Select Car Leasing Stadium, Behind East Stand

2018-19 Accounts Analysis

The accounts for the year ending 30 June 2019 have just been published.  We set our well qualified expert to work on taking a view:

The club has had a very poor year financially making a loss before tax of £30.1m compared to £21m loss in 2018 and £4.7m profit in 2017.  Turnover increased by £3.1m to £21m, the difference being mainly a loan fee for Sone Aluko from Beijing Renhe.

There’s been quite a lot of financial maneuvering on the balance sheet though to accommodate the losses.  The club has net financial liabilities of £36.4m, up by less than £2m.  To achieve this new shares have been issued to the tune of £28m (on top on nearly £16m in 2018) and an increase in borrowings of £6.5m.  Together this covered the cash that was burnt through the day to day operations of the club which amounted to £32.5m. Borrowings for the club now amount to £67.8m which is all owed to the shareholder Dai Yongge via the parent company, Renhe Sports Management Limited (more on them later).

But it is important to note that for Profit & Sustainability rules (commonly known as FFP), the club’s financial performance is based upon the consolidated group accounts of the parent company, Renhe Sports, where the recorded loss is only £11.75m following further asset disposals during the course of the year.

The picture is a little different to last season where the stadium was sold for £26.5m, which offset the day to day cash burn.  This transaction has been ratified by the EFL.  Also last year, new share capital was issued of c. £16m which helped to balance the books for the large outflow on players that season (like Aluko, Ilori, Mannone, Barrow, Bacuna, etc). What we do also need to remember is that after these most recent accounts were drawn up we had a bit of a spending spree in the summer 2019 transfer window, which amounted to £15.2m on players such as Puscas, Joao and, no doubt, some loan fees for the likes of Miazga and Ejaria. A key question for me is just how wise was that spending spree?  But Mr Dai’s ambitions for the club are clear and, in my opinion, commendable.

Unsurprisingly the auditors have stated there is a Material Uncertainty relating to the Going Concern of the club. The directors themselves have concluded “based on cashflow projections prepared by management and through confirmation of continuing support from the group’s main shareholders and creditors, have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future”.

And the club’s owners continue to strive for promotion to the Premier League without jeopardizing the club’s financial position.

From a senior finance professional / season ticket holder.

Full Analysis here: Reading FC – Notes from the accounts – FINAL