The Finances at Hereford United

It is often very difficult to access the up-to-date finances of almost any company. Usually by the time a company publishes its 'latest' figures several months have elapsed.

And Hereford United is no different.

Their latest published figures are for the year ending May 31st 2009, some ten and a half months ago.

However with both chairman Graham Turner and vice-chairman Joan Fennessy deciding to test the market with their shares, it's opportune to have a look at the current state of the financial affairs at Edgar Street.

As at May 31st 2009 taking into account the £1m plus owed to Formsole (Richardsons), the assets were less than the creditors. The total equity shareholders deficit was £159,863.

During the past ten and a half months it is thought that this deficit will have increased by perhaps around £100,000.

The reasoning behind that view is that it is thought the club has traded at a loss this season. However that loss would have been a lot higher without the sale of Toumani Diagouraga to Peterborough. Whilst no figure has been published for the fee, £200,000 may not be far out. There was £131,587 transfer income in last year's accounts.

On the minus side both the recession and the performance of the team have taken its toll on gate receipts.

The average gate to date at Edgar Street is 2105. That is some 36% down from last years 3270. Very roughly that equates to around £200,000 less income (we have made an allowance for season ticket sales not dropping by anywhere near as much as 36%).

Players wages should have dropped slightly this season perhaps by 10% so there is a saving of around £100,000, however other costs are likely to have stayed much as in the previous year.

The last main item is football league income which will have dropped as League Two clubs receive less than League One clubs. We believe this drop to be around £100,000, maybe slightly more.

Summing up:
Transfer Income up by £70,000.
Wages costs down by £100,000.
Gate income down by £200,000
Football League Income down by £100,000.

Last season the club made £26,899. On our figures the club will lose about £100,000 this season. If anywhere near correct it will mean that the deficit at Edgar Street will have risen from £159,863 to about £260,000.

Moving forward, Graham Turner has revealed that the club will receive about 63% of the cost of the Blackfriars End which is estimated to be costing just over £1M.

In effect the club will need to find about £400,000 as its contribution to the stand.

So, assuming the club doesn't lose any more money, once the stand is paid for the balance sheet debt will be around £660,000.

However what is not clear is when the £1M debt to the Richardsons will fall off the balance sheet. It looks quite possible that it might not happen until after the Meadow End is re-developed, and that, as Graham Turner has said, could be four or five years away. And as yet there is little or any money in the coffers to pay for it.

Recently in his Chairman's report Turner was optimistic about the future.

"To sum up, the club is capable of trading profitably; a new long term lease will provide security of tenure, the debt to the Richardsons settles, two new stands and new income streams leads the Board of Directors to believe that the club will be in great shape to progress on and off the field and that the long term future of the club looks very bright."

On that basis it might be a good time to sell shares. But anyone looking to purchase will no doubt want a look at the books. For example he or she would need to find out how much Turner and Fennessey have been paid. Was there a pay-out when John Trewick left? What are the exact terms of the deal with the Richardsons? How much are the new income streams worth? Are the Council putting the rent up with the new lease?

A period of due diligence could mean that any sale could take a while.

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