The company of former Hornets owner Laurence Bassini owes Watford FC more than £1.5m but the club accept there is “the possibility” this debt may not be paid, according to Watford Association Football Club Limited’s annual accounts.
In the report and financial statements for Watford’s parent company for the year ended June 30, it states £606,302 of Danny Graham’s transfer fee and £900,000 of Football League Award money “were borrowed in the name of the club, but the funds were never directly received by the club”.
It adds that “the amounts are provided for as potentially being due to the original lender by the club, but are also considered to therefore be owed to the club by the previous owners ultimate holding company, Watford F C Ltd.
“A provision has been entered for the possibility of non payment of this debt.”
During the year ending June 30, Bassini’s Watford FC Limited received £2.13m from WAFCL (the club). Payments “made for and on behalf of the holding company” (Watford FC Limited) totalled £50,814.
There was also a sum of £568,267 which the financial statements claim were “the total of cash amounts advances” to Bassini by the club for the renovation of the Yellow and Red Lion pub in Vicarage Road for which “no invoices were received”.
Bassini was given ownership of the Red Lion pub by the Pozzo family following their takeover of the club on June 29, which was the day before the account year ended.
However, the financial statements confirmed: “The actual transfer has not occurred and is under review but the accounts include a provision for loss on disposal of the Red Lion pub of £464,358, which represents the net book value as at 29 June 2012.”
The document also confirms that WAFCL were charged £242,000 during the financial year by Watford FC Limited for consultancy invoices. We understand that was £22,000 a month over the course of 11 months.
Watford made a pre-tax loss of £2.65m for the year ending June 30 2012 but without the £2.13m ‘Exceptional Item’ sum which was paid to Bassini’s Watford FC Limited, the loss was just £523,000.
The Hornets were able to do this because of an excellent year in terms of the amount generated through player sales. The club raised £6.4m from the disposal of player registrations for the year ending June 30, compared to just £869,000 in the last set of accounts. The majority of this year’s sum was from the sales of Danny Graham and Marvin Sordell.
These sales were crucial as Watford made an operating loss of £6.79m – which was £2.74m worse than the previous year.
Wages and salary costs were up £1.03m and there was a £1.09m increase in general operating expenses. There was also a reduction of £407,000 in other operating income.
Total turnover increased slightly by £189,000 to £11.18m, which was largely due to the FA Cup income and television money from the fourth round tie with Tottenham Hotspur.
The Spurs tie generated £130,000 in television and radio income, which contributed to media revenue increasing by £231,000 to £5.42m.
For the year ending June 30 2011, the club made a £9.65m pre-tax profit but that figure was hugely distorted because of the £13m intercompany debt waiver between the club and the former parent company Watford Leisure PLC, which needed to happen for the secured bond issue to take place in 2010. Without the £13m, WAFCL made a pre-tax loss on ordinary activities of £3.35m.
The independent auditors report, which was written by Myers Clark who replaced Chartered Accountants this year, states that as of June 30 2012, the club’s liabilities exceeded its total assets by £3.96m.
It added: "The validity of the going concern basis is dependent on the assumptions underlying the financial projections being accurate, the financial projections being substantially realised and the company’s ability to raise sufficient new capital to the extent it may 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. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern."
More to follow.