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

Posts Tagged ‘Benefactors’

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 »

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 »

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 »

Trouble at Rossendale United and Rothwell Town

Posted by John Beech on March 1, 2011

Those who are ‘fleet of ear’ will have picked up on Sunday’s 5 Live Investigates that Rossendale United and Rothwell Town (and, to pick up on Kevin Rye’s well-placed pass, not Runcorn Linnets!) have serious cause for concern.  Clubs in crisis as you go further down the pyramid tend to be less well reported.  These two clubs have come across my laptop screen this last week, but I would certainly not claim to have full knowledge of what is happening, and would welcome any corrections, updates or amplifications.

First up is Rossendale United.  The club faces expulsion from the  League for non-fulfillment of matches (1).  The immediate problem is that the club’s water supply has been turned off (2), which proved to be the last straw for the three fans who in effect had become the management team struggling to keep the club going (see also here, posting by David Hancock).

The club is suffering from a classic case of BWS - ‘Benefactor’ Withdrawal Syndrome.  The club had been ‘saved from financial ruin’ in 1999 by local ‘benefactor’ Andrew Connolly, who ironically is a demolition expert.  His long-term goal was – and here the dreaded ‘A’ word. ‘ambition’ inevitably creeps in – to take the club to the Conference (3).  As he put it at the time, “If it’s good enough for Manchester United, it’s good enough for Dale“.

Initially things went relatively well, with a grant for new floodlights (4) and the appointment of a Commercial Manager (5).  By 2003 Connolly and his wife Sandra were beginning to feel the pressure though, and a new Board was appointed (6).  Managers came and went (nothing out of the ordinary there then!), but in 2006 the Chairman, Declan Callan, who had been “hailed as the man who turned the club around” resigned (7).  Connolly expressed his continuing committment to the club, and pointed out “I have personally invested £370,000 into the club which has put enormous strain on my main business” (8).  Many a fan would have doubtless seen this as Rossendale United’s good fortune, but I would see it as the setting up of a business model that would clearly be unsustainable if Connolly was either unwilling or unable to continue this funding.  It would also see it as financial doping, the deliberate attempt to buy success and upset the competitive balance within the league.

By the end of that year, Connolly was becoming understandably exasperated.  He said he would pay the bills “for the very last time” (9).  This is how he saw the situation:

I am lost for ideas for the club. No local businesses want to get involved but we are now probably in the highest position that we have ever been.

‘My company has put £40,000 in since January and I am totally disillusioned. There are around 67,000 people in Rossendale and we get around 0.05 per cent of them watching the football. Nobody is bothered. I cannot force people to watch or get involved and I will probably be putting the club up for sale. Few other businesses have supported the club and close friends have asked me what I am doing? I am not going to cut the wage bill but I am doing a lot of soul-searching and something has to change rapidly.”

By March 2007, the wage bill had been planned for a cut of probably 70% (10), and in April there were reports of unpaid wages (11). The following month a supporters group was reported as having taken over the running of the club (12), and Connolly had agreed nonetheless to settle the clubs debts. Sponsorship deals were negotiated (13 and 14), and the following summer the club acquired a major new sponsor (15).

In November 2009 Connolly announced the club was up for sale (16). He was “seeking a new investor to take the club forward“. Connolly announced “Any investor who wants to come here can invest straight into the club and not worry about any debts, because it’s all paid off” (17). No investor seems to have rushed forward, and in February 2010 Connolly brought in Nolan Redshaw to market the sale of the club (18).

The resignation of the then volunteer management committee (19) seems to have marked the beginning of the present crisis, although this appears to have been much more an outcome of the situation rather than a cause. The true extent of the crisis was revealed in a statement at the end of February (20). Connolly made a statement which was published on 25 February in the Manchester Evening News (I can’t find it on their website, but I have it from a newspaper database) in which he said:

“After taking stock of the situation at Rossendale United it is now clear that the club has been left in a perilous financial situation.

Over two years ago the club was debt free, it is now in considerable debt.

After 12 years of being involved and ploughing a considerable amount of personal monies, time and effort in it now seems the club is exactly where it was then.

This I believe is due to lack of support and generally a total lack of interest from the Valley.

I now feel that without this interest or investment the club will cease to exist.”

Latest news from the North West Counties Football League is that the club will be suspended if they fail to play their next home game, due on 5th March (21). Their away games at Squires Gate last Saturday and at Ramsbottom United this evening had already been cancelled. The end, it would seem, is nigh.

Rossendale United are of course far from being alone as sufferers from BWS. At Weymouth (see postings passim) ‘benefactor’ George Rolls has just announced that he has quit (22).

At Rothwell Town there is a less clear picture of events.  There is a report that the club has sold its ground, that the money raised is insufficient to cover its debts, and that the club has gone into Administration (23).  I blogged on Rothwell last May, when Imraan Ladack of Kettering Town had flirted, unsuccessfully, with them over a possible groundshare.  Anyone closer to the club who has more (sourceable) information is invited to add it in the comments section.

Posted in Benefactors, Cashflow, Debts, Financial doping, Ownership | Tagged: , , , , | 3 Comments »

The scarf your mum knitted and competitive balance

Posted by John Beech on February 22, 2011

I haven’t been enjoying lunch lately.  Nothing to do with the food in the university canteen; it’s my daily read of The Guardian I blame.  That Matt Scott in particular had me choking today (1) over my vegetarian shepherds pie, although the oxymoron itself hadn’t put me in the best of moods.  I was so bothered that I’ve created a new tag (‘financial doping’) as a result, and will apply it retrospectively as time permits.

To be fair, Matt is an excellent writer, and its was the implications of what he wrote that vexed me, rather than the content per se.  His lead story was about a new Sport+Markt report on European Football Merchandising (2), a snip, I would imagine at 5,831 euros (no, I kid you not, such is the price of valuable market research in the football sector these days).

Matt reported:

The key finding of the European Football Merchandising Report, a survey of 182 clubs and 10,000 fans, was that United’s global revenues (excluding television income) have fallen by 10% in 12 months. The report’s author, Dr Peter Rohlmann, told Digger this was attributable to the “green-and-gold” campaign against the club’s owners.

“Our data show the club has lost retail revenue from the year 2009 to 2010 by around 10%,” Rohlmann said. “This is due to the fact that all the circumstances about the ownership and the behaviour of the Glazer family were not positive in the minds of Manchester United fans. This has had a direct impact on their merchandising spend.”

Rohlmann did not disclose the figures relating to United’s merchandising income because all disclosures made to Sport+Markt by clubs are on a confidential basis. However, he stated that the report analyses all of United’s self-generated merchandising revenues, along with those of their licensing partners such as Nike.

As United reportedly seek a 50% improvement on their £302.9m, 13-year Nike shirt deal, which expires in 2015, the demonstration of a decline in revenues comes at a bad time for the club. The Premier League leaders’ share of the merchandising market, which is worth €1.2bn for the 10 highest-earning clubs across Europe, has also slipped. They are now ranked sixth, down one place from 2008.

A spokesman for the club disputed Sport+Markt’s findings, saying royalties from the profit-share arrangement with Nike had risen in each of the past four years.

Now let’s just stop and put that into its real perspective.  That’s €1.2bn, or a smidgen over £1bn, or a £100m per club, that the fans of just ten clubs have spent in one year on merchandising.  Rather a far cry from the days when you got your mum to knit you a scarf in your club’s colours, and perhaps splashed out on a rosette on Cup day.

As I said, it’s the implications of this that bother.  Such enormous sums spent on the merchandising of a few clubs results in ensuring that the rich and strong clubs just get richer and stronger.  In other words, it distorts the competitive balance in the respective leagues.  It’s not a million miles from financial doping – the attempt to buy success by distorting the balance of competition.  This is normally in the form of ‘benefactors’ pouring money into clubs à la Manchester City or Chelsea, or, at a different level, Crawley Town.  What’s particularly insidious here is that it’s the fans who are being drawn in to pay for the club’s habit.

There is at least one up-side to this though – the Green and Gold campaign is having the desired impact.  As for me, I’ll stick to wearing my favourite footie T-shirt (available from WSC – who still won’t reciprocate a link on their links page, incidentally).

As this was The Digger column that was provoking this reaction, I should have guessed there would be more to incense me.  Matt also reported:

Any defence whose last line consists of Sébastien Squillaci and Manuel Almunia is vulnerable to the attentions of a journeyman striker picked up from the French fourth division. And Jonathan Téhoué, left, proved it in the FA Cup fifth round against Arsenal. Now Digger can reveal just how valuable the Frenchman’s equaliser is expected to be for Leyton Orient. Arsenal turn over £3m for every home game and under the terms of the FA Cup revenue-sharing agreement Orient will be due 42.5% of the net gate receipts that the Emirates Stadium replay generates.

Although the Gunners have yet to announce ticket prices for the 2 March match, the profit is expected to be in the region of £1.6m, raising £700,000 for the League One club. If the match is televised, it will make close to £1m for Barry Hearn’s club – not bad for one game, considering Orient’s total turnover of £3.3m in the 2008-9 season.

Here there is at least an income to the club related to their performance on the pitch.  Orient certainly deserve some good news after their shabby treatment by the Premier League.  My gripe is not with Orient but rather with the fact that in general the distribution of broadcasting rights has the same result – making the rich clubs even richer and distorting the balance of competition.  And who’s feeding the habit?  It’s the fans again.

Have we really lost all sense of the sporting ethic?  Sadly I think I know the answer to that one.

Posted in Benefactors, Broadcasting rights, Ethics, Financial doping, Merchandising, Revenues | Tagged: , , , , , | 1 Comment »

The joy that was, and may yet again be, the Abbey Stadium

Posted by John Beech on January 18, 2011

Perhaps not the obvious stadium to refer to as a ‘joy’, but it has a special place in my personal history.  My very first football-related memory is of being driven along the Newmarket Road as a child aged about 4 years and suddenly catching sight of this enticing building.  Yes, it was oddly enticing.  Frequent family visits to my grandmother’s in Cambridge had no doubt made me blasé about the wonders of mediaeval architecture.  Here though was a truly intriguing building – what could be its purpose?  I should perhaps mention that my earliest years were spent in the rural Surrey/Hampshire borders, and, to be honest, Haslemere Recreation Ground just didn’t cut it.

This must have been in the very early fifties, who knows, perhaps just even in the ‘Abbey United’ era.  Certainly they still played in the Eastern Counties League, and it was to be roughly twenty years before they followed in the path of Headington United (now known as Oxford United) to the heights of the Football League in 1970, replacing Bradford Park Avenue.

In 1992 they made it to 5th place in what is now the Championship, but the last decade has been less kind to the club.

One strength of the club was owning their stadium.  That is, until the fall to the Conference in 2005, alongside going into Administration, brought a not untypical sell-and-lease-back scenario for the Abbey (1), the sale being to Bideawhile, a company owned by one of the club’s directors.

In a less typical dimension to this, ten years ago the fans formed a Supporters Trust, Cambridge Fans United (2), and, by 2003, the Trust had raised £100,000 and was the club’s third largest shareholder (3).

In April 2005 the club, on the strength of a proposed loan from Dr Johnny Hon, a club director, made an offer of £2.2m to buy the Abbey back again, but Bideawhile, whose director John Howard was still Vice Chairman of the club, refused the offer (Bideawhile had bought the ground for £1.92m at the end of the previous November incidentally).  As Cambridge Fans United director Brian Attmore said at the time “This is a kick in the teeth for all our supporters.  It puts United’s future in the real jeopardy. It is for the whole board to determine what is right for the club and not for one individual with his own commercial agenda. This is precisely the conflict of interest we feared would happen.” (4)  Bideawhile ignored a petition signed by 3,000 fans (5), stating that they had “long term plans to help the U’s relocate to a new community stadium.“.  Ah, relocation.

Long term?  Well, 13 days later Bideawhile (what an ironic name) announced that “Football will be played at Abbey Stadium for 50 years, unless the directors and shareholders feel the best thing is to relocate. The ground is safe in the short-term, no matter what people may think.” (6)

Less than a week later the club filed for Administration (7).  Dr Johnny Hon had resigned as a director (8) a fortnight before

By November the club had managed to agree a CVA, but not without the involvement of then Sports Minister Richard Caborn (8).

The following month there was talk of a possible groundshare and even merger with Cambridge City (9), who had managed to climb as high as the Conference South in 2004, but most would agree were the junior of the two sides – perhaps a ‘Bristol Rovers’ to a ‘Bristol City’.  While no doubt this would have been anathema to both sets of fans, it would have made good economic sense.  I’ve advocated ‘thinking the unthinkable’ before, and Cambridge is, in my opinion, better served by one bigger rather than two smaller clubs .  Or perhaps that should, by then, be three – Histon were to win the Southern League that season, and who, as I write, are bottom of the Conference National.

August 2006 saw some shakedowns in the board room  (10), (11), (12).  The new Chairman, Lee Power, said the club would look at another attempt to buy the ground back from Bideawhile (13).  The pressure of having to pay rent was beginning to tell, and by December the club was turning to its directors who were guarantors (14).  In March a new (US) investor appeared on the scene (15).

Early in 2009 there was another flurry of activity with board room appointments (16) and (17).  ‘Stability’ remained the mantra if not the reality.  Finances remained a strain, and in July manager Gary Brabin left (18).  George Rolls, by then the Chairman, explained “There have been disagreements between Gary and myself which have festered over the summer. Gary has pressed the issue to sign more players, when we can’t.”  Brabin’s successor, Martin Ling, lasted roughly a week, having signed a three-year contract (19), the club citing “irreconcilable differences between Martin Ling and chairman George Rolls“.  The next day Rolls quit the club (20), as did Vice Chairman Terry Baker.  Rolls declared “Lots of fans won’t want to hear this but I’m sure I’ll be back one day owning the club. I made a lot of bad decisions but it hasn’t put me off. Yes it wasn’t good business and I had no other option but to stand down. I’ve got no regrets, just happy memories.  I’m not going to cry over anything.  I’ll be back there.” (21)  I suspect most fans would hope not.  Martin Ling would presumably hope not; he was promptly reappointed Manager (22).  Rolls meanwhile was firing off as if in an exit interview, warning of a £900,000 shortfall in revenues:”They have to start living within their means. It’s a sad day for me if the club wants to keep gambling all the time. I kept forewarning the fans cuts would have to take place. If it meant upsetting managers along the way because they were over budget and trying to sign people, I’ll take that, I interfered. But I’m sure the fans would rather have me interfere than six months’ time the club go into administration.” (23)

In a surprise turn of events (well, to me at least!) this time last year, who should come on board at the Abbey Stadium but Gareth Baldwin, late of Histon! (24)  Showing a multiplicity of ’till I die’ approaches is of course the norm for players, but such a switch at board level between two local rivals is somewhat rarer.  In this case it turns out, he ‘admitted’ “a lifelong love of United” (25).  Gosh, he must have been tortured during his time at Histon.  Shortly his wife became Secretary at Cambridge United, a role she had previously held at, where else, Histon (26).

A bombshell at the end of February was the news that Bideawhile – remember, the company owned by United’s then Vice Chairman John Howard who had bought the stadium for £1.92m in December 2004 had sold the ground to Grosvenor Estates for, wait for it, £3.5m (27).  And no, that’s not a typo.  Be warned – there’s a name to watch out for if appointed as a director in a club near you: J-O-H-N H-O-W-A-R-D.  The Supporters’ Trust were, to be fair, given the opportunity to match the £3.5m bid, in a time frame of, er, 18 days! (28).  John Howard had finally stepped down, at the request of the rest of the board, because of his blatant conflict of interests in August 2006 (29).

Sadly, if not unsurprisingly, they failed to manage that, but they did raise over £1m in that very short period (30).

[Definitely a new paragraph, just to give you time to let that sink in...]

That brings us more or less up to date, save for the news at the beginning of this month that Cambridge United itself is up for sale (31).  Baldwin has expressed an interest in buying the club (32), as have those mythical beasties (forgive my cynicism, but I am a Pompey fan) ‘foreign investors’ (33).

Last night Cambridge Fans United decided they too would seek to buy the club (my source for this is Twitter – I’ll post a link in ‘Comments’ once the minutes of the meeting are online).  Present at the meeting was Kevin Rye of Supporters Direct.  He offered me the following thoughts:

Cambridge United fans need to recognise that they’re at something of a crossroads.

“To my mind they have three choices:

  • they could either take the chance with the same, tired model of ownership where a small group of directors including CFU continue to keep the ship afloat every year but basically manage long-term decline; this hasn’t worked already, despite the best efforts of those concerned;
  • or they could wait for the mythical white knight to appear – the less said about that the better;
  • the final, and only real option left on the table, is community and supporter ownership; yes, it seems scary to some people, but the chance to create a vibrant, outward looking club, harnessing the energies, talent, collective wisdom – and finances – of the several thousand CUFC fans out there is surely too good an opportunity to turn down.

Cambridge Fans United certainly are in with a chance. They have existed for ten years and have recently raised £1m at very short notice.  May joy yet again be found at the Abbey Stadium.

Food for thought there for Plymouth Argyle fans…  And indeed for fans at any club that hasn’t yet established a Supporters’ Trust.  Plymouth fans have now done so (34), I appreciate, and good luck to the Argyle Fans’ Trust, but how different their position might have been with ten year’s experience behind them.

 

Posted in Assets, Benefactors, Insolvency, Investors, Ownership, Stadium, Trusts | Tagged: , , , , , , | 6 Comments »

Lessons from Plymouth

Posted by John Beech on January 3, 2011

The car crash that Plymouth Argyle is on the verge of turning into is a strange case, yet many a club might well think that there but for the grace of god go they.

At the beginning of the nineties Dan McCauley had become Chairman, with his predecessor Peter Bloom becoming Vice Chairman.  While the club did not have a particularly stable decade on the pitch (three relegations in eight years; seven managers), the club was run reasonably stably, if unsustainably, on a traditional benefactor model.  Shortly before McCauley finally stood down in 2001, debts were reported to be £2.7m, with £1.8m owed to McCauley’s Rotolok Holdings.  He was also advocating a new stadium, the capacity of which was wound in from 23,000 to 18,000, but with scope to increase capacity.  As McCauley explained “An 18,000 all-seater stadium should be sufficient for us in the short-term. But it’s important to have flexibility in the design to cater for success when Plymouth Argyle move up through the leagues.”  ‘Sufficient’ is an odd choice of word – average seasonal attendances throughout the decade had peaked at just over 9,000 in 1994, but had fallen to around the 5,300 mark.  The sort of figure McCauley was speaking of had not been seen at Home Park on a regular basis since the fifties (1).

Reaching the age of 65 in 2001, McCauley found buyers he felt would be good for the club.  The new board was led by local businessmen Paul Stapleton and Peter Jones, and included the local MP Michael Foot, and two London-based businessmen, Nick Warren and Phil Gill, all Pilgrim fans.

[Sources for the above paragraphs are newspapers, mainly the Western Daily Herald, and are unavailable on the internet]

Under the new regime, stadium redevelopment proceeded, but hit a snag when the Council declined to carry on funding it (2).  Having already spent £2.6m, it felt that it was difficult to justify further expenditure.  Argyle Vice Chairman Peter Jones rather ungraciously argued “People should not forget the council are the freeholder of the stadium. Given the fact that a revamped stadium will bring in more people, more income and more rent, they should be prepared to put in a proportion of the £5m we need.

From a business perspective the early years of the noughties were a success.  In 2004 they announced a profit for the third year running (3), and by 2005 the seasonal average attendance had reached almost 16,500, following a return to Tier 2 for the first time since 1992.  The ground was purchased from the Council in December for £2.7m (4).

How then did things start to go wrong?  The management of players proved problematic. with continuing changes in who was manager.  The club managed to maintain their status in the Championship (until last summer, that is), but the fans started to drift away, attendances falling to just over the 10,000 mark on average.

In February 2008 the club recorded a record annual loss of £715,000 (5).  Not only were revenues down, but the club had locked itself into some rather expensive player contracts.  The wages/revenues ratio, which in 2001/02 had been at a very healthy 43.1%, had by 2007/08 risen to a rather unhealthy 74.4%.

In April 2008 the club announced a surprise new investor – Japan’s K&K Shonan Management Corporation, headed by Yasuaki Kagami who joined the Argyle board (6).

Argyle chairman Paul Stapleton, said: “We are excited about the future possible revenue streams from the Far East in particular and expanding the horizons of Plymouth Argyle. While this agreement has only just been concluded, it demonstrates the considerable appeal that Plymouth Argyle and our region has for companies with a global reach.”  I suspect that few outside Plymouth shared this optimism.

Japanese involvement increased when Yasuhiko Okudera was appointed Argyle’s President (7), and there was talk of Japanese players coming to Home Park (8).

By the summer of 2008 things were beginning to crumble; the transfer budget was reported as overspent (9).  By March 2009 non-playing jobs were at risk (10).

By the summer of that year there was talk of not only further investment from Japan but also of a takeover (11). Phill Gill sold his shares to Kagami (12), and by July Kagami held 38% of the shares, and his colleagues Sir Roy Gardner and Keith Todd joined the board with holdings of 13%, the trio thus holding a small majority.  The appearance of Gardner in particular, a former Chairman of Manchester United, raised hopes for some stabilisation.  Paul Stapleton said of Gardner “He’s going to bring a no-nonsense, common sense approach, and a business attitude to everything we do” (13).  The challenge was certainly there though – they had, for example, inherited a squad of over 30 players (14).

There was to be no magic wand.  In December that year the club was placed under a transfer embargo (15) for what the club dismissed as historic debts, and Kagami rode to the rescue with a loan [sic] of £1.5m (16).  Kagami was meantime being sued for £84,000 by former director Gill (17).

2010 opened badly, with the first of a series of winding-up petitions from HMRC (18).  In March there was the announcement that the club was to ‘sell off the family silverware’, the only recently acquired Home Park (19).  A ‘New World’ was heralded nevertheless (20), involving a 46,000 2018 World Cup stadium – rather than repeat my thoughts on this, see a posting I made at the time called Are we going stark stadium bonkers?.  The year’s financial figures, which featured a loss of £2.9m, were described by Gardner, with the kind of understatement that football club Chairmen specialise in, as ‘disappointing‘ (21).

The relegation to League 1 was a bitter pill to swallow given the already worrying state of finances.  Gardner however insisted that the new stadium was the way forward: “A new stadium is an essential part of our forward-planning and reflects the scale of ambition at the club” (22).  Oh dear, the A-word (ambition).  Perhaps the R-word (reality) might have been more appropriate.

The scale of ambition was certainly enormous – last August the board announced plans for a £150m redevelopment of Home Park (23)!  The following day, it emerged that the club had not paid their long-serving announcer since late in the previous season (24).

Things have just progressed from bad to worse since then, and I will assume that any reader who reached this point is already familiar with the failed 2018 bid, the further winding-up petitions from HMRC, and the worrying appearance of Peter Ridsdale.  I will spare you a repetition of his experiences at Leeds United and at Cardiff City (but see here if you want to read my previous postings on the Spinmeister).  Less well remembered are his days at Barnsley – he took over in October 2003 (25); when he left fourteen months later, new Chairman Gordon Stewart explained Ridsdale’s departure “The club was running into a financial position that was less than comfortable and it was clear cash had to be injected” (26).

For the Spinmeister himself to declare the situation at Plymouth as ‘dire and I can’t even find the words to put into context how bad it is. It is probably worse than you can imagine. This is a race against time‘ (27), one can only assume the situation is considerably worse than dire.

With the exception of bringing in Ridsdale as a ‘saviour’ – all I can offer as hope to the Green Army here is the thought that this might just be a case of fourth time lucky, although I don’t think it actually will be ;-(  - the situation at Argyle is one that could have happened at too many clubs – ‘benefactors’ who couldn’t or wouldn’t stay the course, overpaid players, cashflow insufficient to pay all staff on time, a high turnover of managers, a serious case of ‘stadium envy’, a casual attitude to paying HMRC, absentee investors, an absence of fan power…  It encapsulates most of what is wrong with English football, and offers a very depressing start to 2011.

Posted in 2018, Assets, Benefactors, Cashflow, Debts, History, HMRC, Insolvency, Investors, Ownership, Stadium | Tagged: , , , , , , , , , | 14 Comments »

‘Good Rangers’ v. ‘Evil Rovers’?

Posted by John Beech on December 21, 2010

The top of the Conference table intrigues me.  The top seven clubs come from right across the spectrum of football business models, from clubs whose fans can be rightly proud, through those that have been abused by boards past and/or present, through to clubs that engage in blatant financial doping and whose fans have seen the club become identified with a ‘benefactor’ rather than with a local community.

As I write, the top seven, in order, are

  • Wimbledon
    The exemplar of how fans can run a club successfully.  Their story is so well known it doesn’t need repeating.
  • Crawley Town
    Southern League champions in 2004, and since then they have managed to stay up in spite of several sets of points deductions.  Their recent history off the pitch has been one that you would reluctant to wish upon you deadliest rivals.  A brace of Administrations (in 1999 and 2006), being pursued in court by HMRC as recently as last July (1), and a string of owners.
    The most recent is Bruce Winfield, together with Susan Carter, who has produced a ‘war chest’ for the purchase of new players.  Manager Steve Evans was happily spending money throughout the summer transfer window on a scale virtually unprecedented at the Conference level.  One failed attempt to buy success was a cheeky knocked-back try at purchasing Wimbledon’s captain, Danny Kedwell (2).
    All in all a somewhat colourful history off the pitch.  The mystery surrounding the war chest, and who the investors are, to me puts a measure of uncertainty over the sustainability of their current business model.
  • Luton
    A club much abused by its previous owners.  The new ownership team inherited the massive points deduction, but things seem to have finally bottomed out, and it looks as if it will not be too long before it is back in the Football League.  Its home gates would not be out of place in League 2; in fact, they would be the second best!
  • Newport County
    Not the original club, which disappeared in 1989 thanks to the shenanigans of one Jerry Sherman.  The resurrection club has had to claw its way back up the pyramid, including a period in significant exile and an attempt to have them kicked out of the English pyramid.  The club is now roughly 20% owned by the Supporters Trust.
  • Fleetwood Town
    A club with a very chequered background, and many football fans will still be wondering ‘who?’.  The club is owned by Andy Pilley, also the owner of Commercial Power, who sponsor the club’s shirts.  Commercial Power has some interesting approaches to the conduct of its business – see (3) and (4).
    The club went full-time last summer and a £4m stadium redevelopment is under way. With home gates at just under an average of 1700 this season in spite of the club’s success on the pitch, I fear that, for fans, there may be tears before bedtime.  The financial doping may prove unsustainable.
  • Kidderminster Harriers
    A club in meltdown.  It was reported last month as having debts of £250,000 and has been in and out of court at HMRC’s behest for much of this year.  Although they had a winding-up petition dismissed earlier this month (5), its other debts are only sustainable through handouts from the owners (6), and there seems to be a shortage of those willing to pick up what has become a poisoned chalice (7).  Short of a new local millionaire suddenly riding to the club’s rescue, Administration is looking increasingly likely.
  • Wrexham
    A club which famously had to take its own Chairman to court to regain ownership of its ground.  Even today there are concerns over its future (8).
    There has been talk of the Supporters Trust taking over the club (9), but relations between owners and fans have not always been good.

By the end of the season we will of course have one club as champion and automatically promoted, and four into the playoffs.  The battle to be promoted will be fascinating to follow with its business model overtones, especially if these remain the seven clubs in contention.  Will ‘good’ triumph’ over ‘evil’?  That is of course oversimplifying, but I will find it difficult to remove considerations of their business models from deciding who I want to be promoted.

Posted in Benefactors, Ethics, History, Ownership, Trusts | Tagged: , , , , | 1 Comment »

Manchester City following in Pompey’s footsteps

Posted by John Beech on October 2, 2010

Manchester City’s financial results, published earlier this week (1), were generally reported uncritically earlier this week, notwithstanding the key loss of £121m, with the exception at least of The Sun (2), where there was some attempt to look beyond the positive headlining provided by the club.

According to the club, the financial highlights could be summarised in large font size thus:

We have reported revenues in excess of £100m with a 44% rise in turnover to £125.1m…
Corporate partnership revenue increasing by £25.9m to £32.4m…
Ticket revenues increasing by £2.8m (18.6%) to £18.2m…
Season ticket revenues up by £0.9m to £9.6m…
Television rights fee income increasing by £5.7m (11.8%) to £54m…
Matchday hospitality revenue growing by 0.7m (13%) to £6.1m…
Retail sales and merchandising revenue increasing by £2.9m (60%) to £7.9m

Excellent news indeed, but then we find in much smaller font size that the club is report ing a net loss (and there was me beginning to think they had forgotten about costs) of £121.3m. Apparently “there have been significant increases in both player and non-player wage costs which have only been partially offset by substantial growth in the club’s commercial and other revenues

Or to put it another way, the club itself can’t afford the players but its benefactor can.  Search the report for the word ‘debts’ and you will be out of luck however.  Sheikh Mansour is following the Abramovich route and converting debts to equity, and on a scale that invites comparison with Chelsea:

The financial foundations upon which the Club operates have been strengthened with the conversion into equity of £304.9m in shareholder loans.  A further £135.8m of new equity was issued during the financial year and post year-end a further £53.2m of new equity was issued. As we continue to invest in all areas of the Club, we do so virtually debt free – with only £36m of long term commercial bank debt following the conversion of shareholder loans into equity during the year.

So, there you have it – well over £400m injected with a loss of £100m.  Not quite so encouraging then.

In the smaller print financial data towards the back of the report we find that the aggregate payroll costs have risen from £82.6m to a rather worrying £133.3m – or, as the club like to present data, a rise of 61%.  Turnover had risen from £87m to £125m, meaning that the wages/revenues ratio had risen from 94.9% to 106.6%.

Which is where the reference to Portsmouth comes in.  Deloitte point out that for the Premier League clubs en masse the wages /revenues ratio has risen to a worrying 67% (3), but this rather hides the variance individual clubs have.  Here are the ratios over five seasons:

04/05 05/06 06/07 07/08 08/09

5 seasons’
Average

Ratio for
whole
5 seasons

Manchester Utd. 48.3 50.9 43.5 47.1 44.2 46.8 46.4
Tottenham 47.0 54.8 42.5 46.7 55.4 49.3 49.2
Arsenal 57.4 62.4 50.5 48.4 46.4 53.0 51.7
Liverpool 52.5 56.6 57.9 55.1 58.0 56.0 56.2
Bolton 47.9 52.1 60.2 66.1 68.9 59.0 59.4
Everton 51.4 63.6 74.7 58.8 61.6 62.0 61.5
Middlesbrough 55.7 n/a 79.6 72.5 58.7 66.6 66.0
Sunderland 64.0 44.1 90.1 58.3 76.7 66.6 65.6
West Bromwich 57.4 57.3 73.4 79.9 65.4 66.7 65.4
Manchester City 61.9 55.6 63.9 65.9 94.9 68.4 70.3
Newcastle Utd. 57.7 62.8 65.1 78.6 85.2 69.9 70.2
West Ham Utd. 63.7 51.9 75.8 79.7 91.1 72.4 74.7
Aston Villa 64.2 78.1 81.9 66.7 83.7 74.9 75.2
Chelsea 73.1 74.6 69.7 80.6 80.1 75.6 76.0
Hull City 57.3 61.7 76.7 129.0 65.8 78.1 74.0
Fulham 85.8 80.4 88.6 73.3 69.0 79.4 77.9
Blackburn 75.8 76.9 84.8 70.3 90.6 79.7 79.5
Stoke City 65.2 88.6 88.1 105.9 55.6 80.7 68.6
Portsmouth 69.5 66.0 89.6 76.4 108.8 82.1 83.9
Wigan Athletic 208.3 58.3 100.3 88.3 89.9 109.0 87.5

[Developed from data in Appendix 7 of Deloitte (2010); annual values of over 100% highlighted]

Only five clubs have been operating within the 60% limit generally advocated as good practice.  These include three of the so-called ‘big four’ of English football (Arsenal, Liverpool and Manchester United, but not Chelsea), who have the highest wages and revenues, thus skewing the average for the whole league.  Just over half the clubs have wages. revenues ratios of over 70%, with worst practice at Wigan Athletic, with a five-seasons ratio of 87.5%.  Among the data are some particularly worrying examples of ratios above 100% – Wigan with 100.3% in season 2006/07, Stoke with 105.9% in 2007/08, Portsmouth with 108.8% in 2008/09, Hull with 129.0% in 2007/08, and Wigan again with an amazing 208.3% in 2004/05.

Such figures are clearly unsustainable without the ‘bankrolling’ of a benefactor, and by any interpretation constitute financial doping.

[Normal service should now have been resumed.  I've moved office and buildings, and largely unpacked.  My laptop has been sorted with a new hard drive - all data recovered, but still some non-standard software to install.  Fingers crossed, and on a new back-up schedule!]

Posted in Benefactors, Costs, Debts, Ownership | Tagged: , , , | 10 Comments »

More unexpected ‘benefactor’ behaviour

Posted by John Beech on September 17, 2010

Following my last posting, two stories have caught my eye – at Altrincham and at Accrington Stanley.

For those not familiar with Altrincham’s business model, it would only be fair to provide some context.  In July 2002 Geoff Goodwin became the Chairman.  This followed  a period of considerable instability – an ex-director had threatened to serve a winding up petition, for example – and rising debt, said to have reached a level of £500,000.  Goodwin became the majority shareholder in April 2005; however, in January 2007 he announced that he would relinquish the post in May 2008, but by the end of season 2007/08 he had decided to carry on (1).

Apart from that wobble, Goodwin had held firm in bringing Altrincham into a period of relative stability, managing to turn a small profit most years.  Certainly he had been under pressure over the period he had been in charge, notably with three consecutive ‘great escapes’ from relegation.  There have been indications of increasing pressure of late – in July there was a call for fresh backers to come forward (2), and at the beginning of this month there was at least a possibility that the squad might need rationalisation (3).

So, it was not completely unexpected when Goodwin announced that he would be standing down as both Chairman and as a director (4).   He gave two reasons for his decision.  First, the fairly standard reason that ‘benefactors’ offer, that of ‘mounting pressures at work‘.  This is all too often the case as ‘benefactors’ do have higher priorities associated with their day jobs (an inherent weakness of the benefactor model is that the club cannot be their number one priority; you can’t after all seriously expect them to ignore their day job).

What was unexpected, at least to me, was his second reason: ‘his involvement with his son’s karting activities‘.  His 13-year old son is beginning to make a bit of a name for himself in karting circles apparently, and like any parent he wants to be supportive.  But on the other hand, he was a self-appointed benefactor of a football club.  The fact that his son’s karting comes first is perhaps understandable at a human level, but it makes a mockery of any notion that ‘benefaction’ offers a sustainable business model.  If your club is run by a ‘benefactor’, you will always be worried that his son is suddenly going to divert your interest and time through the discovery of some unusual talent.

The other announcement that , again to me, was unexpected was over at Accrington (see postings passim).  The club had almost been wound-up last year, and had only been saved by a dramatic last-minute accommodation between the intransigent old guard and wannabe owner Ilyas Khan.  Khan has made a great deal of being pro-Supporters Trust in his battle to gain control, but, as Ian King of TwoHundredPerCent pointed out at the time (5), “The white knight on the horizon at Stanley continues to be the Accrington Stanley Supporters Fund, which was recently formed by a group of fans and backed by Stanley shareholder Ilyas Khan. Khan has been trying to wrest control of the club for some considerable time now, and is said to have put £250,000 into the Fund, although the club is unlikely to see very much of this money unless Khan takes control of the club, a situation which the current owners are loathe to to agree to. Despite the name, ASSF is not a Supporters Trust, rather a vehicle for Mr Khan to take control of the club. Whether this is a completely desirable or not may not be known until he takes control of the club, if he takes control of it but, for most supporters, this seems like their only option.

In fact Khan seemed to back away from the Supporters Trust once he had got his feet under the boardroom table.  But wait!  Battle seems to have been resumed, according to a report yesterday: “Chief executive Rob Heys has called for an end to the war of words raging behind the scenes at Accrington Stanley FC. Non-executive chairman Ilyas Khan and managing director David O’Neill have had a long-running difference of opinion on how the club should be run, following the £308,000 tax debts last November that almost forced the club to be wound up.” (6)  The report also tells us that Khan “is now in talks with the Accrington Stanley fans to set up a Community Trust to run the club.”  What can this all mean?  Is this a regression to Plan A? There are more details of his new attempts to woo the fans here.

Apparently the club’s spin on events is “Following the recent public discussions involving Accrington Stanley Football Club Ltd, the club are now looking to internally resolve the many issues that have arisen over the past couple of weeks.  It is the club’s full intention to issue a detailed press release outlining the situation in its entirety, as soon as all outstanding matters have been legally resolved. During this time, Robert Heys will continue in his role as chief executive officer while continuing to work alongside managing director David O’Neill who will concentrate on the legal matters that have arisen.  The club has been instructed by its shareholders to call an AGM as early as possible in October and will announce this to all shareholders once the date is set.”  No doubt all will become clear in the fullness of time, but if any Accrington activists can cast some light in the meantime I would be pleased to hear from them.

What becomes ever clearer in the bigger picture is that the supporter-based co-operative model not only wins over the benefactor model because the committment to the club is ever-so-sustainable, but also because it avoids focussing all the power in the hands of just one individual.

Posted in Benefactors, Ownership, Trusts | Tagged: , , | Leave a Comment »

The increasingly irrational world of football club owners

Posted by John Beech on September 10, 2010

My blood boils far too easily these days.  Perhaps it’s an age thing.  Or perhaps the wacky world of football finance really is going insane. Three stories in the last few days have had me reaching for my gun. I’ll deal with them alphabetically by club, but Mansfield Town fans and Nottingham Forest fans can be assured that I cite their clubs merely as examples of what is wrong – it could have been so many other clubs that I could have used to make the point.  I’m not having a go at their club; I’m having go at their directors, and directors at other clubs who make similar comments. In short, I’m making a general point, which happens to be triggered by comments made by their directors.

First a bizarre quote from the Ilkeston Town saga.  Former owner Chek Whyte is quoted as saying “From the point I took over we had got it up to the next league and the league above that, which is the highest the club has ever been.  The only reason we let the club go was because the new owner could take it to the next level, but he has not done that” (1).  So we are asked to believe that his decision to sell the club was entirely as a selfless move to make sure that the greater interests of the club were respected.  Erm, nothing whatsoever to do with the fact that his debts had risen to £32m (2) then.  But Whyte is known for his interesting explanations – he had been banned from being a company director in 1999, which he told the Salford Advertiser was because he was dyslexic.

Meanwhile, over at Mansfield Town, the club is up for sale (3).  ‘Why?’, you ask.  Well, according to the club website, “The Board believe they have taken the club as far as they can and now is the ideal time for someone new to takeover the helm and move the club to the next level“.  Two of the most irritating clichés in football ownership: ‘taken the club as far as they can‘ and ‘move the club to the next level.

What on earth does ‘taken the club as far as they can‘ mean?  In another announcement the same day on the club website it becomes clearer: “Chairman Andrew Saunders has admitted that both he and his fellow board members cannot continue to make any further ‘major financial commitments’ towards the football club” (4).  He and fellow directors had been ‘investing’  approximately £10,000 a week to sustain the club.

At the very least, this is an admission of poor business practices.  They are directors of a company which is losing over half a million pounds a year.  From a different perspective, they haven’t recognised that a true benefactor, in the traditional mould of Jack Hayward or Jack Walker, has deep enough pockets to keep on benefactin’.  Perhaps they were simply naive when taking on the club.

Over at Nottingham Forest, where chairman Nigel Doughty, who has invested more than £60m in shares and loans during the last decade, may curtail his investment in the wake of recent criticism from fans, some gems from Chief Executive Mark Arthur: “Nigel has regularly put in over £5m over the last few years. Last year his commitment was £13.4m which is double the amount we received from season-ticket revenue and match-day ticket revenue” (5).  When you are committing financial doping on such a blatant scale, you might expect more success than Forest have achieved.  This has resulted in criticism from fans.  Now Doughty hints darkly at stopping his ‘investment’ unless the fans are nicer to him.  Again, he hasn’t understood what a ‘benefactor’ really is.  And he seems to think that everyone must like because he owns the club.  He doesn’t appreciate that buying the club (i.e. the company) doesn’t mean he has bought what fans see as the club (i.e. the social construct).

A true benefactor accepts that he is on a hiding to nothing and throws money at a club, without a hint of complaint, in a deliberate attempt to upset the competitive balance of the league the club plays in.  Increasingly, today’s ‘benefactors’ insist on ‘investing’ with soft loans, which they then get the wobbles over as the money flows straight the club and out again even though they should have some control over it as directors.

Concentrating so much power in the hands of so few people, often new-comers to both the club and the football business, so often leads to clubs struggling hard to survive.  The benefactor model has clearly had its day.  Members of Parliament of all hues agree, as the recent debate showed (6; well worth reading if you haven’t already done so).  Supporters Trusts, and other co-operative/community-involved variants, are the only way forward.

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

HMRC in court today

Posted by John Beech on September 8, 2010

The battle continues, with two clubs due to face winding-up petitions:

  • Ilkeston Town
    Ilkeston Town have been wound-up (1) over a tax debt of £50,000.  The club had argued that it could make a payment of £20,000 shortly as the result of the sale of a player and offered to clear the outstanding debt at £1,000 per month.  The hearing lasted all of two minutes, and Registrar Derrett concluded that “the company is plainly insolvent and I therefore make the final compulsory order“.
    Chairman Gary Hodder had been talking to two prospective buyers (2), so all may not be lost.
    The club has struggled since the withdrawal of ‘benefactor’ Chet Whyte last year following the collapse of his building empire (3).
  • Sheffield Wednesday
    The day before they were due in court it was reported that they had avoided Administration thanks to the Co-operative Bank (4), and as a result HMRC today agreed to dismiss the petitions (5).  Frankly, it’s hard to see why the Bank chose to extend credit even further to the club.
    The club had previously managed to extract a 28-day extension on the basis hat a “substantial” amount had been repaid to HMRC, and talks with prospective new owners were “ongoing” (6).
    The present situation is that the club has at the last minute managed to “broker a deal with the Co-operative Bank to secure their immediate future“.  Specifically, the Bank agreed “to fund a payment of £780,000 to HM Revenue and Customs (HMRC) – the amount sought under the winding-up petition – to buy more time to find a longer-term answer to crippling debts which now total around £30m” (7).  Moreover, “The Owls cannot meet current outgoings and one month’s tax bill of around £300,000 is already overdue“.  The only rationale upon which the Bank could have continued to support the club is the prospect of new owners.
    A number of suitors have been in the frame, including Club 9 Sports (8), former West Ham chairman Eggert Magnusson (9), and a Scandinavian consortium fronted by firmer manager Chris Turner (10).
    Who will succeed is of course a vital question on which we must await an answer, but increasingly ‘when’ is becoming the key issue.  The club will be lucky to get any further help from the Co-operative Bank, and HMRC are unlikely to hold back should ongoing tax payments fail to be made.

HMRC must be feeling reasonably satisfied with the outcomes.  Yet again, today’s proceedings are an indictment of the benefactor model.

ILKESTON TOWN UPDATE – 8 September 2010

The club is reported to have lodged an appeal (A).

ILKESTON TOWN UPDATE – 17 September 2010

The club has been formally expelled from the Conference North (B), meaning that any resurrection club will have to seek a place in the pyramid elsewhere (i.e. lower down) for season 2010/11 at the earliest.

Posted in Benefactors, Debts, HMRC, Insolvency, Ownership | Tagged: , , , , | 3 Comments »

 
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