Monday, 30 April 2012

Franchise finance - year ended April 2011

It's that time of year again, when we see how the Franchise experiment is doing on the financial front. The accounts for the year ended April 2011 are available at Companies House and they make for predictable reading. So, let's not beat around the bush, headline statistics:

Turnover - £5.63m, down from £6.26m in 2010
Operating loss - £1.98m, up from £1.44m in 2010
Loss for the year (after player sales) - £1.69m, up from £0.94m in 2010
Creditors amounts due within one year - £11.04m, up from £10.04m in 2010
Shareholders' deficit - £9.70m, up from £8.01m in 2010

Now, one can do an awful lot of analysis on the figures, plus work in the relevance of the numbers for the parent property company (Inter MK), but the simple message is clear - Franchise continues to trade at a yearly operating loss of £2m per year. Those losses have to be covered by player sales or outside 'investment' from the parent company. There is absolutely no indication that the football club itself has made any progress at all in becoming financially viable. 10 years on from permission to move to MK being granted, Franchise trades at a huge loss, has accrued large debt and, without the guarantee of funds from the parent company through a bank loan, would be insolvent. These are the cold, hard facts of the matter and no amount of dressing them up will change them.

Why haven't they gone bust yet?
Franchise has become, out of necessity, a selling club. Ironically, if they want to stay alive they will have to do exactly what Wimbledon did to balance the books - nurture young talent and flog it off at a big profit. After the 2010-11 financial year closed, Franchise sold a striker to West Ham for an undisclosed fee thought to be over £2m and a 14-year-old youth player went to Liverpool for a fee suggested to be more than £1m. Those sales will register in the 2011-12 accounts, but virtually none of those funds was re-used in buying players, and for a very good reason. Amongst the notes accompanying the accounts is an updated explanation of why the accountants consider the club to still be a 'going concern' and not insolvent. The note reads thus:

"The Inter MK Group Limited ("the Group") is currently undertaking a significant development project of the plot of land known as "Site A", having completed the sale of the site in November 2011 to Crown Estates. Under the terms of the agreement, the Group will develop a new retail scheme and will be required to complete further works on the stadium site including adding a further 8,000 seats."

"The Group is financed by bank debt, including a £5m term loan which is due for repayment in July 2012. The prevailing market conditions delayed the completion of the above transaction by several months and as a result, the timing of the release of funds from the development of Site A are also delayed. The Group are currently in discussions with its existing bank lenders to renegotiate/extend the period over which the £5m term loan is due for repayment. The absence of a formalised agreement to reschedule the Group's borrowings represents a material uncertainty when considering the Group as a going concern, however based on current discussions with the banks, the directors are confident on concluding a new agreement with the banks prior to the term loan becoming repayable in July."

"Taking account of all of the above, the directors have prepared a forecast through to 30 June 2013 with the Group continuing as a going concern having successfully renegotiated the bank borrowings. Accordingly, the directors continue to adopt the going concern basis of preparation."

Heavy going, I know, but worth quoting because it demonstrates just how precarious a position not only the football club is in, but the parent company as well.

This also explains where the money from the two transfers is going - to pay off the bank loan.

Presuming Inter MK was able to restructure the bank loan (again! It already did that once at the back end of 2010), it keeps the football club going, but, as before, that is only on the basis that Inter MK continues to cover the huge losses the club is continuing to incur.

One thing to keep an eye on though is that the bank loan is with Clydesdale and only today we have this news:

Will the Clydesdale's retrenchment further affect Inter MK and thereby Franchise? Have to wait and see on that one, but I can't imagine they are keen to loan yet more money to a struggling football club that shows no signs of being able to balance its books except by selling off 14-year-olds!

There's more analysis to be done here and I'll return to the subject soon, but the bottom line for Franchise FC is as stark as ever - the numbers say the football club is still losing huge amounts of money. I don't think most Franchise customers realise just quite how much trouble the club is in and that it's currently surviving by the skin of its teeth. All it's going to take is one big financial hit and Winkelman simply won't have the resources to maintain a loss-making football club. It's at this point we should be hoping Winkelman HAS fallen in love with football and the club, because that way he might go down with it. There are only so many "Sites" on the land for him to sell off and only a fool would keep throwing that money into a failing football club, right?

Tuesday, 24 April 2012

Not very Bright

We are little more than four weeks away from the tenth anniversary of the FA Commission verdict that killed off Wimbledon FC, and the BBC's Late Kick Off show has provided yet another reminder of why Franchise FC should mark the anniversary by dropping Wimbledon's nickname from its team name. Speaking about Barnet's forthcoming fixture with Wimbledon, presenter Mark 'NV' Bright twice refers to 'MK Dons' instead of Wimbledon, even after being corrected by his co-host. ( Presuming it wasn't a deliberate wind-up - which really would have been stupid for a professional broadcaster - it demonstrates the continuing problems caused by Franchise FC using Wimbledon's nicked-name.

In this instance, I dare say the less smart among the Franchise customers are revelling in 'NV' Bright's mistake, but just as often the mistake gets made in the opposite direction and has them up in arms about it. The answer is simple - they should drop the 'Dons'. It might take a season for everyone to adapt, but then the matter will be done and dusted, leaving only the occasional fixture-list confrontation to drag up old wounds. The fact that this so obviously makes sense for all but a handful of ex-Wimbledon fans, who bizarrely think Milton Keynes has anything to do with their old club, will not stop the Franchise zealots wanting to continue flaunting Wimbledon's nicked-name around, but that's just the foolishness of bitter people clinging on to the past. Doubtless a few will even claim that blog posts like this one strengthen their resolve to continue denigrating Wimbledon's nickname, but that also reveals the smallmindedness of their position - refusing to do the right thing purely out of spite, the act of a spoiled child. It's time Milton Keynes' football club grew up, it's time it dropped the 'Dons'.