Can Someone Please Explain...?

[uk_martin 1,606]

If there is someone with some understanding of accounts, please help. With reference to this document...

 

As you can see this is in the public domain, in respect of GoSpeed International Ltd.

 

GoSpeed International Ltd, as most will know, is the company entrusted by the sport's authorities to handle the media rights, get major headline sponsors and advertisers and basically make the sport a richer place. Mind you, that's not quite what Companys House or HMRC think. According to them, the nature of the business is as "Television programme production activities" Well let's leave that aside for a moment.

 

Now anyone without any accounting knowledge (e.g. me!) , could be mistaken into thinking that this company lives on the back of debts payable and debts owed...pretty much like a bank. it looks like money owed in exceeds money owed out by £2705. Is that right? So is that what the company's net worth is?

 

Presumably, people would be forgiven for thinkiing that the directors will know all the wizard wheezes on how to live off the back of the company, won't they? Like how to loan themselves £17K in an unsecured loan. And how to pay themselves a dividend, some THIRTY TIMES the value of the company. Unless that's a total misreading of the situation. I don't know. Can someone who knows accounts please explain?

 

Can someone also please explain the link between the figures on the Profit & Loss Account page, which to the untrained eye looks like more is being taken in dividends than is being made in what I assume to be trading profits? Is that usual, and is it sustainable? Bear in mind the statement on Page 5 of this document that investigated why the previous GoSpeed Ltd went bust.

 

How on earth is a VAT bill of £87,390 rattled up? That must be the 20% stake of a turnover (incl. VAT) of somewhere near £524,340 - where's that in the accounts? And where did that money come from and where did it go? Where's the corresponding VAT claim back on goods or services obtained?

 

I assume that the other taxes and social security relate to the wages paid to the secretarial services person on the £16K wages?

 

How can a company that's only worth £2,705 rattle up a Corporation Tax bill of £43,123? What's missing here?

 

Finally, do these accounts show how much money has been given over to British Speedway from all the activities undertaken? There must be a load of fans thinking "what's my team got out of all this?" GoSpeed put the blockers on social media etc, that have stopped fans from enjoying the sport to the full, so what's the payback for it?

 

I'm sure that there are perfectly good explanations for all these figures, but they need to be spelt out in plain English so that people can tell what's going on. Mr Russell may indeed be worth every penny of his £62,500 dividend that he got from the company on his £1 share. I'm not denying that. He may also be paying an equitable interest rate back to the company on the £17K loan that he was given. But until the ordinary fan can see by how much speedway has benefited from this operation, and what these accounts mean, there will be those (myself included) who wonder what's going on and if the sport is being taken for a ride.

Edited October 27, 2017 by uk martin

[racers and royals 8,712]

Why don`t you ask your mate Alan Phillips

[Tsunami 10,219]

If there is someone with some understanding of accounts, please help. With reference to this document...

 

As you can see this is in the public domain, in respect of GoSpeed International Ltd.

 

GoSpeed International Ltd, as most will know, is the company entrusted by the sport's authorities to handle the media rights, get major headline sponsors and advertisers and basically make the sport a richer place. Mind you, that's not quite what Companys House or HMRC think. According to them, the nature of the business is as "Television programme production activities" Well let's leave that aside for a moment.

 

Now anyone without any accounting knowledge (e.g. me!) , could be mistaken into thinking that this company lives on the back of debts payable and debts owed...pretty much like a bank. it looks like money owed in exceeds money owed out by £2705. Is that right? So is that what the company's net worth is?

 

Presumably, people would be forgiven for thinkiing that the directors will know all the wizard wheezes on how to live off the back of the company, won't they? Like how to loan themselves £17K in an unsecured loan. And how to pay themselves a dividend, some THIRTY TIMES the value of the company. Unless that's a total misreading of the situation. I don't know. Can someone who knows accounts please explain?

 

Can someone also please explain the link between the figures on the Profit & Loss Account page, which to the untrained eye looks like more is being taken in dividends than is being made in what I assume to be trading profits? Is that usual, and is it sustainable? Bear in mind the statement on Page 5 of this document that investigated why the previous GoSpeed Ltd went bust.

 

How on earth is a VAT bill of £87,390 rattled up? That must be the 20% stake of a turnover (incl. VAT) of somewhere near £524,340 - where's that in the accounts? And where did that money come from and where did it go? Where's the corresponding VAT claim back on goods or services obtained?

 

I assume that the other taxes and social security relate to the wages paid to the secretarial services person on the £16K wages?

 

How can a company that's only worth £2,705 rattle up a Corporation Tax bill of £43,123? What's missing here?

 

Finally, do these accounts show how much money has been given over to British Speedway from all the activities undertaken? There must be a load of fans thinking "what's my team got out of all this?" GoSpeed put the blockers on social media etc, that have stopped fans from enjoying the sport to the full, so what's the payback for it?

 

I'm sure that there are perfectly good explanations for all these figures, but they need to be spelt out in plain English so that people can tell what's going on. Mr Russell may indeed be worth every penny of his £62,500 dividend that he got from the company on his £1 share. I'm not denying that. He may also be paying an equitable interest rate back to the company on the £17K loan that he was given. But until the ordinary fan can see by how much speedway has benefited from this operation, and what these accounts mean, there will be those (myself included) who wonder what's going on and if the sport is being taken for a ride.

How can it be ? If this account relates to his agreed share %age of the SKY money, once it's in his account it's got nowt to do with British Speedway or BSPA in particular.

Another useless attempt to have a go from UK Martin.

[topsoil 2,498]

To answer some of the questions raised above:-

 

It looks like the profits will have been earned and built up in previous years. Dividends can be taken out of the company up to the amount of the reserves (profits) brought forward and built up over a period of time. All perfectly legal.

 

The VAT and corporation tax creditors MAY also relate to prior accounting periods, but if that was the case the creditors would include significant interest and penalties. As regards the question of turnover, it is impossible to determine the turnover of the company, as only the bottom line profit for the year is shown, the income and costs can only be guessed at.

 

The profit for the current year £42,783 will also be AFTER tax.

 

Many small companies are owed money by directors. Directors have up to nine months after the accounting year end to repay the loan before being liable to tax.

 

Hope this helps.

[arnieg 3,620]

The starting point is that you have to distinguish between assets and revenue transactions. It looks pretty typical of a small company (which means it benefits from the small companies exemptions that allow it not to disclose any profit and loss account.)

 

From the VAT creditor and the corporation tax creditors we can hazard a guess that Go-speed has a turnover measured in hundreds of thousands. There appear to be no obvious outgoings apart from the one part time employee so I suspect that there is some form of fee being paid to other companies (but there is no connected party transaction note so maybe not).

 

The value of the company is principally the rights under its existing contract (i.e. the right to receive future revenues) with the BSPA, and that is not shown on the Balance sheet. So we know nothing about the company's worth - it could be twopence, it could be millions.

 

It looks like the booked profits are all paid out in dividends.

 

Which begs the question what is the (non-VATable) expense that makes up the difference.

 

so one possible (note possible - I am making some [very] big generalizations and guesses here) shape of the P & L:

 

Revenue ~500k

Less: Principal outgoings ~350k

Less: wages and other misc overheads ~50k

Profit before tax ~100k

Less corp tax ~40k

Profit after tax ~60k

Less dividends ~ 60k

t/fr to reserves nil

 

Overdrawn directors loan account looks pretty unexceptional to be honest, but the build up of the tax/VAT creditors would sound a note of caution.

 

My guess is that the £350k (and that could be anything between £200k and a million in reality) is paid to another entity and the bulk of the profits from the TV deal taxed there.

[MattK 3,447]

Now anyone without any accounting knowledge (e.g. me!) , could be mistaken into thinking that this company lives on the back of debts payable and debts owed...pretty much like a bank. it looks like money owed in exceeds money owed out by £2705. Is that right? So is that what the company's net worth is?

 

 

A balance sheet is a snapshot of the company's assets minus their liabilities at a point in time. It isn't the net worth of the company, which is more closely related to the company's profits.

 

Presumably, people would be forgiven for thinkiing that the directors will know all the wizard wheezes on how to live off the back of the company, won't they? Like how to loan themselves £17K in an unsecured loan. And how to pay themselves a dividend, some THIRTY TIMES the value of the company. Unless that's a total misreading of the situation. I don't know. Can someone who knows accounts please explain?

 

Can someone also please explain the link between the figures on the Profit & Loss Account page, which to the untrained eye looks like more is being taken in dividends than is being made in what I assume to be trading profits? Is that usual, and is it sustainable? Bear in mind the statement on Page 5 of this document that investigated why the previous GoSpeed Ltd went bust.

 

Any company can grant a director a loan. You'll also be please to hear these are interest free. It is usually done when the company is making a profit, but before a dividend is paid.

 

If you look at the Profit and Loss you will see a profit of 36,894 as at 1 Jan and 52,746 for the year, which means even after a dividend payment of 67,220 the company has 22,420 in the P&L account. This is why the following year the dividend is higher than the profit.

 

How on earth is a VAT bill of £87,390 rattled up? That must be the 20% stake of a turnover (incl. VAT) of somewhere near £524,340 - where's that in the accounts? And where did that money come from and where did it go? Where's the corresponding VAT claim back on goods or services obtained?

 

I assume that the other taxes and social security relate to the wages paid to the secretarial services person on the £16K wages?

 

How can a company that's only worth £2,705 rattle up a Corporation Tax bill of £43,123? What's missing here?

 

The accounts required to be filed by limited companies are not that detailed and don't go to the level of showing turnover or costs. Therefore I think your assumptions are correct and they must be turning over close to £450k-ish.

 

Again, don't get too hung up on the £2,705.

 

Finally, do these accounts show how much money has been given over to British Speedway from all the activities undertaken? There must be a load of fans thinking "what's my team got out of all this?" GoSpeed put the blockers on social media etc, that have stopped fans from enjoying the sport to the full, so what's the payback for it?

 

I'm sure that there are perfectly good explanations for all these figures, but they need to be spelt out in plain English so that people can tell what's going on. Mr Russell may indeed be worth every penny of his £62,500 dividend that he got from the company on his £1 share. I'm not denying that. He may also be paying an equitable interest rate back to the company on the £17K loan that he was given. But until the ordinary fan can see by how much speedway has benefited from this operation, and what these accounts mean, there will be those (myself included) who wonder what's going on and if the sport is being taken for a ride.

 

Given that Go Speed is a privately owned company, there is an element of privacy which covers the businesses activities. Accounts are not designed to answer the questions you are asking. Why don't you ask Go Speed or indeed individual clubs what they receive from the TV deal?

[uk_martin 1,606]

...so one possible (note possible - I am making some [very] big generalizations and guesses here) shape of the P & L:

 

Revenue ~500k

Less: Principal outgoings ~350k

Less: wages and other misc overheads ~50k

Profit before tax ~100k

Less corp tax ~40k

Profit after tax ~60k

Less dividends ~ 60k

t/fr to reserves nil

 

Thanks for the useful info. So using this hypothetical set of figures then, does this mean then that the hypothetical the value of the SkySports TV deal that other threads have been debating the value of could be about £500,000? Assuming that this is, then that the top line is the cheque handed over by Sky to GoSpeed. Out of that, roughly £80,000 could be the value of the VAT, and then about £270,000 is handed over to the BSPA, the difference of £150,000 amounts to the "commission" (or Gross Profit?) that the company is run on then? Is that how it works?

[arnieg 3,620]

I have no idea. My figures were speculative and illustrative, and I think I will leave further speculation to others who know more about the mechanics of the TV contract.

[woofers 467]

A companies worth would generally be the Balance Sheet value plus a ratio of future profits (estimated from future contracts for example).

It would seem that this company is a fairly straightforward trading concern, with profits being taken in the form of dividends as the numbers allow. The low P&L reserve over the years may well be due to profits being taken in those years, with the last two years having been accumulated and then paid out – we simply don’t know, and so long as the P&L reserve remains positive there is nothing wrong or illegal about that.

Although by running a consistently low reserve figure it would seem that there is little attempt or appetite to build a foundation for future growth. Although it is a positive Balance Sheet it is not what you’d regard as ‘strong’ – it is solvent, the amounts due to it outweigh those owed by it, by £2,705.

However the bulk of the amount due is from Other Debtors and the Directors Loan, both non-trading sources. The main Creditors though are from trading, being HMRC in the form of VAT and Corporation Tax. With Corporation Tax averaging 20% and VAT being paid over every 3 months, you can do some arithmetic to speculate whether these are annual and quarterly figures or if they contain arrears.

You don’t need to look too far to see a similar pattern of figures from the past and the outcome. There are no related party transactions for the period covered, however the Director did incorporate a new company in June 2017.