Watford claim their former owner Laurence Bassini’s company Watford FC Limited owes the club more than £1.5m but says “there is a possibility” they will not receive that money.
It is claimed Bassini’s Watford FC Limited borrowed £1.61m in the name of the club but the funds were “never directly received” by the Hornets.
In the report and financial statements for Watford Association Football Club Limited (the club) for the year ending June 30, it is claimed the £1.61m consisted of two amounts – a £606,302 repayment of advanced money relating to Danny Graham’s transfer and a £900,000 repayment of advanced receipts relating to the Football League Award.
The financial statements read: “The amounts were borrowed in the name of the club, but the funds were never directly received by the club – the amounts are provided for as potentially being due to the original lender by the club, but are also considered to therefore be owed to the club by the previous owners ultimate holding company, Watford F C Ltd.
“A provision has been entered for the possibility of non-payment of this debt.”
The club’s annual accounts claim Bassini’s Watford FC Limited received £2.13m from WAFCL, with payments “made for and on behalf of the holding company” (Watford FC Limited) totalled £50,814.
There was also a sum of £568,267 which the financial statements describe as the total of “cash amounts” advanced to Bassini by the club for the renovation of the Yellow and Red Lion pub in Vicarage Road for which it claims “no invoices were received”.
Bassini was given ownership of the pub by the Pozzo family following their takeover of the club on June 29, which was the day before the account year ended.
However, the report states: “The actual transfer has not occurred and is under review, but the accounts include a provision for loss on disposal of the Red Lion pub of £464,358, which represents the net book value as at 29 June 2012.”
The document also states WAFCL were charged £242,000 during the financial year by Watford FC Limited for consultancy invoices.
The directors’ report adds that a provision of £269,000 has been made due to a “prior year” income tax and national insurance liability.
Watford made a pre-tax loss of £2.65m for the year ending June 30 according to the accounts.
For the year ending June 30 2011, the club made a £9.65m pre-tax profit but that figure was hugely distorted because of the £13m inter-company debt waiver between the club and the former parent company Watford Leisure PLC, which needed to happen for the secured bond issue to take place in 2010. Without the £13m, WAFCL made a pre-tax loss on ordinary activities of £3.35m for last year’s accounts.
The Hornets once again relied heavily on player sales. The club reportedly raised £6.4m from the disposal of player registrations for the year ending June 30, compared to just £869,000 in the last set of accounts. The majority of this year’s sum was from the sales of Danny Graham and Marvin Sordell.
These sales were crucial as it is claimed Watford made an operating loss of £6.79m – which was £2.74m worse than the previous year.
claimed there was a £1.09m increase in general operating expenses. The accounts include a reduction of £407,000 in other operating income.
The accounts state players’ salaries went up £681,000 to £7.13m and other football-related salaries, such as academy management and scouting, increased by £90,000 to £1.5m.
This resulted in the club saying their wages to revenue ratio increased from 85 per cent to 90 per cent.
The financial statements stated total turnover increased slightly by £189,000 to £11.18m, which was largely due to the FA Cup income and television money from the fourth round tie with Tottenham Hotspur.
The Spurs tie generated £130,000, which contributed to media revenue increasing by £231,000 to £5.42m.
Watford’s non-match day functions reportedly created £142,000 more than last year.
However, reductions of £58,000 in retail income and £36,000 in ‘other’ commercial sponsorships mean commercial revenue as a whole was only up £28,000, it is claimed.
Ticketing overall reportedly decreased by £197,000 as season ticket income fell by £115,000 and match day ticket revenue was down £82,000. Match day corporate sales was up £23,000 and public catering receipts improved by £22,000.
In the Report of the Directors it reiterates the club’s intentions to pay suppliers within 30 days of receiving an invoice. But it adds: “Overall, the ratio expressed in days between the amounts invoiced to the company by its suppliers (excluding transfer fees payable) and the amount owed to its creditors at 30 June 2012 was 64 days.”
Hornets Investment Limited is now the ‘immediate parent company’ of the club and the ‘ultimate parent company’ is Hornets Management S.a.r.l, which is registered in Luxembourg and has Gianpaolo Pozzo as the majority shareholder.
As of June 30, the financial statements say WAFCL owed Hornets Investment Limited £8.38m but the parent company “will not seek repayment of the loan if to do so would jeopardise the club’s ability to continue as a going concern”.
The independent auditors report, which was written by Myers Clark who replaced Chartered Accountants this year, states that as of June 30 2012, the club’s liabilities exceeded its total assets by £3.96m.
It added: “The validity of the going concern basis is dependent on the assumptions underlying the financial projections being accurate, the financial projections being substantially realised and the company’s ability to raise sufficient new capital to the extent it may be required.
“These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.
The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.”
The company’s bank has said they will regularly review the £1m overdraft facility and extensions will be considered.
The accounts state the club’s net debt increased by £292,000 to £9.97m.
Saracens’ rent for playing at Vicarage Road was £630,000 last season, an increase of £67,000 on the previous year.
The club may have to pay £1.7m in additional clauses for players the club have signed in the past but £1.28m of that figure relates to promotion to the Premier League and international appearances.
Since June 30, a number of players have left the club, with Adrian Mariappa, Scott Loach and Martin Taylor being sold. The report states the club are likely to receive £2.42m in net income this financial year as things stand.
Director David Fransen has agreed to change the terms of his loan agreement with the club and will now be paid the remaining £250,000 of his £500,000 loan, which was made in January 2010, on June 29 next year.
- Today, solicitors acting on behalf of Laurence Bassini said the club's former owner had only just seen copies of the final accounts.
They said “an initial consideration of those accounts raise a number of queries” and that Bassini was “surprised” to read Watford Association Football Club Limited believed Watford FC Limited owed the club money.
Bassini also took issue with the accounts statement regarding the “cash amounts advanced” for work on the Yellow and Red Lion pub.
In a letter, the solicitors state: “Our client has instructed his accountants to consider the issue and an approach will be made to the club for amended accounts to be prepared and filed.
“You will appreciate that until this issue has been resolved with the club’s legal and accountancy advisers, our client cannot make any further response to the matters set out in the accounts.”