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 ‘Investors’

The stadium curse

Posted by John Beech on December 3, 2012

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

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

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

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

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

Well, just about everything:

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

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

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

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

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

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

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

Posted by John Beech on June 7, 2012

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

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

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

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

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

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

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

He kept his word for less than a month.

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

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

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

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

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

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

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

Deconstructing Peter Lorimer

Posted by John Beech on May 15, 2012

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

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

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

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

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

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

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

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

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

But I digress.

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

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

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

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

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

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

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

Unsung heroes

Posted by John Beech on October 14, 2011

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

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

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

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

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

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

Crisis and confusion at Coventry City

Posted by John Beech on April 6, 2011

Since the end of January there have been various changes in the membership of the Coventry City Board, then we saw the sacking of Aidy Boothroyd, the tenth sacking of a Coventry City manager in the last decade (1).  Saturday’s three points against Watford brought at least some cheer to City’s fans, and the fear of relegation is receding.

With a certain irony, what has emerged at board level is a split into a new ‘old guard’ (Ray Ranson and Gary Hoffman) and a new ‘new guard’ (new Chief Executive Ken Dulieu, thrusting Canadian internet entrepreneur Leonard Brody and others parachuted in by SISU).

Brody is “a respected international entrepreneur with a strong track record in business, finance and online media.  He is President of Clarity Digital which is a subsidiary of the Anschutz Corporation, a large US-based sport and entertainment group and is also a two-time Emmy nominee” (2). Quite.

Brody offered an interesting explanation, as part of a new improved communications strategy, of what had been happening:

“What you were witnessing was three years of a dispute between shareholders, people who had different visions and different ideas about where the club was and what they wanted to do.  The key difference here is unity.  You now have the shareholders dispute resolved and a new board that is committed not only to the team but also to the community.” (3)

He paints an intriguing picture of a three-year battle between shareholders.  I have to say that I find this an unlikely picture.  The parent company, Sky Blue Sports & Leisure Ltd had six shareholders: SISU Capital Private Equity Fund A, SISU Capital Private Equity Fund B, SISU Capital Private Equity Fund C, SISU Capital Private Equity Fund D, and SISU Capital Private Equity Fund E, who together held 84% of the shares, the remaining 16% being held by R2 Sports Group plc, a Ray Ranson company.  So it’s the battle between the five SISU Fund Managers that has been holding the club back, is it??

He also says he is “saddened to hear fans think we’ve lost the brand“.  I would have to say that ‘losing the brand’ is not a phrase particularly featuring in conversations I have with City fans.  They are more concerned about survival, in the Championship, and simply surviving as a club.

Another interesting thread in this saga is the question of buying the stadium.  Al parties seem to agree that the Ricoh is a highly attractive ‘cash cow’, and that acquiring it would be a key to solving the club’s problems.  SISU have undoubtedly put money into the club since taking over, but clearly not enough to buy the stadium.  Either they do not have the funding to do so, or they do not have the inclination to do so.  No evidence points towards the latter.

How then can the exciting new board team move forward in the acquisition of the stadium?  Of course, new investors!

Her I see two major obstacles.  If you, as a potential investor, you were approached by SISU with an offer to invest in a club which could be a goldmine if only it could acquire its stadium and the associated revenue streams, once you had overcome your suspicion (‘if it’s such a great opportunity, why isn’t/hasn’t SISU seized on it in the last three years?’), you may well think ‘a cash cow, well, I want some slice of the action as at least a co-owner’.  Yet SISU insist that the club is not for sale.  We shall see.

The new board has already scored a PR own goal, which is not encouraging.  Ken Duliweu announced at a press conference last week that he was about to hold talks with the local Council about their 50% ownership of the Ricoh, a claim promptly and frostily denied by the Council (4).  As the Council statement out it, “The club has talked about a new era of openness and transparency, which we would welcome as a Council.  But so far, in their dealings with us, they have not shown this and we’re disappointed they’ve now said twice they’re meeting with us when no approach has been made to us.”  If there is to be a new policy of openness in communications, the messages should at the very least be accurate.

The only optimistic sign I can see is the talk of a bid by Gary Hoffmann (5) to buy the club.  But a) it’s supposedly not for sale, and one suspects, in the circumstances of his departure from the board, especially not to him and b) it depends on him finding investors.

The only comforts for fans is that the club is no worse off than it was when SISU took over (but arguably no better off), and that it could be worse for them – they could be Plymouth Argyle fans.

Available online is the full interview I gave Late Kick Off last week, just before the Coventry City press conference.

Posted in Insolvency, Investors, Ownership, Stadium, Uncategorized | Tagged: , , , | 2 Comments »

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 »

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 »

Denouement at Liverpool?

Posted by John Beech on October 7, 2010

The long-running saga of Messrs Hicks and Gillett’s failure, first, to bring Liverpool’s level debt down, and, next, to find a purchaser of the club willing to pay the unrealistic price they were asking, has until the last few days been, to me at least, a soap in which there is constant speculation on how the plot might develop but with very little meaty activity – a soap on an obscure satellite channel that I really couldn’t excited about enough to pay a subscription to view it.  Suddenly, on Monday night, all that changed.  Not only did  Twitter erupt into seemingly more unlikely and dramatic messages, even the club website sprung into unusual communicativeness, although it rapidly emerged that it was telling only one side of what was rapidly becoming, to use the now standard cliché, a civil war.  To see how little had actually happened up to this week, see the timeline provided by Sky Sports.

After the first round in the contest for ownership, we now have a break in activity until the matter of who does or doesn’t have the right to change the membership of the Liverpool board is heard by an English court, with most observers predicting that Hicks and Gillett will fail.  I’m certainly inclined to that view but a) I’m not a legal expert versed in the intricacies of this rather obscure area of the law, b) I’m not privy to what if anything was written down when the newer board members moved in and c) decisions by English courts still manage to be entirely unpredicted.  We shall see, although it seems likely that even if Hicks and Gillett win, short of them suddenly coming up the money to repay the Royal Bank, they are still likely to lose control as the bank will force Liverpool’s parent company into Administration, and the club will then be sold to John Henry as currently planned.  One big surprise in this scenario would be the fact that the Premier League have indicated that the 9 points would not be deducted for the parent company going into Administration – entirely the opposite view to the Football League in such circumstances, and not a view that will be well received in Southampton.  I have frequently railed against points deduction as a sanction (see my Working paper on the subject), but, if we must have it, we surely should see the rules being consistently applied across the leagues.

With this post-Dunkirk phase of the confrontation, most commentary seems to be around whether Liverpool would be moving out of the frying pan of one American ownership into the fire of another.  I really can’t get my head round this as an issue – is the nationality of the owner really the over-riding variable that determines whether it will be good for Liverpool?  Might it not just be to do rather more with the effectiveness of the new management team (and not just the owner), the ability of whoever emerges as (football) manager, and the skills of the playing squad to bring success on the pitch, and hence revenues?  To assume that all these factors are a function of the owner’s nationality is a nonsense.

Equally nonsensical is to extrapolate from Henry’s track record.  Turning the Boston Red Sox round is one thing, turning Liverpool round is an entirely different kettle of fish – different game, which he has virtually no experience of, different set of business rules, different governing bodies, different organisational culture, etc. etc.  You might as well argue that Virgin Trains would follow the success of Virgin Atlantic.

If Henry gains control, we will have to wait and see how he chooses to have the club run.  Certainly there are no contra-indications in his business record, but there is still plenty of scope for notching up his first big failure, not least because he is moving into a different ball game (pun intended).  He may emulate the failure of Hicks and Gillett to get to grips with running an English ‘soccerball franchise’, perhaps picking up some tips on the way from the Glazers, or he may follow in the rather more successful footsteps of Aston Villa or Derby County.  Only time will tell.

Speculation on the subject of new American investor-owners simply draws discussion away from the real issue here.  Do we want investor-owners at Liverpool, or any other club for that matter?  Or do we want a fan-owned co-operative in charge of Liverpool?  By now, if you are a regular reader, you will no doubt have guessed my preference.

Posted in Debts, Investors, Organisational culture, Ownership, Points deduction | Tagged: , , , , | 4 Comments »

 
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