Background
St Patricks Athletic FC are run through a company called Newtonheath Company Limited (189439) which was set up in May'92. This company was created in 1992 as the previous entity running St Pats had gone bankrupt. In July 2007 Newtonheath was purchased by Mancar Limited (403848) and this company is ultimately owned and controlled by Garrett Kelleher. With Liam Buckley managing the club since 2012 and Kelleher owning it since 2007 the club has been very stable over that time as a lot of other clubs have had financial difficulties post the 2008 financial crash. Under Kelleher/Buckley Pats won the league in 2013, the FAI Cup 2014 and the League Cup in 2015 & 2016.
Profit & Loss Account
On first view of the company P&L it would indicate that St Pats are making a small annual profit. Over the 3 years the total profit was €52k (2017 €9k, 2016 €11k & 2015 €32k).
However when you read through the accounts you can see that the parent company, Mancar Limited, are writing off some of the debt that Newtonheath owe it each year to in affect balance the books. This has significantly distorted the P&L and when you add this loan forgiveness back you can see that St Pats actually lost (€1.35m) from football activities in the last 3 years. This would compare with circa (€700k) lost by Derry City in the same period although I suspect the Derry figure would be higher again except for the Development Committee monies.
In both 2015 and 2016 Pats were in the Europa League following a 3rd place finish in 2014 and the FAI cup win and a 4th place finish in 2015. In 2016 Pats finished 7th and in 2017 Pats finished 8th in the league. Europa League solidarity payments are vital to the sustainability of any Irish team and in 2015 Pats earned €200k for losing in round 1 and in 2016 Pats earned €440k after losing in round 2. However even with these monies ex the Europa League in both financial years Pats lost in excess of (€300k). You can then see the impact of having no European football in 2017 with the loss close to (€700K) for a full year.
The Pat's P&L is a very good example that even with European football and even winning a round, the model is not sustainable without a large amount of support from a benefactor. The Derry P&L in the previous blog post showed the same.
Balance Sheet
The Newtonheath Ltd balance sheet is one of the more interesting in the league as this company owns the ground it plays in. At the end of Nov'17 Pats had a balance sheet with a deficit of (€3.3m) and accumulated losses to date of (€5.8m).
The principle asset that Pats have on the balance sheet is Richmond Park which is valued at €1.5m. This value is based on historical cost i.e. what it cost plus and investment since. The current value of the site today would depend on its use, as a stadium it would not be worth a lot, especially given the company that owns it is substantially loss making, as a site for other use the land could be worth a lot. In 2007 Jones Lang Lasalle valued the stadium to be worth €33m which led to a court case from a bank that lent to Garrett Kelleher on the strength of this valuation. https://www.independent.ie/irish-news/courts/bank-sues-as-45m-stadium-later-revalued-at-just-1m-29667483.html In today's market depending on what the site was used for who knows.
Pats have current liabilities of (€3.9m) at the end of Nov'17 of which (€3.8m) is owed to its parent company Mancar Limited. Per the accounts, Mancar has agreed not to seek repayment of this loan within the next 12 months and have also agreed to fund the club for the year ahead. This has allowed the auditors to consider the company a going concern. This (€3.8m) debt is after the (€1.4m) debt write off explained earlier which shows at a minimum Mancar has put (5.2m) into the company in the 10 years it has owned it, which is not far off the (€5.8m) of accumulated losses. While Pats debt is very high for a league of Ireland club, it is mostly all owed to its ultimate owner so this is a good scenario to be in. Post the financial crash when a lot of clubs went bust the debts were owed to third parties, this is not the case at Pats.
The other main liability Pats have is a long term liability of (950k) in relation to government grants for the development of Richmond Park. This is a contingent liability and only arises depending on what happens with the site, if it remains a football stadium this will be written off to the P&L over a 15 year basis.
Summary
As with Derry City, St Pats are not a viable club today without the support of Garrett Kelleher. This support has been forthcoming for the last 10 years to the tune of (€5.2m) at a minimum with a commitment from him for this support to continue for at least 12 more months. Pats have had some success in the last 3 years and have received €640k in Europa League Prize money, but even with this money they lost (€1.35m) from ongoing football activities. Even with the investment and losses in 2015-17 Pats have not been able to get back up the table, a 4th, 7th and 8th place finish has been the result in the last 3 years and 2018 won't be much better in terms of league placing. To me this is a good example of a team investing for success/Europe and not being able to get there and running up large losses in doing so. Most clubs cannot afford this model, Pats with Garrett Kelleher can. Also only 4 clubs can benefit from European money and as Pats/Derry have shown even then the monies don't stop the losses. The more clubs that chase Europe and don't get there, the more losses will add up across the league.
No comments:
Post a Comment