Rainy Day Money
If you were reading the site on Saturday evening,you will have seen AULDHEID post a link to an article he wrote on the subject of important questions to be asked at a forthcoming Celtic AGM. Eight of them,in fact. All pertinent of course,as we would expect. And more importantly,none of them are designed to give the board an easy time of it,even if many of us suspect that any answers will contain more than an element of obfuscation at best.
It reminded me of some correspondence I had with someone known to many of us,about six months ago or so. This is a man with much more legal and financial knowledge and experience than I am ever likely to attain,and while the correspondence will remain confidential,the subject was a simple one.
Business Interruption Insurance.
You may have read recently that The All-England Club,aka Wimbledon,recently received a payout of a whopping £194m due to the cancellation during the summer of their annual jamboree and tennis tournament. It seems that this wise sporting institution took a look at the headlines generated by the SARS outbreak in SE Asia in 2003 and decided that it might be a plan to take out some form of insurance which protected them from any financial difficulty caused by a similar outbreak in the future.
This despite the fact that the SARS outbreak was largely contained,occurred about 6000 miles away and the number of eventual deaths was less than 800 poor souls.
This occurred,by sheer coincidence,at around the same time that our famously risk-averse current CEO was arriving at the club,albeit in a far less prominent role at the time. Since when his legend has grown along with the responsibilities which he has selflessly shouldered,to the extent that little of import takes place at the club without his express say-so. And his reputation for fiscal prudence is a matter of record,and of legend. So it was with some surprise that I read the annual accounts last month-which reported quite a large loss,with our cash in hand reduced by about 50% to around £18m.
That wasn’t the surprising bit though. We are,after all,in the middle of a pandemic,and the majority of businesses worldwide have taken a huge hit because of it. Many,indeed,have closed their doors permanently,unable to pay their rents,taxes,even wages.
These are difficult times indeed. We all know that. But of course,our risk-averse and fiscally prudent CEO would have made sure that the club could claim on its Business Interruption policy,even if he didn’t have the foresight to specifically insure against a pandemic,as Wimbledon had done at a cost of approx 0.4% of annual profit. Of course,it may have been based on annual turnover-the specifics of the policy are confidential,as you might expect.
But even based on our record turnover of £101m only two years back,that would have meant a worst case bill of £400,000. As a percentage of income,it is a fraction of how much you or I pay for our house insurance,car insurance,even life insurance. But I won’t hold it against PL for not having that even if other sporting organisations did-the ECB,for instance. After all,he would still have ensured that we had our Business Interruption Insurance.
Now,I don’t deny that I am heavily critical of PL at times,mainly for getting involved-usually to the exclusion of everyone else!-in matters which I think are beyond him. But I have always been happy to congratulate him when he does a good job,so I look forward to congratulating him on a job well done when he reveals the size of our Business Interruption Insurance payout. Of course,I don’t expect it to be on the scale of the award to Wimbledon,nor anything like it. That would be silly,after all our financial hit has only been a fraction of that.
I’ll also be interested to know why no mention of it has been made in the recently issued accounts. Certainly the policy must exist-no man as fiscally prudent as PL would decide to cancel such an important policy,would he? Especially when the costs involved are relatively negligible. And surely no Plc board worthy of the name would allow such a decision to be rubber stamped,and he wouldn’t do that without the authority of the board.
So here,AULDHEID,is potentially Question Nine for the AGM,if it ever happens. Do we have Business Interruption Insurance? The follow-up questions depend on the answer of course. If yes,why is there no mention of it in the accounts,and what amounts are expected to be claimed? If no,why not? Who decided this? If it was the board,are minutes of the meeting available? If the matter wasn’t put to the board,why not and oh dear what a mess.
Oh,and here’s another one. If we have the insurance and haven’t claimed against it,why not? Because that,I believe,is likely to be the case. And the Why Not? I don’t think they’ll want you to go there,but it is an AGM after all and they are bound by the relevant regulations to be truthful at these events.
We live in interesting times…
Above article by BMCUWP.