CAST Treasurer Nigel Kleinfeld patiently answers Richard Wiseman's questions about the CAFC 2019/20 accounts:
RW: Right. I have read through all 44 pages. The accounts cover the year ended 30 June 2020 - the season we were relegated to League One. Since then, the club has changed hands and we have a new owner in Thomas Sandgaard. Doesn't that mean that these accounts are irrelevant - no more than a historical document?
NK: It is true that the accounts mainly reflect what supporters already knew or had surmised. However, they include a disclosure that provides information that I was previously unaware of in relation to the deal struck between Roland Duchâtelet and Thomas Sandgaard.
RW: Which is ?
NK: Note 29 to the accounts ("post balance sheet events") relates to events that have taken place since the end of the financial year in question - to 30 June 2020. The note includes the following statement. “As part of the change in ownership of the club, a deed of waiver and release was signed on 25 September 2020 in respect of obligations owed by the club to Staprix NV. The loan owed to Staprix NV of £44,247k (note 17) was waived in consideration for certain fixtures within leasehold improvement assets which were owned by the club as at 25 September 2020 (note 14)”
RW: What does that mean?
NK: It means that the debt of £44,274K, owed directly by Charlton Athletic Football Company Limited to Staprix NV (Duchâtelet) is now waived and released (no longer payable) so that Charlton Athletic Football Company Limited no longer directly owes this vast sum. Of course, it does not take away the fact that Duchâtelet via his companies still owns The Valley and Sparrows Lane and the separation of these assets from the football operation remains of very deep concern for the future of the club.
RW: Did Duchâtelet get anything in return?
NK: Yes - but in the main notionally. The post balance sheet events note in the accounts of Charlton Athletic (Holdings) Limited, (the Duchâtelet owned company which owns the freeholds) explains it succinctly. “In September 2020, Charlton Athletic Football Company Limited transferred the short-term leasehold assets held by the club to the Company in settlement of an outstanding liability to Staprix NV”. In reality a tidying up exercise to place all property assets under the direct control of Duchâtelet.
RW: What has happened about the rent?
NK: Duchâtelet increased the rent from £188k per annum to £500k per annum on the signing of the deal.
RW: Did I see something about a payment to Duchâtelet if the club reached the Premier League?
NK: Yes. Note 29 continues: “and contingent consideration being payable by the club to Staprix NV if the club is promoted to the Premier League before 25 September 2030”.
RW: So Duchâtelet gets a payment even if promotion to the Premier League happens ten years after he sold the football company. Nice work if you can get it. How much will he get?
NK: Here lies the rub. The accounts of Charlton Athletic Football Company Limited refuse to disclose the detail. Note 29 continues “The details of which have not been disclosed as they are considered to be prejudicial to the arrangements entered into by the club as part of the 25 September 2020 transaction.
NK: Apparently because Charlton Athletic Football Company Limited considers it prejudicial to the deal.
RW: Is that allowed?
NK: In reality, I understand that it is. However, I don't fully understand the thought process in arriving at this non-disclosure. I don't understand why supporters and the world at large knowing the amount Duchatalet will receive if the club were to reach the Premier League is in any way prejudicial to the arrangements entered into by the club as part of the 25 September 2020 transaction. I don't expect that we will ever receive an explanation.
Thomas Sandgaard has been commendably open and honest with supporters across the board so I very much doubt it would bother him if supporters knew.
I speculate that, as ever, it is Duchâtelet who does not want supporters to know. It is interesting to note that Duchâtelet has not filed the accounts of Baton 2010 Limited (The club’s former holding company). He has taken a three- month Covid 19 extension and yet another three-month loophole filing extension by shortening the year end by one day. Hopefully, this is last time supporters will have to deal with his lack of transparency.
RW: Anything else on this?
NK: Yes. One of the fundamental aspects that football supporters want in general from the “Fan-Led Review” is financial transparency. The accounts of football clubs should be supporter-facing and not just “owner and lender” facing. The CAST Board hope that this form of non-disclosure will no longer be possible.
RW: All right. In terms of the season itself it looks like the club made an operating loss of £5.3m even though income increased by £7.5m. Is that correct?
NK: Yes. Income increased largely because central income from the EFL and the Premier League was increased. An extra £2.2m from the EFL for Championship status and £3.8m extra in Premier League "solidarity" payments. Match day income grew by £391k and would have been more but for the fact that the last four games were played behind closed doors. This increase reflects the fact that our average home attendance was just over 18,000 compared to just under 12,000 the previous season.
RW: What about commercial income?
NK: That also increased (by £809k) although some of that is because streaming income appears to have been allocated to commercial income.
RW: So, with all that extra income how did we still manage to make an operating loss of £5.3m?
NK: Don't forget that the operating loss for the previous year was £11.9m so it is an improvement. But there were no overall cost savings with administrative expenses increasing in 2019/20 by £3.2m. The directors have noted the increase is "primarily reflecting the increased cost of player wages in The Championship (£1.7m)". They also note £0.9m of "increases in spending committed to by East Street Investments".
Despite the increase in cost of player wages football finance expert Kieran Maguire reckons that our average weekly player wage (£5k) was one third of the average Championship player wage bill (£15k). That shows what a great effort it was by Lee Bowyer and his staff to manage to take it to the last kick of the season.
RW: Was there anything to offset the £5.3m loss?
NK: Yes. The most significant item was £4.4m "profit on disposal of players". This figure includes the fee received for Anfernee Dijksteel plus contingent payments for Lookman, Gomez, Palmer, Pope and Grant.
RW: So, after taking interest and tax into account we were only £1.5m short of breaking even. If ESI had not thrown money out of the window we might have managed it. Doesn't that prove Duchâtelet’s theory that it is possible to break even in The Championship?
NK: Well, apart from the fact that we can't guarantee to find a Lookman or a Gomez every year, you have overlooked one important thing.
RW: What's that?
NK: We were relegated. Attracting players to compete at top Championship level would inevitably mean that wage costs would increase.
RW: Any other interesting snippets?
NK: The accounts note "since the year end the disposal of players' registrations has generated income of £5.6m" which is hardly a snippet. Some of that will be for Alfie Doughty but some other add-ons must have been triggered as well. We have also spent £1.4m on transfers, termination agreements and agents' fees since the year end.
RW: What about those Range Rovers?
NK: The club spent more on them than players under ESI. Thankfully, "Subsequent to the year end the club terminated hire purchase agreements for six vehicles. The total amount paid via settlement agreements was £261k"
RW: What about Thomas Sandgaard putting money in?
NK: Indeed. The post balance sheet events note include the fact that "On 28th September 2020 Clear Ocean Capital Ltd provided the club with a loan for £10.5m. The loan is interest free, unsecured and is repayable on 28th September 2025 with the option for early repayments to be made by the club but not required"
We must not forget that the balance sheet shows that Charlton Athletic Football Company Limited was £23.3m in deficit at 30 June 2020. It is probable that under ESI 2 the deficit increased before Thomas Sandgaard took over on 24 September 2020.
RW: So, a return to friendly debt?
NK: True. And it is likely to have to increase to compete as a top Championship level club which can aspire to the Premier League.
RW: Well, this time a year ago we were counting down to possible expulsion or liquidation. I for one am pleased we can at last look forward to arguing about the football without always worrying about what is happening off the field. See you on August 7th............
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