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! Football Finance

Archive for March, 2009

A movable famine, as it turned out

Posted by John Beech on March 30, 2009

The third Thursday in March – the cut-off date for clubs going into Administration who look like they will be relegated but want to take this ten points deduction this season – has come and gone. With the financial increasing pressures on clubs, many observers had anticipated a flood of Administrations. These included Barry Hearn, owner and wannabe seller of Leyton Orient, who had spoken of ‘up to a dozen clubs’ facing the possibility of Administration (1) – a figure which he had suggested in a forecast made in 2002 incidentally (2), during the 2001/02 season which saw 10 insolvencies, a record shared with the 2002/03 season. Dave Whelan, owner of Wiagan Athletic has spoken this week of his fears that a Premier League club might go bankrupt (3). Other recent prophets of doom have included David Hinchcliffe, the Administrator appointed to run Darlington, and, I would have to admit, myself (4).

How was it then that not one club succumbed at this critical point in the season? The answer is not obvious. A good starting point is to look at the clubs who might well have discussed the possibility.

The first group are those who have stated during the season so far that they are not about to go into administration (listed in alphabetical order) – a claim which might generally be greeted with the same reaction as a statement that ‘the Board has complete faith the manager’, although for some at least it will realistic assessment:

  • Cheltenham Town (League 1)
    Last season they reported a loss of over £200,000. In September Chairman Paul Baker turned down a bid for his majority shareholding, but admitted that the club needed new investment. Later that month six players were put on the transfer list. In January Simon Keswick, said to be worth £99m, stepped down as a director. Shortly afterwards, the first-team coach and the goalkeeping coach were let go. At the end of February the club announced it would accept offers on any player. Since early March there has been talk of a loan of £100,000 from the local council.
  • Darwen (North West Counties League Division 1)
    Last June the club was forced to settle a debt with a local radio station to avoid a winding up order. The following month saw the owner briefly banned from the ground by a court order brought by the previous owner over alleged unsettled debts. In December the club faced a row with the local brewery over a disputed bill of £12,000. January brought a winding-up order over the contested non-payment of a bill of over £9,000 for ground-keeping equipment. The dispute has dragged on in the courts and remains unresolved.
  • Histon (Conference)
    Histon’s meteoric rise has brought problems with it (shades of Gretna). Staying on a part-time basis rather than switch to a professional squad, the club instituted a series of cost-saving measures in the face of falling gates.
  • Leigh Genesis (Northern Premier League)
    A new Chairman, Dominic Speakman, brought radical changes following his move into the club last season, not least a change of name (sorry, a ‘rebranding’) from Leigh RMI. Difficulties with the opening of a new stadium led Speakman to step down at the end of October after only nine months. The club released all their first-team players having registered their reserves and the youth team. At the end of January the club finally moved into the Leigh Sports Village Stadium, but with a weakened team have struggled badly.
  • Lewes (Conference)
    Another club whose rise seems to have been too meteoric. The departure of Steve King, the manager responsible for this rise, and almost all the first-team squad over the summer can’t have helped, nor can an early and humiliating departure from this season’s FA Cup. By November the club was up for sale. Gates fell and further players were released in December. Various prospective bidders emerged, but none were willing to take the club on. Although debts of £300,000 have been written off, Portakabin sought a winding-up order at the beginning of this month. Shortly afterwards Kevin Kehan quit as first-team manager, general manager and commercial manager. The club has now been relegated at this relatively early stage in the season.
  • Northampton Town (League 1)
    The club faces a long-running battle with the local council over the possible redevelopment of land around the stadium. The Chairman, David Cardoza, is becoming increasingly frustrated as his family has sunk £7m into the club.
  • Oxford United (Conference)
    Attempts to buy the Kassam stadium rumble on, and the club continues to pay a rent of £400,000 per year. New Chairman Kelvin Thomas has taken a hard line on matters financial and has threatened to release players.
  • Port Vale (League 2)
    Last month the club reached an out-of-court settlement for compensation with former manager Lee Sinnott. The board have said that they are willing to sell the club to the right person, but there have been no takers so far. Earlier this month five redundancies were made in the non-football staff.
  • Redditch United (Conference North)
    This season has seen fewer than 200 attending home games. A contentious merger with Bromsgrove has been mooted but is unpopular with both sets of fans. Cashflow has been aggravated by difficulties in the club’s relationship with kit sponsors Kool Sports.
  • Salisbury City (Conference)
    The departure of director Peter Yeldon, whose financial input had had a major impact on the promotion run last season, resigned over the summer of 2006, but abruptly rejoined. At the end of last season he stood down again. By October the club as fund raising and even players donated appearance money and goal bonuses. Next month top players were being loaned out to cut costs. In November salaries were cut by 30% and further players left. This January Peter Yeldon rejoined the board – but for how long?
  • Southampton (Championship)
    In November the club announced a loss of £4.9m in spite of in spite of making £12.7m from player sales. At one point the player and coach wages bill had been running at a worrying 81% of revenues. A stormy AGM followed in December, with Chairman of Southampton Leisure Holdings plc Rupert Lowe having ’30 pieces of silver’ thrown at him.
  • Stockport County (League 1)
    Losses are reported as running at about £300,000 to £400,000 per season. £450,000 is owed to HMRC. A transfer embargo is now in force because money is owed to the PFA for a loan to cover wages.
  • Watford (Championship)
    Boardroom disputes over a possible sale of the club led to the resignation of Sir Elton John as Life President in November. Figures revealed that month showed in a large drop in profit as the club was still coming to terms with relegation from the Premier League. December saw the resignation of both the Chairman, Graham Simpson, and the Chief Executive, Mark Ashton. A new management team, led by Jimmy Russo as Executive Chairman and including Graham Taylor, has prompted Sir Elton to return.
  • West Ham (Premier League)
    The future of the club essentially remains in the hands of Icelandic courts. The club insists that the Tevez affair is now resolved, but litigants continue to threaten to come out of the woodwork. Watch this space.
  • Worcester City (Conference South)
    Pressure from the club’s bankers who were becoming concerned about the £50,000 overdraft resulted in enforced wages cuts for the manager and the players in December. With a new board in post the pressure has eased, at least for the moment.

(a total of fifteen clubs)

Other clubs who have struggled this season with serious financial problems include:

  • Ashford Town [Kent] (Isthmian League Div.1 South)
    Problems have suddenly surfaced in the last week. The two c-owners have fallen out badly and a tax bill for £100,000 has appeared seemingly from nowhere. ‘Receivership’ has been mooted.
  • Bournemouth (League 2)
    The good news is that in spite of starting the season on -17 points, the Cherries are just hovering above the drop zone. The bad news is… well, rather a lot for most of the season. Back in July a takeover was finally announced, the new owners being Paul Baker and Alastair Saverimutto, but Jeff Mostyn remained Chairman, at least, until October when he resigned, Paul Baker taking on the role. By late November rumours were circulating that Baker and Saverimutto were planning to sell to Alan Pitcher. On New Year’s Eve Baker sold his holding to Adam Murry. Or did he? Five weeks later it emerged that Murry had not got the finances in place. Within a matter of days the club was fighting off a winding-up order, and the club was being allowed toi defer part of the rental for the stadium. Alan Pither tabled a bid of £1 for the club, and the club struggled on the pitch with a transfer embargo. The assistant manager Alan Tindall was re-registered as a player to make up the injury-ridden team. In March a Middle east consortium was reported to be showing interest in buying the club. Some of the players did not receive their pay. Adam Murry was again reported to be trying to mount a takeover bid, backed by former Chairman Jeff Mostyn. As things moved forward, the bailiffs were round again but a compromise was negotiated. No doubt as light relief, Adam Murry had a meeting with John ‘Harchester United’ Batchelor, but fortunately nothing came of it. As I write, Murry remains ‘owner in waiting’ and a new winding-up order has been served on behalf PCA Events Ltd (the organisers of the Twenty20 cricket match played at Dean Park last August. You couldn’t make this up; watch for the next thrilling episode!
  • Burscough (Conference North)
    As a result of promotion at the end of last season, the club had to spend out on upgrading their stadium. Manager Liam Watson departed for local rivals Southport, and was promptly followed by ten of the Burscough players. Perhaps this was not the best time to sack your manager, but Joey Dunn was shown the door after just 13 games. Last month the club was served with a winding-up order on behalf of a company acting on Burscough’s behalf in the proposed sale of the stadium. This has now been resolved and a new team of directors appointed.
  • Charlton Athletic (Championship)
    In November a takeover by UAE-based Zabeel Investments came to nothing. In January Charlton reported losses of £11.5m (up 16%) and turnover down by 26%. At the time of wring they sit bottom of the Championship, fifteen points away from safety, with only seven games left to play.
  • Chester (League 2)
    Faced with debts and a transfer embargo, owner Stephen Vaughan has sought all season to sell the club, and in the last few days Gary Metcalf has taken the club over.
  • Dorchester Town (Conference South)
    Long-running rumours of a tie-up with Bournemouth (q.v.) were finally scotched in December by owner Eddie Michell. In January Mitchell initiated cut backs and the Director of Football left; several players have subsequently been asked to leave. Brian O’Donnell is now the acting manager and is not drawing a salary. On 24 February the club was charged by the FA with failure to pay players the terms of their contracts, which relates to an enforced 30% pay cut. The club are currently sitting just above the relegation zone.
  • Merthyr Tydfil (Southern League Premier Division)
    The club is in dire straights. A winding-up order appeared in the closed season from HMRC but was paid in full by October. The supporters trust, with £50,000 to invest, is at odds with the owner Wyn Holloway as he refuses to release control in the club. By December the trust was chipping in to pay the players’ wages. Then another winding-up order was served, with the local council claiming £4,000 of a debt totaling £24,000. Electricity and water for the club were cut off at the beginning of this month, and players are now in their third month without pay.
  • Northwich Victoria (Conference)
    Disputes with the previous owner, Mike Connett, who still owns the stadium, saw the club locked out, a situation now complicated by the fact that his main business has recently been declared bankrupt. The Clydesdale Bank has been pressing over a debt of £1.25m owed by a Connett company. The payment of a tax debt of £300,000 has been renegotiated, and then paid in part. December saw a transfer embargo imposed. Manager Steve King left last month, and six players promptly asked to be put on the transfer list. Currently the Vics remain homeless and sixteen points away from safety with only six matches left.
  • Stafford Rangers (Conference North)
    In December, with gates dropping and sponsorship income falling, pay cuts were enforced, and manager Steve Bull and a number of players have left the club. Debts are believed to be in the region of £200,000. January saw a mystery takeover bid fail.
  • Weymouth (Conference)
    Already in financial difficulty last season, Weymouth began this season with that favourite distractor – plans for the new stadium, a ‘state-of-the-art’ 6,000 seater (average attendance in 2007/08 was 1411). By September five players were up for sale. A new board almost took over in December after protracted negotiations, and in January Malcolm Curtis, Chairman, resigned, describing the club as ‘the Afghanistan on non-league football’. The following month another takeover didn’t quite make it. Players stopped receiving wages and called ‘breach of contract’. A 50p-a-share issue of a million shares was announced. With the departure of the majority of the first-team squad, the club was forced to field a team of youngsters against the Daggers on 21 February – the result was Weymouth 0 – Dagenham & Redbridge 9. Later in the month a consortium of local business had their takeover bid rejected. Curtis believed to be owed almost £250,000 but is not pressing for repayment. Earlier this month local businessman Stephen Beer was set to inject £300,000 into the club but tragically suffered a stroke on the way to the press announcement, and has is now very properly taking things easy instead in order to recover. In mid-March local businessmen Paul Cocks and Shaun Hennessy stepped into the breach, followed by the departure of Chief Executive Gary Calder. Previous Chairman Ian Ridley has been unveiled as the new Chairman. The club is believed to be £500,000 in debt. Can this really mean light at the end of the tunnel?

(a grand total of twenty-four clubs, not separated from the rest by that much clear blue water, it must be said)

With so many clubs in financial trouble, how can it be that none opted for Administration at this critical turning point in the season?

There are two possible reasons. Firstly, the the scenario of points deduction has become less relevant in the context of Administration, and the net ‘advantage’ of seeking Administration is seen as much less than it used be seen. As Martin Elliott, managing director of Lewes puts it:

    The Conference rules are fairly clear that we have to be able to pay all our creditors and football creditors if we go into administration or we put our membership of the Conference at risk. “If we went into administration, payment terms would still have to be agreed and satisfied with all creditors and football creditors. Then, depending when we come out of it, it is whether we could satisfy the Conference we had a structured plan to go forward. “Having taken advice we can’t see any huge advantages of putting Lewes Football Club into administration. It costs a lot of money to call in the administrators and it is money we could spend on the creditors and football creditors we have got to deal with.

    “The only advantage is we might, and I say might, be able to reduce the tax and VAT sums we have to pay.” (5)

Certainly the evidence is that the points deduction does not act as a deterrent.

It should never be forgotten that Administration is no soft option – the owner loses control, and normally the Admistrator sells the club to new owners. At the time the points deduction was introduced, David Sheepshanks, Chairman of Ipswich Town, commented:

    “We bore the brunt of the market collapsing and I take issue with those who say Administration is a convenience because it’s anything but.” (6)

Perhaps there is a more subtle explanation. While some of the clubs in the above list are run by battle-scarred veterans of the football industry, a surprising number are run by relative new-comers who have made a first fortune in some other sector. They lack the experience of running a football team and are perhaps more likely to press on to the bitter end rather than give up control to a court-appointed Administrator. Loss of control perhaps runs a poor second to loss of self-esteem. Their ‘trophy’ must not be tarnished; their passion must not be dampened with the good business sense that allowed them to make their fortune in the first place.

Which suggests that the Administrations this season are still lurking in the cupboard.

Posted in Insolvency | Tagged: | 1 Comment »

Waking up to reality?

Posted by John Beech on March 27, 2009

Two recent reports in the media caught my eye.

First Sunderland are reported to have renegotiated players’ contracts to include a clause that means that, should Sunderland be relegated, the players will take a cut in wages of 40% (1).

A second report covered the story of Weymouth’s considering a return to part-time status (2). The cub turned professional in the summer of 2005, but their current financial problems are forcing a rethink.

These reports suggest that a new reality with which clubs handle their financial affairs may be emerging – and not before time! What is surprising is that they constitute news. Unless clubs develop more sustainable models many will face insolvency events, especially those in Leagues 1 and 2 and in the three divisions of the Conference.

Posted in Costs | Tagged: | Leave a Comment »

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