Beginning of the end? Winding-up petition issued
Pompey are facing yet another battle with HMRC, with another winding-up petition issued against the club following a failure to pay a tax bill of almost £800,0000. A further £1m has since become outstanding...
Is this the beginning of the end once and for all?
Well time will tell but the club have issued the following statement on The Pompey Site...
Portsmouth Football Club Statement
Over the past few weeks the club has been the subject of media speculation, with a number of parties - including prospective owners - speaking publicly about the state of affairs at the club.
We have generally tried to avoid adding to this speculation as it is not helpful and does not assist in the day-to-day management of the club's affairs.
The club is in a difficult set of circumstances at the moment. The period from November to January was always going to be one where the club received owner funding. This injection of cash was to cover a number of areas in our working capital requirements, including salaries and PAYE as well as scheduled payments for player acquisitions from last summer.
We knew that the club would not generate sufficient funds to support itself through this period. However, when CSI, the club's parent company, went into administration we were given assurances by the Administrator of CSI and the charge-holders over CSI (Portpin Limited) that the club would be funded through this period until a new owner was found. This has not happened. One of the reasons for this is that the Administrator has not generated expected funds from the sale of other CSI businesses that might have assisted the club's position.
The club's working capital position has therefore been severely stretched while we seek to resolve the ownership situation and this has resulted in the debts that are due to HMRC.
The club therefore has some difficult circumstances to manage. The charge-holder over CSI may choose to fund the club for any current shortfall in order to protect the value of its financial position. However, this appears uncertain/unlikely which means we may have to try to raise funds through player sales, although this is clearly not our preferred route.
In addition we still have a significant number of parties interested in acquiring the club who are actively pursuing their respective interests. We therefore remain positive that a solution will be found before some of these difficult choices have to be made. As you can imagine this has been, and remains, a very difficult balance.
We have been in regular contact with HMRC, The Football League and our creditors to keep them advised of the position. We will continue to work around the clock to achieve the sale of the club as soon as possible, something which remains our priority and the outcome we all hope for.
What is the process for HMRC and any winding-up petition?
When a debt is not paid to HMRC on time, they are able to issue a petition to wind-up a company. A date is then set for a hearing - this normally takes a couple of months to happen and for us this will take place on February 20.
HMRC are required to advertise the petition which they must do no later than seven days before the date of the hearing. We understand that they will be advertising this week, but some information has been released to the media in advance. We had asked them to delay this process (as they have the discretion to do) as it is likely to harm the club's position, the sale process and possible player trading, potentially to the detriment of HMRC and other creditors.
How much is owed to HMRC and how has this happened?
The petition sought by HMRC is for the PAYE for December which is approximately £800k. Since the raising of the petition a further £1m (in VAT and PAYE) has become due for payment.
By the end of last season, the club had managed to achieve a position close to break even on its P&L (Profit and Loss statement). We will be reporting a relatively minor loss in our accounts which are due to be filed next month.
When CSI came into ownership they pursued an investment strategy that involved injecting funds over and above the club's own generated income, principally relating to player acquisition and salaries, resolution of legacy issues from previous ownership and a significant working capital backlog.
This was in line with their revised business plan that was approved by The Football League at the time and was subject to the funding being underwritten by CSI. This business plan had peaks and troughs in cash flows whereby some months required additional funding and some did not. December and January were months where funding was required. When CSI went into administration this funding obviously stopped immediately and the club has been left with its own revenue streams.
Why has the club not made this information public before now?
The information is obviously commercially sensitive and potentially harmful to the club's interests. As mentioned above it would not be something that we would wish to advertise unless absolutely necessary, as it makes the current circumstances more difficult to manage and potentially harms the sale process and any possible player trading.
We have had to react to the statements made over the weekend which we did not sanction, although the information will likely be officially confirmed this week in any event. There is an important distinction here between transparency and conducting the club's business in public to the detriment of the club's own interests.
Why is the club making this information public now?
Now that the information has been put into the public domain by third parties we felt it necessary and appropriate to clarify the position and explain the circumstances as far as possible.
What is happening about a possible points penalty from the League?
The League are finalising their report on the club's position following the administration of CSI and we are expecting to receive the outcome shortly. However, we understand that the League may delay their decision until the club`s current ownership situation is closer to being resolved.
What happens if funds are not raised or provided?
We are obviously not in Administration at the moment and continue to do everything possible to achieve a successful outcome.
Ultimately if the club cannot meet its debts, it may face administration and the associated impact both operationally and from a football point of view (in terms of an automatic points penalty). We remain positive that this eventuality will be avoided, not least because it is in the interests of those concerned, including the charge-holder, to preserve the value of the club as far as possible.
Who is currently in control of the club's affairs?
The directors and senior management of the club continue to run the club on a day-to-day basis. We have regular contact with the Administrators of CSI as they are our 'de facto' shareholder. However, they do not have direct control over the business of the club, including player trading for example.
How can the fans help?
The most important thing our fans can do is continue to support the club and the team by coming to Fratton Park. The Administrators and Portpin cannot take money out of the club and all our revenue will be used towards meeting the running costs of the club. For the avoidance of doubt, all funds generated by the club are going, and will continue to go, towards funding the club's ongoing cash requirements.
Can there be much gas left in our tanks...
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