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leeds united accounts reveal £9.5m loss & £15m debt to gfh

leeds united accounts reveal £9.5m loss & £15m debt to gfh


It’s time again for an annual event almost as exciting as the release of new fixtures: the release of Leeds United’s accounts.

There is additional scrutiny this year as it seems that only the purchase of the club by Massimo Cellino has prevented Leeds United from succumbing to administration for the second time in a decade.

The search for evidence of that in the twenty page document published at Companies House today is not definitive, as these accounts only take the club up to the end of June 2013; nine increasingly chaotic months have passed since then.

But the signs are there of what was to come. Payments to directors were up, including a £440k bonus to one; administrative expenses were up; and a new amount of £15,235,000 was owed to “related parties” – in other words, to Gulf Finance House.

The ‘Review of Business Activities’ sets the scene. Describing summer 2012 as “the biggest squad overhaul in almost a decade,” it takes us from that false start under Neil Warnock to the heady rush of Brian McDermott’s appointment: “Three wins from the final five games proved enough to secure our safety, and the season ended on a high note with a 2–1 win at promotion chasing Watford.”

The report highlights the changes off the field, too. “There was a change in ownership in December when Dubai-based GFH Capital completed a successful takeover of the club. The new owners made an immediate impact in re-engaging with the supporter-base, via both improved communication, and ticket offers and incentives.”

The impact of the last six months of Ken Bates and the first six months of GFH then follows: “The loss for the year after taxation was £9,552,000 (2012: £317,000 profit) for the company.” The overall loss for the year before tax and player transfers are taken into account was £11.6m; in 2012 that amount was £3.3m.

The summarised performance indicators provide some background to how the club turned a £300k profit into a £9.5m loss in twelve months. Turnover decreased from £31m to £28.6m, “partly attributable to the agreement with Compass Contract Services (UK) Ltd which commenced during the year” – the outsourcing of the club’s catering that was one of Bates’ final manoeuvres. Merchandising income was down from £6.75m to £5.9m, while undisclosed “Adminstrative Expenses” were up, increasing 15% from £28.8m to £33.3m.

The Warnock factor also played its part, with a 7.7% decrease in average home attendances equating to a decrease in gate receipts from £11.3m to £9.7m; TV income was up from £696k to £825k – sorry you had to see that, watching public. Some of Warnock’s team building strategies are also evident in the details; future payments of £2.26m “May be payable dependent on the club’s promotion to the FA Premier League and/or players appearances for the club”; up from £1.14m the year before. The promotion bonus total also increased from £3.1m to £5m, although that seems fairly academic at the moment. £100,000 was paid to the El Hadji Diouf Help Fund, “a charity based in Senegal … [that] provides assistance to disadvantaged children in both Senegal and the United Kingdom.”

The wage bill had an important impact on the bottom line, although the largest increase was off the pitch. Overall wages, salaries and employee costs were up from £17.8m to £20m; but payments to directors increased from £312,000 to £753,938.

The make up of the board shifted significantly during the year, with resignations of Yvonne Allen, Ken Bates, Shaun Harvey and Peter Lorimer, and appointments of David Haigh, Salem Patel, Salah Nooruddin, and Hisham Alrayes, who resigned after this accounting period in September 2013.

The highest paid director in the period – who is not named, so you’re free to guess – took home a salary of £265,449, and “accrued a bonus of £440,000” during the year, of which £220,000 had been paid and £220,000 was still owed at 30th June.

On top of the decreased turnover and increased wages, the presence of several large loans looms in the document. On the 20th June 2013 a “fixed and floating charge was registered in favour of Brendale Holdings Limited … a company owned by GFH Capital Limited.” At 30th June 2013 the amount owed to Brendale was £11,272,399, and the accounts for parent company Leeds City Holdings state that this amount “contributes to the £15,235,000 in Amounts due to related parties.”

That wasn’t the last of the loans from GFH subsidiaries; after the accounting year end on 15th October 2013, “a fixed and floating charge was registered in favour of Berrydale Seventh Sport Holdings Limited … a company owned by GFH Capital Limited.” The amount advanced in this case was £2,012,807.

These were followed by “amounts” from David Haigh’s Sport Capital Limited at the start of this winter’s takeover process: £950k and £825k were “received by Leeds City Holdings” on 21st and 28th November 2013, and “subsequently loaned to Leeds United Football Club Limited.”

The balance sheet shows the club paid £1.24m in interest during the year, which increases the losses to £11.4m; the note referring to the £1.5m loan received and since repaid to Enterprise Insurance gives a 7% fixed rate of interest.

The notes also reveal the changing shape of the club’s ownership over the year; the ultimate controlling party became GFH on 20th December 2012, and “between March 2013 and 30th June 2013 Gulf Finance House sold more than 50% of their interest to various parties and so at the balance sheet date there was no controlling party.” The YEP’s Phil Hay has tweeted this morning that it seems unlikely that the Football League knew about this situation.

The notes add that, “On the 31st December 2013 Gulf Finance House BSC repurchased a number of the shares it had previously sold so that it then held an 85% share holding and once again became the ultimate controlling party.”

That repurchase was, of course, in advance of selling the club on again. The Director’s Report in the club accounts outlines ‘Future Developments’: “The club’s priority remains the pursuit of promotion to the top flight of English Football, The Premier League at which stage the infrastructure that has carefully been put in place at the club will deliver maximum benefit and the resources to remain in that division thereafter. The opportunity to purchase the freehold of Elland Road remains in place until November 2025 and remains the major priority after achieving promotion. The board will continue to seek suitable investors for the club with long term and sustainable regeneration of the club being a key focus.”

The final note to the accounts presents a different plan: “On the 6th February 2014 a company named Eleonora Sport Limited … entered into a share purchase agreement with the shareholders of LUFC Holding Limited to acquire 75% of the ordinary share capital…”

The state of the business that Eleonora Sport have bought isn’t clear from these accounts; GFH have had a further nine months of running Leeds United since June 2013 that isn’t written down here. But the trends are clear; as are the demands that will be made on Massimo Cellino’s bank account. “As of 30th June 2013 … the group had net current liabilities of £22,920,000 (2012: £8,559,000 liabilities).”

In a year GFH had managed to increase the debt by £14m-£15m; all owed to GFH. Cellino may have described them yesterday as a “ghost bank from Saudia Arabia,” but that money will have to be repaid – with interest – as well as any additional debts accrued in the meantime, and all on top of the price paid to GFH to buy 75% of the club.

Massimo Cellino seems like a shrewd character, and Leeds fans will certainly be hoping he is; but the benefit to Gulf Finance House will have to be dealt with before there can be much benefit from his takeover for Leeds United.

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