Derby County; In the Red?
By Mike Kelly
Tuesday 21 Jan 2020 13:02:00
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Fmttm fanzine columnist Mike Kelly uses his accountancy skills to take a forensic look through the books of our Championship opponents. The columns are always titled, In the Red? This article is taken from the last fanzine, Boro v Derby County.

Given the bad blood between the chairmen, it wouldn’t be surprising if lamb is on the menu in the boardroom at the Riverside this afternoon.

Steve Gibson feels Derby’s Mel Morris broke the Football League’s Financial Fair Play (FFP) rules by selling off Pride Park to a company he created, then leased it back to the club so they could continue to use it. The resulting profit on the sale of the stadium enabled Derby to comply with FFP rules in 17/18.

The financial jiggery-pokery surrounding the sale is difficult to disentangle, a cynic might say deliberately so:

Derby County Football Club Limited was originally established in 1896. After Morris had taken over the Rams it had become owned by ‘Sevco 5112 Limited’, which in turn was owned by Morris himself. Sevco 5112 Limited also owned Sevco 5113 Limited, but on the 28th June 2018, two days before its accounting deadline,  Sevco 5113 Limited was sold to a company called Gellaw Newco 205 Limited along with four other companies connected to Morris and his interests in Derby; Global Derby (UK) Limited, Gellaw 101 Limited, DCFC Limited and Derby County Stadium Limited.

Another company, Gellaw Newco 201 Limited, was also set up in June 2018 with Morris as sole owner. It issued £3.2m of shares on 28th June 2018, bought Sevco 5112,  Sevco 5113 and another newly established company, Newco  202, and was then dissolved a year later with these companies appearing to be transferred to Morris. Yet another company, Gellaw Newco 204 Limited, was also established in June 2018 and appears to have subsequently acquired an interest in Pride Park.
Several other companies appear to have been involved in the reorganisation of Morris’ interests, including Gellaw Newco 203, Gellaw Newco 205, Glnew and Gellaw 458, which bought something for £0.5m in 2017, it’s not clear from the accounts what that was, and then either sold part or wrote it down to £180k in 18/19.

This frenetic corporate activity was followed by the arrival of a potential new investor; Henry Gabay, a Swiss/Turkish banker who co-founded Duet Group - a "global alternative management company", which specialises in hedge funds, real estate and private equity.

A company linked to Gabay, Rams Investment Limited, has already registered charges against “Land known as Derby County Stadium” owned by Gellaw Newco 202 and “All estates or interests in any freehold and leasehold properties” held by Gellaw Newco 204.

Gabay is clearly no mug; the ground offers more security than the club itself, which was left in Sevco 5112 along with Derby’s academy, which presumably trains a cohort of promising company secretaries and chartered accountants along with the footballers.

Per the accounts of Sevco 5112; the vision is to make Derby County FC ‘A sustainable and perennial competitor in the top half of the premier league”.

Sevco 5112 made a loss of over £1m even after the sale of Pride Park and after valuing the squad at £50m. It had consolidated net liabilities of £4m before the 18/19 season had started. After losing to Villa at Wembley last May the club will have probably lost around £40m. It’s difficult to see how even the craftiest accountant could dress such financial mutton up as lamb and magic up another gain like the stadium sale, so when the accounts for last season are finally published they may well show that Derby have (again?) breached the letter of the FFP regulations, not just their spirit.

Even if Derby somehow do contrive to baffle the EFL with a maze of financial detail, ultimately it’s the bigger picture that counts. As Gibson said “The FFP rules are important for lots of reasons, they prevent clubs getting into trouble and they should give every team in the league a chance of competing at their level”.
Morris may still believe his vision that Derby’s level is in the top half of the Premier League, but they don't look sustainable in the top half of the Championship. The Rams may already be in financial trouble, Henry Gabay could be justified in thinking that Morris is flogging a dead sheep.

Mike Kelly
© Northern Alliance Ltd

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