The Pitch: Is Waterford FC really worth 1.3m?
A general view of the RSC. Photo by Michael P Ryan/Sportsfile
IF YOU’RE buying a second-hand car, you do so because you’ve been reliably informed that it has four wheels, a working engine and some seats.
But if a football club was a car you’ll buy it even if you’re told it has only two wheels at the moment, it might have seats at some point and the engine needs replacing - but in the end it could be great.
Oh, and if you want it badly enough, most of your investment will be used to pay off liabilities.
Now if that old banger was say, Waterford FC, you’re being asked to pay €1.3m for a club that owes €1.2m to debtors and with no fixed assets.
In any other business transaction it wouldn’t make sense - but in the world of football club takeovers, prices are dictated by Enterprise Value and Equity Upside – an often virtual portfolio that largely consists of intangible assets and potential.
For a truer valuation of Waterford FC, we will have to wait until after August 16 when the latest financial report will be filed with auditors for approval.
What these numbers will show is how much the club currently owes in liabilities to debtors – believed in this case to be money owed by the current owner Richard Forrest to the previous custodian Lee Power.
In the unlikely event that the report presents a significant reduction on the fees owed, then the value of Waterford FC will be accurately reflected by the €1.3m price-tag currently being sought for the 92-year-old club.
And here’s why.
In Irish football it’s not the assets – the stadium or training ground - that has any value. Most clubs don’t own these fixed structures.
Shamrock Rovers doesn’t own its stadium or training ground, but in 2019 Dermot Desmond invested €2m for a 25 per cent share in the club, setting its value at €8m.
He might argue differently, but Desmond was buying into the potential of the club and its brand, intangible assets, but ones he rightly reckoned had great possibility.
Waterford FC’s prospectus is full of intangible assets listed across its ‘!00% of Equity for Sale’ brochure - issued by Oakwell Sports Advisory – the London agency handling the sale of the club.
The firm told The Pitch that the €1.3m value was established using international metrics – the one most referenced by The Pitch and used by Uefa and all top European clubs is the Football Benchmark – Football Evaluation report.
“Our valuation methodology uses an EV (Enterprise Value)/Sales multiple that is based on comparable transactions across UK and European football,” Charlie Umbers, an analyst with Oakwell explained.
Assuming Oakwell used the Football Benchmark methodology, using what’s known as its ‘Revenue Multiple’ approach, or similar, it will have measured the club value based on the sum of the owner’s equity, tangible and intangible assets, less cash equivalents.
Using the information currently available through the abridged financial report for November 30, 2020 and the sales prospectus we can establish a clearer picture. With Waterford, the value of the club is promoted through a mix of balance sheet and Equity Upside or Potential. This includes: Uefa qualification, broadcast revenues, sale of players, commercial/sponsorship and ticket sales.
A lot of this is supposition-based: If it gets promoted and qualifies for Europe (a greater possibility with the addition of the Europa Conference League to the UEFA roster) it could earn up to €6m (based on Dundalk’s previous success).
“If the league moves to secure broadcast partners in Ireland this would bring revenue of c.€250k per team.”
“If the league moves to secure broadcast partners in Ireland this would bring revenue of c.€250k per team.”
How this is possible is not quite clear, with RTÉ currently paying a minimal fee for the broadcast rights of the LOI - based on Oakwell’s speculation this figure would rise to almost €5m (for all clubs) is an ambitious forecast.
If sought-after players emerge from “one of the best academies in Ireland” and through its development of “an academy relationship with Blackburn Rovers” – by the by, Blackburn Rovers told The Pitch that "there is no partnership or agreement in place with Waterford.”
Waterford also notes it has a core group of "committed local sponsors” who deliver “revenue of c. €0.5m” – although the detail of these commercial values were not available in the abridged financials.
Oakwell references a “loyal fanbase” which according to the extratime.com League of Ireland Attendance index has delivered an average gate of 1,900 at the RSC - Waterford City and County Council have confirmed it will soon agree a 50-year lease arrangement with the club.
One area not mentioned is ‘Community’ but that could fall under ‘Goodwill’ in the finance reports.
Currently there is little goodwill and a disconnect between the club and the public, according to Shane Murphy of Waterford FC Blues Community, an influential 7.4k strong Facebook-led supporters group.
“For various reasons the club no longer has a strong relationship with supporters, the local football community and that’s a real pity,” said Murphy. “There are many within those communities who are very talented, passionate people who could help the club and who could be of great benefit to Waterford, but that’s not there currently.”
So what do the financials say? They establish a link for the sale price based on the balance sheet – effectively setting the price of the club as the value of the cash owed to debtors.
While retaining no bank debt, the abridged financial report listed under Power Grade Ltd T/A Waterford FC, shows that a figure of €1,132,172 in liabilities was last reported, set to rise to €1.2m after a year.
If no payments were made to the debtors in the last two years, that figure should now be around €1.3m.
A profit of €40,934 was reported up to the end of 2020 – however, this could include Covid payments by Sport Ireland through the FAI.
And the ‘Goodwill’ we mentioned earlier is orginally stated as €155k.
Therefore it appears that the value of the club is reached based on retained losses, profitability and ‘Goodwill’ factors – with little value for fixed assets of ‘Property, Plant and Equipment’ which comes in at €3,650.
Outside of football, a typical trading company valuation - with normalised profits - will value a business based on a ratio of profit; ratios vary from industry-to-industry but on average can run at five times profit, so for Waterford that would work out at €200k.
But as we’ve discovered, football is a different business and that’s why – based on the owner’s equity, intangible assets, total debt, and cash – Waterford FC’s sale price is probably on the money at €1.3m.
In pure non-football business terms – ‘a lot of money for very little’. In the business of football metrics – a fair price.
Waterford FC declined to respond to The Pitch for comment.
YES it’s ugly, it’s unsavoury and it’s not great for the GAA and its stakeholders. But the Irish sports viewer is enthralled by violence on the GAA pitch and particularly when an epic battle on the pitch becomes all-out war - and here’s why.
For the Galway v Armagh All Ireland quarter final at Croke Park on June 26, a third of the overall audience tuned in to watch the end of the game than had viewed the match throughout (on average), as both sets of players and benches embarked on a free-for-all at the tunnel.
The Nielsen figures provided by RTÉ to The Pitch, showed an average audience of 394k watched the game overall, the smallest number to watch that match and the subsequent All Ireland semi-finals in both hurling and football.
However, once things got physical at the end, that number shot up to a peak of 581k, the second-highest (after Dublin v Kerry), buoyed by social media reports of the fight which was taking place at the final whistle.
Peak figures for games will always outweigh average audiences, but matches that go to the wire, or in this case end up in utter chaos, will experience enormous surges for the closing stages.
Such upward shifts saw 709k tuning in to watch Kerry’s Seanie O’Shea’s epic last-gasp free against Dublin last Sunday, a lift of more than 120k on the average audience of 588k which tuned in.
The Dublin-Kerry numbers are so high due to some obvious factors – primarily the large audience that the Dubs encourage, the fact that this was a clash with its greatest rival, along with the mass appeal that Kerry brings across the country.
The second-highest audience for this year’s All Ireland semi-finals came with Limerick’s epic clash with Galway in the hurling, which saw an average audience of 482k tuning in, with a peak of 578k by the end.
Galway v Armagh (Football) - Average 394,000; Share 55%; Peak 581,000 (17.37).
Clare v Kilkenny (Hurling) - Average 408,000; Share 48%; Peak 465,000 (18.50).
: Galway v Limerick (Hurling) - Average 482,000; Share 55%; Peak 578,000 (17.04).
Galway v Derry (Football) - Average 446,000; Share 52%; Peak 540,000 (19.07).
Kerry v Dublin (Football) - Average 588,000; Share 61%; Peak 709,000 (17.13)
