Trust Reaction To Club's Accounts

The Trust welcomes the fact that the directors of the Club and group took the step of publishing full copies of the financial statements to 31st May 2014. That is a very small step in the right direction

We are, however, deeply concerned by the contents of those published financial statements for Otium Entertainment Group Ltd (OEG) and Sky Blue Sports & Leisure Ltd (SBS&L)

Whilst we understand, and hope, that the 31st May 2014 year end was an unusual year for the club we wonder why, following a new start under OEG, that new company has now been saddled with huge and old debt which has been converted into £60.9m preference shares. Experts in football finance have said those shares are worthless pieces of paper.

Of the £60.9m debt approximately £44m was between CCFC Holdings Ltd and SBS&L and seemingly irrecoverable in the foreseeable future. Surely in that case SBS&L should have taken £44m of the total loss not OEG and then the assets and remaining liabilities of CCFC Holdings transferred to OEG? Surely the Football League would have accepted that because OEG, holder of the golden share, is a separate entity in law, within a group where all members and owners appear to be controlled by SISU. The Football League want a viable club to fulfil its fixtures. How does loading the club with debt or worthless financial instruments help in that?

We understand the legal situation that OEG trading as CCFC has no legal responsibility to repay the £28.5m debt owed by SBS&L to SISU investors. However as the only trading company in the group OEG is the only potential source of funds for repayment of those loans, the remaining loans to ARVO Master Fund and the 9m annual dividend that rolls up each year on the preference shares. The dividend of course cannot be paid until the club has wiped out the 70m reserves deficit and made further profits.

It would seem that these arrangements could make it harder to attract new investors or even new owners. Certainly given that the club can reasonably be expected to make regular losses what is the point of these accounting adjustments? How does it benefit CCFC? Who does it benefit? How does it make CCFC stronger and more viable?

To all intents and purposes the club would seem to be insolvent and shows the biggest deficit in reserves during its once proud history – minus £70m. It would appear that there has been clever but legal use of company law and accountancy rules to produce a situation where an investment of £28.5m has created much more than that in debt within the group. It is difficult to see the way forward for the club in such circumstances.

The directors and owner still put forward the vision of building and owning the club's own stadium. Given the state of the club's finances it is difficult to imagine any way that the Club could finance it. Mr Fisher has now stated it would be an “associated” company that would finance and own the stadium with the club operating it. Does that mean ownership would not even be part of the SBS&L group? Where would that company get its finance (debt) from and how would it repay it or the interest charges? We understand the reasons for separating the stadium asset from the high risk football operation liabilities but there is real no evidence of any stadium over two years after it was first proposed. Indeed even the rough proposed details seem to change on a regular basis and local authorities deny any contact with the club, its owners or agents regarding any possible site or construction. 

The club needs more revenue, it is impossible to argue otherwise. The single biggest effect on that is the product on the pitch. We welcome the appointment of Mr Mowbray however without adequate, proper and sustained investment in the team then once more we will have a manager and team ham strung by the owner’s lack of football vision, clear strategy and ambition for the club.

It is time for a new beginning, one that includes the fans. It is time for the fans to feel part of their club once more. It is time for SISU to sell their interest in CCFC

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