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BWFC: Spending An Object Or The Object Of Spending




The Jordan Rhodes thing- whatever that was- now looks dead in the proverbial water. Whether it was ever alive will be open to debate amongst Whites` and Rovers` fans. But what interested me and should garner interest from the Wanderers` faithful was the £9 million figure being banded about. Of course, no offer of £9 million was ever executed from the Reebok fund but neither was the availability of such an amount debunked from our manager. Dougie did say he would never put the finances of Bolton Wanderers in jeopardy, but how much of that sentiment surrounds the actual fiscal facts of Wanderers` balance sheets and how much revolves around the Financial Fair Play regulations which kick-in this year, only he knows.
What we do all know- or think we know- is the financial situation of Bolton Wanderers Football Club, don`t we?

The Whites` parent company, Burnden Leisure PLC owes Bolton Wanderers owner, Eddie Davies` investment company, Moonshift Investment LTD, £126+ million… Or something like that. To me, it just looks like a whole bunch of borrowing off Peter to pay Paul.
Just like any investment- even though Eddie owns the club- interest is paid to Davies on the £120+ million. However you look at the situation, an interest-income on £126+ million is a nice little earner. Unless something drastic happens, you would expect Davies to be quite happy sitting on his investment- or even adding to it- and letting it gain interest for as long as possible. Even if he did lose his economic faculties overnight, there`s a 10 year pact in place to repay Davies in full.
Also interesting is the amount of 'money` the new sports development is costing… Exactly around the amount Burnden Leisure PLC owes Moonshift Investment LTD. Is there some re-financing or financial massaging going on here? Whatever, Bolton Wanderers` finances are nowhere near as bad as they seem on paper.

Having said all that, surely the signing of Jordan Rhodes, or a player of similar value, would fly in the face of UEFA`s Financial Fair Play policy, right? Especially for a Championship side who makes a loss every year? Well, maybe not.

The signing of a player of Rhodes` value, you would expect a negative £8, 000,000 on the balance sheet for that financial year. But it doesn`t work that way.
When judging whether a team has made a profit or loss for the season, transfer fees are spread out over the duration of the contract. So if Rhodes signs for around £8m on a 4-year deal, it would be accounted for as an expense of £2m a season (£8m ÷ 4 = £2m) each season. If Rhodes is then sold on, any profit or loss on selling the player is determined by comparing their sale price to their 'Book Value'. So, if Rhodes signed this summer, being only 23 years of age and his form continued at this high level, his sale price you would expect to appreciate each season until the age of 28 years of age- it`s already increased 2 million since joining Rovers last season. Hypothetically, if Rhodes stayed with us 2 of his 4 years, his 'Book Value` would be around £12 million, which would show on the assets side of the balance sheet, thus making a 'profit` for the club that financial year. Hence, the £8 million paid for Rhodes would eventually start showing a profit!
Put into context and still hypothetically speaking, if Bolton sign Jordan Rhodes and Jermaine Beckford this summer and the figures are as follows: Rhodes costs £8,000,000 with £20,000 per week wages and Beckford costs £1,000,000 on £40,000 per week wages, they would both equate to around £3,000,000 loss for that financial year. £2m transfer and £1m wages for Rhodes and £1m transfer and £2m wages for Beckford. But- and it`s a big but- Rhodes` 'Book Value` would increase whereas Beckford`s would continue to decline, making Rhodes the financially smarter move. Unbelievable, I know, but that`s the financial world we live in.

The term, 'football is a business`, especially when you look at the financial side of things, never seems more real. Footballers now more than ever- with UEFA`s FFP regulations- are commodities to be floated around the stock exchange. A business is only as good as it`s product, so next time you hear a ridiculous financially sounding transfer story linked to Bolton Wanderers, ask yourself: Is money an object in signing the player or should the object be to spend to accumulate? Rhodes isn`t the only player whose stock is on the rise due to age and ability. A few names spring to mind… Cough, cough, wink, wink… But like what happens when spending money, I don`t want to get too carried away.


The Journalist

Writer: Mr Ecky: bwfc_85 Mail feedback, articles or suggestions

Date:Saturday July 6 2013

Time: 1:42PM

Your Comments

annual losses mean you pay no tax, end of story, that's the bottom line, the club deals in millions, most handed to it by Sky yet the aim is to minimise the tax bills for the company, owner and directors alike. Issues surrounding appreciation or depreciation are all linked with the same issue, the real question is do we have cash in the bank to fund transfers, we have little or none so it comes down to borrowing more money and then servicing the debt. Personally I think we are near broke and club finances will only get worse, we are trawling the market for cheap deals, akin to car boot sales, the complete opposite of how things stood 3 years ago. In 12 years the club have blown near £500 million, lots of people have grown rich on the back of BWFC, unlike the club itself and the supporters. Its a bloody disgrace given the money handed to the club, that we have created a mountain of debt that can never be repaid, unless you belief in fairies. If you look at the list of incoming players in the column to your right not one of them would have been viewed good enough to interest this club 12 months ago, that alone together with tales of how we are desperately trying to cut the wage bill tells you how far this club has fallen and we haven't hit the bottom yet by a long way, its a mess.
aussie mike
Rhodes could turn rubbish and then no one wants him though. This is an crazy article though.
Muur
pre season is a difficult time for this column - how do you keep interest afloat ?everything discussed about players and the management is largely immaterial or hypothetical at best. I would like to see the opportunity taken to write about more obscure facts concerning the club, possibly stories on members of staff behind the scenes who would normally never get a mention, grounds men, the tea ladies, how the floodlights work, the refreshment facilities, the toilets, the good and bad points at the stadium, transport services, the efforts taken by the club and players to support local charities - are we doing more or less on these fronts ? there must be lots of interesting stories and facts in the mix waiting to be highlighted.
aussie mike
Good call mike. Whether the club will accommodate is another matter, but they should. I would love to see a series of interviews with the likes of PG and DF and the players. Maybe they could answer some of the questions and criticisms people have.
Boltongav
What about a 'my match day' feature? Those who wish to could write a short outline of their usual match day routine. Is Mr Ecky carried aloft into the stadium each week and fed grapes whilst receiving a foot massage from the physio's? Is mike escorted to and from the ground to ensure the safety of PG's tyres? These questions and more could be answered.
Boltongav
What about a 'my match day' feature? Those who wish to could write a short outline of their usual match day routine. Is Mr Ecky carried aloft into the stadium each week and fed grapes whilst receiving a foot massage from the physio's? Is mike escorted to and from the ground to ensure the safety of PG's tyres? These questions and more could be answered.
Boltongav
Mike, I think you're right, there are some interesting stories in the subjects you highlighted. I look forward to reading your article.
bwfc_85
We're still second favourite (behind Swansea) to sign Rhodes, it seems. As far as I'm aware, the way player amortisation works is that the book value (i.e. transfer fee) depreciates over the course of a contract. So signing an £8m player on a four year contract means his book value will, in consecutive seasons, be £8m, £6m, £4m, £2m and at the end of his contract will be £0. A player who signs without commanding a transfer fee has no asset value to depreciate. A player who signs a new contract will have zero book value once the old contract expires. That's why you see this in BWFC's financial results: "At the balance sheet date, an amount of £19,038,000 (2011: £18,851,000) is carried forward in intangible fixed assets, representing the unamortised cost of players’ registrations. The directors estimate the current value of the playing squad to be approximately £49,750,000 (2011: £61,500,000)." So in FFPR terms, Rhodes would certainly be a cost that would need to be covered.
robmoss2k
You're right, Rob. I should have wrote IF we sold Rhodes, minus the amortisation, would then show a profit. Probably the reason why Coyle acted like a used-car salesman to get the best price for our greatest assets. Check out Arsenal's team value and how their team value has increased for year 2013. That's how you run a successful football club...
bwfc_85
Ah, I get you. Absolutely right.
robmoss2k
 

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