Blackpool FC’s 12/13 accounts reviewed

Following the release of Zabaxe’s accounts last week, it was the turn of the Blackpool FC group of companies to lodge their financials for the 2012/13 season on 28th February. As with the 2011/12 accounts, there is nothing nearly as shocking as the £11m director remuneration awarded to Owen Oyston (via Zabaxe), but the most recent documents still contain a story worth telling.

As with the previous post on Measured Progress, anyone unfamiliar with the way the football club is structured may be best served by reading some of the back catalogue to get a grasp, as many of the topics touched on here will assume some prior knowledge.

Profit & loss analysis

Examining just the P&L account for Blackpool Football Club Limited, as the entity through which most of the revenue and costs are processed, we can see that turnover has fallen from £28.8m to £22m. Helpfully, the club’s accountant has once more provided some form of breakdown to assist the analysis.

While season ticket receipts remained relatively stable with a modest increase of £45,000, gate receipts were down from £2.8m to £1.2m. Poor performance in the cup competitions and failure to match the previous year’s play-off run are cited as primary reasons for this.

Parachute payments also fell to hit turnover; while the first two seasons post-relegation were originally cited as being equal payments of £16m, the actual figures are slightly different. 2011/12 parachute payments were £15.475m while the 2012/13 sum was less at £12.3m. Other falls in revenue were felt in sponsorship, programme sales, bar and food sales and souvenir shop sales, which each decreased between 15% and 30% from the previous year.

From a cost perspective, the football-related wage bill fell from £10.6m to £9.36m, although the directors’ report felt it necessary to comment that this “remained high” – by what definition is unclear; it’s certainly not high in relation to the rest of the Championship with Blackpool being in the bottom third for wages paid to players, so why the need to state it as such?

Away from the playing side, director remuneration was up from £118k to £568k, with the highest paid director taking home £543k in comparison to £65k the year before. The accounts do not state which director took home this salary, but it is believed to be either Owen or Karl Oyston. Given the turmoil the club endured during 2012/13, it seems hard to justify a directory salary in excess of £500k for somewhat questionable club leadership. In contrast, the club spent only £485k on transfer fees. With a pre-tax profit of £5.9m, the BFC Limited was also liable for a corporation tax bill of £1.35m.

Inter-company transactions

The headline when examining the various inter-company loans and transactions is the additional support being given by Blackpool FC Limited to Segesta Limited (the parent company, formerly Blackpool FC Properties Limited). During 2012/13, BFC Limited loaned an additional £8.2m to their parent company taking the total outstanding loan, unsecured and interest-free, to £23.7m.

Segesta itself has in turn increased its support to various companies owned and controlled by Owen Oyston; Oyston Estates Limited, Oystons Limited, Lancashire Magazine Limited, Yorkshire Ridings Magazine Limited, Segesta Properties Limited, Natfarm Limited and Denwis Limited have all either seen the size of their loans from Segesta Limited remain the same or increase. The total debt owed by these companies now stands at £1.2m, up from £923k the previous year.

Whereas the club’s auditor A I Cherry Limited saw fit to only sign off Zabaxe Limited’s accounts on a qualified basis after casting doubt on the recoverability of that company’s loans to these various Oyston-backed entities, it is curious that the same approach has not been made with regards to Segesta Limited’s accounts. Is there anything that makes Segesta’s loans more recoverable than Zabaxe’s?

Elsewhere, the outstanding debts that Segesta owe to the Belokon family remain at the level from the previous year at £7.27m, with no reduction in their loans to the club. Following yet another year of profits and various loans and payments to Oyston entities, one can only imagine the disappointment felt in Latvia. Sources close to the club suggest that relations between the Oystons and Valeri Belokon continue to be poor.

Blackpool FC Hotel Limited

On top of the loan to Segesta, BFC Limited has also increased the size of its financial assistance to sister company Blackpool FC Hotel Limited. In 2012 the debt stood at £176k and this has now increased to £640k during the 2012/13 financial period. It was only during 2012/13 that the hotel actually commenced trading, with the accounts listing the precise date as 26th July 2012. That means the accounts cover approximately 10 months of trading.

During that period, the hotel company achieved turnover of £859k, so it’s safe to assume this would have topped £1m with a full year’s trading. Cost of sales came in at £415k and administrative expenses £625k. All in all, the hotel made an operating loss of £182k.

Given the low turnover figure, these accounts need to include only basic detail which makes it tricky to really delve into where the turnover has been derived from, specifically the split between normal hotel revenue and any revenue made from the football club for housing players, and what the breakdown of administrative costs is, specifically staff wages. Typically, the bulk of a company’s administrative costs are made up of wages, so at first glance £625k looks particularly high.

Key highlights and conclusions

To repeat some of the key findings in brief:

  • BFC Ltd turnover down from £28.8m to £22m
  • BFC Ltd pre-tax profit down from £16.1m to £5.9m
  • Football-related wages down from £10.6m to £9.36m
  • Highest director paid £543k
  • BFC Ltd loan Segesta Ltd a further £8.2m to take outstanding loan to £23.7m
  • Segesta Ltd loans to Oyston-owned companies increase from £923k to £1.2m
  • BFC Ltd loan BFC Hotel Ltd a further £464k to take outstanding loan to £640k
  • BFC Hotel Ltd makes loss of £182k

Like last year, the financial results paint a concerning picture of a club not maximising its potential. Large sums of money which could be utilised in building a strong club, both in terms of legacy infrastructure and a strong playing squad, appear to be shunned in favour of loans to Oyston entities, high director salaries, large unsecured loans to the parent company and cash hoarding which brings a tax liability on the club.

With Blackpool FC’s current on-pitch predicament, the signs are clear that the current approach is a failing strategy, in the loosest sense of the word ‘strategy’. Relegation back to League One looks a genuine possibility, and for some more pessimistic fans, a near-certainty. It’s time the club called on its significant resources to correct the mistakes of the past few years before it’s too late, and the dream promotion of 2010 loses all significance.