Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

Canaries v. Tractor Boys

Posted by John Beech on May 4, 2009

Norwich City’s failure against Charlton yesterday afternoon means that next season they will be playing in League 1 next season, the first time they have played in Tier 3 since 1960. As recently as 2005 they were in the Premier League.

Since 1996 Delia Smith and her husband Michael Wynn-Jones have been joint majority share-holders in Norwich City plc. In recent years the club has struggled financially, taking out a loan of £15m in 2002 (1), repayable over 15 years – part of a strategy to replace short- and medium-term debt with long-term-debt. Now facing life in Tier 3 this may not seem so wise.

A deal to develop the land around Carrow Road with 330 flats fell through in October 2003 (2). By December the club’s debt level had risen to £8m, not including the £7m for the redevelopment of the stand planned when the loan was taken out (3). With Delia’s personal touch catering income was booming however. A share offer raised £500k from Delia and husband and £1m from fans (4).

In February 2004 the land redevelopment project finally went ahead, resulting in an injection of £6m, needed to finance the cost of players who, it was hoped, would keep the club in the Premier League (5). By December that year however the financial impact was beginning to show – the club had lost £3.3m in the previous financial year and debt had risen to £18.1m (6). Relegation from the Premier League the following May was not the scenario the club had been planning for.

For the year ending 31 May 2006 the club still managed to make a profit after tax of £2.5m, but annual turnover had dropped £37.4m to £24.7m, mirroring the drop in league (7).

May 2007 brought a cash injection of £2m and new board members, Sharon and Andrew Turner (8). As the Canaries struggled, major sponsor Flybe decided not to renew their contract (9) in April 2008, a decision that seems more worrying a year on when Flybe have just decided to stick with Southampton even though their holding company has gone into Administration (10). Fortunately a replacement sponsor was rapidly found, another with local connections – Aviva, aka Norwich Union (11).

In September the Turners suddenly stood down from the board (12), and Delia and Michael had had to sink a further £2m into the club to fill the gap in the budget (13). City was reported as up for sale (14).

As the financial situation worsened, players paid for themselves to fly to travel to an away match at Blackpool (see my posting of 10 April).

For the past year there have been reports of possible major investment by local insurance tycoon Peter Cullum, but at the beginning of this month this possibility was scotched with his pithy announcement that “the economic environment is simply not conducive to investing in an ailing football club” (15)

Earlier this season Norwich City was suggested to me as an exemplar of how a club should be run by the Chief Executive of another Championship club, a choice which he would probably not be making today. Indeed, even the Norwich board are reflecting on the business model they had been pursuing (16).

While Norwich rue their failure to to woo Cullum, down the road at arch rivals Ipswich Town some things look rather different. Admittedly Town have als o been having their financial difficulties – not least, £32m debt. But where Cullum resisted the temptations of Norwich, Marcus Evans , reclusive events magnate, succumbed to them at Ipswich (17), replete with the standard talk of shared values and heritage, not to mention commercial synergies – am I being cynical in questioning whether Ipswich is really the obvious events and conferences destination? The lion’s share of the club’s debt has been converted into so-called ‘soft debt’.

There has been no magical transformation in the club’s trading figures – in January this year an annual pre-tax loss of £5.5m was reported, in contrast to the previous year’s profit of £93,000 (18). New appoints since then include Bryan Klug as Head of Football Development, Simon Clegg as Chief Executive Officer, and Roy Keane as Manager. Time will tell whether they bring success, but the club has a rosier view of the immediate future than does Norwich.

So, football supremacy in East Anglia is being determined by a Battle of the Wallets, one which Ipswich are currently winning and Norwich are losing [and all other local clubs will be condemned to be simply also-rans (19)] . This is not simply an East Anglian phenomenon – it is being repeated all over the country, and is an indictment of the management malaise which pervades the English game. It is no longer just the Premier League in which clubs are reduced to the status of rich men’s play things.

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2 Responses to “Canaries v. Tractor Boys”

  1. [...] geographical arbitrariness in deciding where to throw millions is repeated at Ipswich and Norwich (4). If we continue to see the game dominated by the size of benefactor’s wallets, we will end [...]

  2. Whilst this is an accurate snapshot of a moment in time, just about every single event since has proven that it wasn’t the size of wallet that counted, but rather who had the expertise and experience at boardroom level. Something for QPR to ponder?

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