BSH: Interim Accounts 2024

On Thursday afternoon, ZO Future Group (formerly known as Birmingham Sports Holdings Ltd) announced their interim accounts to the stock exchange of Hong Kong, for the six month period ending December 31, 2023.

Birmingham City Accounts

Although the Hong Kong holding company holds absolutely no authority over what goes on in B9 any more, the accounts give us a glimpse into just where the club is in relation to the Profit and Sustainability rules this season.

For those who wish to read these accounts for themselves, they can be found at this link.

As always, I must caveat this piece with the confirmation that I am not an accountant and this article in no way constitutes investment advice.

Rather than go into detail, I want to highlight three figures that have meaning to us as Blues fans and help us to understand better where the club is.

Profit (Loss)

The first and most important number I think for Blues fans to consider is the bottom line – how much of a profit or a loss has the club made in the first half of the season.

This is important for us to have a handle on, because we know that the club can’t make a huge loss this season as it will potentially fail the P&S requirements.

While ZFG no longer have any financial control over the club, they still own 51% of it and as such are obligated to report the results of the club in their own accounts.

On page nine of the accounts, there is a segmented analysis of how each part of ZFG’s business has done over the last six months.

From this analysis, we can see that the football club has brought in HK$123.144M of revenue and has a loss of HK$40.542M.

This translates to about £12.452M of revenue and a loss of just under £4.1M.

In previous articles I have talked about how the club cannot afford to make a huge loss this year due to P&S rules, using previous losses to arrive at a maximum allowable loss this year of about £4M.

In previous years these accounts would have undoubtedly forced Blues to consider selling players such as Jordan James to balance the books to prevent another breach of the rules.

However, this year things are different.

The naming rights deal that was announced by the club in January isn’t included in these figures, and it’s that naming rights deal that ensures not only that Blues should be okay from a P&S perspective but more importantly that a fire sale of players was not needed.

That meant Blues could stand tall in the face of a lot of interest and at least four bids made for James over the course of the January window.

Jude the Saviour

The second number that is of interest to me in these accounts is on the very first page, where it confirms that a profit was made on the sales of players’ registration of HK$112.201M (around £11.35M)

That money has come from the transfer of just two players; the sale of Tahith Chong to Luton Town and the sell on fee earned as a part of the transfer of Jude Bellingham from Borussia Dortmund to Real Madrid.

I can’t lie in that I found the continual questions over the value of the sell-on fee for Bellingham tiring in the spring of last year, but these accounts are evidence of what we all pretty much knew in our hearts – that once again, Bellingham is the financial saviour of Birmingham City.

It’s funny in that the actual cash received is less important now due to Knighthead being in control at St Andrew’s.

However on paper, the money Blues got as part of that deal ensured that the loss the club makes this year is significantly lower than it would have been otherwise – and ensures that Blues are not going to be facing embargoes or points deductions in the months to come.

Part of the job Knighthead have now is to do what they can to ensure the club generates money to make it more sustainable without depending on huge slabs of cash from player transfers.

The truth is that money from player transfers is too volatile to rely on as it depends on there being a buyer willing to match the valuation required – something that isn’t always a possibility.

Throw in the threat of potential injury derailing a player’s transfer – or indeed their career – and I don’t think it’s hard to understand why the authorities won’t accept future player transfer money as an excuse to be temporarily outside of bounds during the season.

If the club are to make any kind of consistent money from player trading, then it seems inevitable that investment is made in young players – particularly the academy.

Because of the way player valuations and amortisation works in accounting, money made by selling Academy players is booked as pure profit and is the most helpful for balancing the accounts from a P&S perspective.

The Investment

The final number which I believe is important to Blues fans is found on page 17, in the “amount due from / to related parties section.

This section confirms that an amount of HK$173.177M is owed to Shelby Companies Limited by ZFG – about £17.412M.

What this means in real terms is that in the first six months of them controlling Blues, Knighthead have put in that much money into the club.

This has gone towards the improvements we have seen at the stadium, into the player budget and into everything else that keeps the club ticking over.

I think it demonstrates the huge investment Knighthead are making into Blues and should give the few remaining sceptics out there pause for thought on just how much Tom Wagner and his colleagues are doing for the club.

This money is also important in that due to the terms of the takeover agreement, it is now the senior debt that the club owes and must be paid first before anyone in Hong Kong tries to get clever.

It’s part of the leverage that Knighthead have over ZFG and is part of the reason the Hong Kong company have been working hard to diversify their interests in recent months.

There is still no official timeline yet as to how quickly Knighthead will be able to buy the remaining 51% of the club that is owned by ZFG, but unlike previous seasons there is definite progress in that happening.

That progress just adds to the positive changes that are happening around the club – and is a reason why for once I’m completely unworried with regards to the continued losses the club is making.

This season has been a much happier one from a financial perspective and for me has been proof that taking a positive attitude and trying to bring money in is always better than continually trying to cut costs.

The end of this season will see the departure of some players on large contracts and will also see the start of a new lucrative TV deal which will bring more money into all Championship clubs.

However, it’s important for Blues that Knighthead continue to find new avenues of bringing in revenues as this will not only contribute to the financial stability of the club, but will also help it to challenge for a place in the Premier League.

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