On the back of the news that Portsmouth has a transfer ban, comes news that Hull’s accountants have raised concerns over the club’s “ability to continue as a going concern” should they be relegated from the Premier League.
The latest Hull report covers the year ending 31 July 2008, when Hull made a loss of nearly £10million as they won promotion to the Premier League via the play-offs. While Hull’s directors remain confident that the numbers will be better after a full season of Premier League revenue, Deloitte is not so sure.
The auditors report read:
“These forecasts demonstrate that in order to operate within the company’s finance facilities Hull City AFC will need to generate a surplus £23million during the next 12 months through player trading, match day and commercial income and/or through additional finance raising. In the event that the club retain Premier League status for the 2010-11 season, the additional funding required for the 12 month period will be in the region of £16million. This is reduced as a result of the guaranteed level of Premier League distributions that will be received. As is common with all football clubs, Hull City AFC will make player purchases and sales during the course of the season to manage the company’s cash flow as and when required. The directors acknowledge that player purchases and sales are uncertain in terms of timing and quantum and some uncertainty exists over the availability and quantum of additional facilities should such 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.”
Hull, though, remain confident once the additional revenue from their first Premier League campaign is factored in – worth an estimated minimum of some £40million – then the results for 2008-09 will be more positive. The directors’ statement concluded:
“The financial benefits arising from the Premier League’s broadcasting rights are not recognised until the following financial year, where the losses incurred this year are forecast to be made good. The club are currently in advanced discussions with finance providers for the acceleration of known Premier League distributions for amounts of £7million. These discussions are expected to be concluded in the near future and would reduce the surplus finds required by £7million. The directors have a reasonable expectation that the company have adequate resources to continue in operational existence for the foreseeable future.”
So if I read these comments right, Deloitte says that Hull needs to generate an additional £16million over the next 12 months, if it avoids relegation, £23million if they get relegated. The Hull directors response is that we will get £7million from the Premier League, which decreases the requirements to between £9million and £18million.
Lets assume that Phil Brown is able to somehow keep Hull it for another season. They will still need to raise another £7million in revenue, and the only way to do that is to sell two or three or their best players, which will make survival in the Premier League even harder.