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 June, 2009

Farsley Celtic go into extra time

Posted by John Beech on June 30, 2009

With a surprise comeback, Celtic have manged to scrape into Administration with just hours to spare, preventing their winding-up by HMRC (1 and 2).  This is not an end to their problems by any means – the debt of £200,000 to HMRC is still there.

HMRC will continue to press them.  Other clubs who have faced the wrath of HMRC recently include Accrington Stanley (£300,000), Merthyr Tydfil (£7,000), Bournemouth (£300,000) and Hyde United (£200,000).  Expect more close shaves, with some bad results ultimately!

Posted in Debts, Insolvency | Tagged: , | 2 Comments »

Livingston shuffle deckchairs…

Posted by John Beech on June 30, 2009

… or should that be ‘fiddle while Rome burns’?

Oddest story of the week so far comes from North of the border, and thus technically outwith the remit of this blog, but it merits a mention nonetheless – Livingston have appointed a new coach (1). What makes this so odd is that the club is likely to be plunged into Administration by the end of today.

Almost exactly a year ago majority shareholder Pearse Flynn sold his shares to an Italian consortium headed by Angelo Massone (2). Their colourful management style became apparent the following day, when manager Mark Proctor was sacked (3). On the plus side, the new consortium did mange to pump enough money in to get a transfer embargo lifted (4).

The first hint that the new backers did not have deep enough pockets came in Novemeber, with allegations of unpaid wages, monies due for players, and predictably money owed to HMRC (5). No doubt sensing that all was not well, Flynn threatened legal proceedings for money which he said was still due to him (6). Even the club’s milkman said he hadn’t been paid (7).

How did the club react? They sacked the newly appointed manager, Roberto Landi (8).

Into the new year and there were persistent reports that players and other staff had not received wages. This the club denied (9).

By March there was talk of Administration in the air (10). Concerns over the payment of wages continued; so, time to sack the manager, Paul Hegarty (11). At the end of April the SFL became concerned over the club’s record regarding the payment of wages (12).

Next Massone announced talks with West Lothian Council about buying the stadium (Almondvale) (13). Quite how this was going to be financed remains unclear, as the club was £280,000 in arrears on rent to the Council (14).

Massone then turned down an offer to buy the club from Gordon McDougall (15). As the financial plight worsened, the electricity supply was cut off over a £32,000 bill (16). Not all together unsurprisingly the club’s sponsor, RDF, pulled the plug on their contract (17).

The deadline to resolve the rent arrears is today. On past form one might have expected Masseone to sack the manager. This he can’t do, because he hasn’t yet appointed a permanent replacement for Paul Hegarty. The appointment of a new coach therefore became an urgent priority, although there is still the caretaker manager David Hay who can be pressed into the firing line (18).

Posted in Debts, Governance, Insolvency, Stadium | Tagged: , , , | 1 Comment »

Southampton update

Posted by John Beech on June 30, 2009

Things look even worse at St Mary’s today.

First has come the news this morning that the Marc Jackson bid has foundered (1), and then, less than two hours later, that the Pinnacle Group, including Matt Le Tissier, has also pulled out (2). The Pinnacle Group had for sometime been seen as the front runner, even when their exclusivity clause ran out. Pinnacle cite ongoing issues with Football League, although this cannot refer to the 10 points deduction as the issues are said to have only come to light recently.

Who then is still in the frame? A Swiss consortium (3) and a mystery group who appeared on the scene just yesterday (4). Neither bidder can act particularly swiftly if they conduct due diligence, and time is running desperately short – asset stripping in the form of selling players has begun (5). The end may well be nigh – let’s hope I’m wrong.

Posted in Insolvency | Tagged: | Leave a Comment »

On clubs and club shops

Posted by John Beech on June 30, 2009

An unexpected rescheduling of my diary found me in Bournemouth yesterday with several hours free before I was due in Portsmouth, which gave me an opportunity to visit three grounds in quick succession – Bournemouth, Southampton and Portsmouth. Perhaps not a random sample, but interestingly three clubs with serious ownership issues currently or in the immediate past.

Not surprisingly there was a distinct sameness in all three club shops, in particular in respect with what was on sale to supporters. It was what constituted the sameness that struck me – I could have been in any High Street leisureware shop if I had been logo-blind. Yes, to be fair, it wasn’t all replica kits; there was the usual selection of mugs, glasses, key chains and so on. But I wonder if supporters wouldn’t actually appreciate more diversity in the offer, and be willing to spend even more in supporting their impoverished club if there was a more imaginative range of products on sale. To me at least, noticeably missing were any books about the clubs – their halcyon days, their heroes, their histories. The offer in this respect was entirely in the DVD format, which may well be better in many respects, but not for the detail fans appreciate in studying their club history.

All three shops were not especially busy with customers, but after all it was a very hot day in the closed season. All three were busy with stock, again an indicator of the time of year, but staff had time to engage in conversation with me.

There were some differences between the three however:

  • Bournemouth had the only shop with any sense of serving fans rather customers, but this derived only from a large selection of club programmes on sale, some up to twenty years old. It was the only one of the three where a queue formed, albeit briefly, for tickets. There was an air of activity to the stadium, perhaps reflecting the arrival of incoming Chairman Eddie Mitchell, and it was the only one of the three where there was a strong sense of involvement with the local community.
  • Happenchance had brought me to Southampton on a day which the Southern Daily Echo was billing as a possible ‘D Day’ given the ongoing problems with Administration, the Pinnacle Group proposed takeover and the appearance of foreign consortia (1). I had half expected to find Matt Le Tissier addressing a rabble of reporters [the following sequence contains flash photography] and an angry but caring mob of protesting supporters. The stadium was all but deserted, which was rather eerie in such a modern and spacious stadium (easily the most desirable of the three, were it not for the industrial landscape in which it sits). Staff here were particularly helpful, prompting me to visit Waterstones where specific books on the club were known to be available. A missed opportunity though to sell me something I would have readily purchased.
  • Finally on to dear old Fratton Park with its boyhood memories of Gentleman Jim no longer quite in his pomp. The approach up Frogmore Road with its presentation of the club as something mock Tudor was both reassuring, but also faintly ludicrous for a Premier League club. With a perversity that will be familiar to Pompey fans, the club shop was not actually in the stadium; it was several hundred yards away in a mix of retail and light industrial operations. As befitted a Premier League club it had the largest range of branded miscellaneous items, but none that had me leaping for my wallet in spite of the fact that I was ‘easy meat’. Staff tried to be helpful, but left me utterly confused as to the apparently significant differences between what was on sale on the website and what was on sale in the shop.

All in all, it was an odd afternoon. It left me feeling that clubs are driven by what manufacturers offer them in branded form rather than finding out what fans actually want and would be prepared to buy. I was left with impression that market research had not really been attempted.

Posted in Merchandising, Stadium | Tagged: , | 3 Comments »

Farsley Celtic 1 : HMRC 2 L

Posted by John Beech on June 28, 2009

Farsley Celtic are in deep, deep trouble, for reasons which I partly sympathise with, but which are partly of their own making.

The glory years for Celtic have been very recent – promotions in 2004, 2006 and 2007 under Lee Sinnott, who then moved onwards and upwards to Port Vale (1). Suffering from Gretna Syndrome, Celtic struggled to muster the support in the Conference National that might have made them a ‘Tranmere’ to Leeds United and Bradford City, and after just one season were relegated back to the Conference North.

The club’s plan for financial stability was to sell some land and build 26 houses and 31 flats (2). First rejected by the local planning authority back in February 2008, the club fought on but to no avail.

Meantime, the debts were mounting up, most significantly a £200,000 tax bill due to HMRC, quite a large debt for a Tier 6 club with problems in maintaining their revenue streams (3).

As HMRC became more demanding and sought a Winding-Up Order, Celtic decided to protect themselves by going into Administration (4). Unfortunately they have left it too late, as HMRC are refusing to hold back with the Winding-Up Order to allow for time for an Administrator to be appointed (5).

This hard line approach by HMRC is consistent with their attitude since they lost preferred creditor status, and as a result football creditors in effect assumed the preferred creditors status. This is frankly an absurdity – why should Barchester City who sold a club a old pitch roller have a higher claim than the government body which collects taxes? If the government is for whatever reason unwilling to restore HMRC’s preferred creditor status, then football’s governing bodies should review the football creditors rule, and ensure that clubs see paying their corpoartion tax, national insurance contributions and VAT (tax which they have collected on behalf of HMRC) as the highest priority.

Farsley Celtic’s President, John Palmer, has admitted with respect to HMRC “it has perhaps not helped that in the past our payment record has not been the best” (6). That is true of too many clubs, and increasingly they will pay the price.

Posted in Debts, Governance, Insolvency | Tagged: , , | 3 Comments »

Cutting your cloth in the Conference

Posted by John Beech on June 26, 2009

The calling in of Administrators Deloitte by the UK arm of Setanta came as no surprise. The question had long been ‘when?’ rather than if ‘if?’. The precise implications of the collapse are less predictable however, and will only become clearer in the next few days and weeks.

The sport which will be potentially the most effected is of course football, where Setanta UK held four different bundles. The ‘jewel in the crown’ for Setanta was the set of 46 Premier League games, which Disney-backed ESPN has already bought, for, it is believed, the same sum that Setanta paid. This might suggest that the other rights packages will be picked up in a similar way, but that would be misleading. They are arguably the only part of Setanta’s rights which were bought at the right price.

In the case of its Scottish Premier League matches, it seems clear that Setanta were over-optimistic in their bid. It is likely that they will be resold at a lower price, a drop of roughly 30% being probable. The SPL is in an unusually good position to take a hit having just announced record profits of £23 million (1), and have already made moves to support their member clubs. However, their member clubs are all in individual financial positions and the impact on them will depend on their particular circumstances. Hardest hit will be the smaller clubs and the clubs which are already struggling financially – Hearts made a loss last year (2); Rangers have increased their net debt (3); Kilmarnock are not currently in a strong financial position (4); and this will hardly be good news for newly promoted St Johnstone. Aberdeen have already indicated that a direct impact is that they do not plan to participate in the summer transfer window (5).

The FA bundle is a very mixed bag. The full internationals should prove attractive and the FA should have no difficulty in selling them at a good price, and the same will apply to the FA Cup. The attractiveness begins to lessen though when it comes to the Community Shield and the under-21 matches. Alternative broadcasters will want to cherry pick and are in a position of ‘buyer power’ if they hold their nerve.

The final football bundle is for Blue Square Conference matches. Although of much lower value, they are a significant source of income to the clubs involved. For Conference National teams the income was between £75,000 and £100,000; for clubs in the lower North and South divisions, it was £15,000 a year. For these clubs it might prove a make-or-break figure. Conference clubs are highly individual in the way they are run and in their financial stability. Those that are currently struggling financially – these, in my opinion, include Northwich Victoria, Stafford Rangers, Lewes and Weymouth – will be rushing to update their Plan B, that is assuming they have one. It is at this level in the football pyramid clubs are inherently most vulnerable and we can expect to see more cases of Administration, which will no doubt be blamed on the collapse of Setanta. This will be at least a tad misleading.

Kidderminster Harriers Chairman Barry Norgrove has expressed concern on the impact the collapse will have on Conference clubs (6). He also said “The Premier League have a new deal and I think they should filter some of that down through the leagues.”

“With Setanta going into administration it’s going to be very difficult for a lot of clubs in our league because the finances won’t be there to pay the budget,” he pointed out (7).

If the collapse of Setanta UK did come as no surprise to chairmen of Conferernce clubs, they will have already had their Plan Bs prepared, and made signings, or rather not made them, as necessary. After all, the transfer window did not open until 15th May, and by then Setanta was already being reported as in trouble.

There are obvious parallels with the collapse of ITV Digital in 2002, which a number clubs held responsible for their insolvency. A scratch below the surface reveals that not only was the number of cases of clubs going into Administration already on the rise – it had been rising since 2000 (8) – but a look at the debts of those clubs shows that the loss in income from ITV Digital may have been the straw that broke the camel’s back, but it was certainly not the primary cause.

The clubs who are vulnerable are, as ever, the weaker and smaller ones. They have been hit in a time of general recession. So far the richer clubs have proved fairly resilient to the recession, but the collapse of Setanta will only serve to emphasise the ever-growing disparity of affluence across the tiers of professional football.

In the last eight weeks we have seen these eight insolvency events – Stockport County (League Division 2) into Administration, Gresley Rovers (Northern Premier League Division 1 South) wound up, Fisher Athletic (Conference South) wound up, Darwen (North West Counties League Division 1) wound up, Northwich Victoria (Conference National) into Administration again, Chester City (League Division 2) into voluntary Administration, AFC Hornchurch (Isthmian League Premier Division) fold, and Merthyr Tydfil (Southern League Premier Division) into Administration, and all of this since Southampton (Championship) called the Administrators in to their parent company. The collapse of Setanta UK can only result in additions to this pattern through back-breaking straws. Setanta will take more than its fair share of blame however.

Posted in Broadcasting rights, Insolvency | Tagged: , | 2 Comments »

Administration ain’t easy

Posted by John Beech on June 25, 2009

I have long argued that the option of going into Administration is a far from easy option, and that further punishment by football’s governing bodies not only constitutes ‘second punishment’ but is dysfunctional in that it punishes the club rather than the directors who caused the financial problems, and adds to the likelihood of further financial problems (1). This is not a view that is shared by many in the football business – Graham Turnerof 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 into Administration as guilty of cheating in the same way as athletes who take drugs (4).

One of the few to disagree publicly with this view is David Sheepshanks, erstwhile Chairman of Ipswich Town which spent a period in Administration, who said at the time the 10 points penalty was introduced: “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” (5).

Today comes a rare insight into what running a football club in Administration is actually like. Peter Rowe, who spent a spell as Chief Executive at Swindon Town while they were in Administration, has commented to the Southern Daily Echo on his experiences:

“I’ve seen what being in administration means from a first hand angle, and it’s so frustrating.

“The situation can go on for months. I think Swindon were in Administration for six months when I was there, I actually joined the club when they were in Administration.

“I ended up working with both hands tied behind my back before we exited Administration.

“Whenever you had a bill to pay, even something as minor as the electricity bill, you had to go upstairs to get the approval of the Administrator to sign it.

“The very last bill that was paid before we could exit Administration was the Administrator’s own bill, and that was something like £900,000.“(6)

A bill of £900,000 is hardly a soft option for a club which is fighting to return to solvency.

Posted in Governance, Insolvency | Tagged: , | Leave a Comment »

Don’t you just hate this time of year?

Posted by John Beech on June 25, 2009

And I’m not referring to the closed season. There is after all some football to follow. A certain Confederations Cup result was certainly memorable – will the tabloids run with ‘End to 59 years of heartache’? This year is especially busy with insolvencies to follow – another on Monday perhaps?

No, what I’m referring to is a very specific fortnight. The time when a headline such as ‘Match-fixing allegations at Wimbledon‘(1) sets me thinking ‘What have the lads at Kingsmeadow been up to?’, only to discover, to my relief, that it’s an entirely different matter.

Posted in Uncategorized | Leave a Comment »

One more, apparently two

Posted by John Beech on June 24, 2009

[See my earlier posting Just how many more? (1]

Yesterday Newcastle Blue Star announced that they were withdrawing from competitive football (2). This might seem strange as the cub has just won the UniBond Division One North play-offs and was therefore about to join the Premier Division.

Off the pitch there has been no parallel fairy tale – ‘farce’ would be a better word to describe recent events, or, from the club’s perspective, ‘tragedy’.

In early May it was announced that the club’s Chairman and benefactor was withdrawing his financial support (3). Two days later it was revealed that the Football Stadia Improvement Fund (FSIF) was demanding the repayment of £65,000. How this came about is a classic of the strange world of non-League football.

The club’s version of events has been put by Secretary Jim Anderson, who has been involved with the club for 21 years:

“During the last 10 years, we obtained substantial sums from the FSIF to improve the Wheatsheaf ground.

“In April 2006, we were approached by the Football Association and asked to join the newly-formed UniBond League Division One North.

“We said at the time that we would have to relocate to Kingston Park since we knew that, despite the improvements which had been carried out, the Wheatsheaf ground would not meet the criteria.

“The FA and UBL were desperate for a North East side to move up the pyramid.

“And there was even a promise of support towards travelling costs when it became known that Blue Star would be the only North East club making the move.

“In the last three years, we have continually explained why we should not repay the £65,000 which had been spent on the Wheatsheaf ground.

“It’s not as if the money is lying in the bank.

“The only way the club can continue is for the FA to sanction a ‘transfer of membership’ to Kingston Park but it is refusing to do so while there is an outstanding claim.” (4)

The club has not abandoned the Wheatsheaf, but their presence is restricted to the “Sunday team and over-40 side in addition to 150 kids who regularly are at the ground”.

At Kingston Park, capacity 10,200, gates have averaged 153 (5).

The terms under which the FSIF make grants state that “We base grants on the league you were in at the time you sent your application, regardless of whether you are relegated or promoted after that, unless your promotion or relegation has been confirmed by the league at the time you sent your application to us“. (6)

All in all, it had become an unholy mess. A pragmatic solution was called for, but the FA and the FSIF stuck to their guns, effectively pulling the plug on the club (7).

Meanwhile down in the Midlands, news of Racing Club Warwick remains scant. Their website has been suspended (8) and UKDATA reports the following events with respect to the club:
19/06/2009: Dissolution or striking-off document filed – Application for striking-off.
23/06/2009: 652A – Application for striking off.
23/06/2009: Dissolution or striking-off document filed.
It is a club particularly committed to community involvement, but it has struggled to find a backer and faced debts reported to be £68,000 owed to HMRC and other creditors (9). So far even the local news media have not picked up these latest events.

Posted in Community, Debts, Governance, Insolvency, Stadium | Tagged: , , , , | 2 Comments »

Culture of secrecy

Posted by John Beech on June 24, 2009

Researching management in any sector can be hampered by the difficulty in getting data. In the football sector it’s often particularly difficult because of football’s culture of secrecy. Requests for information may be met with the mechanistic response of ‘it’s commercially confidential’, especially if the request is for financial data.

While I can readily understand that most financial data is sensitive and that it is unreasonable to expect clubs to divulge it, any club which has limited liability, i.e. almost all except those at the very bottom of the pyramid, have to file accounts which are then in the public domain, although at a cost to the researcher.

When data would show the club in good light, there seems no point in adopting a blanket attitude of secrecy.

In the 8th June issue of Regeneration & Renewal, a journal for regeneration professionals (1), Ben Cook investigated the impact relegation has on the local community. He tried to establish how much clubs spent on Corporate Social Responsibility (CPR) plans – community programmes focussing on health, education, social inclusion and the environment, for example.

Extraordinarily, of the 20 Premier League clubs there was no response from 17; two (Arsenal and Everton) did respond, but would not disclose any figures. Only Chelsea spotted the opportunity to blow their own trumpet, pointing out that the club “invest[s] more than two per cent of its turnover annually – nearly £4.5 million – in community, charity, social inclusion and environmental schemes”. The Premier League itself would only provide a global figure of £125 million invested in community programmes during the 2007/08 season, an average of £6.25 million per club.

Most telling of all was the comment from an Everton spokesman (and, to be absolutely clear, I do not believe it reflects an attitude that is even remotely unique to Everton), who said: “We never discuss what we spend on anything. This a football club. If we announce we have spent £3 on tea bags the punters [sic] slaughter us, insisting the money should have been invested in players.

How reassuring that the club is so concerned about what its fans think.

Posted in Organisational culture | Tagged: | 3 Comments »

Developments at Chester City

Posted by John Beech on June 18, 2009

The latest developments at Chester City seem to have attracted surprisingly little comment, let alone criticism. Regular readers will recall that Chairman Stephen Vaughan took the club into Voluntary Administration a month ago (1).

Former player David Jones got as far as requesting due diligence with the Administrator, but did not reach a deal to buy the club (2). Then on 29 May Stephen Vaughan revealed his cunning plan – he would buy the club back from the Administrator. He argued “… if I take the club through a CVA (Company Voluntary Arrangement) the debt will be £290,000. But if the club goes to another bidder the debt will be £4,290,000” (3). In a nutshell, he was prepared to write off the debt the club owed to him if he was allowed to buy it back, but not if anyone else bought the club.

To no-one’s surprise there were no new bidders.

At a meeting with creditors on 11 June, a CVA was agreed. The club was to bought by the slightly perversely named Chester City 2004 Ltd (owned by the Vaughan family) – surely that should be Chester City (2009) Ltd – and creditors to be paid 15p in the pound over a four year period (4). The shuffling around of share ownership is not unknown to Vaughan. In 2001 Chester were drawn against Barrow in the FA Cup and Vaughan happened to own both clubs. To allow the match to go ahead, Vaughan sold his Barrow shares to a local painter and decorator three days before the match and promptly bought them back two days after the match (5).

With remarkable good luck in at least one sense, Chester had not only been relegated a tier, but from the Football League to the Football Conference. Unlike the case of Leeds United, where Ken Bates bought the club back from the Administrators, Chester City would need to placate a new governing body.

The following day the Football Conference held their AGM and decided to accept Chester City with a 10 point deduction for going into Administration, news which appeared on the Chester City website that very afternoon (6) but, as I write, has yet to be announced on the Conference website.

So far the only criticism I have found has come from Woking Chairman Shahid Azeem (7). He said “For a club to have £7m worth of debts and then go into administration, only for the same chairman to buy back the club at 15p in the pound, including all the assets, is wrong.We were told they hadn’t broken any rules though because they were not a Conference club until they were accepted at the AGM on Saturday”. This seems a strange a logic when Chester will start the season with a ten point deduction for going into Administration, which also occurred before they went into the Conference!

It should be noted that Woking had a vested interest in Chester’s application to join the Conference – Woking were relegated at the end of this season. It reminded 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 relegated.

What bothers me in all of this is the lack of any criticism, Azeem’s excepted, of Vaughan’s action. The Chester Evening Leader, apparently suffering from short-term memory loss as to how the club came to be in its present situation, has billed Vaughan as ‘CHESTER CITY SAVIOUR’ (9). Vaughan himself is quoted as saying “I would expect a big influx of new players in the next seven to 10 days.” (10) and “We’re coming into the division in a healthier situation financially” (11). It’s as if the last month had never happened.

Posted in Debts, Insolvency, Ownership, Points deduction | Tagged: , , , | 5 Comments »

Of footballers and horses!

Posted by John Beech on June 17, 2009

Last week at the Play the Game Conference, my colleague Dr Terri Byers gave a very interesting paper entitled Use or Abuse ? Animals in Sport (1). She focussed in particular on horse racing, and how horses fitted into the sport.

Her framework for analysis identified three phases in the life cycle of race horses and eventing horses:

  1. The Breeding Phase
    where far too many horses are bred, the surplus are simply discarded with far too little thought for their welfare, and little thought is given on how this large unwanted surplus might be reduced
  2. The Competition Career
    where welfare of the horse is paramount, but any horse which is badly injured is simply discarded
  3. The Post-Career Phase
    which attracts little attention and where the welfare of the horse is a very low priority for those engaged in the sport

Sound vaguely familiar?

More seriously, if there is a parallel, it suggests interesting research agendas into youth football development programmes (and what happens to the many aspirants who do not make the grade), and what happens to retired footballers who don’t make the grade as managers or TV pundits. In the old days they would often have become pub landlords or opened an independent sports equipment shop in their home town – neither are likely to be career options for the footballer retiring today.

Now you may think “What’s the problem? They earn so much during their albeit short careers!”, but this is only true for the elite. For the journeyman footballer of the lower tiers of professional football, there is often a real problem. The PFA have taken significant steps to help footballers post-career, but there are so many of them.

You may recall Jimmy Glass, the Carlisle goalkeeper, who carved himself a particular immortal niche in pub quizzes by scoring the goal that kept Carlisle up during the final minute of extra time in the final game of the season – his ’95th minute of fame’. That was back in 1999. Today he drives a taxi in Poole (2).

At least they don’t shoot footballers.

Posted in Players' careers | Tagged: | Leave a Comment »

Andrew Jennings at Play the Games 2009

Posted by John Beech on June 12, 2009

The Play the Game Conference 2009, held in Coventry and hosted by the Centre for the International Business of Sport, has come to its conclusion.

The final speaker, Andrew Jennings, was his usual provocative self. His speech, which elaborates his views on the Football Association and its 2018 bid, can be heard as a podcast (1) – his speech begins at around the eight minute mark – and he gave an exclusive interview to one of Coventry University’s Sports Journalism students (2)

Posted in Governance | Tagged: | Leave a Comment »

Ronaldo’s exit from Manchester United

Posted by John Beech on June 12, 2009

The purchase of Cristiano Ronaldo by Real Madrid for a fee of £80 million (1) has been widely reported (as has the latter’s earlier purchase of Kaka from AC Milan for a reported fee of £56 million (2)). How much of the £80 million will be made available for use in the transfer market remains unclear, and it is thus difficult at this stage to assess the impact on the English transfer market. But I would surprised to see Sir Alex Ferguson spend it all before the end of the transfer window.

The impact on Spanish football is more clear. Real Madrid are making a bold statement of how they see themselves as a European club – as a big roller. Within the Spanish football scene, the gap between the ‘big 2’ of La Liga and ‘the rest’ will inevitably be widened, to the detriment of all other Spanish clubs and the state of Spanish football in general.

At an entirely different level, I can’t help pointing out that the combined fees of £136 million would have bought 217,600 classrooms from Save the Children (3) – I pick this particular charity because of rivals Barcelona’s involvement with UNICEF as shirt sponsors. Have we become inured to obscenity?

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

Liverpool and the Auditors

Posted by John Beech on June 11, 2009

KPMG, the auditors of Liverpool, have warned of a “material uncertainty which may cast significant doubt upon the group’s ability to continue as a going concern” (1).

So, what does the qualification of a company’s accounts by its auditors imply? With a conventional business it would certainly be a cause for concern, and an indicator to potential investors to steer clear. But football is not a conventional business. In particular, a club may have its finances structured around ‘soft debt’ – long-term debt which it is not under pressure to repay, a loan from its benefactor for example.

In the Premier League, for comparison with Liverpool, here are the number of instances of the qualification of accounts in the most recently available sets of accounts:

Arsenal Football Club plc – 0 in 10 years
Aston Villa Football Club Ltd – 0 in 8 years
Blackburn Rovers Football & Athletic plc – 0 in 8 years
Bolton Wanderers Football & Athletic Co Ltd – 1 in 10 years
Chelsea Football Club Ltd – 0 in 10 years
Everton Football Club Ltd – 0 in 10 years
Fulham Football Club (1987) Ltd – 8 in 10 years (2 most recent are unqualified)
Hull City Association Football Club (Tigers) Ltd – 0 in 7 years
Liverpool: Kop Football (Holdings) Ltd – 0 in 1 year; previously Liverpool Football Club and Athletic Grounds Ltd 0 in 10 years
Manchester City Football Club Ltd – 0 in 10 years
Manchester United Football Club Ltd – 0 in 10 years
Middlesbrough Football and Athletic (1986) Ltd – 0 in 10 years
Newcastle United Football Co Ltd – 0 in 10 years
Portsmouth City Football Club – 0 in 10 years
Stoke City Football Club Ltd – 3 in 10 years
Sunderland Association Football Club Ltd – 0 in 10 years
Tottenham Hotspur plc – 0 in 10 years
West Bromwich Albion Football Club Ltd – 0 in 10 years
West Ham United Football Club plc – 0 in 10 years
Wigan Athletic AFC Ltd – 5 in 10 years (5 most recent are unqualified)

Liverpool is thus in the minority of Premier League clubs, but certainly not unique.

The most extreme case I have come across is at Hereford United, where, regular readers will recall, Chairman Graham Turner was swift to attack the business operations of Stockport County (2), and which is about to move down to League 2. For the last ten years, the club’s auditors have qualified the published annual accounts on every single occasion.

It is not simply the fact that Liverpool’s accounts have been qualified that is a cause for concern – it is the specific underlying reason for the qualification. That reason is of course the uncertainty hanging over the renewal of the loan facility for £350m due to be made next month, debt which is certainly not ‘soft’.

Nonetheless, it seems unlikely that Liverpool as a club is really in any serious danger. If Hicks and Gillett do find themselves in a position where they were forced to sell the club, it would be a more attractive club to purchase than almost any of the other clubs which are currently seeking a purchaser.  There may well be some sticky moments in the next few months, but Liverpool will undoubtedly survive.

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