The directors present their report on the affairs of The Watford Association Football Club Limited (“the Company” or “the Club”), together with the financial statements for the year ended 30 June 201 8 .
Background
As at the year end, the Club’s Board consists of three directors (as detailed in the Company information section on the first page ), being the executive chairman and two independent non-executive directors.
The executive chairman has responsibility, in close liaison with other directors, for the day to day running and long term operation and running of the Club and refers to the Board in regard to significant decisions affecting all aspects of the Club.
The Club had previously retained its position in the Premier League for the 1 7 /1 8 season and had another successful season in the League.
The Club finished in 1 4 th position in the 201 7 /201 8 Premier League season, recording 4 1 points from eleven wins and eight draws.
There are a number of potential risks and uncertainties which could have a material impact on the Company’s long term performance. These risks and uncertainties are monitored by the Board on a regular basis.
Income
The Club derives its income from three principal sources: gate receipts, television and commercial relationships. All three sources of income are dependent on the performance of the first team and its appeal to football supporters. The performance of the first team is significantly influenced by the quality of the coaching staff and the players that the Club can attract in a highly competitive market on both domestic and European levels.
Expenditure
In order to attract talent , which will continue to improve the performances of the first team , the Club continually invests in the playing staff by way of both transfers and wages.
Regulatory environment
The Club is regulated by the rules of the FA, EPL, UEFA and FIFA. These regulations have a direct impact on the Club as they cover areas such as the division of centrally negotiated television deals and the operation of the transfer market. The Club has staff whose roles include ensuring that the Club monitors the evolution of the rules and ensures compliance with them.
Funding
Funds are provided by the Club’s parent C ompany Hornets Investment Limited. The Club reviews and updates its cash forecasts on a regular basis and keeps the owners aware of financial commitments going forwards.
The Board has considered the risks and uncertainties that face the business which are principally related to the costs and revenues involved in maintaining a playing squad and trading in players, and of maintaining its league status. It has also considered the financing requirements of the business that may result and these are referred to in note 1. 2.
Corporation tax
In April 2017 the government made a change to the corporation tax legislation. This change restricts the amount of previously accumulated corporation tax losses that a C ompany can utilise against its taxable profits in any one period. For the Club this means that corporation tax will be due in earlier periods than if the change in legislation had not taken place.
The Club’s owner s continue to be committed to new investment into the business in respect of playing staff and updating the facilities at the Stadium and the Club’s Training Ground at London Colney. This strategy continues to be evident at the Vicarage Road Stadium with ongoing works relating to accessible stadium requirements and a new hospitality reception and lounge on the West side of the stadium. The Club continue to review options for further development of the stadium in order to increase capacities in both hospitality and general seating areas. Works to improve the Club’s Training Ground at London Colney are also ongoing and the new thirty year lease signed is reflective of the intent to further improve facilities and ensure the Club is equipped with state of the art training facilities. The Club also continues to invest in its playing squad, in order to sustain performance and improve on its 1 4 th position finish in the Premier League during 201 7 /201 8 .
|
2018 |
|
2017 |
|
£'000 |
|
£'000 |
|
|
|
|
Turnover |
128,222 |
|
123,907 |
Wages and salary costs |
(85,809) |
|
(76,015) |
Other operating expenses |
(30,376) |
|
(29,978) |
Amortisation and impairment of player registrations |
(41,433) |
|
(28,514) |
Other operating income |
69 |
|
62 |
Regulatory fees |
- |
|
(4,300) |
|
|
|
|
Operating loss |
(29,326) |
|
(14,838) |
|
|
|
|
Profit on disposal of player registrations |
2,901 |
|
22,354 |
Net interest charges |
(5,189) |
|
(3,488) |
|
|
|
|
(Loss) / Profit on ordinary activities before taxation |
(31,615) |
|
4,028 |
|
|
|
|
Cash generated (absorbed) by operations |
9,041 |
|
19,019 |
Wages to revenue ratio |
67% |
|
61% |
League position |
14th |
|
17th |
The loss for the year before taxation was £31,614,544 compared to a profit of £4,027,590 for the prior year. Increase in salary costs, increase in amortisation of players and decrease in profit on disposal of players were the principal reasons for this reduction.
Total turnover increased by £ 4,316,111 from £ 123,906,784 to £12 8 , 222,895 . This was mainly due to an increase in Media & Broadcasting revenue because of increased centralised distributions from the Premier League of £3,611,929 and increase in sponsorship income from the Club's main sponsor, FX Pro. Revenues generated on match days have increased by £ 376,311 .
Salary costs, have increased from £ 76,014,960 to £ 85,809,117, with players' salaries increasing by £7,741,216.
Other operating expenses have increased from £29,978,382 to £30,376,093 mainly due to an increase in legal and professional fees in the year.
The football Club made a profit of £2,901,431 (2017: £22,353,656) principally due to the sales of Behrami, Berghuis, Suarez and Agbo.
Intangible assets have increased from £91,830,843 to £123,518,694 due to player acquisitions during the year.
As in previous years, the financial performance of the Club is reflective of its progression in the Premier League - turnover continues to grow steadily, as do the running costs associated with running a successful business within the Premier League.
Retention of the Premier League status for the 18/19 season maintains the Club's positive outlook. The shareholders are committed to invest in the Club to enhance its value and performance on and off the pitch, and will keep investing in upgrades for both the stadium and the training ground, along with strengthening the squad in an effort to increase commercial revenues and diversify the revenue streams.
On behalf of the board
The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.Therefore they have continued to adopt the going concern basis in preparing the financial statements. Further details regarding the going concern basis can be found in the accounting policies in note 1 to the financial statements.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard , and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the C ompany’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue .
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' r eport for the financial year for which the financial statements are prepared is consistent with the financial statements ; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' r esponsibilities s tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the C ompany’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the C ompany or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor’s report.
Use of our report
This report is made solely to the C ompany’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the C ompany’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the C ompany and the C ompany’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The Watford Association Football Club Limited is a private c ompany limited by shares incorporated in England and Wales. The registered office is Vicarage Road Stadium, Watford, Herts, WD18 0ER.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling , which is the functional currency of the C ompany. Monetary a mounts in these financial statements are rounded to the nearest £'000.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The Watford Association Football Club Limited is a wholly owned subsidiary of Hornets Investment Limited. The result of the Club are included in the consolidated accounts of Hornets Investment Limited which are available at 15-17 Grosvenor Gardens, London, SW1W 0BD.
T he Company has a loss before tax for the year of £31,614,543 (2017 - profit of £4,027,590) and had net liabilities at 30 June 201 8 of £27,867,016 (2017 - net assets of £2,859,090).
Following retention of Premier League status, the Company's income over the next twelve months, along with the continued support of the parent company, is sufficient to provide the necessary working capital for the Company and therefore it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
The Company's bankers have indicated that, so long as the Company continues to operate within its financial plan, regular renewal of the £ 5,000,000 (2017 - £5,000,000) overdraft facility will be available.
The parent company has confirmed that they will not seek repayment of the balance outstanding to them of £83,409,524 (2017 - £ 45,476,584) if to do so would jeopardise the Club's ability to continue as a going concern. The Club's owner is committed to new investment into the business in respect of playing staff and in order to update the facilities at the Stadium and the ultimate beneficial owner has entered into a financial commitment to financially support the Company for the next 12 months.
Acquired players' registrations
The costs associated with the acquisition of players' registrations are initially recorded at the date of acquisition as intangible fixed assets. Part of the acquisition cost may be dependent upon the number of appearances and the directors exercise their judgement on the probability of the deferred consideration becoming payable and capitalising that cost as an intangible asset. These costs are fully amortised over the period of the relevant player's contract.
Intangible assets are tested for impairment at each balance sheet date. An impairment loss is recognised for the amount by which the assets carrying value exceeds its recoverable amount. The directors' valuation of a player's registration is arrived at by reference to market conditions and comparative data of recent transactions. Impairment losses are recognised in the profit and loss account.
Amortisation is charged to the profit and loss account on a straight-line basis over the length of each player's contract.
Software and website development costs
Software and website development costs (not research costs) are recognised as internally generated intangibles when the following can be demonstrated:
a) the technical feasibility of completing the intangible asset so that it will be available for use or sale.
b) its intention to complete the intangible asset and use or sell it.
c) its ability to use or sell the intangible asset.
d) how the intangible asset will generate probable future economic benefits.
e) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
f) its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Amortisation is charged to the profit and loss account on a straight line basis over 10 years.
Pouring rights
Payments made to release the Company from exclusive supply provisions relating to alcoholic beverages have been recognised under the description of "Pouring rights". Pouring rights are capitalised as an intangible fixed asset and were amortised on a straight line basis over the economic life, estimated at 10 years. The Company's supply agreement was renegotiated in a prior year. As a result the asset was fully written down in that year's financial statements.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss .
At each reporting period end date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
If an arrangement constitutes a financing transaction, the financial liability is measured at the present value of future payments discounted at a market rate of interest for a similar debt instrument.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future paymen ts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are s ubsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the C ompany’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Company.
The Company enters into foreign exchange contracts in order to manage its exposure to foreign exchange risk.
The Company contributes to The Football League Limited Pension and Life Assurance Scheme for certain employees and also contributes to players' own pension plans, the assets of which are held separately from those of the Company in independently administered funds. Contributions payable are charged to the profit and loss account over the period to which they relate
.
In addition the Company is making contributions in respect of its share of the deficit of the defined benefit section of The Football League Limited Pension and Life Assurance Scheme (the "Scheme"). A provision has been established for the Company's share of the deficit which exists in this section of the Scheme and this additional contribution is being charged to the profit and loss account over the remaining service life of those employees who are members of the Scheme.
Under the provisions of FRS 102 Section 28 the Scheme would be treated as a defined benefit multi- employer scheme. The Scheme's actuary has advised that the participating employer's share of the underlying assets and liabilities cannot be identified on a reasonable and consistent basis. Therefore in accordance with FRS 102 Section 28 the Scheme has been accounted for as if it were a defined contribution plan.
Capital grants are recognised at the fair value of the asset received when there is reasonable assurance that the grant conditions will be met and grants will be received.
Grants relating to an asset are recognised in income systematically over the asset's expected useful life. If part of such a grant is deferred it is recognised as deferred income rather than being deducted from the asset's carrying amount.
In the application of the Company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The complex nature of the tax legislation under which the Company operates necessitates the use of estimates and assumptions in assessing the tax amounts provided in the financial statements. Actual tax payable may differ from the amounts provided.
T
he Company has one main business segment, that of professional football operations. As a result, no additional business segment information is required to be provided. It operates in one geographical segment, the United Kingdom, and accordingly no additional geographical information is required to be provided.
Notwithstanding this, a voluntary analysis of the revenue streams is given below to assist with an understanding of the business
.
Revenue streams comprise:
Matchday - season and matchday tickets and corporate hospitality.
Media - television and broadcasting income, including distributions from the English Premier League broadcasting agreements, cup competitions and local radio.
Commercial - sponsorship income & merchandising.
Other - loan fee receivable and other sundry income.
Within amortisation is £3,512,201 of impairment (2017 - £2,759,108) on intangible fixed assets.
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to a gain of £612,307 (2017 loss - £2,038,901).
The average monthly number of persons (including directors) employed by the Company during the year was:
Their aggregate remuneration comprised:
Termination benefits totalling £1,192,986 have been paid to 9 ex-employees since the termination of their employment contracts with the Club. These payments relate to the monthly salary of the employees which is contractually due to be paid to them until they find alternative employment. The value of the termination benefits charged is therefore based on amounts that are contractually due and that have been paid to date; future amounts are disclosed as contingent liabilities as they will cease to be paid upon the ex-staff members finding suitable alternative employment.
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2017 - 1). The charge to the profit and loss account in the year in relation to directors retirement benefits amounted to £21,000 (2017: £17,600).
Investment income includes the following:
The enacted rate of corporation tax will reduce to 17% from April 2020. The Company's deferred tax asset has been valued based on 17%.
The actual credit for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
Tax losses at 30 June 201 8 available for offset against future trading profits are in excess of £53 million (20 17 - £ 25 million) .
The figure for cost of player registrations are historic cost figures for purchased players only. Accordingly, the net book amount of player registrations will not reflect, nor is it intended to reflect, the current market value of these players nor does it take any account of players developed through the Club's youth system.
The directors consider the value of intangible assets to be significantly greater than their book value.
The amortisation of players' registration costs is included within cost of sales in the profit and loss account.
There is impairment of £3,512,201 (2017 - £2,759,108), included within the amortisation charge for the year.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
The estimated replacement cost of stocks does not materially differ from their balance sheet value.
Other creditors of £6,170,000 relates to amounts payable on transfer fees received in advance. A further £750,000 is repayable after more than one year. The corresponding debtor is shown in note 15 under transfer fees receivable. Total interest charged during the year is £551,499. Interest prepaid at the year end was £179,324.
Loans from group undertakings
Loans from group undertakings includes the following loans with the immediate parent company, Hornets Investment Limited:
A £20,000,000 loan, attracting interest of 5%. The full balance is due in less than one year. Total interest charged in the year is £711,849. Unpaid interest at the year end amounted to £711,849.
A £55,000,000 loan, originally attracting interest of 6% above LIBOR and now attracting 6.28% above LIBOR. The full balance is due in more than one year. Total interest charged in the year is £3,576,328 (2017 - £2,211,710). Unpaid interest at the year end amounted to £1,758,889 (2017 - £1,192,329).
An unsecured interest free loan of £626,584 (2017 - £626,584). This is repayable on demand and is therefore due within one year.
A £2,250,000 loan, attracting interest of 4.5% per annum. The balance due in less than one year is £900,000 (2017 - £450,000). The balance due in more than one year is £1,350,000 (2017 - £1,800,000). Total interest charged in the year is £101,250 (2017 - £101,250). Unpaid interest at the year end amounted to £25,243 (2017 - £nil).
A £1,000,000 loan, fully repayable in more than one year (2017 - £1,000,000), attracting interest of 4.5% per annum. Total interest charged in the year was £45,000 (2017 - £45,000). Unpaid interest at the year end amounted to £193,408 (2017 - £148,408).
A £1,600,000 loan, fully repayable in more than one year (2017 - £1,600,000), attracting interest of 6% per annum. Total interest charged during the year was £96,000 (2017 - £96,000). Unpaid interest at the year end amounted to £243,551 (2017 - £147,551).
Other loans
Other loans includes the following:
A secured loan from Watford FC's Community Sports & Education Trust of £418,961 (2017 - £468,961), attracting interest of 1.5% above Barclays Bank base rate. The balance due in less than one year is £50,000 (2017 - £50,000). The balance due in more than one year is £368,961 (2017 - £418,961). The total interest charged for the year is £8,547 (2017 - £9,786).
An unsecured interest free loan of £75,000 (2017 - £75,000) due within one year.
An unsecured directors loan of £1,930,030, attracting interest at 3% per annum. The balance due in less than one year is £965,015 (2017 - £965,015). The balance due in more than one year is £965,015 (2017 - £1,930,030). Total interest charged in the year totals £59,487 (2017 - £88,438). Unpaid interest at the year end amounted to £53,856 (2017 - £82,092).
Security
Hornets Investment Limited hold a fixed and floating charge secured on the total assets of the Company.
Barclays B ank PLC hold a fixed and floating charge secured on the total assets of the Company. Barclays also hold a legal charge and guarantee and debenture charge secured on the Vicarage Road Stadium
Watford FC 's Community Sports & Education Trust hold a legal charge secured on the Vicarage Road Stadium.
The carrying amount of the total assets of the Company is £ 190,832,245 (2017 - £168,852,893) and the carrying amount of the Vicarage Road Stadium is £23,715,359 (2017 - £25,626,139).
Finance lease payments represent rentals payable by the Company for a certain item of plant and machinery. The finance lease liability is secured by the asset held under the lease. The lease agreement includes fixed lease payments, and no restrictions are placed on the use of the asset.
The term of the lease is 36 monthly repayments, due to end in August 2019.
The following are the major deferred tax liabilities and assets recognised by the Company and movements thereon:
Capital grants include a balance of £800 (2017 - £3,070) relating to the grant received principally from the Football Stadium Improvement Fund, formerly the Football Trust, towards the cost of stadium re-development.
Also included is a grant received from Fabulous Fan Fayre Limited, towards the cost of catering equipment. At the balance sheet date £480,000 (2017 £540,000) of this remains within deferred income.
Defined benefit scheme
|
2018 |
2017
|
|
£'000 |
£’000 |
Liability at start of the year |
320 |
358 |
Payments in year |
(69) |
(69) |
Increase in provision |
13 |
31 |
Liability at end of year |
264 |
320 |
The Company has been advised of its share of the deficit of the Scheme. The most recent actuarial valuation of the Scheme was at August 2018 and indicated that contributions required from the Company towards making good the deficit was £559,464 at 1 September 2018 (the total deficit in the Scheme at this date was £30.4 million). The Company's share of the deficit is being paid over a period of seven and three quarter years commencing September 2018.
Additional contributions are being charged to the profit and loss account over the remaining life of those employees who are members of the Scheme. The amount charged to the profit and loss account during the year was £23,893 (2017 - £31,069).
The Ordinary 'A' shares rank pari-passu with the existing Ordinary shares. The shares have attached to them full voting rights, dividend and capital distribution (including on winding up). Any capital distribution shall be applied amongst the holders of the A ordinary shares and ordinary shares pari-passu as though the same constituted one class of shares pro rata to their numerical holdings notwithstanding they are of different nominal values. They do not confer any rights of redemption. Hornets Investment Limited own 99.7% of the Company's issued share capital.
Contingent liabilities and assets
The Company has liabilities under transfer agreements to pay additional sums dependent upon players' attainment and subsequent transfer value. The maximum that can be calculated and could be payable in respect of transfers made before 30 June 20 18 is £21,171,678 (201 7 - £ 19,835,622 ). Since the year end £ 560,000 has become payable (201 7 - £50,000 ) .
At 30 June 201 8, the Club had sums receivable from other clubs in respect of players, dependent upon the number of first team appearances or percentage sell-on clauses. Due to the uncertainty of receipt of these contingent assets, it is not practical to calculate the amount likely to be received. Since the year end £ Nil (2017 - £1,001,443) has become due.
At the reporting end date the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts contracted for but not provided in the financial statements:
As outlined in note 2 5 , subsequent to the year end, sums have been receivable from other clubs in respect of appearance and sell-on clauses in respect of players previously sold. It is estimated that net income of at least £ nil (2017: £1,001,443) is to be reflected in the financial statement s for the current year. Since the year end various players' registration have been sold or terminated and in respect of those it is estimated that net income of £46,546,540 (2017: £3,801,256) is to be reflected in the financial statement for the current year.
Since the year end there have been several new player registrations. The net payments to which the Club is committed in respect of those transactions is estimated to be £ 7,693,893 ( 2017: £49,666,000) ( dependent upon certain exchange rates at the date of payment), with further potential amounts of £ 4,335,200 (2017: £4,160,000) due dependent upon Club and / or player performance.
An amount of £ 965,015 (2017: £965,015) has been repaid in respect of a Director ' s loan.
Other than the directors there are no other members of key management. Directors' remuneration is reported in note 7.
As at 30 June 201 8, the C ompany owed £ 83,409,524 (2017 - £45,476,584) to Hornets Investment Limited, its immediate parent company. Details of the loan s are included in further detail in note 18 .
During the year, Hornets Investment Limited charged the Company £145,000 (2017: £nil) in relation to management charges. There is a balance of £145,000 (2017 - £nil) outstanding as at the balance sheet date.
During the year, the Company made a repayment of £965,015 (2017: £965,015) towards the unsecured loan from one of its directors of £ 1,930,030 (2017 - £2,895,045), accruing interest at 3% per annum, repayable over a 4 year period. The loan is outstanding as at the year end date and interest owed as at 30 June 201 8 is £53,856 (2017 - £82,092). Interest included in the accounts this year totalled £59,487.
One of the directors is also a trustee of Watford FC 's Community Sports & Education Trust, a charitable company registered in England and Wales . In the year, the Trust made purchases from the Company of £4,148 (2017: £nil) relating to merchandise sales, £9,502 (2017: £nil) relating to matchday income £7,560 in relation to hospitality income and £2,163 (2017: £nil) relating to events income. A balance of £10,503 (2017: £nil) was in trade debtors and £11,270 in prepayments at year end. The Company made payments to the trust of £4,844 (2017: £nil) in relation to events support. There was no balance in trade creditors at year end.
As at 30 June 201 8 a secured loan of £ 418,961 (2017 - £468,961) was owed to the Trust . I nterest is accr uing at 1.5% above the Barclays B ank base rate. The total interest charged for the year was £8,547 (2017 - £ 9,786 ) and all interest amounts are paid.
During the year , a salary of £31,275 (2017 - £ 30,500) was paid to the majority shareholder and ultimate controlling party.
During the year , a total amount of £ nil (2017 - £94,884) in respect of administration fees, was paid to Fidentis Advisors Limited, a company incorporated in England and Wales. The company is related to the Company's parent company through associated directors . There is no balance (2017 - £1 , 2 00 ) outstanding as at the balance sheet date.
During the year , total amount s of £ 120,650 (2017 - £nil) and £50,010 (2017: £nil) were paid to Galzar Consulting Ltd , a company incorporated in England and Wales , in re lation to consultancy services and assistance with accountancy matters respectively. The company is related to the Company's parent company through associated directors . There is no balance (2017 - £nil) outstanding as at the balance sheet date.
During the year , a total amount of £ 114,642 (2017 - £20,531) was paid by Harefield Academy Trust, a c ompany incorporated in England and Wales , in re lation to educational services. The company is related to The Watford Association Football Club Limited through its company secretary . There is a balance of £51,722 (2017 - £20,531) outstanding in trade creditors as at the balance sheet date.
During the year , commission fee s of £ 275,000 (2017 - £195 ,000 ) and finance services fees of £nil (2017 - £75,000) w ere paid to BGB Aurea Limited, a company incorporated in England & Wales. The company is related to the Company's parent company through associated directors.
During the year , a total amount of £ 20,833 (2017 - £15,749) was paid from Watford Ladies FC Ltd , a company incorporated in England and Wales , in respect of merchandise sales. The company is related through one of the Company's directors . The balance outstanding is £nil (2017 - £18,710) as at the balance sheet date.
During the year, £4,003,654 (2017 - £3,468,609) was paid to Udinese Calcio SpA, a company under common control, in respect of transfer fees, £nil (2017 - £9,633,647) in respect of sell on fees, £43,960 (2017 - £24,287) in respect of solidarity fees and £5,140 (2017 - £nil) in respect of gifts to the board. £20,254 (2017 - £19,417) in respect of solidarity received and £nil (2017 - £1,800) was received from corporate hospitality.
The immediate parent company is Hornets Investment Limited, a company registered in England and Wales. The ultimate parent company and controlling party is Diversify Sport Investment SL, a company registered in Spain. The sole shareholder and therefore the ultimate controlling party is Gino Pozzo.