2020 Financial Report

The club has filed its annual report for the year ended 30 June 2020 at Companies House.

As provided last year, and in line with our club’s Values of Honesty, Openness and Integrity, Argyle’s Head of Finance, David Ray, has written to the Green Army to provide additional context to the financial statements being published.

The report outlines the club's financial position as of 30 June 2020 and covers the period before our promotion to Sky Bet League One. Although some of the effects of the COVID-19 pandemic are felt in this report, the financial impact will continue to be felt throughout the following year, at least.

You can also view the submitted report, in full, by clicking here.

AT A GLANCE:

Aligned with our Value of Transparency, the annual report for the financial year includes more information than in prior years.

This is the first time Argyle has reported full financial results, rather than the abbreviated version permitted under company law. As part of our continued commitment to sharing financial information with our supporters, we would like to take this opportunity to explain these financial results and how they fit in with our long-term strategy and the mission we shared with supporters a year ago. 

What do these financial statements tell us?

As noted last year, we have changed our reporting period to align with the EFL season. As a result, the report compares the year to June 2020 with the six months to June 2019. We think it is more helpful to review this year’s results against the financial results for the full prior year (therefore comparing the 2019/20 season with the 2018/19 season).

Despite the COVID-19 pandemic, the club has made progress towards our goal of being financially sustainable. That goal is for our success to be based on the financial resources we can generate from our various activities, not on external sources, such as shareholders or lenders.

This year, we have seen many positive developments, including:

• Attendances are up, as we secured promotion to League One, with more people coming to see the club’s attacking, entertaining and successful style of football;
• The £7.7m renovation of the Mayflower Grandstand was completed. It was opened for use both on matchdays, and at other times as a conferencing and events centre; and
• Increased transfer income.

These developments, plus continuing emphasis on cost control, have put us in a position to generate surpluses of income over costs when the pandemic is over.

The emergence of the COVID-19 pandemic, triggering the curtailment of the 2019/20 Sky Bet League Two season and the cancellation of major events planned at Home Park in the close season, presented an unprecedented challenge for our club. With this in mind, we can be pleased with these results.

Following relegation from Sky Bet League One in the 2018/19 season we enjoyed a successful season in Sky Bet League Two in 2019/20, achieving our objective of winning promotion at the first attempt. Despite participating in a lower division and being confronted with a global pandemic, many of the financial results included in this annual report demonstrate an improvement on the prior year. We consider the key elements below.

Income

Turnover increased by around 6% from £6.6m to £7.0m. This increase was largely due to strong retail performance, income from hospitality and events in the redeveloped Mayflower Grandstand, and enhanced sponsorship deals.

It is important to note that, in addition to this turnover, we also generated income from player transfers. This amounted to over £1.1m and included proceeds from the sale of Freddie Ladapo to Rotherham United and a sell-on fee received following Sam Gallagher’s transfer from Southampton to Blackburn Rovers. Although welcome, transfer income is unpredictable, and cannot be relied on for budgeting purposes.

We took measures necessary to protect the club during the COVID-19 pandemic. This included taking advantage of the government’s Coronavirus Job Retention Scheme. We received support of £0.5m in respect of the period between March and June 2020 when most of our staff, including the playing squad, were placed on furlough following the curtailment of the Sky Bet League Two season. Consistent with our Values, we took the decision to top up the 80% provided by the scheme, to protect our staff and their families.

Costs

Wages and salaries remain the major cost for Argyle, in particular those of the first-team management and playing squad, as is the case for all elite-level football clubs. These costs decreased from £3.3m in the 2018/19 season to £2.9m in the 2019/20 season. (Note that this understates the costs involved for the first team squad, as it does not include unavoidable travel, accommodation and medical costs).

Profit

Whilst we recorded a loss after tax of £0.7m during the year, this was significantly lower than in the 2018/19 season, where we recorded a loss after tax of £2.4m.  We discuss this in more detail below. The chart shows the breakdown of income received and costs incurred to bring about the loss of £0.7m.

Fixed assets and net assets

Fixed assets and net assets have increased considerably, mainly due to an increase in tangible fixed assets from £7.3m to £12.1m in the 2019/20 season, following the completion of the £7.7m Mayflower Grandstand refurbishment. The Mayflower Grandstand represents a significant asset for the business, and we hope very soon to be able to use it to its full potential to generate enhanced revenues, both on a matchday and non-matchday. In the meantime, we have been delighted that the NHS has used the venue to serve our community throughout the pandemic.

Cash

As at 30 June 2020, the club had a cash balance of £3.7m.

Simon Hallett, our majority owner and Chairman, invested an additional £3.5m into the club in June 2020 to protect us against the financial impact of the COVID-19 pandemic. This money was initially invested into the club in the form of a short-term loan, which bore no interest, and, upon completion of the necessary paperwork, was almost immediately converted into shares. The conversion of the loan to equity took place after 30 June, the date of these accounts. This means that the although the £3.5m appears as a loan in the accounts, it can be considered as equity given the subsequent conversion.

Unlike many football clubs our losses have been financed by issuing shares, not by taking on loans. Argyle is almost debt free, putting the club in an enviable position.

We also received donations in the form of cash and forgone refunds from supporters. We thank the Green Army for their loyalty and generosity in this regard. You have helped safeguard the long-term future of our club.

How do these results relate to our mission?

In December 2019, our board set the mission of being a financially sustainable Sky Bet Championship club within five years. 

But what do we mean by financially sustainable? Put simply, we will generate sufficient income to cover our costs and therefore will not be reliant on our owner to inject money into the business to cover any losses. This is of crucial importance for the long-term financial security of the club.

Despite recording a loss of £0.7m in the year ended 30 June 2020, we believe this represents progress towards our mission.

On the pitch

We made great strides towards our objective, most notably by achieving promotion from Sky Bet League Two to Sky Bet League One. We have an exciting young management team who are achieving great results and implementing what will become the club’s own football philosophy. To develop the squad, we are successfully investing in young players from both our Academy and through our recruitment process.  We see this as an area of great opportunity for the club.

As is the case for all football clubs at the elite level, player and management wages account for a significant proportion of our overall costs. Controlling these costs, whilst ensuring the quality of the playing squad improves, is critical to achieving our mission.

Player wages fell in comparison with the previous season, as we dropped from Sky Bet League One into Sky Bet League Two. We maintained a competitive budget for League Two, whilst acknowledging the reduced revenues for participating in a lower division of the EFL.

In coming seasons, the introduction of the EFL player salary cap at £2.5m per season for Sky Bet League One clubs will help us to attain financial sustainability, whilst remaining competitive at this level.  We will compete by being smarter about how we spend resources. In particular, we are using data analytics to target the best players for recruitment, based upon criteria that align with our playing philosophy. We have already made good progress in this regard. Any investment in the playing squad will be made with the future in mind. We will continue to identify and recruit young players who can deliver long-term value to us and will have a value attached to them.

Off the pitch

The development of the Mayflower Grandstand is crucial to the future of Argyle, as an asset to both the football club and our community. The increased revenues generated will enable us to invest further, not only in the football squad, but also in better facilities for our fans. It will allow us to continue to improve our fan experience and attract new supporters to our club. The efforts made to date to improve the experience at Home Park for families have been recognised and we were proud to be named Kin + Carta Connect Family Club of the Year in respect of the 2019/20 season.

In summer 2020 we completed an organisational restructure, with several changes to supporter-facing roles. This involved difficult decisions, but we needed to look closely at our cost base and to ensure that we have the structure and skill sets to achieve our long-term objectives. We feel we have a skilled and diverse team in place, on and off the field, to continue to take the club towards our goal of becoming a financially sustainable Championship club in the years ahead.

COVID-19

The pandemic contributed significantly towards the loss of £0.7m reported. The curtailment of the 2019/20 season impacted our income streams, as did the cancellation of concerts and many other non-matchday events that had been planned.

We have mitigated losses through, amongst other things:

• the overwhelming generosity of supporters donating amounts due by way of refunds on season tickets and hospitality packages;
• finding new and innovative ways of generating revenue on non-matchdays;
• reducing capital expenditure and operating expenses;
• taking advantage of government support schemes such as tax deferrals, and the Coronavirus Job Retention Scheme;
• the continued support of our sponsors; and
• the support of the EFL and the footballing authorities, including the Premier League.

We continue to adapt accordingly. Cash balances are under constant review and forecasting has been performed to reflect different possible scenarios over the coming year. 

It is reassuring and testament to the generosity of our stakeholders, particularly our fans, and also the hard work of our staff, that our auditors did not have any concerns about the ability of our club to continue as a going concern, despite the adverse external environment.

What does the future hold?

We will continue to work towards our mission and will maintain the excellent progress we have made to date on our journey towards financial sustainability. Success on the field and stable finances are a recipe for lasting success for our club. Simon has supported the club generously throughout the past few years, and this generosity has provided the club with a good financial platform upon which to build. This is certainly the strongest opportunity the club has had in many years to create sustainable success.

The club has weathered the storm of the pandemic very well. Simon’s recent cash injection, along with the support of the Green Army, gives us resources for the future and the breathing room to recover fully from the absence of fans at Home Park during the 2020/21 season.

Our resources will be used to build a long-term platform for success, investing in infrastructure (both physical and human) that will have a long-term payoff.

In the meantime, we will compete by being smarter about how we use our resources. We will put good decision-making at the heart of everything we do at the club, both on and off the pitch.

I look forward to seeing you all back at Home Park soon. Thank you for your continued support.

David Ray