BSH: Interim Results to December 2018

Birmingham Sports Holdings today announced their interim results for the six months ending December 31, 2018 today. The results have shown some improvements but the company still reported a HK$173million (around £16.6million) loss in just six months.

Hong Kong Stock Exchange

The full accounts can be viewed at this link.

The headline figures

Things have slightly improved for BSH in the last few months but the accounts still make for pretty grim reading.

While the loss before taxation was HK$173milllion, the company only brought in revenue of HK$116.42million (around £11.2million), a minor improvement on the first six months of the previous financial year.

Operating expenses have dropped significantly, with staff costs dropping by 25% or so to HK$162.143million (around £15.6million) – however this still means a wages:turnover ratio of 139% which is unsustainable.

So what does this mean for Blues?

While these accounts are the accounts for the parent company and not the club, they have helpfully segmented them somewhat so that it is possible to see what loss is attributable to the club.

This is shown as HK$135.374million – which is around £13million.

If you take into account that Blues are allowed to lose no more than £13million over the year for P&S purposes, then it’s easy to see that Blues face a difficult second half of the season to ensure they comply with the rules.

Indeed, the accounts lay it out bluntly:

In respect of the Group’s operation, although the Club’s on-the-field performance had been improved as compared to the previous season and the management had been keen for achieving better operating results, the Club was still incurring substantial loss and required continual support by the Company. The results of the Club were still far behind expectation.

BSH obtained a revolving loan facility on 10 August 2018 of up to HK$250,000,000 at an interest rate of 8%. By December 31, they have burned through HK$150million of it and already owe HK$3million in interest.

Effectively, the borrowing is what is propping the company up.

All doom and gloom then?

Well, yes and no.

On the one hand, the results aren’t great and show that Blues really need to bring in some money in the second of this season to avoid being in trouble again.

On the other hand, the company have seemingly recognised that they need to up commercial income and diversify revenue streams.

There is even a hint that BSH will look to bring in someone else who will invest in the club.

In terms of future development of the Company and for the interest of the Shareholders, the management will, on one hand, continue to support the Club for further improvement in performance and, on the other hand, will take a keen but cautious approach to explore all possible solutions, including the possible introduction of and joint venture with strategic partners who can bring in financing and management support to the Club so as to enhance its competitiveness and to attain better results.

This is the first time I’ve seen in the Suen reign that BSH are prepared to look further for financing for the club.

Whether that means bringing in another mainland Chinese partner, or maybe even looking outside of the PRC for investment I don’t know.

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