Embargos, HMRC Payment defaults, non payment of wages, the usual under Dai Wrongge

[Mid Sussex Royal]

That Mirror guy has been pretty wide of the mark all summer, think I'd rather believe Earnshaw

[YorkshireRoyal99]

It still really worries me that we've had these problems from the very start of the season - a time when we should have had the most money in the bank. I don't know whether we just built up large debts last season that we then paid off - but we should have got in June/July:
1 - The bulk share of tv and EFL money (they pay it at the start of the season to give clubs money for the transfer market).
2 - At least the initial instalments of sponsorship monies.
3 - All of the season ticket money.

When you add on the loans that SCL have apparently given us to pay tax and wages in August, it just sounds like something happened to the money. Did Dai instantly transfer it out of the club??

unlikely - the club probably loses £1m per month so it is just a constant battle to keep a positive cashflow if the owner isn't putting cash in to fund those losses. The season ticket money will have been long gone from June onwards. Not sure the TV money comes in all in one go either. I know parachute payments came in at the end of the season.

I don't know - I can't see how it would be spending so much that it would have gotten through the pre-season money by the end of August. Our total wage bill might be something like £1m a month - though that would be very high given the fact that we only have 2-3 players on legacy contracts. Are we really paying an average of like £7k a week to players? Then you do have some match day income from tickets, hospitality, food/drink etc. I don't see how we got through season ticket + efl/tv money + sponsorship cash + player sale money in that short space of time on just normal club operations.

I was definitely expecting us to be in trouble by Christmas. Not now though.

I believe there was an article on The Athletic that "estimated" that we were losing around £500-550k a week, so £2m a month. I can't quite understand where the rest of the money on day-to-day operations is going. That was when we were a Championship club though and we aren't/weren't the only club like this allegedly (Bristol City were losing £450k a week, QPR are losing £450k a week and Birmingham were losing £600k a week, again all estimated).

[Winston Biscuit]

Earnshaw has just posted that players haven’t actually been told anything yet contrary to the earlier report

Robert Earnshaw?!

[Elm Park Kid]

unlikely - the club probably loses £1m per month so it is just a constant battle to keep a positive cashflow if the owner isn't putting cash in to fund those losses. The season ticket money will have been long gone from June onwards. Not sure the TV money comes in all in one go either. I know parachute payments came in at the end of the season.

I don't know - I can't see how it would be spending so much that it would have gotten through the pre-season money by the end of August. Our total wage bill might be something like £1m a month - though that would be very high given the fact that we only have 2-3 players on legacy contracts. Are we really paying an average of like £7k a week to players? Then you do have some match day income from tickets, hospitality, food/drink etc. I don't see how we got through season ticket + efl/tv money + sponsorship cash + player sale money in that short space of time on just normal club operations.

I was definitely expecting us to be in trouble by Christmas. Not now though.

I believe there was an article on The Athletic that "estimated" that we were losing around £500-550k a week, so £2m a month. I can't quite understand where the rest of the money on day-to-day operations is going. That was when we were a Championship club though and we aren't/weren't the only club like this allegedly (Bristol City were losing £450k a week, QPR are losing £450k a week and Birmingham were losing £600k a week, again all estimated).

Well, we know for a fact that we lost £17m in 2021/22. I would expect that to be lower last season and lower again this season. At the most it can't be more than the £1m a month figure.

[WestYorksRoyal]

Fairly "meh" if it's just HMRC. Embargo when the window is closed, and more time to get investment before shit hits the fan. We all know the club is in poor financial health so it's nothing new.

Friday is the big one. Another points deduction virtually certain if we're even a day late, and at some point it will hit morale and on field performances. Relegation a massive concern if this happens.

Thankfully Earnshaw has proven to be a much more reliable reporter than Witcoop this summer, so I believe his version of events.

[3points]

From the June 2022 accounts (admittedly over 1 year out of date) key stats include:

- Total income £16.9m (of which £8.5m relates to TV monies). In the same year Ipswich Town (a reasonable comparator?) received £3.1m in TV monies out of total revenue of £14.4m. By comparison Shrewsbury Town had total revenue of £5.7m with about £1.8m coming from the league and TV.
Wages - £25.3m (we had an EFL imposed cap of £21m for players), so over £4m for non-playing staff. Last year the EFL imposed level was £16m. Ipswich had a total wage bill of £16.4m. Shrewsbury's wage bill was £4.4m.
Rent - we pay Dai £1.5m per year to use the stadium since he sold it to himself.

In 2022 our loss was £17.3m; Ipswich lost £12.6m and Shrewsbury £300k! It goes to show there are lots of costs to running a football club - some of our 2022 loss is player amortisation but we also made £8m that season selling Olise to Palace!

[3points]

I don't know - I can't see how it would be spending so much that it would have gotten through the pre-season money by the end of August. Our total wage bill might be something like £1m a month - though that would be very high given the fact that we only have 2-3 players on legacy contracts. Are we really paying an average of like £7k a week to players? Then you do have some match day income from tickets, hospitality, food/drink etc. I don't see how we got through season ticket + efl/tv money + sponsorship cash + player sale money in that short space of time on just normal club operations.

I was definitely expecting us to be in trouble by Christmas. Not now though.

I believe there was an article on The Athletic that "estimated" that we were losing around £500-550k a week, so £2m a month. I can't quite understand where the rest of the money on day-to-day operations is going. That was when we were a Championship club though and we aren't/weren't the only club like this allegedly (Bristol City were losing £450k a week, QPR are losing £450k a week and Birmingham were losing £600k a week, again all estimated).

Well, we know for a fact that we lost £17m in 2021/22. I would expect that to be lower last season and lower again this season. At the most it can't be more than the £1m a month figure.

For June it may have been higher as we still had Moore, Joao, Puscas, etc on the wage bill. Plus a bunch of loanees. So the wage bill would have been much higher in June than in July and going forward. It also wouldn't surprise me if some players had loyalty bonuses in their contracts, payable at the end of their contracts on 30 June. We may even still have been paying instalments on Joao and Puscas' transfer fees!

[Snowflake Royal]

There was obvs rumours of the wages being paid - but not by Dai as such last month

Big day this Friday if that is payday - it might be be is prioritisation wages or it might be he has run out of available money altogether

Fun times

If the wages aren't paid on time there becomes a non-zero chance of us finishing on negative points this season.

[YorkshireRoyal99]

I don't know - I can't see how it would be spending so much that it would have gotten through the pre-season money by the end of August. Our total wage bill might be something like £1m a month - though that would be very high given the fact that we only have 2-3 players on legacy contracts. Are we really paying an average of like £7k a week to players? Then you do have some match day income from tickets, hospitality, food/drink etc. I don't see how we got through season ticket + efl/tv money + sponsorship cash + player sale money in that short space of time on just normal club operations.

I was definitely expecting us to be in trouble by Christmas. Not now though.

I believe there was an article on The Athletic that "estimated" that we were losing around £500-550k a week, so £2m a month. I can't quite understand where the rest of the money on day-to-day operations is going. That was when we were a Championship club though and we aren't/weren't the only club like this allegedly (Bristol City were losing £450k a week, QPR are losing £450k a week and Birmingham were losing £600k a week, again all estimated).

Well, we know for a fact that we lost £17m in 2021/22. I would expect that to be lower last season and lower again this season. At the most it can't be more than the £1m a month figure.

To be fair the article is about 9 months old now, so probably dates back to a lot of figures the season before last and it might not have factored in any profit we made, it may have just purely been on losses that we were incurring on day-to-day operations. I still think there must be a lot of unknown outgoings somewhere within the club, spent on what, who knows.

[Mid Sussex Royal]

Not been embargoed yet by EFL and they're usually on this pretty quick. Tax was due Friday, not yesterday as widely reported on Twitter.

[Stranded]

Not been embargoed yet by EFL and they're usually on this pretty quick. Tax was due Friday, not yesterday as widely reported on Twitter.

Doesn't go on the list for a few days. If it is not paid by end of Weds then we will be on the page again.

[windermereROYAL]

We`re under an effective embargo regarding unpaid tax until 2025 anyway, what good would a new one do outside of the window?

[Linden Jones' Tash]

Technically HMRC should issue a statutory demand, wait three weeks and then issue the WUP. However, for repeat offenders HMRC can issue demand today and only give 24 hours notice of the WUP. However, the hearing at court takes a little while for it to be heard but it is still very much a tightrope that is being walked. And will only buy a pretty short period of time before it has to be paid to have the hearing cancelled. The Directors are unlikely to let the hearing happen anyway, and would opt to place the company (ie the football club) into administration first.

FWIW - I work in the world of restructuring and insolvency and, in imho, I will be surprised if we don't end up in administration before Christmas. I really hope I'm wrong and Dai finds the money (either from his own resources or through investors) but it doesn't look great from the outside (clearly not privy to any inside info here). The fact pattern is similar to many of the situations I work in.

Hi 3 points, i used to work for the insolvency service so am not a complete novice at this. Why in your experience would Reading go into administration? The owner is the only creditor (that we know of) other than the players and HMRC. If the players don't get paid we wil eventually get kicked out of the league so administration doesnt remove those creditors, HMRC would rather wind us up then agree to an administration. If Dai himself puts us into administration the administrators would take control of the club and Dai would lose control of the club. Why is that in his interests?

Because it is the usual route that protects the directors in their directors' duties. A compulsory liquidation will be the end of RFC as we know it. An administration at least allows a chance for the club to be sold and continue to play in the current league, rather than be reformed and start in Tier 9 of the football pyramid.

Agreed that Dai gets nothing out of it in theory. However, as the stadium is not held as an asset of RFC, but a company controlled by him, if the club is solf out of an admin then the new owners will need that club to play in a stadium. Therefore, Dai can get some of his money back in selling the stadium to the new owner of the football club. If it goes into compulsory liquidation, the stadium will have limited or no immediate value as a stadium (unless you have a Wasps / Ricoh scenario - which is very rare). If he wants a short term return on his money I'd say the admin with a stadium sale works best for Dai.

HMRC don't get the choice to agreeing to an administration. The act of placing the company into admin trumps and stays all other creditor actions. So HMRC just have to put up with it, despite maybe not preferring it as an option.

This is really interesting, thanks.

I am struggling with this as, as far as I can see, the owner put in a lot of money to get the club into the PL and did it very badly, failed, ended up falling foul of FFP and now, with the difference in income in L1 vs, the Championship, there is a real struggle with cashflow (whether it is due to China issues or because the owner refuses to fund the club further, who knows)

so this bit:
"If he wants a short term return on his money I'd say the admin with a stadium sale works best for Dai."

Surely that would be around the (paper) price sold, if not less?

But if the club owes the owner £180M - isn't that a big paper loss?

[East Grinstead Royal]

If the club were to be sold, surely it would still owe Dai £180m?

[Royal Rother]

In theory yes, but at the point of sale he would have no option but to write it off.

No write off, no sale would be the deal.

[Greatwesternline]

This is really interesting, thanks.

I am struggling with this as, as far as I can see, the owner put in a lot of money to get the club into the PL and did it very badly, failed, ended up falling foul of FFP and now, with the difference in income in L1 vs, the Championship, there is a real struggle with cashflow (whether it is due to China issues or because the owner refuses to fund the club further, who knows)

so this bit:
"If he wants a short term return on his money I'd say the admin with a stadium sale works best for Dai."

Surely that would be around the (paper) price sold, if not less?

But if the club owes the owner £180M - isn't that a big paper loss?

Sunk costs versus realisable assets.

The money that he has put in, its fair to say is gone, unless Reading make a remarkable footballing comeback without any additional injection of Dai's money, and somehow make it to PL and someone is prepared to pay him the money back he has lost.

Even in that scenario, he seems like the sort of person who would want to own a PL football team, in which case, he'd probably keep the club, and in that scenario the only way he gets the money owed back is Reading make consistent profits for many years and he pays himself back via repaying the loans and paying dividends.

So if we assume none of those things will happen sporting wise, then his best bet to get any money back at all, is to somehow realise the value of the stadium he owns. Give the club to someone else for free, ridding himself of the losses the club makes, and continues to rent out the SCL to the new club, earning him a cashflow, or selling the SCL to someone else who wants it for whatever reason.

[Linden Jones' Tash]

This is really interesting, thanks.

I am struggling with this as, as far as I can see, the owner put in a lot of money to get the club into the PL and did it very badly, failed, ended up falling foul of FFP and now, with the difference in income in L1 vs, the Championship, there is a real struggle with cashflow (whether it is due to China issues or because the owner refuses to fund the club further, who knows)

so this bit:
"If he wants a short term return on his money I'd say the admin with a stadium sale works best for Dai."

Surely that would be around the (paper) price sold, if not less?

But if the club owes the owner £180M - isn't that a big paper loss?

Sunk costs versus realisable assets.

The money that he has put in, its fair to say is gone, unless Reading make a remarkable footballing comeback without any additional injection of Dai's money, and somehow make it to PL and someone is prepared to pay him the money back he has lost.

Even in that scenario, he seems like the sort of person who would want to own a PL football team, in which case, he'd probably keep the club, and in that scenario the only way he gets the money owed back is Reading make consistent profits for many years and he pays himself back via repaying the loans and paying dividends.

So if we assume none of those things will happen sporting wise, then his best bet to get any money back at all, is to somehow realise the value of the stadium he owns. Give the club to someone else for free, ridding himself of the losses the club makes, and continues to rent out the SCL to the new club, earning him a cashflow, or selling the SCL to someone else who wants it for whatever reason.

Thanks - very helpful.

I wouldn't be surprised if the (wholly unlikely) first scenario is still in play.

People who make fortunes tend to over estimate their own role vs. External factors in making said fortune (luck, timing, connections etc)...

Which leaves the club in its present limbo

[Jackson Corner]

Administration is the best option. Sell the ground and training ground all our players start again in National league south and ground share with Aldershot,

[morganb]

https://twitter.com/JPercyTelegraph/sta ... IfFgA&s=19

ReadingFC placed under transfer embargo after failing to make HMRC payment

[Snowflake Royal]

Administration is the best option. Sell the ground and training ground all our players start again in National league south and ground share with Aldershot,

Dai isn’t going to put himself in administration, thereby losing control of making a sale.