If you would want to see the accounts for yourself, you can see the stock exchange announcement by clicking on this link.

In addition, I would like to disclaim any financial advice I may have given, the fact that I am not an accountant, and that any investor should conduct their own due diligence before investing in ZO Future Group shares.

ZFG and the Blues are only related by the fact that they are still 51% stockholders, therefore I won’t attempt to undertake a thorough examination; instead, I’ll focus on the key numbers.

Top Stats

The question of how the Blues can afford to spend so much money has been raised by rival team supporters in the wake of the side’s summer transfer spending spree.

While some copium-addicted followers have vowed up and down that the Blues will be busted again for violating financial fair play regulations, more realistic supporters of rival teams have questioned how the Blues can break even in light of the previous barren years.

In light of this, I believe the most crucial numbers to look for have to do with revenue—that is, the amount of money the team makes.

The rules that Hong Kong has for its main board listed firms require ZFG to provide information on the income, expenses, and profit/loss of each member of the group of companies.

The report’s page seven confirms what we all knew had happened at Blues—that the restaurant’s income had increased dramatically over the previous 12 months.

The lower section of the ground’s restorations being finished, together with the overall positive vibe, was undoubtedly one of the main causes of the club’s increased attendance.

Matchday receipts increased to HK$61.087M (about £5.851M) last year, or 171% of the previous year’s total of HK$36.042M.

The amount of money from sales is also significantly larger, coming in at HK$59.140M (about £5.665M), or 124% of the total from the previous season.

I expect the revenues for this season will surpass the HK$239.763M (£22.965M) level they were given for the previous season, even if the accounts caution investors that a drop to League One will come with a loss in revenues. Based on the data we’ve seen thus far, that does not all seem to be the case.

Indeed, based on the parameters I outlined in a recent article, I think the goal is to bring those revenues closer to the £30 million threshold, which will help secure the club’s sustainability.

The other significant number I like to examine from the accounting is staff costs, since the wage to income ratio is a crucial indicator for any club.

Sadly, staff costs are not broken down in the same way, so it’s difficult to assess how well the Blues are doing in that area.

The money that Blues made from player trade is one figure that is appropriately divided. This is displayed on the accounts announcement’s first page and indicates that HK$151.737M (£14.535M) in profit was made.

The funds from the sales of Tahith Chong, Kevin Long, and Jude Bellingham to Real Madrid from Borussia Dortmund would be included in this amount. The funds from the sale of Jobe Bellingham to Sunderland, which happened in the previous fiscal period, would not be included.

The last significant number I extract from these documents is found on page 20, and it is the amount ZFG owes to Shelby Companies Limited, the investment entity that Knighthead utilized to purchase its club shares.

As of June 30, 2024, HK$210.832M (£20.194M) remained unpaid to SCL. This should serve as evidence of the substantial financial outlay Knighthead has previously made for the club.

What does all of this mean, then?

Sustainability in the Here and Now

The most significant conclusion I draw from these tales is that the numbers that are crucial to the club’s long-term viability are rising.

There is no getting around the fact that the Blues must increase revenue if they are to succeed.

It’s crucial, though, that Blues don’t depend just on one source of income since, should something happen to undermine that source, it might become a very serious issue.

The previous year, Blues took the necessary steps to restart the matchday receipts.

The club could sell an additional 9,000 or more tickets each game after the stadium was fully renovated, and maybe the same amount of season tickets during the off-season.

Matchday ticket sales have increased dramatically as a result of this.

Commercial revenue has been the main focus this year.

The fact that it didn’t increase significantly the previous year may have been caused by the time required to terminate less lucrative contracts, such as those with Elior for catering and Just Sport for equipment, as well as the time required to establish connections with larger commercial players.

We’ve already seen this season’s new kit deal with Nike, an extension of the Undefeated shirt sponsor arrangement, and a shirt sleeve sponsorship agreement with Delta Airlines.

These sponsorship agreements are probably not the last ones we hear about; in fact, it’s precisely these kinds of agreements that should improve the commercial earnings and, thus, the club’s viability.

The wage to turnover ratio is the one important statistic about which we are unsure as we won’t have precise wage data until the club accounts are released in the spring.

For the simple reason that many players’ contracts that have stayed with the team will automatically be affected by the club’s relegation to League One, I’m not as concerned about that as I once was.

Additionally, it seems to me that Blues have been cautious about the salaries they are paying their players right now, promising them raises should the team be promoted back to the Championship (and possibly even higher).

But there’s still one unanswered question: How long will ZFG be involved with the Blues at all?

The Prospects

Regretfully, my crystal ball is now undergoing maintenance, therefore I must exercise extreme caution while attempting to foretell ZFG and Blues’ future.

It appears unlikely that ZFG will be able to get go of Blues very soon.

The amount of money that Blues produced in comparison to the other group parts prevented ZFG from selling Blues in one large piece, and that doesn’t seem to have altered significantly.

The segment study reveals that ZFG’s new venture into electric cars and trucks has yielded minimal revenue, while the properties in Cambodia continue to generate minimal income and the Japanese healthcare firm has now been fully divested.

Furthermore, there has never been a firm deadline established for when Knighthead will be able to acquire the remaining shares in the team.

But in spite of everything, I’m more optimistic than ever that ZFG will have to part ways with Blues sooner rather than later.

The staggering amount of money already owed to Shelby Companies Limited (and so to Knighthead) is one factor contributing to this.

As we have seen with loans from investment vehicles such as Dragon Villa Limited, Birmingham Sports Holdings has previously been able to pay off large debts by converting them into shares.

They won’t be able to accomplish that this time.

Knighthead has no intention of taking any equity position in a failed Hong Kong company that is listed.

Thus, in my admittedly ignorant opinion, I believe that ZFG’s only option will be to exchange their club shares for the money owing to Knighthead.

When the buyout was first completed, I seem to recall Tom Wagner discussing the deal in a Bloomberg video. He also mentioned that the loan SCL was making would serve as leverage to compel them to sell the remaining shares.

I believe I would be dissatisfied if a sale wasn’t forced by the conclusion of the 2025–2026 fiscal year, and I would hope it could be done sooner, even if I can only guess as to when it might occur.

It is ZFG’s responsibility to get that past the Hong Kong Stock Exchange, and to be honest, I don’t give a damn.

Even if these accounts don’t provide us with all the BCFC statistics, we should be encouraged that things are improving.

Moreover, these reports offer additional proof that the concerns over the Blues’ potential to breach financial regulations and disappear are baseless.

I’ve already examined reports in an effort to come up with a logical justification for what is occurring at the club.

That this time, it’s just an exercise in confirmation bias and curiosity makes me incredibly happy.

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