match, and the levels of turnover the club will achieve this season will be by far the highest in its history. Exact figures are naturally difficult to come by but Blackpool FC appears to have timed promotion at a lucrative moment. Not only is the Premier League in the first year of an improved television deal, parachute payments have also been increased in the worst case scenario of relegation.
The amount of television revenue each club receives is calculated on the following basis:
- 50% – Basic Award
- Each club receives an equal share of half of the television revenue, for both domestic and international rights.
- 25% – Facility Fees
- For each game shown on live TV, clubs are awarded a facility fee. Typically this is a minimum of 10 games for each team (although Blackpool look set to feature in just nine televised fixtures). Naturally, the more often a club features, the larger its share of the payments.
- 25% – Merit Payments
- Clubs receive a payment based on their final league position. Last year the payment for finishing in 20th was around £800k, with a further £800k for each place above that, up to a total of £16m for winning the title.
What the improved deal means in real terms is best considered in light of last year’s television revenue. Last season’s bottom club Portsmouth received a total of £31.8m from its share of the television revenue. This coming season the club finishing in 20th can expect to receive a minimum of around £41m from television rights alone. For a club like Blackpool, who has never before turned over more than £10m from all sources in a single year, this amount is staggering. When other revenue sources such as gate receipts, merchandising and sponsorship are included, it is reasonable to expect that the club will turn over in excess of £50m in its debut Premier League season. Protecting this income by avoiding relegation would naturally be a massive boost, but even in the unfortunate event of returning to the Championship, the financial prospects still aren’t exactly bleak.
The new system for parachute payments ensures a total of £48m over the course of four seasons, assuming promotion back to the top flight is not attained. This is paid in sums of £16m for the first two years, with that figure halving for the remaining two seasons. Averaged out at £12m a season, this still eclipses total revenue from any previous years. With contracts reported to contain clauses that see wages drop upon relegation, from already modest salaries, the club would appear to still be in a healthy position whatever the outcome of this season – in a financial sense at least.
Of course, before we even contemplate Blackpool FC’s financial future beyond the end of this season (whatever division that may be in) there are some obvious events which have taken place after the publication of the accounts being analysed in this article. Off-the-field, the new East Stand is sure to make an impact on the 2010/11 accounts, as is the continued fit-out of the South Stand. On the playing side of things some higher transfer fees are inevitably going to have to be considered. Although meagre by Premier League standards, it’s likely that Blackpool may have spent as much as £5m, although the fees will be accounted for over the length of the players’ contracts. Wages too will have risen considerably, possibly to more than double the previous season’s level – and a potential survival bonus of another £5m will drive this even higher.