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 ‘Costs’

The ins and outs of the transfer window

Posted by John Beech on September 3, 2011

So, the transfer window finally slammed shut, to use the mandatory cliché, amid the predictable hype.  In one respect this was hardly surprising – of the 289 August deals reported by the BBC (1), no fewer than 93, or 32%, had taken place on the final day.  In total 141 (49%) had taken place in the final week.  One was almost left wondering whether a whole month was needed.

A noticeable feature of the BBC data is that of the 289 deals, 69 involved players described as unattached, 110 were loans, and 10 were free transfers, leaving only 100 (35%) that were full-blown fee-paying transfers.  Given the main reason for having a transfer window – to prevent clubs buying in extra talent in a burst to achieve promotion or a Champions League place – the question must surely arise as to whether it is necessary to apply any transfer window at all to non-fee-paying transfers, now the clear majority.  After all, no club is going to loan another club a player willingly if it feels that will upset competitive balance and/or give the receiving club a somehow unfair advantage.

It’s difficult to analyse the spending by individual clubs – the BBC data records the figure for a mere 17 deals:

Samir Nasri Arsenal – Man City £25m
Juan Mata Valencia – Chelsea £23.5m
Bryan Ruiz Twente – Fulham £10.6m
Mikel Arteta Everton – Arsenal £10m
Peter Crouch Tottenham – Stoke £10m
Andre Santos Fenerbahce – Arsenal £6.2m
Scott Parker West Ham – Tottenham £5m
Oriol Romeu Barcelona – Chelsea £4.35m
Jermaine Beckford Everton – Leicester £3m
Emmanuel Eboue Arsenal – Galatasaray £3m
Ishmael Miller West Brom – Nottingham Forest £1.2m
Leroy Lita Middlesbrough – Swansea £1.75m
Shaun Maloney Celtic – Wigan £1m
James McClean Derry City – Sunderland £350,000
Darnel Situ Lens – Swansea £250,000
Shaun MacDonald Swansea – Bournemouth £80,000
Chris Lines Bristol Rovers – Sheffield Wednesday £50,000

There seems to be a consensus that spending has peaked again following a couple of years decline.  Which is bad news in my book.  I would have hoped that Financial Fair Play and capped squad sizes would have reined in the crazy levels of spending.  It may be that they have outside the Big 5, but that in itself is dysfunctional – these are the five clubs most likely to qualify for Europe and therefore find themselves under scrutiny from UEFA.

It’s also clear from the limited data available that there is no sign of the vertical disparity in terms of spending power  up and down the football pyramid declining.  Again, I can only greet this with disappointment.  When will they ever learn?

Posted in Costs, Globetrotterisation, Premier League, Transfers, Uncategorized | Tagged: , , , | Leave a Comment »

Substitutes and ‘cheating’

Posted by John Beech on July 21, 2011

The Football League has announced that its member clubs have voted “voted to reduce the number of substitutes that can be named on the teamsheet for matches in the npower Football League from 7 to 5” (1).  As a rationale for this change, it was stated that “This was felt to be a sensible and prudent step given the financial challenges facing many football clubs and the commitment made earlier this summer to adopt UEFA’s Financial Fair Play framework“, or, to put it another way, it’s ultimately a good way of cutting costs by employing a marginally smaller squad.

I for one would like to see a change in the rules regarding the actual substitutions allowed.  Nothing imposes such a feeling of anti-climax at the end of a tense game is the tactical (and essentially unnecessary) substitution of players as the final whistle approaches.  It has far more to do with the ‘gamesmanship’ of Stephen Potter than the gamesmanship of what used to be the Beautiful Game.

Musing on this, I turned out an early report by the Football League (but actually published in the FA Yearbook 1966-67, and hence not available online I’m afraid) called “Substitutes: An Experiment Justified“.

It begins “When the Football League introduced its Substitute Rule at the beginning of the 1965-66 season, it was received with misgivings from many people inside and outside the game.  Many of those who were against it chose to ignore the fact that substitution of players for injury has been permitted by the Laws of the Game for a good number of years”.  The second sentence came as a surprise to me.  Did substitution actually take place before 1965?  Surely in that era the culture was for a player to battle on, hiding injury in spite of the danger of exacerbating it causing permanent injury.  Think Bert Trautman.

The report continues: “There were many forecasts of the amount of cheating [sic] and misuse which would follow.  In point of fact, there has been no instance of the Substitute by a manager in order to gain a tactical advantage over his team’s opponents.”  Would that the same could be said today.

Data in the report broadly backs up the claim.  It records that 772 substitutions had been made in 2,028 League games.  These occurred during games thus:

Period of game

Substitutions

Up to 10 minutes

26

11 to 19 minutes

31

20 to 29 minutes

55

30 to 45 minutes

141

Total, first half

253

46 to 59 minutes

182

60 to 69 minutes

100

70 to 79 minutes

110

80 to 85 minutes

106

86 to 90 minutes

21

Total, second half

519

The number of substitutions in those days was limited to one, and, as the report says “If substitution is raised to two, this would increase the danger of substitutes being used tactically, which is really what everyone wants to avoid“.  Substitution was, in any case, only permitted then for injury.

Subsequently ‘everyone’ apparently stopped wanting to avoid the use of tactical substitution, and we have seen the number permitted on the bench grow to 5 in 1996 and then the about-to-be abandoned level of 7 in 2008.  Memory fails me on when tactical, i.e. for reasons other than injury, substitution was first allowed (any offers?).

Do I detect in all of this the idea that the Football League cares less about the game and its enjoyment by fans today than it did in 1965, and cares more about the costs of its member clubs?

Perhaps I’m being a little harsh.  Substitution for injury is a principle I would strongly defend, on the grounds of players’ well-being, and I wouldn’t want a return to pre-1965 practices.  It’s just that it seems to me we have gone too far with tactical substitution, something which I still want to avoid, to use the League’s phrase.

Posted in Costs, Ethics, Football League, Health & Safety, Human Resource Management, Organisational culture, Players' careers | Tagged: , , , , , , | 2 Comments »

Chester revisited

Posted by John Beech on June 28, 2011

Not a return visit to the carryings on of Stephen Vaughan, or the resurrection at the Deva, but a revisiting of the Report of the Committee on Football, aka The Chester Report, published in 1968.  With the current Select Committee report on Football Governance in preparation, it seemed timely to have look at what has and hasn’t changed since Norman Chester and his committee found when they looked at the game almost forty-five years ago – his committee was appointed in June 1966 and first met on 19 July 1966.

In this first posting I’m going to look at how the context has changed, and then, in a couple of postings spread over a couple of weeks, I’m going to focus on the similarities and the differences of then and now, and finish with some thoughts on whether we have learned any lessons.

His terms of reference are interesting: “To enquire into the state of Association Football at all levels, including the organisation, management, finance and administration, and the means by which the game may be developed for the public good; and to make recommendations”  (the emboldening is my addition).  What I find interesting is that the Committee took what we would today describe as broadly stake-holder approach.  They included looking at the game from the players’ perspective, and from that of referees and linesmen, but, although a view from the fans’ perspective is often explicit, the committee didn’t explicitly report on the state of the game from a fans perspective.  The notion of fan ownership of professional clubs was yet to emerge.

Most striking too is the financial state of the professional game at that time.  Gates had been declining since a peak shortly after the war, and professional clubs were beginning to have to come to terms with the scrapping of the maximum wage and destruction of the retain clause following the Eastham case.  The writing was on the wall that the game was going to see a flurry of wage escalation and that commercialisation would be the inevitable response, although shirt sponsorship, for example, would still be banned for almost another 15 years.

Given the generally weak state of the game, the following data is perhaps surprising.  It is in the report but its source is the 1966 PEP report on English Professional Football.

Match receipts and
Other Operating Income

Salaries, team and
admin expenses

Profit/Loss
on all matches

Profit/Loss adjusted
by Average Earnings

Division 1

£3,770,333

£3,310,667

£459,667

£47,700,000

Division 2

£1,674,333

£1,937,000

-£262,667

-£9,090,000

Division 3

£1,149,667

£1,658,000

-£508,333

-£17,600,000

Division 4

£691,667

£1,160,000

-£468,333

-£16,200,000

LEAGUE TOTAL

£7,286,000

£8,065,667

-£779,667

-£27,000,000

(The original data was for the three seasons from 1963/64 to 1965/66, which I have averaged, and the final column I have added using the MeasuringWorth.com calculator to give an idea of the profit/loss in today’s terms allowing for inflation.

‘Wealth at the top’ is still the case today, although the Premier League clubs would be happy to turn the kind of profits being turned 45 years ago, inflation adjusted or not.  There is a financial disparity between the tiers, although it was nothing like as large as today – broadcasting rights had yet to be a major factor in football.

Interestingly the disparity between levels had been growing significantly over the previous ten years, as this table from the Chester report shows:

Match receipts
1956-1966

Team and Ground Expenses
1956-1966

Division 1

+72%

+157%

Division 2

+15%

+131%

Divisions 3 and 4

+11%

+114%

The lower tiers were already failing to keep income up to a level to cover expenses even more miserably than the old Division clubs.

More to come in later postings, but interspersed with more typical postings on the current scene.

Posted in Costs, Governance, History | Tagged: , , | Leave a Comment »

A day of reckoning

Posted by John Beech on May 23, 2011

I managed to follow the great play-off between AFC Wimbledon (to whom, many congratulations) and Luton Town (to whom, commiserations) at least live online.  Football at its most exciting.  I wonder if Andy Burnham chose quite the right words though when he tweeted “Wimbledon back in Football League. Brilliant. A great victory for all football supporters over the money men. Well done to all at AFC.”  I’m sure he wasn’t referring to Luton as ‘the money men‘, although his comment would have been entirely appropriate if Wimbledon had beaten Crawley Town.

Yesterday, with the final day of Premier League games, unfortunately found me in the Tirol in a hotel room, arriving and logging on just after the games had started.  Heady stuff, and probably the most exciting afternoon in the PL all season.  As Alan Hansen was moved to write (1), “The big winner has been the Premier League itself, because this season has shown it to be the most exciting of the lot. ”  I’m not sure that I would enirely agree with his argument.

It struck me, particularly as I was feeling somewhat removed from the action, that it was distinctly odd that all the excitement was over who would or wouldn’t be relegated.  Aston Villa v. Liverpool, Everton v. Chelsea, and Fulham v. Arsenal were attracting very little attention from the twitterati.  Is this the grand scheme of things that the greedy breakaway Chairman of the old First Division envisioned some twenty years ago?  I came to the conclusion that in fact, yes, it was, had they bothered to think their plans through.  To me it is yet another symptom of what is wrong with the governance of English football.  Who is or isn’t relegated is clearly an important part of the general excitment of football, but it surely shoudn’t be the major focus.

The sacking of Ancelotti (2) because “this season’s performances have fallen short of expectations and the club feels the time is right to make this change ahead of next season’s preparations” to me provides yet more evidence of just how dysfunctional the Premier League has become.

Relegation from the Premier League undoubtedly puts serious financial pressure on a club.  When the drop in broadcasting revenues is netted off against the parachute payment, one is looking at a drop of £30m-£25m in revenues.  To this must be added a drop in matchday revenues (reduced attendance and lowered ticket prices) and a drop in merchandising sales, although these will vary from club to club, depending on the loyalty of their fans, in particular how large the core of ’till I die’ fans is.  Clubs may face a contractual drop in sponsorship fees, and may or may not have had the wisdom to include relegation clauses in their players’ contracts.  In other words, any club relegated faces a financial problem, but some may face significantly harder problems than those who had planned for the eventuality.  Clubs will also be in different states of financial health to start with.

Last week I was asked by BBC West Midlands to review the prospects for Wolves and Birmingham City should they be relegated.  On virtually every financial measure Wolves looked far more resilient to facing the drop than Birmingham City.  West Ham will undoubtedly face serious difficulties too, and only Blackppol look reasonably equipped to face the drop.

The Football League season is not quite finished, but further down the pyramid things are clearer with respect to next season.  AFC Wimbledon and Crawley Town are joining the Football league, the epitome of fan ownership and ‘benefactor’-induced financial doping respectively.  At the other end of the Conference National, it’s goodbye to Southport, Altincham (whose luck in benefitting from other clubs’ financial problems finally ran out, Eastbourne Borough, and Histon.  I’m sorry to see Eastbourne Borough go down as they were the most senior English club which is a Community Interest Company (CIC).  As an interesting aside, the Scottish Premier League may well have a CIC as a menber in the coming season – St Mirren (3).  This is a case that is well worth following, as the current owners are seeking to sell the club in a way that was  “making sure it remained sustainable and debt-free” (4).

Lower down the pyramid, the upcoming movements are plotted here.  Good to see resurrection clubs AFC Telford and Farsely on the way up.  It’s interesting to note that Ilkeston are listed as ‘reinstated’, good news for their fans following their resurrection (5), but I wonder what, for example, King’s Lynn fans or Grays Athletic fans will make of the reinstatement decision.

Finally I turn to a football story that is relevant to me in my immediate circumstances, but which does not seem to have well covered by the English-speaking  media, although due credit to Yahoo! Sport (6) for being an exception.  The story quite simply is that a major derby match between Rapid Vienna and Austria Vienna was abandoned after 26 minutes following a major pitch invasion – see here and  here.  Disturbing images that we hope we will not see moving further northwards and westwards.  After thirty minutes of disruption, the police felt unable to guarantee the safety of the players in a resumed match.  We seem to have moved onward from such dark days in England, and it was good to note the Birmingham City fans staying on at White Hart Lane to show what they had in common with Spurs fans (7).

Mind you, I suspect that “Thursday night, Channel Five” is not really going to catch on on the terraces.

Posted in Broadcasting rights, Costs, Economic impact, Fans, Football Conference, Governance, Merchandising, Premier League, Promotion, Pyramid movement, Relegation, Revenues, Sponsorship | Tagged: , , , , , , , , , , , , | 2 Comments »

Groundhog Day for the Trotters?

Posted by John Beech on November 12, 2010

Reading through my Bolton file certainly makes for consistent reading, although ‘consistently inconsistent’ might be more accurate.

We have to balance the books” he told us as far back as 2003 (1), adding “We can’t afford to spend any money we haven’t got. We’re not going to go down that route.”  A fan of Mr Micawber then.  Unfortunately, less than a fortnight later it emerged that Burden Leisure, the parent company of Bolton Wanderers, had debts of about £38m and the wage bill had risen from £5.2m to £21.7m during the previous financial year (2).

Later that month the Bolton financial model became clear – put your faith in a benefactor (3), but not some ‘johnny foreigner’, a thoroughly pukka British benefactor, Eddie Davies, a life-long Bolton fan, who lives in, erm, the Isle of Man.  As Gartside put it, “Without Ed’s support we would be watching a very different standard of football…  We can now sit down with the banks and have serious talks about restructuring our debts.

These themes – living within your means and depending on a good old British benefactor – constitute the consistency in that regularly recur in the years since.

This week we have seen the latest Burden Leisure figures published (4) – turnover from football operations was £54.0million, which was £2.2million higher than the 2009 total of £51.8million; the retained loss for the year was £35.4million; and the cost of retaining existing players resulted in the cost of wages increasing by 14% in the year to a total of £46.4 million from the 2009 total of £40.9million.

No wonder then that one of Gartside’s favourite themes of late has been the need for a salaries cap in the Premier League.  Bolton have certainly been one of the better behaved clubs in this respect, managing to keep wages/revenues at under 60% from 2004/05 to 2008/09 (see table here), an achievement shared only by Manchester United, Tottenham, Arsenal and Liverpool.

So ‘where is the inconsistency?’ you ask.  The calls for restraint on wages and keeping within ones income are fine and deserve to be more widely supported.  The living on debt mountain sustained by a rich benefactor are not – they are forms of financial doping, attempting to disrupt competitive balance by the use of unearned money.  The inconsistency is beautifully expressed by Gartside himself, suggesting that UEFA’s Financial Fair Play protocol is not quite what is wanted: “There are ways of tweaking it that would suit the English game better.  Owners should be allowed to invest in equity.  So if you, as an owner, want to buy a striker for 10 million (pounds) that shouldn’t be a problem. But what you then can’t do is pay him extortionate wages that take you out of the breakeven situation.”  His logic is one that escapes me.

Posted in Costs, Debts, Ethics, UEFA, Wages | Tagged: , , , , | 2 Comments »

Liverpool and Manchester United

Posted by John Beech on October 14, 2010

I’ve been abroad for work and then taken a couple of days leave – the net result is a week of only occasional internet contact.  A week is a long time in football it would seem.

All my standard searches to keep up with football management affairs have resulted in a total overkill on the Liverpool sale soap.  Certainly it’s a fast-moving and ever-changing saga – I was interviewed on BBC News 24 this morning, and already there has been a development, oh, and a non-development.

It strikes me that the focus on Liverpool, understandable though it is, has meant that some very interesting football management stories have been largely ignored.  For example, there are stadium stories at Bristol City and Worcester City, not to mention the 2012 stadium confrontation, and the Portsmouth CVA and Sheffield Wednesday’s plight should definitely not be ignored.  I hope to blog on at least some of these shortly.

The oddest of largely ignored stories is, to me, the reporting of Manchester United’s financial results (1).

The club has certainly done stunningly well in terms of growing revenues and turning a profit.  Turnover is more than twice that of cross-city rivals Manchester City.  Wages have risen, but the wages/revenues ratio remains just a vague aspiration for most clubs.

All very commendable, but there is the other side to the coin – an £83.6million loss and overall debts of £521.7million.  For all the success with growing revenues, debt management has been rather less successful. Given all the legitimate concerns of United fans regarding the Glazers, there is still room for a glance at Liverpool and the thought that things could be distinctly worse.  The difference between the club’s financial positions is nevertheless not so great, even if the relatively small difference leads to quite different outcomes.  Highly leveraged debt leaves a club worryingly exposed.

In the way that we are running out of ‘benefactors’ with deep enough pockets, we are also running out of ‘investors’ with sufficient finds of their own to invest.  Clubs seem to be convinced that the scenario at Portsmouth could never possibly happen to them.  First Portsmouth, now Liverpool.  Just how many Premier League clubs to teeter on the brink will it take before Chairmen get a grip on club finances, before they take Mr McCawber’s advice.  Unless spending is reined in to the extent that the business model becomes sustainable, we live in danger ultimately of only having a weekly exhibition match between Mansouri City and Abramovich Globetrotters to tune in and watch.

Meanwhile back at Liverpool, or rather at court rooms around the world…

Posted in Costs, Debts, Investors, Ownership, Revenues | Tagged: , , , , | 5 Comments »

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 »

The inevitable tension surfacing…

Posted by John Beech on August 20, 2010

Although there is always a tension between, on the one hand, the needs of a club from a footballing perspective, exemplified perhaps by the views of the manager, and, on the other hand, the needs of a club from a business perspective, it is inevitable that the tension will be greatest when a) clubs are facing financial pressures and b) the end of the transfer window is beckoning.

In the last week or so, the tension has been manifest at some clubs (in alphabetical order):

Aston Villa
Although Chairman Randy Lerner, a ‘good benefactor’ in my book, has been guarded in his comments on why Martin O’Neill has left, he has said “I can say only that we no longer shared a common view as to how to move forward. To deal in greater detail would do little but cause additional distraction for the club as it faces imminent games and the clear priority of hiring a permanent manager.  Finally, there have been no changes in our approach to building the club, aiming always to be as competitive as possible given our size and resources” (1).  I’m sure I’m not alone in thinking that the clue lies in the last phrase – an expression of ‘cutting our cloth’.

Cardiff City
Given the transfer embargoes, it’s hardly surprising that manager Dave Jones should be anxious to add to his squad (2).  It’s equally unsurprising that, with the massive Langston debt, the board take a more constrained view.  Even allowing for the clearance by the Football League of the Bellamy deal, additions have tended to feature loan deals.

Hartlepool United
Yesterday Chris Turner quit as Director of Sport (3).  He is quoted as saying “You don’t have to be a rocket scientist to work out what could happen if we haven’t improved much from the squad that only just stayed up last season and other teams have strengthened… Whether we will be able to get any more people in, you will have to ask the owners” (4).

Histon
Manager John Beck is today reported as leaving ‘beleagured’ Histon (5).  Chairman Russell Hands explained “It was a difference of opinion.  We couldn’t give him what he needed to do the job. Because of the financial restrictions we’re under he found it very, very difficult…In the end John felt that he had got as far as he could and in the interests of both parties we decided to go our own ways“.

Ipswich Town
Here, Roy Keane said today “We’re doing a lot of talking but supporters don’t want to hear that, they want to see players coming in.  We’ve been close but getting close to signing a player is no good… You’ve got to get the deals done.  We’ve been in talks and more talks and more talks. We’ve had players lined up 12 weeks ago who wanted to sign for Ipswich and they weren’t done” (6).  In spite of the backing of Marcus Evans, it would seem that there are constraints on spending.

There are certainly others that could be added to the list; please feel free to contribute other examples.

What is noticeable, apart from the general theme of frustrated ambition for the club, is the range of levels of the clubs, and the varying degrees of financial troubles they face.

It will be interesting to see how quickly O’Neill and Beck take to reappear.  They should be respected for having the conviction to vote with their feet, but their ambition may prove an impediment when facing the owners of a different club across the interview table.  O’Neill in particular has undoubted talents as a manager, but has he revealed his Achilles heel to an employer?  There are still clubs out there apparently committed to financial doping, at least while funds last and the Financial Fair Play protocol remains unaddressed, but increasingly owners seem to be opting for realism over ambition.

Posted in Costs, Organisational culture | Tagged: , | 3 Comments »

The trouble with new stadiums 4 (and final)

Posted by John Beech on August 10, 2010

[See also The trouble with new stadiums 1, which looked at the argument that "We’re a club with ambition and we need more seats to reflect that ambition", The trouble with new stadiums 2, which looked at the argument that "We’ve got the wrong sort of stadium.  We need one better suited to maximising our revenue streams.", and The trouble with new stadiums 3 which looked at the argument "There’s this amazing property deal we can do. We’ll sell the old stadium for redevelopment and there’ll be loads of money to build the new one.".]

This final posting in the series looks at whether there are cases where a new stadium can be justified, and begins with a look at Premier League clubs, for it is at this level one might expect to find any evidence that a new stadium has been a successful strategy – it is these clubs which have the highest revenues and which should thus be in the strongest financial position to finance a new stadium.

First, the big 4.  Of these, only Arsenal have opted for a new stadium, Chelsea and Manchester United having opted for stadium redevelopment, and in Manchester United’s case considerable expansion of seating capacity.  Arsenal have made a reasonable success of the new stadium, the only significant qualification being the downturn in the property market which has hindered the redevelopment of the old Highbury site.  Liverpool have opted for a new stadium policy – they could certainly justify an expansion of capacity – but their financial situation, with debts of £350m, doesn’t augur well for the timing of such a strategy.

Three of the big 4 have particular local rivals.  Manchester City are a rare example of “If it seems too good to be true, it may actually still be true“.  The financial deal that Manchester Council offered them was definitely a very attractive one, and they would have been fools not to have accepted.  Everton are in a similar situation to Liverpool – the sound business case for a new stadium is rather weakened by the debt level they try to go forward from.  Tottenham’s plans for a new stadium next door to the current one have got bogged down in the planning process – the government’s advisor on architecture, urban design and public space, the Commission for Architecture and the Built Environment, have objected that “an overall masterplan for the site is not evident: the three components – the stadium, supermarket, and housing – feel like very separate projects without convincing spatial relationships between them” (2).

Overall the situation in the Premier League

  • The clubs with new stadiums: Arsenal, Bolton Wanderers, Manchester City, Stoke City, Sunderland and Wigan Athletic, a total of six.  Of these, only Wigan has ‘shown ambition’, built a new stadium, and risen up the pyramid.  Notwithstanding the professed objection of their Chairman, Dave Whelan, to a ‘debt culture’ (3), the club has only once turned a profit in the last eleven years, and in its most recent accounts has long-term liabilities of just under £48m – it’s dependent on its benefactor for its continued existence.
  • Those with new stadium plans of varying seriousness and immediacy: Birmingham City, Everton, Liverpool, Tottenham Hotspur and West Ham United, a total of five.  West Ham would have fallen into the next group but for the exceptional possibility of ‘doing a Manchester City’ at the 2012 stadium.
  • The rest, who have in varying degrees redeveloped or plan to redevelop their existing stadiums: Aston Villa, Blackburn Rovers,  Blackpool, Chelsea, Everton, Manchester United, Newcastle United, West Bromwich Albion and Wolverhampton Wanderers, a total of nine.

    The evidence that building a new stadium is a sensible strategy is thus not strong even where you might expect to find it.

    In the Championship, Cardiff City, Coventry City, Hull and Preston North End have all paid a high price in opting for a new stadium.  Middlesbrough and Reading have survived a new stadium through the benefaction of Steve Gibson and John Madejski respectively.

    The decision to opt for a new stadium rather than redevelopment is of course a leap, with no in-between option.  The scale of cost does however vary.  From my own data, I estimate that the cost per seat can vary by a factor of over 10, so there may be some scope for restraint at the planning stage in order to make a planned new stadium more viable.

    Now, most fans will be tempted to put a case that their club is an exception.  “The current stadium is particularly awful/inappropriate/decrepit” (remember, I’m a Pompey fan) is a frequent lament.  I would argue that only in one group of clubs are there exceptional circumstances – clubs in exile or with a lease which cannot be renewed – but even in this case the danger is that optimism overrides realism.  It would be mean-spirited to do other than wish, for example, Brighton and Hove Albion well in the new Falmer Stadium when it opens next year, but the project does carry with it the assumption that Tony Bloom’s benefaction and committment are long-term.  I’m certainly not suggesting that there is any reason to think otherwise, merely pointing out that there is a risk associated with the development.

    There may even be a case for a very small group of clubs who may reasonably expect to be on a longer-term ascendancy through the pyramid AFC Wimbledon and FC United of Manchester are the obvious ones that spring to mind.  Even at the lower levels of the pyramid there is no reason in principle why a club on the ascendancy should not develop a realistic model to develop a new stadium.  A club to watch in this context is Runcorn Linnets, who offer a different approach to building a stadium by virtue of the fact that they are owned and operated by a Supporters Trust.  Perhaps it is the case that fans are only really realistic when they have chosen not to follow the broken benefactor model of ownership.

    Posted in Assets, Costs, Debts, Stadium | Tagged: , , , | 13 Comments »

    Bubbling away in the background…

    Posted by John Beech on July 31, 2010

    Hidden away in last month’s budget (1) was a proposal that could be causing some concerns for football club finance directors.  Para 2.25 states:

    The Pay As You Earn (PAYE) system is a fundamental part of the UK tax system. The Government wishes to explore how it could be improved in order to reduce costs and make the system easier for employers and HMRC to administer. As an initial step, the Government intends to consult with employers and payroll providers on mechanisms that could support more frequent or real time PAYE data.

    A detailed discussion document (2), aimed at kicking off the consultation process (which is scheduled to be completed quickly, by 23 September), has just been issued, and Para 4.31 suggests that the use of real time information has the potential for:

    enhancing compliance with tax laws by using real time information to assist in tackling late or under payment of the deductions some employers make

    Late or under payment of taxes?  Football clubs?  Surely not!

    Another document , Tax consultations announced at Budget (June 2010), downloadable from the HMRC website here, introduces the consultation under the simple heading of PAYE improvement.  All this falls short of proposals in Alistair Darling’s budget (3) of March this year, aimed at “Employers that operate Pay As You Earn (PAYE) schemes to account for income tax and National Insurance Contributions (NICs) and have a history of serious non-compliance in terms of paying late or not paying“; these would have included “provisions allowing HMRC to require security in the matters that can be covered in PAYE regulations. It will also set out the new offence of failing to provide security. Similar provisions will be made for NICs through regulations using existing powers.

    The Budget does however say that (Para 2.112) “The Government will now consult on introducing a power for HMRC to require financial security where PAYE & NICs are at serious risk of non payment, rather than legislate in the upcoming Finance Bill as announced at the March 2010 Budget“, so financial security is not necessarily off the agenda

    So, because of a timely change in government, football clubs may have had a narrow escape from the prospect of having to up-front security if they already had a bad track record of payments to HMRC (too many to list, but Club round-up might include some possibles).  HMRC may well be just a tad disappointed.

    Nevertheless, HMRC may well end up with stronger powers to ensure PAYE and NICs are paid on time, a situation which too many football clubs are entirely unfamiliar with.  Certainly the days of being able to negotiate late payment of already overdue debts look to be coming to an end.

    Posted in HMRC, Politics, Wages | Tagged: , , | 4 Comments »

    More stadium madness

    Posted by John Beech on April 30, 2010

    Last week I blogged on the unrealistic plans for new stadiums in Plymouth and Bristol in connection with England’s 2018 bid (Are we going stark stadium bonkers?). This approach is certainly not confined to England, and an interesting example can be found in Qatar, bidding for the 2022 World Cup (1).  This particular article, citing Reuters as a source, states that officials have said that Qatar will build “12 air-conditioned outdoor stadiums if it wins the right to host the 2022 World Cup“. It also quotes a figure for the cost of the Qatari bid as $4 billion (approximately £2.6 billion).  Not exactly ‘ghutrahs for goal-posts’ then.  The first five of the planned stadiums can be seen here.

    Now, a little surfing suggests that not all 12 will be new-build – some at least will be upgradings. The four billion dollars figure is however widely repeated.

    The United Nations estimate of Qatar’s population for 2009 is 1.4 million, slightly less than the combined population of Birmingham and Manchester.  If we take the typical figure of stadium capacity being quoted as 45,000, and bear in mind that, as Peter Snow will doubtless be saying on Thursday night, this is just for fun, it’s not meant to be accurate, roughly a third of the population will be able to sit in one of these air-conditioned lovelies at any given time.  They will have cost roughly £2,000 per member of the Qatari population, or, to put it another way, roughly £5,000 per seat.  A fine legacy though, you have to admit.

    To put this in a wider perspective however, the $4 billion cost of the bid is roughly equal to eight years’ worth of Oxfam’s gross annual income (from 2).

    Funny old game?  More like funny old world.

    Meanwhile, closer to home, Southend United (see postings passim) Chairman Ron Martin has been telling the Southend Echo how the club’s relegation will affect the seemingly eternal plans for the new stadium (3): “The stadium plans have been unaffected and they will continue.  Our business plan is built on taking Southend to a new stadium so we have more income and therefore can grow and all the activity in building up the youth setup is predicated on the growth of the club.  The biggest thing about being in League Two is a loss of income.  No doubt we will have less crowds, charge less ticket prices and commercially there will be less income but equally the wage demands are less in League Two. We are also extremely well placed to compete as a football team.

    ‘Extremely well placed’, eh!  Luck old Southend.  Do you know, I’m beginning to think he actually believes what he says!  Perhaps he might instead reflect on the slogan of Sainsbury’s, the superstore on which the club is becoming increasingly dependent (they paid off the club’s £378,000 tax bill to avoid winding-up this month [4]): ‘Try something new today!’.  Quite possibly Sainsbury’s are beginning to wish he would.

    Posted in Costs, Stadium | Tagged: , | 4 Comments »

    English excesses exported?

    Posted by John Beech on February 16, 2010

    With Deloitte’s annual publication of its Football Money League, identifying what Deloitte euphemistically calls the ‘richest’ clubs (it is based on revenues and conveniently ignores debts), we have become used to English clubs being at the vanguard of high revenues.  In its most recent version published almost a year ago (1) there were seven English clubs in the Top 20.  In addition to Manchester United, Chelsea, Arsenal, Liverpool, Tottenham, Newcastle (doubtless set to disappear from the next list) and Manchester City (equally doubtless set to have roared up the Top 20), Germany and Italy have four representatives each, Spain and France two clubs each, and Fenerbahce slipping into the list at no.19, which was historically occupied by one of the Auld Firm.

    Although now a year out of date, the list might serve as an indicator of the salaries clubs would be prepared to pay in 2009/10.  A list (2) of the Top 50 Players Wages for 2009/10 published by the excellent futebolfinance website (now added under the Links tag above) suggests that either English clubs are reigning in their wild costs or their profligate spending has started to catch on abroad.

    Of the five most expensive players, four play for Real Madrid or Barcelona, with Eto’o of Inter squeezing his way into this otherwise Spanish forward line.  Of the top 19 players, who earn 6.5m euros a year or more, eight play for English clubs, two for Italian teams, and nine for Real Madrid or Barcelona.

    Of the Top 50, 20 play in England, 17 in Spain (mostly for the familiar two, but with single representatives from Seville, Valencia and Atletico Madrid), 9 in Italy for a selection of the bigger clubs, and 4 in Germany (all for Bayern Munich).

    Too much might be made of this data, but there is certainly a suggestion that Real Madrid and Barcelona are pushing ahead in the high salary stakes, seemingly unconcerned by the problems that the debts of their English counterparts have brought to the fore recently.  Real’s willingness to spend, financed by bank loans, suggests that once again others in football follow the English way, perhaps not altogether wisely in this case.

    Finally of interest in the futebolfinance list to followers of English football is that there are seven players from Chelsea in the Top 50, and six Manchester City players compared to four from Manchester United. The only other English clubs to feature are Liverpool with two and a lone Arsenal player just scraping in.

    Posted in Costs, Wages | Tagged: , | 1 Comment »

    Varying the capacity of stadiums

    Posted by John Beech on February 9, 2010

    Last week I was at the FH Kufstein University of the Applied Sciences Winter School in Austria, and, among a number of very interesting presentations from both academics and practitioners, was one given by Rainer Quenzer, Managing Director of Nüssli International AG, a Swiss company which specialises in building temporary and semi-permanent  modular stadiums (see the Nüssli International website).  I must admit that I had little idea how sophisticated this branch of the construction industry had become, with modular designs that can be very quickly assembled and dismantled.

    My thoughts turned to the London 2012 stadium, which is designed so that its capacity can be reduced once the Games are over, and which Karen Brady is eyeing for West Ham.

    I was also reminded of the clubs who have become embroiled with unrealistically high capacity stadiums, the most obvious example being the white elephant at Darlington.  Currently Southend United, Plymouth Argyle and Worcester City are working on designs for new stadiums which, at least to my mind, the intended capacity is arguably high, Plymouth being particularly so, with a planned capacity of 40,000 (1). I think there are more appropriate adjectives to describe this particular project than ‘audacious’ and ‘sensational’, which the Western Morning News chooses.

    Given the sophistication of designs from, for example, Nüssli International, I wonder to what extent this option for a new stadium has been considered in English football.  I can’t think of an example where this approach has been seriously considered by an English club (corrections please if you can think of one), and, given the increasing criteria for stadiums and their seating capacity that are needed as a club climbs through the middle levels of the pyramid (which are no longer necessary or supportable financially if the move upwards turns into reverse through relegation), it strikes me that this is perhaps short-sighted.

    A key issue is, of course, costs (stands can be bought or rented by the way).  Does any reader have any knowledge on whether this approach stacks up financially?

    Posted in Costs, Stadium | Tagged: , | 4 Comments »

    Stockport County protest

    Posted by John Beech on December 16, 2009

    Back in July I blogged on A Forgotten Cost – the cost of having an Administrator, which either have to be added to a club’s debts or paid by a new owner. In particular I noted that football was providing an inordinate amount of business to insolvency practitioners, and that Begbies Traynor had just reported a major jump in profits.

    In an unusual and welcome display of fan politicisation, a protest march is planned by Stockport County fans regarding what they see as the high level of charges being made by Administrators Leonard Curtis (1). Davis Schofield, co-organiser of the protest, thinks “the £300 an hour Leonard Curtis is charging is unfairly expensive“. At Southampton, Begbies Traynor were charging “around £340 an hour” earlier this year (2).  Fair or unfair, the Leonard Curtis charge appears to be around the going rate – Administration is a decidedly expensive state to be in.

    Posted in Costs, Insolvency | Tagged: , | 3 Comments »

    Scary plans at Chester City

    Posted by John Beech on September 30, 2009

    Alerted by a posting on the Supporters Direct blog titled Strange goings on at Chester City, I’ve been looking at an Excel spreadsheet (1), downloadable from the club’s website, of the club’s forecast for its Profit & Loss Account for 2009/10.

    Highly commendable that the club should make this available, but it certainly isn’t going to reassure anyone.

    Key number is ‘the bottom line’ of course – the projected profit or loss.  Homing in on this, you find, unless it has been corrected since, a projected Profit of an amazing £660k!  But wait – that can’t be right, not with a projected Income of only £649k, can it?  (That, by the way, includes a parachute payment of £215.5k, or almost exactly a third of the projected Income.) And a projected Expenditure of just over £1.3m?!?!

    No, of course it isn’t right.  The spreadsheet has been set up to calculate profit (or loss) by subtracting Income from Expenditure, rather than the rather more conventional accounting standard of subtracting Expenditure from Income.  Oops!  The projected Profit of £660k, it transpires, should in fact be a projected Loss of £660k – quite an error by any standards.

    With that kind of howler, it’s difficult to have much credence in any of the figures.

    Even if we take the figures themselves seriously, it hardly paints a healthy plan.  Planned expenditure on ‘Playing Squad / Loans In’ is a staggering 92% of Income!!!

    And all this from the man the Chester Evening Leader was hailing as the club’s ‘saviour’ back in June (the URL to the source now produces 404 page not found for some strange reason).

    In case you haven’t seen, the club today sacked their manager Mick Wadsworth (2), who complains that the club is ‘full of negativity‘.  Once corrected, their projected Profit & Loss Account certainly is.

    Posted in Costs, Debts, Uncategorized, Wages | Tagged: , , | 1 Comment »

     
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