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

Archive for the ‘Ownership’ Category

Moving on from ‘SISU OUT’

Posted by John Beech on August 15, 2014

It was a difficult choice of topic after so many months, but Coventry City is probably the obvious choice for me – I live about a mile from the old Highfield Road ground and could hear the roar on matchdays.

By chance, I was turning out last week and came across a copy of the Coventry Observer from 20 December 2007. My reason for keeping it was apparent on page 3 – two stories which began thus:

  • Last minute deal secures football club’s future
    Coventry City were just half an hour away from going into administration when pen was finally put to paper on a long-awaited takeover deal.
    with the clock ticking towards Friday’s 4pm deadline for a deal to be struck, the Sky Blues confirmed shortly before 3.30pm, the takeover by SISU Capital was going ahead – securing the club’s future and banishing the threat of administration…

  • Arena pledges support for club’s future
    Ricoh Arena chiefs have pledged to support SISU Capital’s efforts to return Coventry City to the Premier League…

Clearly much has changed since December 2007. The club had been through a disastrous period in the years immediately before. Debts had been reported as running as high as £38 million; year after year the club made operating losses; and investing in the new £60m stadium had proved a step too far. Indeed, the stadium, the brainchild of the club’s then Chairman, Bryan Robinson, had only become reality by the club passing the stadium project over to Arena Coventry Ltd (ACL), a joint venture company consisting of Coventry City Council (50%) and the Alan Edward Higgs Charity (50%), a trust set up to help deprived children from Coventry.

The then owners of the club – the major shareholders, owning 90%, were Craigavon (City MP Geoffrey Robinson’s family trust, and Sir Derek Higgs, son of Alan Edward Higgs) – announced their intention of placing the club into Administration. Apart from Sisu, the only potential buyer was ‘Greek billionaire businessman Alki David’, who rapidly backed off when he realised the scale of the debts he would inherit.

The club thus stood, to borrow the recent words of David Conn (or a Guardian sub-editor perhaps) on the edge of an abyss.

Coming in then as saviours of a club in distinct danger of liquidation, how then did we reach today’s situation of repeated legal confrontation and the club’s exile?

Sisu were by their own admission new to the football business. They brought in football business experts such as Ray Ranson and Ken Dulieu. Their judgement proved questionable and both departed. As the performance on the pitch deteriorated and the club suffered a further relegation to League 1, the fans became severely disenchanted, a situation compounded by Sisu’s almost non-existent transparency or engagement with the fans.

Opposition to Sisu became public and organised, and we drifted into phases of protest characterised by a series of slogans.

The first of these was the unequivocal SISU OUT. Understandable though this was, in my eyes it always seemed at best only half a strategy – and what next? The further Sisu sank funds into the club, the less likely it was that anyone else would want to buy the club. In the six and a half years of Sisu’s ownership only the brief appearance of Preston Haskell IV presented any viable alternative to Sisu. It became abundantly clear that a presumption of the SISU OUT slogan – that Sisu were willing to sell – was ill-founded, and even wishful-thinking.

The straw that broke the back of many fans was the decision of Sisu, in an attempt to force ACL’s hand in the increasingly bitter disputes over rent and matchday revenues, to take the club into exile at Northampton. We then entered a phase where the slogan of choice was BRING CITY HOME. A perfectly simple proposition on the face of it, but one which begged the intractable questions of how and under what conditions.

The most recent phase has seen protests with banners saying LET DOWN, which begs the question of by whom. Moz Baker of the Sky Blue Trust when interviewed on local television earlier this week cited Sisu and the Football League, and it’s not hard build an argument for either nomination. I would add to this list ACL and its joint owners, Coventry City Council and the Alan Edward Higgs Trust. I would also add to the list the previous owners of the club, for it was they who precipitated the current situation by deciding to move away from the old stadium at Highfield Road, which resulted in the separation of ownership of the club and its stadium.

From a business perspective, it is perfectly understandable and indeed reasonable that the club owners would want the matchday revenues, particularly with the restraints that Financial Fair Play protocols now place on spending . Equally understandable and indeed reasonable is that the owners of the stadium would also want the matchday revenues, particularly as the football stadium is the core of the revenue generating potential of the infrastructure.

So, we are in the situation where the entrenched positions of the two main proponents are understandable and reasonable from their own perspectives. The only way out of the impasse would be compromise by one or both parties. At present we have a war of attrition. There are unsubstantiated rumours that talks are taking place between Sisu and ACL. If true, we can only hope that ‘jaw jaw’ will stop ‘war war’. The present situation with the club in exile is patently bad for the owners of the club, for the owners of the stadium, and, above all, for the fans, and indeed for the Council Tax payers in Coventry (of which I must put my hand up as being one). The only gainers are the lawyers.

A return to the Ricoh is a no brainer. There must surely be some way forward through compromise.

 

[A reminder – this is a personal blog which is moderated.  Abusive comments will not be posted; counter-views are not considered inherently abusive.]

 

Posted in Assets, Cashflow, Debts, Football League, Governance, Insolvency, Ownership, Revenues, Stadium, Strategy | 4 Comments »

The stadium curse

Posted by John Beech on December 3, 2012

The topics of the stadium which has become separated from its club in ownership terms, and the mixed blessing that a new stadium can bring, are ones that I have covered in previous postings (see postings passim).

The battle over Fratton Park is shortly to be resolved in court (1).  The twisted history of Portsmouth’s financial ills and, indeed, its ownership ills seem to be moving towards a denouement.  Certainly as a member of the Pompey Supporters Trust, and a strong advocate of fan ownership, I want the Trust to ‘win’ the case (they are not a directly participating party, hence the quotation marks).  The case for a much lower valuation is a strong one, and for once I’m optimistic that the result will, for once, go the right way.  If it doesn’t, it will almost certainly mean the liquidation of the club, and the fight to establish a resurrection club will begin in earnest no doubt.

Nearer to home, literally, as I live and work in Coventry, if not metaphorically, the issue of the ownership of the Ricoh is almost as prominent on my radar.

Its origins go back to the heady days when Coventry was enjoying a notably long and unbroken run in the top flight, dating back to 1967 and the managership of Jimmy Hill.  Its then stadium at Highfield Road dated from 1899, and, with a post-Taylor capacity of approximately 23,500, it lacked any of the facilities that a Premier League stadium needed to compete from a business point of view.  It was not a million miles from Fratton Park to be honest.

In 1997, under the Chairmanship of Bryan Richardson, grand plans were announced for an ultra-modern stadium to be built on a brown-field site on the northern edge of the city, close by Junction 3 of the M6 (and adjacent to the Coventry-Nuneaton railway line).  Arena 2000, as it was originally to be called, was to be the envy of many a self-respecting Premier League, with a retractable roof and a removable pitch, making it ideal for other revenue-generating activities such as pop concerts.  What could possibly go wrong?

Well, just about everything:

  • The brown-field site, which had been the site of Foleshill Gasworks, proved problematic.  Contamination of the site required two years of remedial work to make it reusable (2).
  • The club was being operated unsustainably.  By 2003 debts were at a level of £20 million (3) and continued to rise (4) and rise (5).
  • On the pitch, Gordon Strachan failed in the battle to keep the club up in 2001.
  • In 2002 it was only possible for the building project to continue with the formation of a new joint company, Arena Coventry Limited (6), 50% owned by Coventry City Council and 50% by the Alan Edward Higgs Charity, a wealthy local charity for children which has a strong sports interest.
  • Sponsorship of the stadium by local car manufacturer Jaguar, itself under financial pressure, fell through as production of their cars in Coventry ceased (7).

To cut a long and tortuous story short, the stadium was built, but to a significantly lower specification than originally planned (capacity was reduced to 32,500), Ricoh took on the sponsorship, and Championship Coventry played their first game there in 2005.  Not that this proved a particular turning point for the club.  In 2007 a potentially club-saving takeover by American consortium Manhattan Sports Capital Partners fell through (8).  Then, having come within twenty-five minutes of going into Administration, the club was acquired by venture capitalists SISU (9).

Although SISU planned to buy at least the 50% of the shares owned by the Alan Edward Higgs Charity, this has not happened, and the club continues to rent the stadium from Arena Coventry Limited.  From the club’s financial perspective, the stadium is thus a monthly liability rather than the major asset and revenue generator originally envisaged.

Relegation from the Championship to League 1 in 2011 exacerbated an already difficult situation.  Attendances and revenues were hit.  The agreed rent, reported to be £100,000 per month, became significantly unrealistic for a League 1 club to sustain.  Again cutting a long story short, the owners and club have been unable to agree a compromise rent that is realistic, and the club, SISU that is, started a ‘rent strike’ in March last year (10).  Obviously this is a situation that cannot run on indefinitely, and in the last few weeks matters have come to a head, with both sides apparently digging their heels in and maintaining collision course.  On the one hand, Deputy Conservative leader John Blundell says that ACL may have to seek a winding-up order over the unpaid arrears (11), while on the other Coventry City Chief Executive Tim Fisher accuses Arena Coventry Limited of pulling out of talks (12).  Whatever the rights and wrongs of the respective protagonists, some compromise needs to be reached, and rapidly.

As well as the two confrontational tales of Fratton Park and the Ricoh, there is a crumb of comfort on the stadium front at Stockport County’s Edgeley Park (13) where a deal has been announced that will see the club running the stadium at a reduced rent and retaining the revenues from it.  Let’s hope there will positive news to report shortly from both Coventry and Portsmouth.

Posted in Assets, Investors, Ownership, Stadium, Trusts | Tagged: , , , , | 7 Comments »

Pompey – the turning point?

Posted by John Beech on November 20, 2012

I’ve not blogged recently on the Pompey basket case.  Not because there wasn’t much happening, but rather because there has been almost too much happening to stop and take a coherent view.  In fact, the last time I posted was back in March 2011, when I commented “Portsmouth City Football Club Ltd. is dead – long live Portsmouth Football Club (2010) Ltd.!” (1), and it reads today like some historical piece, and at least a tad ironic to boot – the tagline was “Onward and upward at Portsmouth?

The announcement that a conditional sale to the Pompey Supporters Trust has been agreed (2) brings at least some sort of turning point.

That the alternative bid from Balram Chainrai was turned down by the Administrator can only be good news – just how many times can the same person ‘save’ a club?  Trevor Birch’s choice may or may not have been influenced by the blogs of Micah Hall (3), but certainly the lack of response to the questions Micah posed to Tavistock Communications, Portpin’s PR company, spoke volumes.  Micah’s digging deserves an award, and shows how far a fan can go in the bigger picture of financial decision-making.

The fly in the ointment of the sale is, of course, the issue of the value that Chainrai is trying to place on Fratton Park.  Unless he finally decides to bow out gracefully, accepting that he made a very bad business call, the matter will go to court.  With independent valuations at a much lower level, the Trust stands a very good chance of getting the desired result.

There is also the matter of a potential further ten points deduction on coming out of Administration.  Here I am less optimistic.  I fear it will be yet more evidence that the deduction of points is an entirely dysfunctional sanction, but let’s not burn our bridges before we come to them.

All-in-all, there does finally seem to be a light at the end of the tunnel, and this hopefully will prove a turning point in the club’s miserable fortunes.

In the bigger picture, it may well prove to be a turning point in the road to fan ownership of clubs.  It does need to be seen though as one of many turning points, as I’m sure Brentford. Chester, Exeter Wrexham, and Wimbledon fans, and that’s not a definitive list, would be quick to point out.  It’s significance will depend on how well the hybrid model involving High Net Worth Individuals will work in practice.  If it does work, it will doubtless encourage the Supporters Trusts at bigger clubs such as Liverpool, Manchester United and Newcastle.

As a member of the Pompey Supporters Trust, I feel considerably more confident regarding the future than I have for a very long time.  I’ve even put a bottle of bubbly in the fridge, but I’ll not actually open it though until Fratton Park is in the fans’ hands.  The only certainty is the debt of gratitude Pompey fans owe to the PST Board.  Let’s show our gratitude by uniting behind them.

Posted in Community, Fans, Insolvency, Ownership, Points deduction, Sanctions, Stadium, Trusts | Tagged: , , , , , , , | 3 Comments »

Round-up of Season 2011/12

Posted by John Beech on September 8, 2012

The 2011/12 season has been characterised by long-running sagas.  Normally I find myself in an annual review recounting a series of relatively self-contained accounts of the woes which have beset a number of clubs, but many of those listed below are far from resolved scenarios.

The selection is not systematic – it consists of the clubs who have found themselves on my radar screen; further suggestions are welcomed.

Ashford Town
For a club to have its two co-owners feuding (1) was always likely to lead to tears before bed-time.  Add to this a withdrawal from its league in 2010 (2) and there is a clear downward pattern.  This July HMRC issued a winding-up petition  (3).

Billingham Town
A long dispute with Hartlepool over who should pay for improvements to the Billingham stadium (4) had been resolved in December 2010, but in January this year Billingham sought to wind themselves up (5).  However, HMRC then stepped in with their own winding-up petition (6).  The former of the these two seems to have been granted in April (7), but nonetheless the club is still is playing.  Any insight into what has happened would be much appreciated.

Coventry City
Coventry City have faced financial problems since their relegation from the Premier League in 2001, not least because of the development of the Ricoh Arena, a less ambitious materialisation of what had originally been called Arena 2000, originally designed with a retractable roof and a removable pitch (8).  In 2007, in a moment of financial crisis with the club having announced its intention to go into Administration, it was bought by venture capitalists SISU.  Since then SISU has failed to inject enough money to buy back the Rich from the local council and a local charity.
SISU have struggled to find the right balance between economising and maintaining team performance, thus causing complaints from fans.  The financial struggle led to SISU stopping paying the rent for the stadium in April this year in an attempt to force a lower a rental.  The confrontation was resolved in court last month, but details have not been made public (9).

Croydon Athletic
The imprisonment of owner Mazher Majeed for his part in cricket’s ‘spot-fixing scandal’ last November (10) made the club unsustainable.  It was promptly fined and deducted 10 points (11), adding another straw to an already broken back.  Unable to find a new owner, the club withdrew from the Isthmian League, unable to fulfil its fixtures (12).  A resurrection club, AFC Croydon Athletic, has been formed however (13).

Darlington
A sorry tale of desperation and despair, covered in postings passim and on the TwoHundredPerCent website, but eventually one of hope.  In early May fans group Darlington 1883 finally succeeded in taking over the club (14), but at what a price – the club had been forced into exile (15 and 16), and demoted to the Northern League Division 1 (17).  Onwards and upwards!

Harlow Town
Another sorry tale, this time tied up with the owners’ divorce (18 and 19; note the dates).  The club entered a CVA back in September 2009 (20).  Last November the club faced a winding-up order from HMRC (21), but this was finally dismissed in February.  In the same month, new owners had taken over (22).  Any further insight from local readers would be appreciated.

Kettering Town
Not the ultimate car crash – that comes lower down the posting – but certainly one of the most dragged cases.  See postings passim and on the TwoHundredPerCent website.  The season just finished was yet another traumatic one.
Having started the season by going into exile at the former Rushden & Diamonds stadium in Irthlingborough, less than ten miles away, there seems to have been no synergy in attracting new fans, as is reflected in the appearance of fan-owned AFC Rushden & Diamonds, also in exile, at Wellingborough, ground-sharing with Wellingborough Town, less than five miles from Irthlingborough.
Debts built up, and in June the club had to enter a CVA, with debts reported to be £1.2m (23), and HMRC hot on the club’s heels (24).
Meanwhile, want-away owner Imran Ladak had handed over the reins to ‘acting Chairman’ George Rolls, at least, until he was suspended from football for five years by the FA (25).  Ritchie Jeunne took over as Chairman (26), albeit extremely briefly, and now, in a Chainraiesque twist, Ladak is back (27).  The long-suffering Poppies Trust continue to fight on doggedly (28) notwithstanding demotion and a 10 points penalty (29).

Neath
Chased over debts by HMRC and then Barclays (30), the Welsh Premier League club was wound up at the end of May (31).

Northwich Victoria
Another depressing season for the clubs’ fans – evicted from their stadium (32), and then a crazy saga about where they could and couldn’t play (33), and expulsion from the Northern Premier League (34).  You couldn’t make it up.

Plymouth Argyle
It seems some time ago now, but the final chapter in the club’s survival was last October, and so within last season.  Mark Murphy has a neat summary of events here.

Port Vale
Yet another long-running saga – see postings passimandTwoHundredPerCentfor details.  Notable events and non-events during the 2011/12 season were the appointment of an Administrator in March (35), the lack of an attempt to take over by long-time suitor Mo Chaudry (36) and the Administrator’s misplaced faith in Keith Ryder as a potential owner (37).

Portsmouth
Here we go yet again.  The ‘club as company’ has been, more or less continuously, the basket case of English football for the past four decades, and this last season has proved no exception, with the arrest of the latest owners in November (38) and a now familiar drop into Administration in February.  I’m going to hold back in my lengthier comments for the moment as we seem to be on the point of either the start of a new chapter in the saga or dénouement.
Suffice it to say, in the red corner is Balram Chainrai, threatening to ‘save the club again’.  To me this is a bit like ‘giving up smoking’ – you can’t logically apply the phrase on more than one occasion.  In the blue corner is the Pompey Supporters Trust (vested interest declared – I have made a pledge to buy shares, and would urge all Pompey fans to do likewise here)

Prescot Cables
In an act all too rare in English football, the supporter-owned club took the difficult but realistic decision to return to amateur status (39).

Rossendale United
Effectively defunct at the end of the previous season, the club still appeared on my radar screen.  In March the club was still being chased for £37,000 by HMRC (40).  In January the defunct stadium had been gutted by fire (41), and the next month the owner, Andrew Connolly, had announced plans to redevelop the site with 50 new houses (42).  This forced the abandonment of plans for a resurrection club (43)

Rothwell Town
Which is, by the way, five miles from Kettering and thirteen from Irthlingborough.  In May 2010 the club had withdrawn from the Southern League due to financial difficulties (44), and a mooted rescue did not materialise (45).  Last October the club went into Administration (46), and in March the ground was put up for sale (47).  As far as I can make out, there have been no further substantive developments – again any local input would be appreciated.

Stockport County
Yet another season of uncertainty for County (see postings passim and TwoHundredPerCent).  The end of a ground-sharing agreement for Edgeley Park  with Sale Sharks will have added to the financial pressures (48).

Truro City
An interesting case of amazing success on the pitch, driven by a ‘benefactor’, which has proved unsustainable (49).  The club has been pursued by HMRC (50), struggled to play its players (51), and at the start of the current season has had to seek protection through Administration (52).  Two mysteries remain – the involvement of the Salisbury City Chairman, William Harrison-Allison (53), and the sale of the ground (54).  The timing of the latter will guarantee that this story has legs.

Widnes
The joker in this particular pack, destined to be an obscure name that only reappears occasionally in pub quizzes.  It marks an attempt by Steven Vaughan, he of Barrow, Chester and at one time allegedly Wrexham fame (see postings passim), through his son, to create a football club from scratch.  Originally to be called Widnes Town (55), it had to change its name on the not unreasonable grounds that Widens Town already existed (56).  Finding a ground to pay at proved challenging (57) and Stephen Vaughan seems to have opted to weave his own very particular brand of football magic in Malta instead (58).

Very roughly, the clubs involved fall into two groups.  First here are the League clubs.  Here there seems to be a continuing trend of slightly fewer clubs getting into financial difficulty, but those that do do so on a grand scale, and perhaps do so on a kind of cyclical basis – one crisis leads directly to the next one.

The second group, the non-League clubs, frequently display Benefactor  Withdrawal Syndrome (BWS).  The unsustainability of this business model becomes particularly problematic when the ‘benefactor’ has lifted the club up the pyramid to a level where his withdrawal makes survival especially difficult.  Clubs like Crawley Town and Fleetwood are surely vulnerable to BWS, not to mention the League and Premier League clubs of much longer standing who have become benefactor-dependent.

When I started preparing this posting, I did so with as close to a sense of cautious optimism as I manage.  With the natural exception of Portsmouth, surely things were beginning to look a little rosier in the football football finance garden.  Having completed it, I’ve fallen back to more usual mood of pessimism, wondering when club owners are going to get a grip and face reality (full marks to Prescot Cables as an exception).  Not that aren’t some good practice stories out there – Wrexham and Chester provide the most encouraging examples.

At least fifteen years ago I wondered ‘when the bubble was going to burst’.  This has obviously proved the wrong metaphor.  Suggestions for a more appropriate one are welcomed.

Posted in Benefactors, Debts, HMRC, Insolvency, Ownership, Resurrection, Trusts | Tagged: , , , , , , | Leave a Comment »

So, is it really ‘goodbye Bluebirds, hello Red Dragons’?

Posted by John Beech on June 7, 2012

Like the old joke about anti-social behaviour in a lift, what is happening at Cardiff City is just plain wrong at so many levels.

The root causes of the problem lie in Sam Hammam’s decision to build a new stadium, the resulting deep financial difficulty that Cardiff got themselves into with Langston and the Damoclean debt hanging over the club as a result, and Peter Ridsdale’s decision to involve the club in what was, from the first, described as a ‘strategic marketing alliance’ with Malaysian investors (1).  As he said at the time, “It will be a long-term alliance.  It will include youth development, it will include the opportunity to explore the whole fan base.  It will certainly include sponsorship.  We are already talking to them about shirt sponsorship and stadium naming rights without any definite conclusions at this stage.  We are also talking about their assistance in trying to put this club on the sort of financial footing that we would have liked to dream of when I first arrived at this football club.

Needless to say, there was no public talk of the shirt sponsorship involving what has just been announced.

Indeed, as recently as 10 May Dato Chan Tien Ghee said, in an open letter to fans, wrote:

The new club crest and home colours which were being discussed were intended to demonstrate the symbolic fusion of Welsh and Asian cultures through the use of the colour red and the predominant featuring of a historical Welsh dragon under the Cardiff City FC name. This would have been a springboard for the successful commercialisation and promotion of the club and its brand, driving international revenues and allowing us to fund transfers and success locally, thereby giving the club the best chance of competing at the higher reaches of competition.

This was not meant as a slight in any way shape or form on the club’s traditions or history which we recognise are the lifeblood of any club. It was intended as a positive change to allow us to adapt and embrace the future. Notwithstanding a number of rumours there were no further plans to turn the stadium red or make other radical changes. ” (2)

His use of “were being discussed” and “would have been” must have suggested to many, including myself, that the rebranding of club with a change in shirt colour and change in logo were now a dead duck, a not unreasonable understanding as he continued In the light of the vociferous opposition by a number of the fans to the proposals being considered as expressed directly to our local management and through various media and other outlets, we will not proceed with the proposed change of colour and logo and the team will continue to play in blue at home for the next season with the current badge.

He kept his word for less than a month.

In his open letter he also alluded to the current instability in the club’s business model thus: “It is clear to all concerned that the club simply cannot continue to function and exist in its current state, effectively losing large amounts of money each month, while acquiring more and more debt.”  No one can reasonably disagree with view.

In the debate that has broken out in the last couple of days since the announcement of the decision to do a U-turn (3), or to use the language you might expect from someone engaged in a ‘strategic marketing alliance’ – “Following a comprehensive review of wider supporter feedback via email, letters, media coverage and polls run via the official Supporters Club and Media Wales and as a consequence of the above commitment, Cardiff City Football Club will also reactivate rebranding proposals with a view to exploiting and maximising its brand and commercial revenues in international markets” – attitudes seem to have become polarised into two camps.  On the one hand, what is happening is a Faustian pact which involves selling the soul of the club.  On the other, the club’s survival depends on a business plan that will result in untold wealth pouring in from new fans in the Far East.  As is so often the case, it is difficult to engage in debate regarding the relative merits of these two views because they are based on different meanings of the word ‘club’ (4).  The present attempt at debate assumes that these are two mutually exclusive and opposed views, and that there are no other possibilities, no room for overlap, and no possibility of compromise.  That certainly seems to be the view of the Malaysian investors.  Which raises a number of issues in itself.

It suggests that the future of the club hangs on the fickleness of future supporters in the Far East who a) would support a club in a red shirt but not one in a blue shirt, and that b) providing the club’s shirt is red and has a dragon on it they will support in sufficient numbers to pay off the rest of the ‘Langston debt’, reinvigorate the club’s fortunes (in both senses of the word), and allow the investors to see a return on their investment.  As to a), I think this is simplistic and over-stated.  As to b), I can understand the Malaysian investors looking to the marketing success of Manchester United, but they might better have a word with Balram Chainrai, or those behind the K&K Shonan Management Corporation (5), erstwhile ‘saviours’ of Plymouth Argyle.

What is happening at Cardiff is little short of seeing owners who view a club as a commodity which can have some brand value spray-painted onto it to make it stand out from the rest.  A simple question to Dato Chan Tien Ghee – if the key to your success lies in owning a red club, why didn’t you buy a red one?  If the answer is simply ‘Well, Peter hadn’t got a red one in his briefcase to show us’, God preserve us.

Others have tried this drastic rebranding, with some commercial success.  An obvious example is that of SV Austria Salzburg, which Red Bull bought and rebranded as FC Red Bull Salzburg in 2005, complete with change in club colours and logo.  The new club has enjoyed considerable success since the takeover, but the old club had also, and that is where the comparison begins to break down.  Red Bull bought an already successful club and turned it into an even more successful one.  But in doing so they alienated fans to such an extent they started a new club, which they called SV Austria Salzburg, and which has already climbed, Wimbledon and FC United of Manchester style, from the seventh tier of the Austrian football pyramid to the third tier.

I’ll leave my final thought to the SV Austria Salzburg fans who are reported as having raised this banner in the past few days.

Posted in Cashflow, Debts, Fans, Investors, Marketing, Merchandising, Ownership, Stadium, Strategy | Tagged: , , , , , , , , | 5 Comments »

Deconstructing Peter Lorimer

Posted by John Beech on May 15, 2012

Peter Lorimer’s thoughts on fans being on the boards of football clubs (1) were, at least as reported by the BBC, somewhat confusing and even confused.

Certainly his assertion that he does not envisage a member of the Supporters Trust having a place on the Leeds United board is hardly a surprise given the way that Chairman Bates views fans (2).  In fact, it’s no more ‘news’ than would be David Cameron announcing that he could not envisage an Argentinean having a place on the Port Stanley Parish Council.

As Lorimer said, “People put a lot of money in and they’re entitled to run the club as they want.”  I was reminded of the Ingram brothers and their long-running confrontation with the Yeltz Supporters Trust (3).  To many on the owners’ side of football’s divide, legal ownership is simply about the right to control, and there is no recognition of the fans’ perspective of psychological ownership.  There are exceptions – most notably that at Arsenal, where the notion of being ‘custodian’ rather than ‘owner’ has a long history – but their numbers are few.

In other words, Lorimer simply pointed out that current owners, be they ‘benefactors’ or investors, see Supporters Trusts as the natural enemy, because they want to take over the company running the club.  As Basil Fawlty once put it, a ‘statement of the bleeding obvious’.

What was confused and confusing with his comments were his attempts to add a rationale to the argument – one that doesn’t need to be there, and, in the case of his comments, is a flawed rationale.

He was quoted as saying with respect to having members of the Supporters Trust on the board of a club “For me it’s never worked at any club” and “I just don’t think it works on a whole scale. I’ve seen a number of occasions where fans have ended up running a club and it’s ended in disaster.”.

I can only think of one case that I would consider to have ended in disaster, which was that of Notts County, where the Supporters Trust was all but conned out of ownership (4 and postings passim).  Another case that was not an unmitigated success was that at Bournemouth, with the Supporters Trust having to give up control of the club as it continued to struggle financially (5).

Incidentally, while digging the last link out of my files, I came across the following snippet for The Independent of 12 January 1993.  I reproduce it without comment as it may be of interest to those who followed a recent unsuccessful prosecution:

A PAYMENT of £100,000 made to Harry Redknapp, West Ham’s assistant manager, when he left Bournemouth last summer was paid personally by the chairman of the south coast club. Norman Hayward gave Redknapp the gift when he left the club after nine years in charge. Bournemouth had been swamped with angry calls and letters from fans who threatened a boycott when it was made known how much Redknapp was receiving at a time when the club was fighting for survival with debts of £2.6m. Hayward said yesterday the payment came from his own ”personal funds”.

But I digress.

The Bournemouth case, at least in wider context, is typical of clubs when Supporters Trusts take over – they almost invariably do so in the direst of circumstances.  ‘Benefactors’ and investors take over in a variety of financial circumstances, so any comparison is automatically weighted against the Supporters Trusts being successful.

To be clear though, there are numerous examples of Supporters Trusts turning a club round.  It is easy to fail to appreciate the numbers involved, especially as many cases are further down the pyramid.  Recent data from Supporters Direct shows the following clubs with Supporters Trust shareholdings (%):

AFC Telford United 100
Chester FC 100
Enfield Town 100
FC United of Manchester 100
Gretna 100
Hendon 100
Merthyr Town FC 100
Runcorn 100
Scarborough 100
Fisher FC 100
Clydebank 99.99
Inverness Clachnacuddin 76
AFC Wimbledon 72
Exeter City 63
Brentford 60
Newport (IOW) 51
Chesham United 45
Aylesbury United 38
Clyde 32
Dundee 26
Carlisle United 25.37
Dover Athletic 25.1
Lincoln City 25
York City 25

etc. etc., including Swansea City.  In total, 95 English and Scottish football clubs are run by companies with Supporters Trust shareholders.  68 clubs have a Supporters’ Trust director on the board.  The following are fully supporter-owned: AFC Telford United; AFC Wimbledon; Brentford; Chesham United; Chester FC; Clyde; Clydebank; Crusaders (Northern Ireland); Enfield Town; Exeter City; FC United of Manchester; Fisher FC; Gretna; Hendon; Merthyr Town FC; Newark Town; Prescott Cables; Runcorn; Scarborough; Stenhousemuir; Stirling Albion; and most recently, Lewes and AFC Rushden and Diamonds.  There may well be more – please comment if I’ve missed any from these lists.

This hardly squares with Lorimer’s claim that “it’s never worked at any club”.  More to the point, I wonder whether he really believes that ‘benefactors’ or investors are more likely to make a success of running a club.  My list of clubs that have suffered events is littered with the failures of clubs that were NOT run by Supporters Trusts.

If Peter Lorimer really thinks that traditional owners make a better fist of running clubs than Supporters Trusts, I can only recommend that he starts reading a fascinating new series of postings by Ian King on the twohundredpercent website – The 100 Most Controversial Football Club Owners of All-Time.  It will open his eyes.

Posted in Benefactors, Investors, Ownership, Trusts | Tagged: , , , | 4 Comments »

Why I shall be especially grumpy this Saturday afternoon

Posted by John Beech on April 3, 2012

Football clubs ‘in poor financial health’” a headline on the BBC News website has just screamed (1).  Apparently “many clubs are continuing to spend too much, principally on players’ wages, as they always have done”.  What?  Surely not?  Well, OK, the said headline was in the Business section of the BBC website rather than their Sports section.

Begbies Traynor, who over the years have been Administrators of Chester City, Kingstonian, Lincoln City, Huddersfield Town, Northwich Victoria, Wrexham, Farnborough Town, Crawley Town, Scarborough, Bournemouth, Halifax Town, Southampton, and now Port Vale, have just completed a survey looking at the finances of Football League clubs.

Beneath the trite headline, there was some detail of interest.

Of 68 teams surveyed in those divisions, 13 have signs of distress such as serious court actions against them, including winding-up petitions, late filing of accounts and “serious” negative balances on their balance sheets.

That 19% compares to just 1% in the wider economy, the firm said.

In particular “the financially distressed clubs include three in the Championship, six in League One and four in League Two.”  Obviously the survey had been completed under conditions of confidentiality, so we can only speculate on which these thirteen clubs might be that are under short-term financial pressure, a temptation which I will resist, at least publically.

There are also the clubs which, to me, have potentially longer-term pressures because they operate on business models which may not be sustainable.  Two which have caught my eye with their recent publication of financial results are one likely to be relegated to the Championship, Wigan, and one about to be promoted out of the Football League, Southampton.

At Wigan (2), turnover was reported as up 16% on the previous year, although this, it was conceded, was “mainly due to the increased Premier League broadcasting rights contract”.   Worryingly though, net losses had risen from £4m to £7.2m.

Wigan fans might take some comfort from the fact that:

Net debt including bank borrowings and loans from David Whelan and his family remained virtually unchanged at £72.2m compared with £72.6m in the previous year Since the year end £48m of debt was converted to equity which significantly reduces the Club’s long term liabilities.

Chief Executive Jonathan Jackson commented:

This position would not have been possible without the continued financial support of Chairman, David Whelan. The post year end conversion of debt to equity has significantly strengthened the Club’s financial position and has, to a very significant extent, written off the debt owed to Mr Whelan.  The club cannot continue to make losses every year and we are continuing to shape all aspects of the Club to ensure the long term future remains positive both on and off the pitch.

Perhaps just a hint there that Mr Whelan’s pockets are not bottomless.  It was he who has called for control on players’ wages (3).  It was Wigan that managed to hit a wages/revenues ratio of an utterly unsustainable 208.3% in 2004/05 (posting passim).

Meanwhile over at Southampton another ‘debt for equity’ conversion was reported last Thursday (4).  The estate of former owner Markus Liebherr had ‘invested’ £33m over two seasons but had now converted these loans into shares.  (My reason for putting single quotes around ‘invested’ is that I do not see loans as investments.  If I had pushed my credit cards to their spending limits, would I talk in terms of MasterCard and Visa investing heavily in me?).

This conversion certainly takes the financial pressure off a club which last season made a net loss of £11m in gaining promotion from League 1.

The Liebherr family seem to be in that rare group of benefactors which includes Steve Gibson at Middlesbrough – those prepared to dig into their pockets deep and for the long term.  At Middlesbrough the club is “now free from debt owed to external providers” (5).

Looking along the South Coast from the perspective of a long-suffering Pompey fan (but who is number 1 a football fan rather than a club fan), a club in deep, deep trouble not least because it is still paying some players Premier League wages as it faces the drop, my eye caught on the wages/revenues ratio at Southampton, a very high 93%.

This counter-evidence in the discourse over the financial strengths and weakness of clubs is hardly typical.  While few clubs, correction, no English clubs, are as financially distressed as Portsmouth, the Begbies Traynor report paints a more typical picture.

As Portsmouth head for Southampton this Saturday, to be ‘entertained’ as the media like to phrase it, I’ll not be building my hopes up for a surprise Pompey victory.  The earlier derby this season may have been a draw, but Portsmouth now have a depleted squad, forced upon them by their financial circumstances (and as one might well argue, not before time).  No, I’ll be quietly fuming on the absurdity that the outcome on the pitch will have been determined ultimately by the lottery of how rich and how committed your club’s benefactor has been.  It may be a football match, but it certainly is being played in a context of competitive balance.  One club has been the subject of heavy financial doping, and is paying the price, and one is the subject of financial doping, but has so far kept the ‘habit’ under control.  One is a savage indictment of the failings of the benefactor model, and the other is fortunate enough to be able to say ‘OK so far’.

If any good at all is to come out of the ‘basket case’ circumstances Portsmouth finds itself in, it will be through a new and more sustainable financial model, which is why I fully support the community share offer from the Pompey Supporters Trust.  Post-commercial era football has totally lost it way.  Clubs have become the playthings of sugar daddies, and have, as in the cases of Portsmouth and Southampton, sugar daddies with no local connection.  Ownership has become a lottery, and fans have been betrayed as a consequence.  Football governance looks as it will receive only light-touch reform, but that is insufficient to set it back on a road where the results of games are determined in a context of competitive balance.  Financial Fair Play, whatever the extent to which it will actually prove successful, is a no brainer.  And fan ownership is the only way to ensure clubs are a part of the community whose name they are happy, and proud, to identify themselves by.

This posting is, for the moment, open to comments, but please bear in mind that this is not a fans’ forum – it is a personal blog, which is happy to encourage serious debate.  Trolls will have their comments deleted, as will those who favour the so-called banter of ‘scummers’ and ‘skates’.

Posted in Benefactors, Community, Debts, Financial doping, Governance, Insolvency, Ownership, Wages | Tagged: , , , , , , , | 5 Comments »

That feeling of déjà vu at Pompey, all over again

Posted by John Beech on February 17, 2012

Portsmouth’s return to Administration today (1) for the second time in a smidgen under two years speaks volumes, especially coming in the week that Rangers, a rather more iconic club, suffered the ignominy of Administration too (2).  High profile those these events are, the phenomenon of financial problems is not confined to te top clubs.  This season so far we have also seen Darlington go into Administration, as have Rothwell Town way down the pyramid.  Prescot Cables have returned to amateur status mid-season, and poor Croydon Athletic have disappeared, at least for the moment.  (A full listing of English football clubs’ insolvency events in the modern era is available here; a warning, it does not make pleasant reading)

It would be easy to dismiss the case of Portsmouth as a special case (especially bad, that is).  The ‘club as company‘ has a long and shameful tradition.  It was formed in 1898 to replace the previous club, Royal Artillery, who were disbanded because of that delightful euphemism ‘financial irregularities’ – payments to players which were blatantly undermining their supposed amateur status.  Funny how history can return to haunt you.

By 1912 the owners were already in deep financial trouble, and the company was voluntarily wound up and promptly reformed, thus wiping out its debts (3), a procedure which is no longer legal, but was far from rare in those days.  The mind boggles at how football clubs today would behave if it were still a legal option like this open to them.  To use a ‘Partridgeism’, the club ‘bounced back’, entering the Football League in 1920, winning the FA Cup in 1939, and the old First Division title in 1949 and 1950.

The road was only downhill after that, obviously excepting the recent relatively spell in the Premier League and FA Cup win.  Sporting decline was followed by financial decline.  A series of owner/benefactors who failed in various degrees is a familiar mantra to Pompey fans – since 1973 the list reads John Deacon, Jim Gregory, Terry Venables, Martin Gregory, Milan Mandric, Sacha Gaydamak, Sulaiman Al Fahim, Ali Al Faraj, Balram Chainrai, and Vladimir Antonov.  Whatever criticisms can be made about them individually, the lack of any continuity has hardly been good for the club.  And there will doubtless be further criticism to come as the unravelling enquiries of both this period of Administration, and the previous one, tease more and more uncomfortable detail out of the wood work.

Of the 200+ files I have on English football clubs, Portsmouth’s is the biggest.  It would be convenient to say that this is because I am Pompey fan.  That would not  though be honest.  It’s because they have a spectacularly aberrant history of ownership and mismanagement.  ‘Spectacularly aberrant’ from normal business, that is.  Merely ‘worse than most’ with respect to other football clubs.

The themes which have dogged Portsmouth occur throughout my files, and all over this blog:

  • Owners who did not have deep enough pockets, and yet push clubs further into unsustainable financial positions
  • Owners unlikely to win ‘Ethical Businessman of the Year’ competitions
  • Owners who have clearly not read the dictum of Mr Micawber in David Copperfield (Charles Dickens was born in Portsmouth, so the reference is particularly appropriate)
  • Repeated failure to pay HMRC on time

Portsmouth’s latest ‘misadventure’ should provide a wake-up call.  But then so so should their one two years ago.  Will the governing bodies just hit ‘snooze’ again?  I like to think not, but, would you believe it, I’m not optimistic.

I can’t argue that the imposition of the Financial Fair Play protocol, or effective club licensing ,or an effective Fit and Proper Person Test would necessarily have avoided Pompey’s current discomfort.  Without them though, another round of insolvency events is inevitable.  It doesn’t have to be that way and nor should it be.

Surely the football world must finally wake up to sorting out, as its highest priority, its financial messes, by attacking the causes rather than the symptoms  rather than stressing over the number of English clubs left in European competition or who the next England manager should be.

Posted in Benefactors, Ethics, Financial doping, Fit and Proper Person tests, Globetrotterisation, Governance, History, Insolvency, Ownership | Tagged: , , , , , , , , | 4 Comments »

Round the Lower Levels Part 2

Posted by John Beech on December 21, 2011

At last, Part 2 of my overview of what is happening from a broad financial perspective.  Part 1 ran alphabetically up to Prescot Cables, and is available here.  With a slight jump backwards, we pick it up with:

  • Port Vale
    An interesting case of ‘fan ownership’.  Valiant 2001 bought the club from the Administrators in 2003 (1) – the club had debts of £2.4m and was said to be losing £500,000 a year (2) – and in doing so avoided the real threat that football might have disappeared from Vale Park (3).
    Survival has been a battle, with the problem of sponsors not paying and a threatened takeover (4), and the need for a loan from Stoke City Council (5).  Nevertheless the club managed to complete its CVA in May 2005 and to come out of Administration in October 2006.  Meanwhile local boy Robbie Williams had bought shares for an undisclosed sum (6).  However Chairman Bill Bratt had “taken the club as far as I can” by September 2008 (7), but was denying takeover rumours the following month (8).
    Into the New Year and a row was brewing over the apparently different involvement with local rivals Stoke City by the council (9).  Bratt attempted to clarify the club’s difficulties here, and pointed out his already considerable commitment to the club (10).
    Fan opposition to the way the board was running the club mounted, and Bratt pointed out the obvious:

    Supporters have protested against the board in recent weeks, and Bratt said it could be potentially destructive.
    “If we go, what happens? We fold immediately. If that’s what they want, they could take the club down, not the board,” said Bratt.
    He added: “I’m quite happy to walk away from this club right now, but the banks and creditors would come in straight away, and there’s no Plan B in place. (11)

    Plans B, C and D have however emerged in recent years – the failed attempts by various parties to invest in the club (Harlequin Properties (12); Mike Newton (13); Mo Chaudry (14); and most recently Blue Sky International (15)), although there has been investment by Peter Miller (16).
    All the uncertainty has prompted an attempt by fans to oust the board (17).
    All very sad.  The days of fan-benefactors like Jack Hayward, Jack Walker and Steve Gibson seem to have gone, and fans need to be clear in discriminating between ‘fan-owned’ and ‘Supporters Trust owned’.

  • Portsmouth
    I’d planned to avoid blogging about Pompey until the situation became clearer, but it hardly seems reasonable not to comment in this context.
    The immediate situation sounds reasonable, with the immediate possibility of points deduction probably not on the Football League’s agenda (see previous posting).  The issue is just how long the ‘immediate’ will last – current indications are that it will all too brief, with time and money running out sometime next month.  Whether Keith Harris will have been able to weave his magic in finding a buyer before then (18) seems unlikely – Pompey are hardly the most attractive of clubs to buy in their present mess (19).  I have it on good authority that even the liquidation of the ‘oldco’ is proving to be contentious.
    Administration for the club (as opposed to the existing Administration of CSI) looks increasingly likely, with its inevitable 10 points deduction, threat to keeping up the CVA payments (and further points deduction).
    Increasingly liquidation and resurrection by the Pompey Supporters Trust looks the only viable longer-term scenario.
  • Rossendale United
    The club did not reapply for membership of the North West Counties Football League at the start of this season (20), and a new club is being resurrected (21).  News is scant, any local informed input would be appreciated.  See also my posting in March where I argued that the club was a classic case of Benefactor Withdrawal Syndrome (BWS).
  • Rothwell Town
    In October the Rowellian Football Social Club (trading as Rothwell Town Football Club) did go into Administration (22).  Again, any local informed input would be appreciated.
  • Rushden & Diamonds
    Following their expulsion from the Conference (23), the club tried but failed to get into the Southern Premier League (24), and went into Administration (25).  That appears to be the end of the club in this manifestation, but an AFC Rushden is being formed (26).
    This seems to be another case BWS, although perhaps with twists yet to emerge…
  • Southend United
    In November the club announced “Roots Hall Development Moves Closer” (27).  So, nothing new there then.  Meanwhile, the Fossetts Fantasy Farm project has been “has been removed from the [Council’s] capital programme until the certainty of developer contribution can be ascertained” (28).
  • Truro City
    The club owned by Kevin Heaney, wannabe owner of Plymouth Argyle, is in deep, deep trouble.  Wages have been unpaid (29) and the ‘Stadium for Cornwall’ project now has a big question mark hanging over it (30).
    HMRC are chasing tax debts of over £100.000, and the club has until January 16 to come up with the money or face a winding-up order (31).
  • Wakefield
    A not entirely unfamiliar story here too (32), with unpaid wages and money owed by a sponsor (33).

All too worryingly, I could start going round the alphabet again, with various tales of various woes at Barnet (34), Cheltenham (35), Chorley (36), Coventry (37), Croydon Athletic (38) and Dorchester Town (39), although at least the last of these has a positive side, a possible takeover by Dorchester Town Supporters Trust.

It looks as if the race is definitely on for the club to face the first insolvency event of 2012.  February is the second highest peak for insolvency events (behind may), so it could well be a close run thing.

I’m beginning to wind down (or is it up?) for Christmas, so, in case I don’t post again in the next few days, a very Happy Christmas, or Bah Humbug (delete as you consider appropriate), to all readers.

Posted in Benefactors, Debts, HMRC, Insolvency, Ownership, Stadium | Tagged: , , , , , | 1 Comment »

Round the lower levels Part 1

Posted by John Beech on November 28, 2011

Plenty has been happening once you look down the football pyramid since I last gave a general overview.  The continually flashing lights on my radar screen have of course been Plymouth Argyle and Wrexham, although, for entirely different reasons, I have resisted the very strong temptation to blog on these two clubs.  In the case of Plymouth, I have been put off by the plethora of non-news that has been churned out over the last few months – it seemed as if 90% of this consisted of Peter Ridsdale purring that one of two takeover attempts was due to completed ‘next wekk’.  At Wrexham, in distinct contrast, real news was happening at a staggering rate – I did actually start a posting, but, while, I was writing it, two press releases issued which made my opening paragraph redundant.  In any case, my friends over at Twohundredpercent gave (happenings and non-happenings) at both clubs excellent coverage.

A third nebula seems to heading towards my radar screen – the ever-dependable Portsmouth, but with one Henry James Redknapp due in court shortly, I’ll hold back for the moment at least.

It’s not as if the radar screen has been otherwise blank though.  In alphabetical order of clubs then:

  • Astley Bridge
    (I haven’t managed to identify which league the club plays in – any offers?)
    The club, which has been around since 1892 (1), is under threat thanks to thieves who stole the club’s pitch mower (2).  The club cannot afford the alternative of having the council mow their three pitches at a charge of £1500 for five cuts.
  • Bournemouth
    The club has failed to buy back its Dean Court stadium which it was forced to sell and lease back almost six years ago (3).  Meanwhile, 50% of the club’s shares have been sold to a 41 year-old Russian petrochemicals trader (4), and chairman Eddie Mitchell purred “His arrival brings security to the club”.  Is it just the Pompey fan in me that finds this less than reassuring?  I hope so.
  • Carlisle
    Carlisle have formidable issues with the existing Brunton Park stadium, not least the threat of a repeat of the 2005 flooding (5).  Just over two years ago the club was losing £1.2m a year and facing gates down to just over 6,000 (6).  By March 2010, gates were down to around 5,200 and budget cuts had to be imposed (7).
    Now we have the results of a feasibility study (8) and ‘Project Blue Yonder’, which would see the building of a new 12,000-seater stadium (9).  Certainly this appears more realistic than Plymouth Argyle’s ill-fated plans for a 40,000+ stadium, but not a great deal more so – Plymouth has a population of just over 250,000 whereas Carlisle’s population is just over the 100,000 mark.
    No easy solutions to the club’s dilemma I’m afraid.
  • Dawlish Town
    I’m a bit thin on information here, but a link (10) said that the club had withdrawn from the Western League Premier Division in July.
    The club website (11) is still live, but does not appear to have been updated recently.  With doubtless no intended irony, it still has a link to an item headed “Chairman dreams of promotion and new stadium
    Their Wikipedia entry (12) begins with that damning phrase “Dawlish Town A.F.C. was a football club…
    A Facebook page (13) implies that the club has disappeared, and a new FC Dawlish Town is being formed.
    Can anyone with local knowledge expand on this?
  • Harlow Town
    A winding-up petition from HMRC was dismissed in court o 14 November because the club had paid its tax bill (15).  This followed on entering a CVA in September 2009 (16).
    See also postings passim.
  • Hucknall Town
    After a particularly turbulent period last season (16), the club has new owners (17) who talk of turning into a community club.   There is even talk, perhaps just a tad OTT, of the club as a ‘sleeping giant’ (18).  All in all, things a lot a rosier nonetheless.
  • Kettering Town
    Ah, the inimitably enigmatic Imran Ladak!  See postings passim.
    Having solved the impending problem of the end of their ease, Ladak took the club to Rushden’s Nene Park (19), which everyone hoped would see the start of a new period of stability (for Kettering, at least)
    Ladak is now ‘open to offers’ for the club (20), the entire team is transfer listed (21), players are partly unpaid (22), and as a result it has been transfer embargoed (23)
    Who can guess what Ladak will do next?  This, after all, is the man who brought in Gazza to run the club, sacking him after six games (24).
  • Prescot Cables
    This Community Interest Club has taken the decision to return to being an amateur club, the financial pressure having built up following the lack of a sponsor (25).

Part 2 will be coming to a screen near you shortly.  I’ve now more or less recovered from the failure of my laptop’s CPU and hence its scrapping, so normal service should now be resumed.

Posted in Debts, Insolvency, Ownership, Stadium | Tagged: , , , | 4 Comments »

Wages and the distortion of the pyramid

Posted by John Beech on October 30, 2011

The data just published by Sporting Intelligence (sourced from internal PFA files) adds more fuel to my argument that the football pyramid is becoming utterly distorted in the sense that the scale of finance in the different tiers is being ludicrously stretched.  In a recent public lecture as part of the  Coventry Sporting Conversation series (a podcast is available here beginning at 02:05 mins.), I put the case that the lifting of the maximum wage started to stretch the level of financial activity across the tiers, and that when the Premier League broke away and negotiated its own broadcasting rights this process accelerated dramatically.

While the Sporting Intelligence data in its tabular form excited me, it was when I put into Excel and produced some graphs that I got really excited.  The full set of data on average players’ basic wages , together with UK average wages as a benchmark is shown here:


(All graphs can be enlarged by double-clicking on them)

At first glance it is obvious that things started to change with the appearance of the Premier League, but if we plot pre-Premier League and post-Premier League separately, the change can be seen as an acceleration of the existing trend:


The most striking features of the data emerge when you compare the average basic wages over time in each tier with the average UK wages.  The Premier League data confirms the stereotype of the ability to live the Ferrari-driving playboy lifestyle:

In 1984/85 the average Premier League player was earning two-and-a-half times the average UK wage, but by 2009/10 this had grown to 34 times the average OK wage, with no sign of slowing down.

On the other hand, life for a player in today’s League 2 is rather different from this stereotype:

Starting from a position in 1984/85 of below the average UK wage, things did slowly get better until the dawn of the Premier League.  Apart from a strange positive blip in 2003/04 (and no, I can’t explain it either), his lot has been scarcely different from the average UK worker’s wage.  Given that a footballer has a limited career, I wonder how a League 2 player ever manages to get a mortgage and buy a house, especially if he’s a goalkeeper – other data I have shows that goalkeepers are the worst-paid players.

This distortion in wages up and down the pyramid is simply a reflection of the disparity in revenues.  Of course higher levels deserve higher broadcasting rights and should be able to pay higher wages to attract the best talent, but when the size of the difference between tiers has become so vast, the traditional view of a club having some ambition and a local businessman to back them has long gone.  The only way upwards to the top is with an Arab prince or a Russian oligarch.  This is of course hardly news, but the data above makes abundantly clear that unless 92 Arab princes or Russian oligarchs come along, performance on the pitch will continue to be grossly distorted by the richness or otherwise of a club’s benefactor.  That is, unless change in governance takes place, and Financial Fair Play is imposed rigorously up and down the pyramid, financial doping is stopped, and a measure of sporting competitive balance returns to the game.

Posted in Benefactors, Financial doping, Wages | Tagged: , , | 18 Comments »

Unsung heroes

Posted by John Beech on October 14, 2011

The news that Plymouth Argyle’s players and administrative staff are still failing to get their full pay (1) is not, of course, really news at all.  This situation has been going on for roughly a year.  It’s a message of despair that has become as familiar as Peter Ridsdale cooing that he expects a deal to be finalised very shortly.

There are still those who do not break out in sympathy with the players at least – you know the sort of stuff: “Overpaid prima donnas.  Serves then right.  No sympathy whatsoever.”  This is of course nonsense.  Plymouth Argyle is not a Premier League club, and the majority of players are on salaries that do not even begin to approach the telephone numbers that Premier League players command.  They do have the professional Footballers Association supporting them though.  Still, it’s hardly easy to adjust to dramatic changes in family income whatever your salary is.  I should know: I once had no choice but to make the first Mrs. Beech redundant from our shared workplace.

The administrative staff will undoubtedly be on generally lower salaries, and I have even more sympathy for them.  Apart from being worse off financially, they didn’t sign up to a profession where a transfer to somewhere else in the country was going to be an industry norm.  I’m sure most of them are local folk, who have more than demonstrated their loyalty to a club which is not just their employer but a club that they care about.  They are the real unsung heroes.

In a different news story today, another super-loyal administrator (in the non-insolvency sense of the word) has left his club/employer after an amazing 38 years – now there’s loyalty.  This is the case of Portsmouth’s Club Secretary, Paul Weld (2) .  As the club website points out: “Paul has worked through nine changes of ownership, 19 different managers (22 if you include Frank Burrows, Alan Ball and Harry Redknapp, all of whom managed Pompey twice), encompassing two periods of administration, four relegations, four promotions, one FA Cup final triumph, one FA Cup final defeat and a season in Europe!”  No doubt it was the two periods of Administration that must have caused the greatest stress in the Weld household.  Why did he remain so loyal when there must have been more secure job opportunities open to him over the years?  Well, “A Pompey fan, Paul was an active member of the London Supporters’ Club before arriving at Fratton Park from the Football Association as assistant to the then secretary Jimmy Dickinson, before taking over as club secretary.”  So, someone to whom it was clearly more than ‘just a job’.  And here’s a hint, Paul – yours is an autobiography that I can’t wait to read.

I’m sure there are similar stories to be told at a myriad of clubs.  Let’s not forget these unsung heroes, especially in the troubling circumstances of the current Plymouth Argyle administrative staff.  A club is much more than just the team who turn on Saturdays.  Let’s hope that those directly involved in the takeover negotiations can bring a rapid close to the brinkmanship and haggling, and show a little humanity to their loyal staff and their families.

Posted in Community, Human Resource Management, Identity, Insolvency, Investors | Tagged: , , , , | Leave a Comment »

Shares, not shirts!

Posted by John Beech on August 29, 2011

A couple of postings back (see Chester revisited) I threatened some more thoughts on my revisiting the Report of the Committee on Football, aka The Chester Report, published in 1968.  This is the first of two, and focuses on how the funding of clubs by fans has changed in the past 40+ years.

Today clubs have three main revenue streams – broadcasting rights (effectively non-existent in the sixties), commercial revenues through sponsorship (banned in the sixties, in spite of Jimmy Hill’s attempts to get the Talbot logo onto Coventry City’s shirts) and merchandising (then as unimaginable as being allowed to buy a School First Team or Prefect’s tie if you weren’t entitled to it – shirts were only fit to grace the backs of players), and direct revenues through ticketing, and to a lesser extent matchday programmes.  Among the direct revenues in those days were donations from supporters clubs – a to-a-large-extent, although certainly not entirely, forgotten form of fans financing clubs.

Chester was able to write back then:

The financial position of a club is determined by several factors: gate receipts in relation to operating expenses (players’ wages, administration etc.); contributions from supporters clubs, sweepstakes etc.; transfer fees; and distributions from the Football League and the Football Association.

The order in which the factors are listed is interesting, and to some extent implies their significance.  Under the heading ‘Miscellaneous Income (including Supporters’ Club contribution‘, the Chester Report states (and it’s worth quoting the full text):

Most clubs obtain a good deal of money from the operation of sweepstakes, bingo, raffles, and a variety of “gambling” devices [sic]. These are sometimes run by the club or a body directly under its control, but more often they are run by the Supporters’ club.  From the published accounts (which by no means tell the full story) income of this kind totalled £4¼ million and provided over 90 per cent of all additional funds to League clubs in 1963-1966.  Its significance varied in different leagues.  It was least important, absolutely and relatively, in the First Division.  In the Third Division, however, it compensated for some 80 per cent of gross operating deficits in 1963-1966 and for roughly two thirds of such deficits in the Fourth Division.  Indeed these two lower divisions, where team and administrative expenses and wages alone exceed total gate receipts, could not have been sustained without money from this source.  The total in the Third and Fourth Divisions during these three seasons alone was £2¼ million as against gate receipts of some £5 million.  In other words, Supporters’ clubs, bingo etc. contributed in the ratio of nearly £1 to every £2 taken at the gate.  In addition such clubs may make contributions to the well-being of their football clubs which do not appear in the accounts, e.g. the improving of terracing and ground facilities.

The importance of Supporters’ clubs for the financial survival of the lower division clubs , quite apart from their social role in canalising the deep attachment which many supporters feel for their local clubs, cannot be exaggerated.  It is most disturbing therefore, that these contributions were on a slightly declining trend in Divisions 2, 3 and 4 during 1963-66.  Should this trend ever become more pronounced, the financial viability of many of the lower clubs would be in serious doubt.

(To allow for inflation and look at these figures by today’s standards in terms of changes in average earnings, 1968 figures should be multiplied by a little over 25.)

The importance of donations from Supporters’ Clubs is echoed in another report from the same era.  The Political and Economic Planning (PEP) report English Professional Football of June 1966 notes: “Probably only four or five First Division clubs depend on [donations from Supporters Clubs] to a marked degree, yet in the lower divisions many clubs would be unable to exist unless these funds were forthcoming.  During 1964-5 in at least five League clubs, supporters’ donations represented some 60 per cent of the parent club’s total income.”  I find that staggering, especially when viewed from today’s perspective.  Unfortunately the report does not name the five clubs.

There are of course, especially in lower Leagues, some clubs today where the income directly from fans is a key element in the club’s budget.  What is different from the sixties though is that fans would not be prepared to simply subsidise a club owned by a ‘benefactor’ (or maybe in some cases they would and do) without some say in how the club was run.

Direct financial support of a club by a fan today includes the purchasing of endless variants of shirts.  Does it actually matter if this revenue stream has replaced donations through a Supporters’ Club?  I would argue very strongly that it does.  At least if the donation was through a Supporters’ Club, fans had a strong voice, if no significant power.  By seeing income shift from Supporter’s Club donations to the sale of shirts, the fans’ voice has been effectively individualised and thus virtually silenced.  Well-intentioned though recent boycotts of merchandising have been, they have had relatively little impact on club boards.

To regain a voice, and gain a say in how their club is run, fans need to gain stakeholder power through share ownership.  The next time you contemplate spending £40 on the new alternative away shirt, or for some reason feel embarrassed by wearing a shirt with last year’s sponsor’s logo (personally I’m embarassed at wearing any sponsor’s logo – remember, I’m a Pompey fan, and not so long ago we were, for some inexplicable reason, sponsored by Ty, the manufacturer of Beanie Babies), consider the option of instead donating £40 to your Supporters’ Trust war-chest!

Posted in Cashflow, History, Merchandising, Ownership, Trusts | Tagged: , , , , | 3 Comments »

Round-up of insolvency events 2010/11

Posted by John Beech on August 27, 2011

Things looked slightly better than in the previous season in simple terms of the number of insolvency events I have logged – ten events involving nine clubs, compared to twelve events each at a different club in the previous season – although there were still some large clubs involved.  In 2009/10 we had seen Crystal Palace, Portsmouth, and Chester City crash financially; in 2010/11 it was the turn of Plymouth Argyle and Rushden & Diamonds, the latter disappearing and the fate of the former hanging on a knife-edge as I write (there is clearly no cause for celebration when a) no money has actually been paid, b) the Football League has yet to agree the Golden Share being passed on, and c) the prospective owner of the club is facing three charges of fraud at another football club in four weeks time (1 and postings passim)).

In alphabetical order the clubs in 2010/11 which suffered what I include in my definition of insolvency event were:

Atherstone Town  (Tier 8 )

The club had become dependent on the bank-rolling of Chairman Aidey Burr (2), who stood down in November 2009.  By December 2010 the club was forced to announce their intention to withdraw from the Southern League Division One Central (3).  They now play in the Midland Football Alliance.

Dawlish Town (Tier 9)

In March 2011 Chairman Dave Fenner stood down (4) because of work commitments.  In July the club withdrew from the Western League (5) with debts of £60,000 owed to landlord Teignbridge District Council and brewery Carlsberg Tetley.  The club faces a winding-up petition brought by the latter (6).

Eastwood Town  (Tier 6)

An unusual case.  The club has been on the rise since Rob Yung began a frenzy of financial doping, boasting “I personally pay the players’ wages and any other money that comes in from the fans through gate money and the like goes straight into the club” (7). No notion of Financial Fair Play there then.  The club’s rise has been impeded by stadium restrictions, and Yung put the club up for sale for £1 (hence its inclusion in the list) (8).  The good news is the club is debt free (but whether it is sustainable at its current level without Yung to feed its financial habit remains to be seen) and new owners are in place (9).

Gedling Town (x2)  (Tier 10)

Another case of benefactor withdrawal, but with more serious consequences.  Chairman Roly Ash had bankrolled the club for many years (10 and 11), but at the beginning of the season gave up, withdrawing the club from the East Midlands Counties Football League.  In November new club officials were announced (12) but in June the club again withdrew from the League (13).  A bizarre consequence is that each of the club’s players now has to pay the League £22 to cover the fine imposed on the defunct club!  It would seem that there is a Football Debtors Rule too.

Hucknall Town  (Tier 7)

Another oddity.  The club has had a recent history of financial struggling, and matters suddenly came to a head in May when it was hit with a £75,000 VAT bill by HMRC.  For a number of years, it emerged, the club had decided not to pay VAT on revenue items such as gate receipts (14).  With a hefty helping hand, a significant part was paid off and an agreement reached over the balance (15).  In the meantime the ownership structure has had to be drastically altered and the club has been forced back to amateur status (16).

Leyton  (Tier 7)

After a period of troubled ownership (17), the club (not to be confused with better known neighbours Leyton Orient) withdrew from the Isthmian League because it could not pay its subscription.  There was a mass exodus (18), and the club, London’s oldest, was formally dissolved in July (19).

Plymouth Argyle  (Tier 3)

An ongoing can of worms that I don’t propose to reopen in the context of this round-up.  I’ve covered the saga in postings passim, and it has been very well covered by twohundredpercent.

Rushden & Diamonds  (Tier 5)

The club went into Administration in July (20) and effectively folded.  Finances had gone from bad to worse since being taken over by Liam and Steve Beasant in December.  A number of rumoured last-minute rescues failed to materialise, and a resurrection club is now under way (21).  The club’s demise had a silver lining for Kettering, who, under pressure because their lease was coming to an end, have now moved into Nene Park (22).

I have mixed feelings about this.  Certainly its good news for Kettering (which is roughly eight miles from Nene Park in Irthlingborough – the ‘Diamonds’ part being ‘Irthlingborough Diamonds’), and a rational case can be made for the Kettering, Wellingborough, Rushden and Irthlingborough area being ‘over-populated’ clubs.  But football is not an entirely rational topic.  A League club has been lost, and there are still questions to be answered about its rapid decline.

Windsor & Eton  (Tier 7)

Another sad case.  An indulgent benefactor failed to restrain an overly ambitious manager (23).  By May 2010 debts had risen to £137,000, including £50,000 owed to HMRC (24).  In spite of various reprieves, the club was eventually wound up at the beginning of February 2011 (25).  A resurrection club, Windsor FC, has been formed (26).

Although there has been a small decrease in the number of insolvency events, it is worth noting that a number of clubs came perilously close to inclusion in the list – Hinckley United (27), Welling United (28), and Wrexham (29) for example.

While League clubs have shown a general trend towards better financial management and control over recent years, non-league clubs remain very vulnerable.  Common factors ate benefactor-dependence followed by benefactor withdrawal, and tax payment issues.  Clubs at the lower levels are being forced to seriously consider ‘downgrading’ to semi-professional and even amateur status.  There is little evidence that these trends will change.

If readers spot any omissions, please let me know.  I’m afraid last season’s monitoring was necessarily a tad inconsistent because of too many nights spent away for work in hotel rooms with dodgy internet connections.

Posted in Insolvency, Ownership, Resurrection | Tagged: , , | Leave a Comment »

Just how slow can a car crash be?

Posted by John Beech on July 3, 2011

On Tuesday we were told that the long-running Plymouth Argyle saga was on the verge of taking a significant turn according to Administrator Brendan Guilfoyle: “at a meeting with the preferred bidder held today, Tuesday, June 21, 2011, the terms of a formal sale and purchase agreement were agreed by both parties” (1).  These terms of course include the separation of ownership of the stadium and the club, invariably bad news for a club.

On Wednesday Peter Ridsdale, as ever the Spinmeister, announced “Our objective is to have [the deal] go through by the end of this week” (2), which, in my book at least, promptly increased the odds on this actually happening.

Sure enough, as I write, no deal has yet been announced.  Nor will any imminent deal have any significant impact on the longer term stability of the club.  There is still the issue of the club’s Golden Share to be resolved, and the potential fly in the ointment is Kevin Heaney, owner of Truro City Football Club and not entirely successful property developer (3).  Ridsdale happily purrs “Mr Heaney would only be the landlord of the [Home Park ground] and would have nothing to do with Plymouth Argyle Football Club. As long as the club is independently owned and financed, there is no reason why the Football League should complain.”  Predictably the Football  League’s chairman has promised that “the governing body will “rigorously enforce” its regulations before giving the takeover the green light” (4).  This is the Football League that rigorously enforced its regulations with respect to the anticipated removal of West Ham to Leyton Orient’s doorstep (5), so perhaps the Spinmeister has reason to be optimistic.  I doubt it however.

There is too the small matter of Ridsdale’s impending court case, which continues to cast a shadow over any new dawn in Argyle’s fortunes (details of the charges here).

As a Pompey fan, I am only too familiar with false dawns.  At present, the consensus among Portsmouth fans seems to be to give the new owners, Vladimir Antonov and Convers Sports Initiatives, a ‘fair chance’.  The Football League apparently have by sanctioning the takeover (6).  The Financial Services Authority were, against their general flow of approval, less inclined to allow another Vladimir Antonov business, the Lithuanian Bankas Snoras, to operate in the UK (7), the problem being a failure to provide all the required information to the regulator.  Another Antonov deal, the purchase of Spyker Cars from Saab attracted attention when there were allegations, strongly denied, that Antonov had links with the Russian mafia (8).

To me, it seems that, not only do we suffer from ineffective ‘Fit and Proper Person’ Tests in English football, we suffer from the lack of any Fit and Proper Governance Test.  While we are quick to (rightly) condemn what has been going on in FIFA of late, perhaps some mote-casting would be in order at the same time.

UPDATE – 5 July 2011

Apparently the deal is “all on track“, although presumably that’s the track with leaves on it.

Posted in Fit and Proper Person tests, Football League, Governance, Ownership, Stadium | Tagged: , , , , | 5 Comments »

 
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