Company Announcements

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1.         BASIS OF PREPARATION

The principal accounting policies applied in the preparation of these Financial Statements are set out below.  With the exception of the change in accounting treatment for leases following the implementation of IFRS16 (see below), these policies have been consistently applied to financial years 2020 and 2019, presented, for both the Group and the Company.

IFRS 16 Leases

IFRS 16 become effective for accounting periods beginning on or after 1 January 2019. The Group has therefore applied the standard for the first time for the year ended 30 June 2020 using the modified retrospective transitional approach, whereby comparative numbers are not restated. The reclassifications and the adjustments arising from the new leasing rules are recognised in the opening balance sheet on 1 July 2019.

On adoption of IFRS 16, the Group has recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 'Leases'. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as at 1 July 2019. The weighted average incremental borrowing rate applied to the lease liabilities at 1 July 2019 was 3.82%.

The Group had no finance leases in place as at 1 July 2019 and 30 June 2020.

The Group has taken advantage of the following practical expedients upon transition:

·      A single discount rate to be applied to a portfolio of leases with reasonably similar characteristics, being 3.82%;

·      Reliance on its assessment of whether a lease is onerous by applying IAS 37 immediately before the date of initial application;

·      Exclusion of leases whose term ends within 12 months of the date of initial application; and

·      Exclude initial direct costs from the right of use assets at the date of initial application.

Accounting approach

From 1 July 2019, leases have been recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. The lease payments are discounted using the Group's incremental borrowing rate as noted above.

Right-of-use assets are measured at cost comprising the following:

·      the committed lease payments due from date of recognition to the end of the lease term;

·      any other committed payments in relation to the leases including service charges and dilapidation commitments; and

·      an applied discount factor on the above commitments equal to the Group's cost of borrowing as noted above;

1.         BASIS OF PREPARATION (CONTINUED)

On the adoption of IFRS 16 the Group recognised the right-of-use assets and lease liabilities. This table shows the measurement methods adopted on transition:

The following table presents the impact of adopting IFRS 16 on the statement of financial position as at 1 July 2019:

(a)   The right of use assets adjustment reflect those items previously classified as operating leases.

(b)   An onerous lease provision existed at 30 June 2019 relating to 2 retail units. As at 1 July 2019 this was recorded as an impairment against the related assets in line with the practical expedient available under the modified retrospective approach. Note that during the year, a re-assessment of one of the properties resulted in this impairment being reversed and released to the statement of comprehensive income.

1.         BASIS OF PREPARATION (CONTINUED)

(c)   The following table reconciles the minimum lease commitments disclosed in the Group's financial statements for the year end 30 June 2019, to the amount of lease liabilities recognised on 1 July 2019:

The net impact on retained earnings on 1 July 2019 was £nil.

The additions to the 'Land & Buildings' and 'Plant & Vehicles' categories within 'Property, plant & equipment' are shown separately on a separate line on Note 16. The depreciation on the right-of-use assets is included within the total for those categories in Note 16. 

As noted above the Group had no finance leases in place as at 1 July 2019 and therefore no reclassifications took place on transition.

Other considerations

(i) Variable lease payments

Estimation uncertainty arising from variable lease payments

One retail property lease contains variable payment terms that are linked to sales generated from the store. The initial measurement of the lease payment terms are based on the minimum guaranteed payments which are in-substance fixed payments. The variability in lease terms based on sales levels over a certain amount will be recognised in the profit or loss when such conditions are triggered. As such, any decrease in sales would not affect the lease liability. The variable element of this lease is not considered material to the financial statements.

(ii) Extension and termination options

Extension and termination options are included in a number of the property leases. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Company and not by the respective lessor.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). In all leases recognised as at 31 December 2019, the lease end date has been taken as the first available termination date per the lease agreements.

(iii) Leases not recognised under IFRS16

Short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. There is therefore no change in the treatment of these within the consolidated statement of comprehensive income.

1.         BASIS OF PREPARATION (CONTINUED)

Going Concern

As part of the Directors' consideration of the going concern assumption used in preparing the Financial Statements, different scenarios have been analysed for a minimum period of 12 months from the date of approval of the Financial Statements with outlook assumptions used beyond this time frame. The main factors considered were:

•     Current financial stability of the Group and on-going access to funds;

•     Continuing restrictions on trading conditions as a result of Covid-19, primarily the attendance of fans in football stadia;

•     Security of revenue streams;

•     First team football performance and success; and

•     Player transfer market conditions.

The Directors have adopted a prudent approach in the assumptions used in relation to the above, in order to provide additional comfort around the viability of the Group going forward.

At 30 June 2020 the cash net of bank borrowings was £18.2m. In addition, the Group had a net receivables position with respect to player trading payables/receivables. This provides a strong financial base over the short to medium term. At the time of writing the Group has secured season ticket revenues for the financial year ended 30 June 2021, retail outlets are fully operational and performing strongly as a result of the new partnership with Adidas, participation in the Europa League group stages has been secured guaranteeing a minimum level of income, and we have clear visibility over committed labour costs and transfer outgoings.  The Group has established contracts with a number of commercial partners and suppliers providing assurance over future revenues and costs. In addition, the Group has in recent years, achieved significant gains in relation to player trading and manages the movement of players in and out of the team strategically to ensure maximising of value where required while maintaining a squad of appropriate quality to ensure, as far as possible, continued on field success.

The added complexity in forecasting which has been brought on by Covid-19 primarily relates to the attendance of football fans in stadia, however as noted above our assumptions on this matter are considered to be appropriately prudent and do not consider there to be a significant risk in the medium term.

Subsequent to the end of the financial year, the Group agreed an amended and restated £13m RCF with the Co-operative Bank which remains undrawn. This provides additional access to funds in the short to medium term should these be required. The current cash flow forecasts over the period of the going concern review do not show a requirement to utilise this facility.

The Group continues to perform a detailed budgeting process each year which looks ahead four years from the current financial year, and is reviewed and approved by the Board. The Group also re-forecasts each month and this is distributed to the Board. As a consequence, and in conjunction with the additional forecasting and sensitivity analysis which has taken place, the Directors believe that the Company is well placed to manage its business risks successfully despite the continuing uncertain economic outlook.

In consideration of all of the above, the Directors have a reasonable expectation that the Group and Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual Financial Statements.

2.         REVENUE

3.         EXCEPTIONAL OPERATING EXPENSES

The exceptional operating expenses of £1.96m (2019: £1.79m) can be analysed as follows:

The impairment of intangible assets relate to adjustments required as a result of management's assessment of the carrying value of certain player registrations relative to their current market value. The carrying value of intangible assets are reviewed against criteria indicative of impairment and, where the carrying value exceeds their current market value, impairment is recognised.

Onerous employment contract costs result from a situation where the committed costs under that contract are assessed as exceeding the economic benefits expected to be received by the Group over the term of the contract.

Settlement agreements on contract termination are costs in relation to exiting certain employment contracts.

4.         DIVIDEND ON CONVERTIBLE CUMULATIVE PREFERENCE SHARES

A 6% non-equity dividend of £0.51m (2019: £0.51m) was paid on 28 August 2020 to those holders of Convertible Cumulative Preference Shares on the share register at 31 July 2020. A number of shareholders elected to participate in the Company's scrip dividend reinvestment scheme for the financial year to 30 June 2020.  Those shareholders have received new Ordinary Shares in lieu of cash. No dividends were payable or proposed to be payable on the Company's Ordinary Shares.

During the year, the Company reclaimed £nil (2019: £0.07m) in respect of statute barred preference dividends in accordance with the Company's Articles of Association.

5.         TAX ON ORDINARY ACTIVITIES

The corporation tax receivable as at 30 June 2020 was £0.02m (2019: payable of £0.14m). The current year tax expense was £0.24m and total tax payments in the year were £0.40m, of which £0.38m related to the current financial year and the remainder relating to prior years. The balance potentially due from HMRC for the current year has been offset against prior periods. The available capital allowances pool is approximately £7.53m (2019: £9.00m). These estimates are subject to the agreement of the current year's corporation tax computations with H M Revenue and Customs.

The standard rate of corporation tax for the year in the United Kingdom is 19% (2019: 19%). 

6.         EARNINGS PER SHARE

Loss per share and diluted loss per share of 0.39p (2019: earnings per share of 9.30p) has been calculated by dividing the loss for the period of £0.37m (2019: profit £8.74m) by the weighted average number of Ordinary Shares of 94.3m (2019: 94.0m) in issue during the year. 

7.         ANNUAL REPORT & FINANCIAL STATEMENTS

Copies of the Annual Report & Financial Statements together with the Notice and Notes of the 2020 AGM will be issued to all shareholders in due course.

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 30 June 2020 or 30 June 2019. The Independent Auditor's Reports on the statutory financial statements for 2020 and 2019 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The statutory financial statements for 2019 have been filed with the Registrar of Companies and those for 2020 will be delivered to the Registrar of Companies in due course.