Tuesday, 27 April 2010

Accountants report on football future

Hull City have two more games to play in the Premiership but, after losing to Sunderland at home on Saturday, all hope has gone of remaining in the top flight.

At this point the Hull supporters might be forgiven for wishing that the club had, like Portsmouth, already gone into administration. After all, the points deduction that a club suffers on entering an insolvency process does not matter when relegation is certain. Now there is the fear that Hull City will not not be solvent next season in the Championship and, on being forced into administration, will find that the points deduction opens up the drop to League One.

Unusually, Hull City's auditors, Deloittes, have already predicted an equally disastrous financial outcome by issuing a qualified auditors' report on the company's most recent set of accounts. Deloittes could see that even if the club achieved its goal of remaining in the Premiership its debts were unsustainable: if Hull failed to avoid relegation that would only make the situation worse. For many businesses a qualified auditors' report leads directly to insolvency because the company's bankers and other creditors no longer have any reason to believe that there is a future for the enterprise. Football, apparently, somehow finds this less inevitable and even now Hull's chairman, Adam Pearson, believes that the club can avoid administration. This is a remarkable case of double-think because Mr Pearson also knows that the club's bill for players is far too high, writing in a match programme "Just under £6m spent on agents' fees in two years and the deal breakdown and size of agent payments is abhorrent. A wage bill of just under £40m when the club turnover is £50m in the Premier League. These figures, added to the significant transfer fees owed, clearly show that the maths don't add up."

Like Portsmouth, the hope is that the club can sell its better players to bring down its debts and that sale will certainly go ahead. Look at that qualified report, though, and it's clear that Deloittes have anticipated that even after the club replaces its Premiership personnel the accounts will never 'add up'.

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