Onward and upward at Portsmouth?
Posted by John Beech on March 5, 2011
As Plymouth Argyle fans come to terms with their club being in Administration, they can look along the South coast to Portsmouth to see that things can get better. On Thursday UHY Hacker Young, Pompey’s Administrators announced “the completion of the Club’s Company Voluntary Arrangement and exit from Administration on 24 February 2011. On 10 February 2011 an order was made by the Court confirming that on completion of the Administration the case would move to Compulsory Liquidation. Subsequently, the Secretary of State was appointed on 25 February 2011 with Geoffrey Carton-Kelly and David Hudson of Baker Tilly being appointed as Joint Liquidators on 28 February 2011.” (1) Portsmouth City Football Club Ltd. is dead – long live Portsmouth Football Club (2010) Ltd.! I hope not too many fans will feel a need to try and sort out tattoos – in fact, I wonder how many people even realised that the old company included the word ‘City’ in its name.
The Administrator’s Final Progress Report is downloadable here (as is the Completion of the Arrangement Report) – a welcome example of transparency. The Final Progress Report makes for interesting reading, and below I’ve set out some of the points it makes, in the order they occur in the report, with some thoughts of my own in italics:
- Although Kevin‐Prince Boateng was sold to Genoa last August for €5,750,000, an installment payment plan was agreed. The first two of the four payments have been made, but the third, due on 15 January 2011 for €1,325,000, has yet to be paid in full. In fact, only £175,000 has so far been received. The fourth installment, for the same amount, is due on 15 July 2011, will go to the new company.
Payments have been problematic from the beginning (2). Portsmouth, of course, don’t exactly have the moral highground when it comes to payments, but these are sums which the new company will be very much reliant on.
- The sale of Tommy Smith to QPR will result in an extra £400,000 being paid if QPR are promoted to the Premier League.
Which looks increasingly likely, so good news for Portsmouth.
- Six players – Mahoto, Nlundulu, Subotic, Jordan Hughes, Papa Bouba Diop, and Hurst - agreed to cancel their contracts and thus reduce the club’s wages bill.
There is a lot of criticism of players for being greedy. Clearly this is not always the case.
- “Breakfast and lunch was also provided for the first team and the Academy at the training ground. The total cost of food and drink purchases in the period was £41,494.13.”
Interesting that in a climate of cost cutting, Pompey did not choose to follow the example considered by Chelsea of charging players training for their lunch (3), but Pompey players are no longer on Chelsea salaries.
- “Police costs for the 2010/11 season were raised by the police due to the team being in the Championship and, as a result, playing more games.”
While the rationale is clear, it does highlight in general a generally ignored discrepancy between the Premier League and the Championship – the number of league games played in the season. Sure, there are the games in Europe for some PL teams, but the players in the PL strugglers have a less demanding season than those in Championship clubs, for much higher wages. There’s something not quite right about this.
- “A VAT surcharge of £23,224.63 was incurred for the late submission of the VAT return for the period ended 30 November 2010. I have withheld these monies (and they are currently being held in my client account) whilst I challenge the surcharge. If I am successful I advise these funds will be forwarded to PFC10.”
My God! HMRC must just love Pompey…
- Jobsite re-signed as club sponsors, but at a reduced rate because of the club’s relegation.
Nevertheless, Andronikou reports that the new figure as “favourable when compared to other teams in the division”, some evidence for those who believe in the power of long-term sponsor relationships.
- There have been a total of ninety staff redundancies.
On the one hand this was inevitable, but it is all too easy to forget the human cost to those involved.
- The Academy has survived in spite of all the pressures.
This has to be good news for the longer-term future of the club.
- Sky TV was installed at a cost of £3,092.60 in the club’s offices, training grounds and hospitality suites.
A minor amount, but isn’t it a tad ludicrous that Sky gets a revenue from clubs as well as from fans?
- Ownership details of PFC(2010) are:
Authorised and Issued Share Capital: 1,000,000 ordinary £1 shares
Shareholder: Sports Holdings (Asia) Limited hold 100%
Directors: Balram Chainrai, Levi Kushnir, Deepak Chainrai, David Lampitt, John Redgate
Company Secretary: John Redgate
I confirm that Sports Holdings (Asia) Limited is a British Virgin Islands company wholly owned by another British Virgin Islands company, Horizon Eclipse Inc (‘Horizon’). Horizon has 1,000 ordinary£1 shares both authorised and issued.
These shares are issued as follows: Balram Chainrai 445; Levi Kushnir 445; Deepak Chainrai; 100; Ashok Patel 10
This is not new information (4), and to me is distinctly bad news. As soon as I see ‘British Virgin Islands company’ I break out in a cold sweat. Too many too recent memories of Falcondrone and Portpin… This lack of transparency is certainly not helpful and should be eradicated from English football ASAP.
- Among the assets transferred to the new company, ‘Goodwill’ is listed at a value of £1.
A bit of an over-estimate some might think ;-)
- On the Sulley Muntari transfer saga:
As previously reported, following the sale of SM to Inter Milan (‘IM’) in 2008, £900,000 is now heavily overdue in respect of certain terms within the sale contract. IM had initially withheld these monies due to the fact that Udinese Calcio (‘Udinese’), a fellow Italian team, were due money by the Club. Udinese have now been paid those monies by the PL, however, Udinese believe that further monies are due. This matter is in dispute and is ongoing in the courts.It is not envisaged that IM will make payment until the matter with Udinese has been resolved. I advise that PFC10 are now continuing to pursue these monies and have full entitlement to any monies realised in this respect.
Just the sort of problem the new club would do without. Nothing to do with the fact that Inter have managed a cumulative loss of €509 million over the last three years then (5), impressive even by Pompey standards.
- The ghost of Sascha Gaydamak continues to haunt the club. On the dispute between the club and him, Andronikou comments:
As you are aware after the initial six month period the [Barclays Bank] balance was frozen as a result of Alexander Gaydamak’s (‘AG’) claim for a subrogated right of security on these funds. At this time Barclays held funds totalling £498,129.54. I advise that in order to obtain a Deed of Release for these funds it was necessary to pay a ransom payment to AG of 50% of the monies held. I advise that a total of £249,064.77 was therefore paid to AG.
This bitter dispute has an additional implication for the club – it continues to pay Milland 2004, a Gaydamak company, for the use of the stadium car park. The fact that Gaydamak still ‘earns’ from the club he set on the way to its current situation when he sold it to Sulaiman Al Fahim (albeit it was a house of cards ripe for toppling) will not exactly endear him to the fans.
- Non-preferential creditors (who are being paid 20p in the £) were owed a total of £65,155,211. This includes £17,135,173 owed to HMRC, a figure which is described as ‘being reviewed’.
Is there still a twist to come in the battle with HMRC? I had thought the figure had finally been agreed following HMRC’s legal challenge.
- Peter Storrie has been paid almost £110,000 as a consultant.
Does he think he’s a banker on a bonus? Whatever the contractual agreement and the going rate may or may not be, it strikes me as quite wrong for him to be benefiting on such a scale from the club in Administration.
- A confidential report on the conduct of PCFC’s directors has been submitted to the Insolvency Service, and the Liquidators of PCFC will be carrying out their own investigations.
They may well prove to be more skeletons lurking the cupboard. Good that the past activities of the PCFC board will be subject to scrutiny. And of course there are the upcoming tax court cases – Storrie is due to appear in court in May, Redknapp in July.
The prospects of club as ‘company’ (see my 3Cs model)look good in terms of the organisation that the Administrator has shaped for the new owners. Who those owners are even in the mid-term are a cause for worry though. The prospects for club as ‘construct’ certainly look good look good, with Cotterill and the players seemingly on a roll. So, to any Plymouth Argyle fans reading this, there is life after Administration. They might also look closer to home – Bournemouth and, dare I say it, Exeter – for cause for hope.
But never let it be said that I am losing my touch as a miserable curmudgeon though. Notwithstanding that all charities have now been paid in full, the majority of unsecured creditors have lost 80% of the monies owed to them and this will leave a very bad taste for a very long time, as will the fact that the club is coming out of Administration and back into the hands of the owner who placed them there.