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

Bulls’ Chairman talks bullish

Posted by John Beech on May 5, 2009

Perhaps there is some mileage in a TV series called ‘Chairmen say the Funniest Things!’. The first programme might feature Hereford United’s Graham Turner.

Talking to BBC Hereford and Worcester, he is reported today as condemning ‘the ruling that has allowed Stockport County to stay in League One, despite going into administration’. He is quoted as saying “Clearly the people who run the club couldn’t afford to sustain the expenditure…. Clubs that go into administration should be automatically relegated” (1). He concluded “We had ours [financial problems] 14 years ago and you learn from that lesson that you have to live within your means.” Certainly Hereford had its problems in 1997/98, and its recent record of five years ‘in the black’ suggests strongly that they have learned to live within their means. All credit to Graham Turner for this.

But perhaps some detail might put Turner’s, and Hereford United’s, moral high-ground into perspective. In May 1997 Hereford, then about to drop back to the Conference, had built up debts of approximately £1,000,000. The club’s cummulative loss for the period 1995 to 1999 were £1,148,890 (2) – a significantly worse situation than the one Stockport County currently find themselves in, and that is without any adjustment for ten year’s inflation.

In October 1997 it was revealed that players and administrative staff at Hereford United had not been paid for a month (3). Turner at that time was the club’s Director of Football and took a voluntary pay cut of 30% (Times, 2 Jan 1998). Later that month he became majority share-holder and took on the role of Chairman (Belfast News Letter, 23 Jan 1998). Three months later and the club was facing a winding-up order from two creditors.

New debt of £5000,000 was taken on and a Company Voluntary Agreement was entered into with the club’s creditors. These included the Inland Revenue (£140,000) and Customs and Excise (£120,000) as well as a number of others (£47,000). In case you need reminding, Stockport have been forced into Administration over a debt of £300,000.

In September 2004 the Hereford Times was able to report that the CVA had been settled. The last two paragraphs of their report are:

The club initially agreed to repay the entire debt and made a first payment of 40p in the pound. But, this week, creditors accepted a further, smaller, dividend to bring the CVA to a close.
While the end of the CVA is a significant landmark for the club, a long-standing debt of £1 million, plus interest, remains outstanding to developers Formsole.

Two points are clear – the debts which caused the entry into a CVA, which were mainly due to the Exchequer, were not settled in full, and five years on the club was still dependent on debt. Today, incidentally, a club would not be allowed to stay in a CVA for so long.

The last five years ‘in the black’ began with a wiped slate, at the taxpayers’ expense, rather simply a clean one.

Personally I am against the second penalty of points deduction or automatic relegation.

A case can be made for it I concede. The Chairman of Hereford United doesn’t strike me as the person to make that case however.


15 Responses to “Bulls’ Chairman talks bullish”

  1. Your article appears to suggest that Stockport owe just £300,000, which is considerably incorrect.

    The one creditor that pushed them over is owed £300,000, and called in their loan just nine months after it was given. They also owe significant sums to HMRC, the PFA (for players’ wages in March – confirmed by the Daily Mail), and a number of other sources.

    The ground owners, their former owners and owners of co-tenants Sale Sharks, Cheshire Sports had to pay their Police bill in order for the club to play their final home match in front of spectators. Cheshire Sports themselves reported losses of £4million investing in Stockport during their ownership.

    The local press suggests that the total existing debt is £1million – and that is after they have sold players over the past season for more than £1.5million in a series of fire-sales to stave of various threats.

    It is also worth noting that the current owners, the Supporters Trust, have achieved all this debt in just four years at the helm. Add to that the previous regime’s losses and you have a club that has recordable day-to-day losses of at least £6.5million in barely ten years.

    • John Beech said

      Martin Watson is correct in pointing out that Stockport County is carrying debt other than the £300,000 which has directly resulted in them in entering Administration. Perhaps he hadn’t read my posting of 1 May which provides a link to a local press report of debts of around £500,000.

      These other debts were proving manageable – a practice that Graham Turner would hardly condemn – until the foreclosure on the David Farms loan. I also noted in that posting that Caroline David of David Farms is one of the ‘names in the frame’ to buy the club from the Administrator.

      Any insolvency event, whether the CVA that Hereford United found themselves in or the Administration that Stockport County currently find themselves, is a cause for concern and balanced comment. For the Chairman of a club that did not suffer automatic relegation, did not suffer a 10 points deduction and did not pay off its debts to the Exchequer at £1 for £1 (something which should be a cause for concern to any taxpayer) to call for automatic relegation of a club with broadly similar debt levels, but at a higher level in the Pyramid (and hence with generally higher levels of revenues), is disingenuous.

  2. I certainly dispute your claim that ‘These other debts were proving manageable’ when they were faced with the prospect of not earning gate revenue due to being unable to pay the Police bill.

    The David Farms loan, which was taken out last summer to ease ‘short term’ cash flow problems, may have speeded up the process but Administration was an inevitability without a significant cash injection. Whether David Farms deliberately pushed the club over to gain something else in the long run is open to debate.

    If you’re looking for a pot/kettle situation in Graham Turner’s words, you’d be better off looking at Gillingham. Their chairman, Paul Scally, has also called for automatic relegation for financial problems. The only thing was he did it days after they announced that they had paid £440,000 in interest on their substantial debt pile. Or would you consider that manageable for a League Two side.

  3. Will Wright said

    Your article seems to have skated around the fact that Graham Turner was not associated with the club when the poor financial management led to the position that HUFC found themselves in.

    He was initially appointed as manager and then took over the Chairman reins after relegation to the Football Conference. The following ten years, under his control, have seen a dramatic improvement in the financial position resulting in promotion from the Conference to League 1 and relegation back to League 2. I think that his comments are based upon the fact that HUFC have traded “in the black” up to and following 2007/08’s promotion alongside Stockport, whereas their trading appears to have been a little less “responsible”.

    • John Beech said

      According to my records he was actually appointed as Director of Football rather than Manager in August 1995, but I agree that the financial crisis which hit Hereford United was one which he was not responsible for. To be fair to myself, I was at pains to say in the original posting with respect to the club’s current financial position “All credit to Graham Turner for this”.

      He was however firmly in the driving seat when the CVA was exited without full payment of the debts.

      Whether he would have been able to turn the club round if it had suffered a second (disciplinary) demotion, as Turner now advocates, on top of the sporting performance demotion it suffered, is of course only open to speculation. Personally I doubt it, and I reiterate that I find it strange that he should now be making the case for something which Hereford did not suffer.

  4. John Beech said

    I suggest you read the statement by Stockport County (1), which makes clear that the reason the police bill could not be paid by the club was because the actions of David Farms had directly resulted in the club’s bank account being frozen.

    As for Paul Scally, you will find that I have already looked at the case of Gillingham in some detail on this blog on 6 April.

    Whether I consider Gillingham’s level of debt as manageable would be abundantly clear if you had read CIBS Working Paper no. 4 (available through the Research Resources tag at the top of the page) which was published about nine months ago.

    • John Beech said

      [Due to my inadequacies as a blogger, comment 4 failed to appear as a reply to comment 2 by Martin Walker, which is what it should have done. Apologies for any confusion.]

  5. For reference, the Director of Football post was the manager’s job. There was no manager, merely a team coach, and Turner was responsible for team selection. It was never fully explained why Turner had this new (to Hereford) job title, but he had no sway or actual boardroom position until he became Chairman.

  6. John Thick said

    You say That Hereford enjoyed writing off a debt to the Taxman due to a CVA agreement. You miss the fact that at that point in time the Taxman was a PREFERENTIAL Creditor and as such HAD to be paid in full. Changes that treated the taxman as just another creditor only came in more recently, and teams like Leeds and Luton have taken advantage of these changes. Teams such as Newport County, Aldershot and Accrington Stanley were forced to close and restarted. Please realise times change and check that the rules have changed!

    • John Beech said

      The point in time when the Crown lost its preferential creditor status was 15 September 2003 (1); it was a provision of the Enterprise Act of 2002.

      The completion of Hereford United’s CVA was in February 2005.

  7. Graham Turner has chosen to respond to your article himself. The video of the interview can be downloaded from the website.

  8. […] while calling for a second punishment for Stockport County, one which Hereford had not suffered (4). Hereford’s long-term liabilities at the end of May 1999 were £1,265,257. At the end of May […]

  9. […] me of Hereford United’s Chairman Graham Turner’s condemnation of Stockport County (8), who went into Administration but survived in League 1, unlike Hereford who were […]

  10. […] – Graham Taylor of Hereford United, for example, has argued for automatic demotion (2 and 3) for clubs who go into Administration, as has Barry Hearn of Leyton Orient, who sees clubs who go […]

  11. […] of the later part of the season that Graham Turner of Hereford United was going to win this (see [3]), but he was well beaten by a cracker from Bob Morton of Newcastle Blue Star (with whom I actually […]

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