As INEOS TEAM UK embark on the latest stage of their quest to become the first British crew to win the America’s Cup, we're supporting them…
Today marks the return of Premier League football for the first time since 13 March; the Championship is set to return on 20 June.
It had been estimated that top flight clubs could lose a combined £1bn of revenue this year, mainly related to broadcasting/media rights so the fight has been well and truly on to get sports back on our screens as soon as it was safe to do so.
Playing games behind closed doors, however, inevitably leads to a reduction in match day revenue and raises the question of how to deal with fans who have paid for tickets to games that they will now be unable to attend.
At some football clubs, fans have been offered a part-refund on their season tickets, or to use credit to go towards next year’s season pass. All Premiership season ticket holders will receive two NowTV day passes entitling them to watch games of their choice over two days on Sky Sports. A total of 64 of the remaining 92 matches will be shown on the channel.
Whilst it is feared that the combined impact of the above could lead to a wave of insolvencies, there is a renewed optimism amongst those in the industry as games kick off again.
In the midst of all of this, Clubs will be continuing to monitor their financial positions closely. In dealing with the potential impact, the key financial questions clubs need to answer are:
- Can I trade profitably and to what extent is trading profitable?
- What are my working capital requirements?
- What historic creditors do I need to deal with?
The furlough scheme continues to provide vital support to clubs but from August any businesses claiming under the scheme will be expected to contribute to the cost of furloughed staff until the scheme eventually ends in October. Flexible furloughing may also help clubs manage non-playing or match day staff.
Cash is king therefore managing cash flow is important for directors, who should be preparing timely financial forecasts, covering a wide range of scenarios. This can help management make informed decisions on working capital requirements that are in the best interests of all their creditors.
Creditors should not be allowed to get into a worse position. Priority should be given to paying ongoing necessary business costs and only if there is a surplus after this should historic creditors be paid.
Communication becomes key in managing historic creditor expectations, creditors, including HMRC, may be willing to agree payment holidays and deferrals but directors must remember that these amounts need to be paid in future and ensure these are factored into forecasts.
It is common for HMRC to issue winding up petitions to clubs in respect of unpaid taxes. There is currently a ban on any creditor issuing a winding up petition on a business, under the new Corporate Governance and Insolvency bill. This is unless the court is satisfied that coronavirus has not had a financial impact on the business or if the business would have been insolvent before the financial impact of coronavirus. This bill will shortly come into force, however the ban will end one month thereafter.
Taking on further debt may seem like the easy solution to cash flow issues but directors will need to have some comfort that they can pay this along with the ongoing costs of the business in future.
In some instances these measures alone may not be enough but there are other options available for clubs, which do not necessarily mean insolvency, which can lead to points deductions for clubs.