Sevco’s Sleight Of Hand Accounting Reveals More Than It Hides

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So you may or may not be aware of it, but Sevco posted accounts on Friday, where they knew the story would get lost in the weekend and where it probably wouldn’t be picked up until this week. Today it was, and thanks again to the Internet Bampots over on the Scottish Football Monitor, some of whose guys spotted a newly filed document at Companies House.

Even a brief perusal of it makes depressing reading for their fans.

I’ll give you the headline numbers; they’ve posted overall losses for 2015 of over £9 million.

The total debt burden, which the “club” owes to its “parent company” is now £34 million, accrued over the four years of its existence. If that number is maintained over the course of 2016 (and indications are that it will be) they’ll arrive in the SPL with over £40 million of “internal debt”, with only modest returns on offer in that league.

One thing sums up their current state perfectly.

Their running costs – even before a football player is employed – total some £17 million and change. On their current operating income, which is around £18 million, and is heavily restricted by, amongst other things, the Sports Direct deal, they would be perilously close to being in debt even if every player and member of staff was willing to work for free.

But of course, they’re not.

Sevco’s annual salary costs, in total, including the playing side, their coaches and all the others who work inside Ibrox, was £12 million.

This club is, quite literally, bleeding all over the place. With no credit line from a bank they are subsisting on loans, many of which have to be converted to equity, which will all but wipe out the value of the current shares, and therefore needs the approval of shareholders at a future EGM.

This is why they’re trying to ban Ashley and others from being able to vote at those meetings.

And all of this is to say nothing of what the consequences will be when – not if, but when – current directors take the decision that they’re no longer going to carry the water here. Many of them will already be quietly contemplating the prospects of never seeing a penny of their current “investments” back.

They might be willing to live with that, but getting them to pony up even more cash is probably going to be impossible.

Apart from anything else, the accounts contain a little bit of financial sleight of hand; I included the £5 million loan they got to repay Sport Direct in my total debt figure of £34 million; it’s actually not included in these accounts, which is why the posted losses and liabilities weren’t higher.

There’s also a couple of areas where expenditures have been cut, and that saving somehow converted into profit; the means by which they’ve done it is technically within the law, but it’s not something you’ll see accounting firms, or reputable companies, do every day.

Such blatant massaging of the figures doesn’t change the realities which confront Sevco at the end of all this; they are a club haemorrhaging money and betting everything on the notion that reaching the SPL will see a major transformation in their finances.

It’s simply not going to happen.

This is the club that boasts about playing in front of full houses every week; you know what that means? It means they’ve pretty much reached the limit of their income potential, with the only serious prospect of raising it further coming from vastly increasing prices.

TV revenues will not be significantly higher and prize money for actually competing in the top flight is minimal stuff compared to those kind of losses.

The future remains pretty bleak for Sevco fans; at some point in the proceedings real and sustained and probably permanent downsizing is going to have to take place there. There’s really no way around that, and with the manager expecting significant funds to spend in the summer transfer window – he has a reputation to protect, don’t forget – the range of choices facing their board continues to narrow, and the troubles continue to pile up.

This is a volcano waiting to blow.

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