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 November, 2009

Job security and the football manager

Posted by John Beech on November 24, 2009

The sacking of Paul Hart by Portsmouth (1) has been greeted with universal sympathy in cyberspace and this will doubtless be repeated in newsprint tomorrow. Received wisdom is that he was on a hiding to nothing and made the best of a bad job in the circumstances, made all the more ironic by the number of goals scored last Saturday by former Pompey players (no, please don’t mention Ricardo Fuller’s contribution; he left Fratton Park as far back as 2005 in any case).

The sad fact is that managers have one of the most insecure jobs in the world.  Yes, there are the exceptions of Sir Alex Ferguson, Arsène Wenger and Dario Gradi, but they definitely are the exceptions.

Dr Sue Bridgewater at Warwick Business School conducted a very comprehensive survey of manager employment trends including dismissals in the top four divisions over the period from 1992 to 2005 (her very readable report is downloadable here, and there is a webcast of her talking about the key findings here).  She found, among a number of fascinating conclusions, that more experienced managers who have longer in post achieve higher levels of success.  It also emerged that the average rate of tenure over that period, 2.19 years, was declining, and could be projected to have fallen, if the trend is maintained , to one year by 2023.

She also found that there is a significant correlation with success for managers who have followed the route of taking coaching and Management qualifications.  Yet still we see good ex-players without coaching badges being given special dispensation to manage even in the Premier League.

Human Resource Management in the football sector is way, way behind the times.  In other sectors it is not generally accepted that you get the best out of people by kicking boots at them or continually swearing at them.  And I have yet to see any evidence that such approaches actually work in football.

To return to Paul Hart, my recent posting (2) suggests that current board-level HRM practices at Portsmouth are poor even by football’s low standards.

Posted in Human Resource Management | Tagged: | 1 Comment »

More high drama at Weymouth

Posted by John Beech on November 24, 2009

A press conference scheduled for last night was postponed, and the Dorset Echo has carried two reports today (1 and 2) which provide some insight, if not full transparency, on what is going on.  Cancelled press conferences are a bit of a Weymouth thing – back in March one was cancelled when Stephen Beer, who was expected to be announcing a £300,000 investment in the club, was rushed into hospital with a suspected stroke just thirty minutes before it was due to take place (3).

So far as I can tell, the Ryan/Beasant offer (see 4), which had looked set for confirmation, had in fact been rejected, the alternative George Rolls bid, at least according to George Rolls, former Chairman of Cambridge United, having been accepted instead.  This, it would seem, was to be announced at last night’s press conference, which was cancelled at one hour’s notice.

Derek Bish of the Dorset Echo suggests that pressure had been put on the board by Malcolm Curtis, a former director currently trying to recover money owed him by the club, by saying in an email that he would demand immediate repayment of his £221,000 loan if Ryan and Beasant were allowed to take over the club.

Ryan confirmed late this morning that the directors had placed unacceptable conditions in his way (get rid of Beasant? pay off Curtis? [JB]), thus in effect rejecting his offer, adding “Consequently our offer was rejected in favour of George [Rolls]‘s“.

There is no confirmation from the club that Rolls’s bid has been accepted, the club website having gone very quiet.  There does not seem to be a third alternative other than Administration, which the board has tried desperately to avoid.  Definitely one to watch.

Posted in Debts, Fit and Proper Person tests, Insolvency, Ownership | Tagged: , , , | 2 Comments »

Statements of the bleeding obvious, the ironic, or just the plain surreal

Posted by John Beech on November 23, 2009

Headlines can be oddly misleading.  I clicked through just now to ‘Boro collapse stuns France’, wondering how the French had failed to notice Middlesbrough’s relegation for so long (1), only to find that I had forgotten the name of the manager of one of our leading resurrectionist club.

They can also be very amusing.  I’m thinking here of headlines that just aren’t news, more, as Basil Fawlty would have it, statements of the bleeding obvious, or statements of just wishful thinking.

A good example of the former is Martinez embarrassed after defeat from today’s BBC website output. No! Really?

An example of the latter would be Ridsdale Far East trip expected to tie up Cardiff City investment from WalesOnline on 2 November.  Surely even Ridsdale wasn’t seriously expecting this.

The downright surreal also would qualify, as in £10m loan will secure Pompey future: Al Fahim from Portsmouth’s The News of 17 November.  Of course – the new owner is going to increase the club’s debt.  Really thinking outside the box there.

So, any offers of non-headlines?  The rules are simple.  All you have to do is post the actual headline in a comment below, exactly as it appears on the webpage, together with the URL, and the date it was published – no more, no less.  It has to be on the topic of football management (rather than performance on the pitch), and the less there is any need for comment, and/or the greater the irony, so much the better.

I’m a Pompey fan so I need cheering up. If that had been a headline it would certainly have qualified as a statement of the bleeding obvious!

Posted in Uncategorized | Leave a Comment »

King’s Lynn down a key player as they face HMRC

Posted by John Beech on November 23, 2009

King’s Lynn, who face a winding-up order in court this Wednesday from HMRC over a debt of £65,000, have just seen the resignation of their recently appointed Financial Director David Handley (1).  This is clearly a cause of deep concern to Linnets fans, but it might the bigger picture behind this might just pick up some resonances for fans at many another club higher up in the pyramid.

The nearest Football League clubs are Peterborough (roughly 30 miles away), Norwich (roughly 40 miles away) and Lincoln (roughly 50 miles away).  To see a Premier League game you would have to travel just over a hundred miles to watch Spurs or Arsenal, or almost 110 miles to Hull. So with a population of 135,000 in the town alone, it would not be unreasonable to have aspirations of being at least in the Conference or even League 2.  Carlisle, for example, is in a similar position in terms of local competition, and has a smaller population.

The Linnets have however spent most of their life in the various divisions of the Southern League, but were promoted to the Conference North in 2008.  The beginnings of fulfilling their not unreasonable ambition?  Sadly not.

The first of a number of problems arose with their stadium, which is owned by the local council. The Conference decided at the end of last season that the Walks Stadium did not come up to their standards, and announced that the Linnets would be demoted. This, in spite of the fact that King’s Lynn Borough Council had given their unconditional undertaking that all required alterations would be completed by the start of this season (2) and West Norfolk Council had earmarked £250,000 towards the cost of new changing rooms and floodlights (3).  The Conference was given written undertakings that the work would be completed by the start of the season, but chose to take an uncompromising line and the appeal against demotion was rejected (4).  The milk of human kindness was not to flow as it was for Chester City but a few months later – one attitude to those coming down the pyramid and a different one to those trying to climb it, it would seem.

One immediate outcome was that the manager and his assistant resigned (5), followed by their Director of Football (6) on the day that the HMRC winding-up petition was announced (7).  In September the new Assistant Manger resigned (8) saying that the club owed him ‘a considerable sum of money’ and that the club had “been taking advantage of me“.

Clearly financial matters in the club were, let’s say, suboptimal.  David Handley arrived in October.  At the time he told the Lynn NewsThis is a massive and dream job for me, but I’ve got big plans for the future and on the financial side of things the buck will still stop with me.I want the fans to judge me at the end of the season, but I’m determined to get the club in a good financial position and move forward from there. When I took the job on I had two aims. The first was to get an adjournment with the Revenue, which we’ve done, and the second is to repair and fix the financial position of the club. You have to remember that the outstanding debt with the Revenue goes back a number of years and because players have been overpaid in the past. There’s no reason whatsoever why I can’t get the club where I want it to be financially when you look at the fan base and if we can achieve success on the pitch with a good, young side.

Handley is a realist, saying on 22 October: “I don’t think we can expect to get any outside investment within that sort of timeframe. Added to that we haven’t got many home games within this period either so I guess the burden will fall on me and the other directors. I’ve already put some money in initially to get a place on the board and I managed to get us an adjournment result in the High Court, and let me tell you that was by no means a guaranteed outcome. This situation is solely down to unpaid tax on high wage-earning players but I’m pretty confident we can clear the debt and stabilise the club so it can move forward.” (9)

A month later, and his views are rather different: “I feel I have been brought to the club under false pretences. I have put in £23,000 and I feel I am going to be made a scapegoat for all the problems. I had a pact with the other directors but it seems I was paying for everything and there was a hell of a lot coming out of the woodwork.

To be fair, the facts are disputed by 40% shareholder, director and ‘benefactor’ Michael Chinn, who now says of Handley “We’ve wasted six weeks because of him. He came in making all sorts of promises and basically he hasn’t been able to deliver” (10) and disputes Handley’s claim of £23,000 investment.  As the club prepares for the High Court hearing Chinn says “I have got a Plan A and a Plan B and I’m confident we’ll be okay. I’ll be talking with a number of friends and I’m hopeful they will lend me the money I need to pay off the tax bill” Ah, an almost seamless switch from benefaction to borrowing.  At least he has two plans, which is two more than some Chairmen, but let’s hope neither involve disappearing from the dugout at this vital time – in January he resigned from the board (11) only to reappear by June (12) promssing to take the demotion issue to the Court of Appeal (which he decided eight days later not to [13]).  Borrowing may get HMRC off the club’s back but it’s hardly the way to be going forward – borrowing from Peter to pay Paul is not a sustainable business model.

There is one small glimmer of good news – the Blue and Gold Supporters Trust was launched earlier this month (14 and 15).

There is a cautionary tale here for any club that has aspirations to climb the pyramid, has become dependent on a benefactor model, or has not kept up payments to HMRC.

That doesn’t really cut it down much though, does it?

Posted in Benefactors, Debts, Football Conference, Governance, HMRC, Insolvency, Ownership, Trusts | Tagged: , , , , , , | 8 Comments »

Chairman Ron’s Little Blue Blog: Prologue

Posted by John Beech on November 22, 2009

Southend United’s Chairman Ron Martin could never be accused of consistency.  First we were told on the club website on 4 November that a full statement about the recent near melt-down of the club in winding-up proceedings would be forthcoming, but this claim was mysteriously airbrushed out.  Warming to his strategy of non-communication of information, he bluntly stated on 9 November that, the debt to HMRC having been settled, the matter was now closed (1).

In a dramatic and unexpected, but most welcome, U-turn, he has now decided to explain what exactly he meant – “I said at the time of discharging the payment to the “tax man” (on the day of the Gillingham FA Cup game) that I would make a fuller statement the following week. The short comment about the formality of the court hearing on the Monday was not it!” (2)  Actually, Ron, I don’t really think that anyone thought that.

What is that has prompted to come good on his promise of a full statement?  Apparently it’s because “A few – not many in truth – have commented that I have “gone quiet” over the past two or three weeks whereas supporters would have expected me to add clarity to recent events “as you always do“.  Ah yes, clarity.  Personally I had expected a uniquely odd view of things direct from Planet Ron, and I haven’t been disappointed.

We learn that “Like all complex legal/banking matters there are often subsequent conditions which need to be addressed, swept up if you like, and the past two weeks I have largely been engaged in doing just that“. Quite so, sweeping up, not to mention air-brushing.

Now that he’s finished sweeping up, “I shall, next week, be issuing [sic] a series of blogs to cover such subjects as:

  • HMRC – how did the position arise
  • How was the debt paid
  • The “consortium”
  • My thoughts about the current squad size
  • The future”

Probably a series of statements on the club website I would guess, rather than blogs where people can post comments.  To be fair, what with him being so busy, he probably hasn’t quite caught up with the interweb thingee.

I must confess though, ‘How the debt was paid’ is the one I’m really looking forward to.

What are we then to expect?  As a taster, Ron tells us “Recent events did not creep up” unnoticed and whilst the inadvertent “use” of HMRC Bank Plc may not have been well received in all quarters the Club’s approach was one of control and expectation of policy promoted by the Football League in discussion with HMRC. In the event, HMRC had the Government coffers to protect and in doing so had no regard for the screamingly obvious commercial position that would facilitate payment or the delays and circumstances of which they were directly or indirectly responsible.

If this gives the impression that the gods are looking down from Olympus and competing with each other to see who can screw our Club the hardest, then so be it. As football supporters we are all cursed with a genetic propensity for moaning but the tax man’s efforts to unglue all that is good about our wonderful Club was beyond the pale. Not just the passion that is created during 90 minutes on a Saturday, or as with today on a Friday night, but the outstanding contribution the Club makes to the community, social inclusion, charities, civic pride and the children of our Town. Do not tell me this would not have been unravelled if HMRC had “won”.

I guess what we might have expected from Ron Martin – all the fault of ‘HMRC Bank plc’ (well, he is certainly as brazen as he is cynical) and absolutely nothing to do with the esteemed Chairman or the board.  His use of ‘inadvertent‘ as in ‘the inadvertent “use” of HMRC Bank Plc” is interesting – had he not noticed that this is the second year running that HMRC has had to take the club to court to get over £600,000 in unpaid taxes etc.?

Ominously he concludes “I know where I am taking this Club and will not be distracted by the detractors“.  And where exactly would that be?  To Fossetts Farm via Hell in a handcart?  Let’s just hope that the wheels don’t unglue.

Posted in Chutzpah, Debts, HMRC | Tagged: , , | 1 Comment »

How not to run a club

Posted by John Beech on November 21, 2009

A press interview (1) given by manager Paul Hart reveals the level of communications which can be expected form Portsmouth’s new owners.  Following a meeting with their representatives (he has yet to meet Al Faraj some seven weeks after the takeover), Hart revealed:

“There have been discussions. They were preliminary talks which will lead to others.

‘The detail wasn’t great so there needs to be more said.

‘The talks were with two of his advisors and more talks are going to take place over the next few weeks.

‘When we get down to more succinct talks and conversations and a bit more direction then we will know where we are going.

‘The date for more talks isn’t in my diary at the moment.

So, a clear strategy effectively communicated from the top then.  ;-(

This style of football management is more appropriate to a pre-Herbert Chapman world of club secretarys than to the Premier League in the twenty-first century!  As if Paul Hart hasn’t got enough obstacles to overcome…

Posted in Organisational culture | Tagged: | 2 Comments »

Why Weymouth should be worried

Posted by John Beech on November 21, 2009

Just how brazen can you get in flouting the Fit and Proper Person test?  See my last posting for some suggestions.  There is however a new contender.

Latest on the takeover at Weymouth from the Dorset Echo includes the following gem: ““We are on course to fulfil our due diligence and will make a full statement on Monday on our decision, which is to carry on and take the club on,” said …” (1)

The name that follows is not that of Chris Ryan, presented as the “prospective new owner” (2), but that of Steve Beasant, who the Echo euphemistically describe as ‘Advisor’ to the Ryan consortium.  Beasant was declared personally bankrupt less than a year ago (3) following the compulsory winding-up of two of his companies, leaving debts running into millions of pounds.

Beasant happily speaks of ‘we‘, and indeed the club itself referred to the investment proposal as having come form “Chris Ryan, Steve Beasant and a group of un-named investors” (4, 13 November).

The Ryan consortium would present Beasant’s position as “purely a consultant on behalf of the consortium” (5), which is hardly compatible with Beasant’s use of ‘we‘ mentioned above.

If Beasant is not “a person who exercises or is able to exercise direct or indirect control over the affairs of the Club” (from the FA’s own rules on who the Fit and Proper Person test applies to), then what on earth is he?

Once again the  Fit and Proper Person test proves itself to be absurdly ineffective.  It seems anyone can circumvent it by describing themselves as a ‘consultant’ or an ‘advisor’ and owning less than 30% of the club.

If the FA does not act swiftly to plug the obvious loopholes in the test, it will be seen as an object fit for proper ridicule. It is in serious danger of bringing the game into disrepute, for want of a better expression.

Meanwhile, unless some action is taken before the Monday deadline for finalising the sale, Weymouth will be subjected to the business practices of someone whose recent track record is hardly one to inspire confidence.  Hasn’t the club suffered enough?

Posted in Fit and Proper Person tests, Football Association, Governance, Ownership | Tagged: , , , | 1 Comment »

Should Steven Vaughan be worried?

Posted by John Beech on November 18, 2009

Well, obviously he should about the future of Chester City, but I was thinking rather more of the implications of his signing an undertaking banning him from acting as a company director until the year 2020 (1).  The specific implication is that “may no longer act as either an active or inactive director, or exercise control over an individual who is a director, of any company” according to Companies House.

Although Vaughan had been a director of Chester City Football Club Ltd, the company which went into Administration in May, he is not a director of Chester City FC (2004) Ltd, the company which now owns the club.  He is, however, the owner of Chester City FC (2004) Ltd.  We are thus moving into the shadowy world of what is known as a ‘shadow director’, defined as a person upon whose instructions the majority of the board of directors of a company are accustomed to act.

It is because of the potential existence of shadow directors that expressions like “exercise control over an individual who is a director” appear.  Indeed, the FA Fit and Proper Person Test rules and regulations include the following within the definition of a director of a football club:

  • a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act; or
  • a person who exercises or is able to exercise direct or indirect control over the affairs of the Club. For the purposes of this definition, a person shall be regarded as being able to exercise direct or indirect control over the affairs of the Club in particular but without prejudice to the generality of the preceding words if that person owns or is entitled to acquire 30% or more of the share capital or issued share capital of the Club or the voting power in the Club.

It was because of this last sentence that the FA has just required Vaughan to reduce his shareholding (2).  It is the rather more open to interpretation first bullet point that there will be dispute.

A look at possible precedents paints a rather one-sided likely outcome.

I’ve blogged before on Spencer Day (formerly Trethewey), ruiner of Aldershot, convicted fraudster (six counts, plus one of obtaining credit while bankrupt), and now owner and team manager of Chertsey Town FC, and also on the brothers Muduroglu.  Sami, disqualified from being a company director, used the cover of his brother Eren, who lived in Turin, as Chairman to run Fisher Athletic into the ground.

There are other examples of driving a bulldozer through the spirit of the Fit & Proper Person test.  At Salisbury City, Peter Yeldon, who had been severely reprimanded and fined for malpractice by the Professional Standards Office of the Institute of Chartered Accountants in England and Wales (3), served as a director.

Reading through my files when preparing yesterday’s posting, I was reminded of the case of Mike Diamandis at Swindon Town.  He “supplied management and financial support on a day-to-day basis” by the club’s own admission (4) and, in meetings with potential investors, was “at the forefront of these discussions” (5).  He attended meetings alongside the board members (6).  The BBC described him in december 2006 as “the man who – behind-the-scenes – has effectively run the football club for the last five years” (7).  Diaminidis was not a director of the club – he had been disqualified from acting as a company director in 1992 (8), and had been “in breach of a director’s disqualification between 1997 and November 2004 which later became the subject of criminal investigations” (9).  The authorities seemingly did not see him as “a person in accordance with whose directions or instructions the persons constituting the management of the Club are accustomed to act“.

Vaughan, it would seem from precedent, does not have much to fear.  Once again, the Fit and proper Person test proves to be neither fit nor proper.

Perhaps the pressure has got to him nonetheless.  The Liverpool Daily Post carrys a report that Chester City is in talks with a consortium interested in buying the club.  This was revealed by Chairman Ian Anderson rather than the ‘presumably about to be ex-owner even if the consortium doesn’t buy the club’ Stephen Vaughan.  He was, I would imagine, too busy arranging the transfer of shares, not that he is inexperienced in the procedures, having once famously and quite openly sold his Chester shares to a local painter and decorator and promptly bought them back again once a tie against Barrow had been played, Vaughan still being the owner of Barrow at the time (10).

This latest move against Vaughan is not really a scalp, maybe a short-back-and-sides, but definitely not yet a scalp.

Posted in Fit and Proper Person tests, Football Association, Football Conference, Governance, Ownership | Tagged: , , , , | 2 Comments »

St Modwen v. Swindon Town

Posted by John Beech on November 17, 2009

Swindon Town have one of the worst financial records among English league clubs.  They last turned a profit in 1996/97, and have been into Administration in February 2000 with debts of £3.5m, and again in March 2002 with debts of £1.8m. Following the second Administration, they did not emerge from a CVA until the end of May 2008.  Their financial instability has been compounded by their lack of stability in the pyramid, having been as low as the current League 2 following a single season in the Premier League in 1993/94.

A report in The Guardian (1) that they are once more in financial trouble, under threat of a winding-up order to be serve by property developers St Modwen, came as no great surprise.  The report refers to “the non-repayment of a £2.45m loan dating back to 2005“, adding that St Modwen “is claiming the original £1.45m loan plus £1m in interest“.  The club’s response, however, says that the “matter referred to dates back to 2003 when the Club’s former holding company established a joint venture company, Shaw Park Developments Ltd, with St. Modwen” (2).

The quite horrific amount of interest would suggest that no interest has been paid since 2005, and that, at such a high rate, the club were seen as toxic, a very unsafe bet.

Certainly the club were in serious trouble in January 2005.  On 24 January the BBC reported that they faced an unpaid tax bill of £600,000 (sic), and had been given until 2 February to clear the debt (3).  Three days later the BBC reported “Sir Seton Wills, the club’s major shareholder and benefactor, and Town’s development partner St Modwen provided a £750,000 loan to cover the amount” (4). Roll on another nine minutes, and the BBC are reporting a different version of events: “major shareholder Sir Seton Wills stepped in and brokered a loan deal with property company St Modwen” (5).

Roll on until 19 October the same year, and we find that the club has again faced a winding-up order for non-payment of VAT, and has narrowly escaped closure.  And who paid this time? “It is unclear how the current bill was paid.  A club spokesman said: “I’m not aware of the details”” (6).  Given the level of revenues at the club during this period, it looks as if no tax was being paid until writs were served, and the not out of cashflow – Modwen and Sir Sefton Wills were relied on to bail the club out.  The regime at the time, under the chairmanship of Willie Carson, were not overfond of filing accounts either – accounts for 2004/05 were not filed until May 2007, and for the next three seasons did not appear until a new board had taken control.

So, the assertion that the demand is for the repayment of £2.4m lent to pay off tax debts in 2005 is perfectly plausible, but the club, now under a new regime with Andrew Fitton as Chairman, insist that the debt, which they dispute, is to do with the establishment of a joint venture company, Shaw Park Developments Ltd, back in 2003.

This was established in connection with a somewhat fanciful plan (7) to build a new 23,000-seat stadium, with the seemingly mandatory hotel and gym, at a site which, although largely ‘brownfield’, included part of the Great Western Park, which would necessitate the felling of thousands of recently planted trees (8) – a plan hardly likely to proceed with serious opposition.

I use the word ‘fanciful’ as Swindon’s average attendances have not exceeded 10,000 since the 1997/98 season (9). Like far too many clubs, Swindon suffered from a ‘cargo cult’ belief that a large empty stadium would attract twice or three times the number of spectators.  It was also fanciful in that there was no huge profit to be made by the club in selling the old ground to developers – it was owned by the council and the club were tenants.  Nevertheless, the whole project fell within the regeneration remit, and would appeal to property developers.

Now, if the phrase ‘property developer’ automatically fills you with dread when used in a football context, you should think again with respect to St Modwen.  If you don’t take my word for it,check out their website. It will rapidly become clear that they are the Goliath in this dispute with Swindon Town.  Their high prestige redevelopments include the regeneration of Trentham Gardens, turning it into one of Britain’s most popular visitor attractions (10), and the MG Rover Longbridge site (11).  They are no strangers to redevelopment projects with football clubs – their Trentham Lakes project (12) includes, as a relatively small part, Stoke City’s Britannia stadium, and they are leading partners with Worcester City on the Nunnery Way project (13, and, for my thoughts on this particular project, 14).

Why should such a giant get involved in a dispute over what is, by St Modwen standards, pretty small beer, if rather more crucial a sum for Swindon Town?  There is the pretty obvious reason that the Swindon redevelopment is no longer going ahead, the club instead looking to a phased redevelopment at the existing County Ground (15), with the announcement being made a few weeks ago.  This will have made absolutely clear to St Modwen  that there was no longer any chance of major scheme requiring their involvement.  Time to tidy up and close the Swindon account then.

Another reason may well be that this is a bad time for redevelopment with companies, with their property portfolios taking a hit in value with lowered property prices.  This is certainly part of the reason why St Modwen have yet to begin the building development on Stoke City’s old Victoria Ground, vacated by the club in 1997. St Modwen’s latest financial accounts show an annual loss of £50.7m, as opposed to a profit of  in the previous year of £93.7m (16).  As I expect they can’t resist saying in the world of regeneration through retail parks and supermarkets, ‘every little helps’.

There seems little chance of a quick and simple resolution of this dispute.  As Ian King has pointed out (17), it will become bogged down in arguments about the interpretation of documentation. Nothing but more worry for Swindon fans, and no doubt Worcester City fans will also be watching on with interest.

To me this sorry tale makes clear that any notion of a CVA being a kind of ‘half way house’ in the rehabilitation process for companies coming out of Administration is laughable.  The regime under which the failure to pay taxes from cashflow and the reliance on an unsustainable old-style benefactor model operated under what, I believe, is the longest CVA in the football sector.  If ever there was a case for some form of monitoring of companies while still in a CVA, the previous Swindon Town board provide ample evidence.

Posted in Debts, Insolvency, Ownership, Stadium | Tagged: , , , | Leave a Comment »

Insolvency overview

Posted by John Beech on November 15, 2009

Three weeks is a long time in football management – it was only on 25 October that I posted my last overview.  Previous ‘overviews’ can be accessed by clicking on the ‘Overviews’ tag at the top of the page.

With a number of clubs things have become clearer, but for many the confusion has just changed to a new confusion.

  • Accrington Stanley
    The absurd brinkmanship that saw the club rescued on the footsteps of a court has seen Ilyas Khan come in as non-executive Chairman, but with ex-Chairman Dave O’Neill effectively in day-to-day control as Managing Director and Head of Operations.  Khan is now talking of the Championship in three to five years (1), not suggesting a great degree of realism, and seems to have forgotten all the talk of being pro-fan – certainly no indications of any fan directorships.  The current crisis is over, but I’m not encouraged at the prospects for the longer term.
  • Bournemouth
    Bournemouth won my Soap Star of the Year Award last season and obviously are reluctant to give up the title.  Eddie Mitchell announced last Monday that £80,000 had been paid to HMRC (2) and the remaining £70,000 would be paid by today (although, as I write, that second payment had not been confirmed).  Where this money has suddenly materialised from is not being revealed, although Mitchell says it is being “paid through hard work – not through loans or anything else. It is hard work which usually does it”, whatever that means.
    A case brought by Jon Piper against Vice Chairman Jeff Mostyn personally over a loan of £30,000 has been dismissed, but he is taking action against the club over a different loan.
    Meanwhile manager Eddie Howe is making himself more and more attractive to other clubs by sustaining moss impressive performances on the pitch.
    Definitely one with legs.
  • Bromsgrove Rovers
    The club has been bought from the Administrator by Mike Ward (3), together with as yet unnamed partners, but these do not include Tom Herbert, former Chairman.  The purchase has yet to be approved by the FA, and Ward is not make any announcements at this stage on his strategy.
  • Chester City
    See postings passim.  The club, or rather the company, its owner and the board, continue to make a mockery of football governance.   Owner Steven Vaughan is, it would appear  no longer a ‘fit and proper person’ following being banned from acting as a company director, or in any way controlling a company as a result of his involvement in a VAT scam while a director of Widnes.
    Vaughan however “indicated to The [Chester] Chronicle that his disqualification will not effect the club as he has no part in running it” (4).  As if!  An FA spokesperson said to the Chronicle: “All I can say at this stage is that we are aware of the decision and that we will be considering it in line with the requirements of our Fit and Proper Person Test”.
    Meanwhile the Conference have given Vaughan Chester another extension to paying their football creditors! (5)
    The club website is its usual informative self – the most recent news item is ‘Youth team coach required’, posted as recently as 6 October.
    Quite why the FA and the Conference both continue to pussy-foot around is far from clear.  Their lack of action is setting very dangerous precedents.  Frankly, phoenixing as AFC Chester is becoming the only viable way forward.
  • Darlington
    No developments of significance, but new owner Raj Singh is busy trying to get sponsorship from local businesses (6).
  • Halesowen Town
    See postings passim. The day of decision by the creditors on who of two rival bids has come and passed, with the meeting postponed.
    So, an unusually quiet period of activity for the club by recent standards, but Yeltz fans must just be wishing that the whole sorry episode comes to a definitive conclusion.
  • Hyde United
    The club has survived its immediate demise, but a debt of £50,000 to HMRC remains (7).  In what way the board is going to change its business model in order to meet this remaining debt has not been announced, but apparently it allows new signings (8).
  • Ilkeston Town
    Back in July, the club faced a potentially serious problem with the personal bankruptcy of benefactor Chet Whyte (9).  Latest news is that a deal for the Whyte family to sell the club to a group of Nottingham businessmen has collapsed (10).
  • King’s Lynn
    Not much to report here other than new signings (11). The deadline to pay HMRC £65,000 remains 25 November.
  • Lewes
    The club was given a three-month adjournment on 3 September  of an HMRC winding-up order, and have to pay off the outstanding debt at £10,000 a month.
  • Margate
    By way of a change from developments, or lack of them, at other clubs, some unmitigated good news – the club has cleared its debt to HMRC in full, having raised money through a successful shares issue (12).  Excellent news!
  • Merthyr Tydfil
    The Supporters Trust, now running the club, have had to make some tough decisions.  Wages have been cut by 50% (13) in the light of unexpected debts of £40,000 to the FA, Merthyr Tydfil Borough Council and the Administrator, and disappointing revenues.
  • Northwich Victoria
    Still no CVA agreed.  As a result, the club cannot yet receive the financial benefits of their successful cup run, thought to be £43,000 so far (14), with an FA Cup Second Round tie at home against Lincoln to come.
  • Ringmer
    Still a news blind spot, I’m afraid. Unless, of course, you know better – any information would be gratefully received.
  • Salisbury
    Discussions between the would-be consortium (15), the Administrators, the Conference and HMRC are ongoing, with the Administrators “still confident that agreement can be reached” (16).
  • Southend United
    See postings passim, and The continuing Southend saga in particular.
    The matter remains closed apparently, at least to Chairman Ron Martin, even if the mystery of where the money came from remains unresolved, and there is no indication of how a repeat of the recent fiasco will be avoided.
    Presumably the move from Roots Hall remains ‘transitional’ and, at least to Chairman Ron Martin, there was ‘no financial crisis’ (17).
  • Stockport County
    The Administrators remain confident that ongoing discussions will lead to an exit from Administration (18).  We shall see.
  • Weymouth
    See postings passim.
    Ian King recently described the club as “one of the ongoing financial basket-cases of the last three years in non-league football” (19), and with good reason.  I see them as a seemingly never-ending Western, with an ever-changing cast of ‘good guys’ and ‘baddies’.  The end may yet be nigh however.
    To cut a complicated and ongoing story short, here are the most salient points.
    On 28 October, the club announced their intention of appointing Administrators ( a pre-Administration legal move) (20).  This prompted two expressions of interest in buying the club.  One was led by Chris Bryan, local businessman, and involves one Steve Beasant, the other being led by ex-Cambridge United chairman George Rolls.  However the deadline was passed without either group formalising a deal.
    Director Paul Cocks then announced that the club was “under an obligation to take formal insolvency proceedings” (21).
    The Ryan offer had been one of £2 (sic), but has subsequently been revised upwards.  Beasant cannot be one of the directors as he is a property developer (no, that’s not yet a reason for failing the Fit and Proper Person test, although it probably should be, but bear with me) who was declared bankrupt at the end of last year (22).  This hardly augurs well.  Ryan has been putting the case for his bid on the Weymouth Independent Fans Forum on the thread OUR OFFER under the particularly irritating pseudonym of ‘True Facts’ – a tautology since there cannot be a fact that is not true. Cocks has also been posting on the forum (23), and on the club website (24).  He resigned as a director on Friday night, although his resignation has yet to be accepted. News on the club website may dry up if his resignation is accepted.
    All of which leaves the club in an unholy mess.

Other clubs on my radar screen are the Premier League trio Hull, Portsmouth and West Ham, for well publicised reasons, together with a number of Football League clubs who I have mentioned in previous postings, now plus Watford (25).

Posted in Debts, Fit and Proper Person tests, HMRC, Insolvency, Ownership | Tagged: , , , , | 23 Comments »

Coming in from

Posted by John Beech on November 15, 2009

As there have been a blog posting since the link was posted on the forum, you need to click here for my posting on the UEFA Club Financial Control Panel.

Posted in Uncategorized | Leave a Comment »

Nepotism attempts to rear its ugly head again

Posted by John Beech on November 13, 2009

Regular readers will recall how Eddie Mitchell was reported to be the author of several emails to Weymouth offering them £5,000 to take on his son Tom as a player (1).  Mitchell dismissed the emails as an elaborate forgery.  He, of course, had famously tried to leave his sons in charge at Dorchester Town when he bought Bournemouth (2), and has openly admitted “I’m not a passionate football fan – my son plays and that’s what drew me into football” (3).

Now there is a would-be club investor who is seemingly totally brazen in his motives. The Cambridge News reports “[Chairman] Tony Roach has revealed Histon have no financial agreement in place with businessman Raj Chodankar. But the Indian could invest in the club in the future if his son impresses during a forthcoming trial at the Glass World Stadium” (4)!

Back in July the club website had reported “International businessman Raj Chodankar is putting the finishing touches to various items of paperwork and the fine detail regarding joining the Board is expected to be completed within the next fourteen days” (5).  Chodankar’s public profile is about as high as that of, for example, Suleiman al Fahim at Portsmouth.

What shocks me is not only the lack of empathy with the sporting ethic, but also that this should involve a club whose origins lie in the principled foundation of the Histon Institute and the donations of John Chivers (of jam fame).

To put this scenario into a context, it needs to be borne in mind that Histon are under pressure from, guess who, HMRC, who are owed £20,000 of VAT (of course, already HMRC’s, collected by the club but not yet forwarded), but also £11,000 owed to Cambridgeshire Constabulary.  Allen Soraff, the club’s Finance Director, says “We’re very comfortable with the level of debt we’ve got and the arrangements we’ve got to clear it. We’ve made a significant payment to the police and what we owe to HM Revenue and Customs is a very small amount of money in relation to what other clubs owe. Arrangements are in place to pay it off and everything is under control” (6).  That HMRC will rest easy simply because other clubs owe more seems unlikely.

Histon faces two particular problems.  For those who are not familiar with the geography of East Anglia, Histon and Impington are a pair of villages with a combined population of approximately 10,000 only.  They lie less than five miles from Cambridge, which has Cambridge United (Conference; ex-Football League) and Cambridge City (Southern League Premier Division).  The city of Cambridge has a population of over 80,000 if the students are excluded.  Histon might expect to be the ‘Tranmere’ of the trio of clubs, but that title falls currently, if not historically, to City.  Comparison with Gretna and Carlisle United is tempting.

This issue of potential attendance links in with the second problem. Soraff has also said “The directors putting their hands in their pockets and paying the bills is going to be the key to turning the finances around. Even if you put 200 or 300 people on the gate, that brings in £3,000. The sort of money we need to run on the budgets we now have, there’s no question people like (chairman) Tony (Roach) and myself are going to be putting their hands in their pockets to get the club through it. I set a budget at the beginning of the season that didn’t need directors to put their own money in. But gates haven’t been at the level we hoped for, sponsorship hasn’t been at the level we hoped for, and TV revenue has disappeared“.  There is an alternative to pressing on regardless with the same budget on a benefactor model, and it’s not rocket science – cut back on the budget to an appropriate level.

The route back to financial sustainability should not depend on the depths of directors’ pockets, nor indeed on the trial of the son of a potential benefactor.

Posted in Debts, Ethics, HMRC | Tagged: , , | Leave a Comment »

Just how significant today will prove

Posted by John Beech on November 11, 2009

I don’t suppose it will get much press coverage in tomorrow’s papers, but today something happened which will have a major, major impact on the English game – UEFA announced the formation of its Club Financial Control Panel (1).  The Panel is tasked with ensuring that the UEFA club licensing system is applied correctly across all 53 UEFA member associations, that clubs have fulfilled the criteria defined in the UEFA Club Licensing Regulations, and, most significantly, driving through the adoption of UEFA’s Financial Fair Play concept (2).

Let me quote the passage on the Financial Fair Play concept which will send shivers down the spines of many of the Chairman I have blogged about of late:

The major objective of the Financial Fair Play concept is to improve the financial fairness in European competitions, as well as the long-term stability of European club football. In order to achieve this goal, a set of measures will be put in place. These include an obligation for clubs whose turnover is over a certain threshold, over a period of time, to balance their books or break even. Under the concept, clubs cannot repeatedly spend more than their generated revenues. Guidance will be given on salaries and transfer spending, indicators provided on the sustainability of levels of debt, and clubs will be obliged to honour their commitments at all times.

Can this really be the blueprint for dragging Chairman down screaming off Debt Mountain?  Will it really reign in the insanely escalating levels of pay for players?

As UEFA President Michel Platini puts it: “The idea is not to hurt clubs. The idea is to help them. The basic premise is that clubs should not spend more than they earn. Club owners have asked for the introduction of rules, and this will be an adventure for European football and UEFA.” He argues that the measures are essential for the long-term health of the European game.  They certainly are essential for even the mid-term health of the English game.

Key to the success or otherwise of the Panel’s work will be the quality of the people appointed to serve.  They are Jean-Luc Dehaene, Belgium (Chairman); Jacobo Beltrán, Spain; Egon Franck, Germany; Umberto Lago, Italy; Johan Lokhorst, Netherlands; Brian Lomax, England; Petros Mavroidis, Greece; Brian Quinn, Scotland; and Yves Wehrli, France.

The two British members of the panel are a particularly interesting choice.

Perhaps not a name ubiquitously well-known on English terraces, Brain Lomax is nonetheless a major figure in the recent development of English football.  He was a founder member of the first Supporters Trust, at Northampton, back in 1992, and then became first the Managing Director and subsequently the Chairman of Supporters Direct.  This year he was awarded an OBE for services to football in the Queen’s Birthday honours list.

Brian Quinn CBE is much better known North of the border, as Chairman of Celtic.  He joined their board in 1996 and was appointed as Chairman in 2000, holding the post until 2007.  He holds Masters degrees from both Glasgow and Manchester Universities, and a Doctorate in Economics from Cornell University.  Prior to his work with Celtic he had worked for the International Monetary Fund and the Bank of England, rising to be Deputy Governor. (There is more on him and his strategy at Celtic here.)

If the other seven panel members of the same calibre as these two, we can expect a Panel that will be effective and efficient in driving through of Financial Fair Play, and that will have a major impact on the English game, a very positive one.  No doubt there will be tears before bedtime from some Chairmen, but that will be no bad thing.

Posted in Governance, Insolvency, Ownership, UEFA | Tagged: , , , | 2 Comments »

Oldham (v. Spurs?!)

Posted by John Beech on November 10, 2009

When I blogged on Parallel Realities and Worcester City recently, contrasting the board’s full-blown optimism in pursuing a new stadium with the harsh reality of the club’s financial situation, I cited other examples – Portsmouth, Southend and, most notably, Darlington.  I might also have cited the case of Oldham, a particularly interesting case, as it seems the owners seem almost aware of the parallel realities (not the case in the other examples, at least not publicly), yet somehow can see no way of reconciling them.

Oldham went into Administration in August 2003 (Evening Standard, 19 August 2003), following the withdrawal of funding from ‘benefactor’ Chairman Chris Moore.  So desperate had he become to quit, just two years after taking over, and with the club losing £50,000 a week (1), he offered to write off a £4m loan to the club, and talked with Peter Ridsdale about the latter taking over.  Some might say fortunately, he sold instead to three London-born entrepreneurs who had made their fortunes in New York in real estate and the mobile phone business – Simon Blitz, Simon Corney and Danny Gazal (2).

On the stadium side, Boundary Park was beginning to exceed its sell-buy date and eventually a stand was closed for redevelopment.  In February 2006 the three owners revealed plans for an £80m ‘Oldham Arena’ regeneration project (4) to be built at the Boundary park site.   There problems getting planning permission, and the green light was only given in December 2007.  Things did no go smoothly however, and an effective local residents group continued to lobby against the scheme (5).   Demolition work began, but financial obstacles began to appear.

On the finance side, the three had had a baptism of fire.  As David Conn reported in The Independent:

To finance this dream, they funded the club for three months in administration, which cost them £522,500. The preferential creditors, the Inland Revenue and VAT, were owed £715,000 and were paid 32p in the pound: £237,000. “Football Creditors” – other clubs, players and the League’s pension deficit – are to be paid £428,000, while Blitz and Gazal paid £120,000 for Oldham’s office equipment and other assets. Unsecured creditors, the usual victims including a £30,000 policing bill, local family firms and £1,856.50 unpaid to St John Ambulance, got nothing. The club’s ongoing losses are estimated at £1m, and their shoring-up of the club adds up to £2.4m. They are paying £4.6m more for the ground and land, while guaranteeing that Boundary Park will still be a football ground in 10 years’ time.” (4)

Given that Oldham have played at the same level in the pyramid since 1997, the stability on the field might have been expected to allow a steady recovery in the club’s financial fortunes.

However, in June 2009 the club’s major sponsor Hillstone Development went into Administration (5).

By march this year this was talk of a mystery foreign investor (6), but he did not materialise.  The three owners hinted that might sell up to right person however.

In early July there was talk of a possible groundshare with Rochdale (7) or possibly Stockport, but at the end of the month a major shift in plans was announced – a major new development, a 12,000 seater-stadium at Failsworth (8).  Gates at Boundary Park have been hovering around the 6,000 mark for the past decade.

The rationale for the move was, in one respect apparently compelling (9).  As Corney put it, “In its current state Oldham Athletic is dying. Our revenue fell 20 per cent again last year and we’re now attracting attendances on a par with many League Two clubs. This new vision gives us an opportunity to provide a facility that will create new revenue streams to make the club financially viable and self-sustaining, whilst also giving supporters a superior matchday experience. We haven’t taken the decision to leave Boundary Park lightly – it was our preferred option to redevelop it – but the credit crunch means the land value and market conditions have diminished to an extent which makes that scheme no longer economically viable.

But if redevelopment of Boundary Park is no longer viable because of the credit crunch, how exactly can the club finance a much more grandiose scheme?  As Corney stated recently “We originally purchased the club for £5.4m and have spent say £1m a year for seven years. The new stadium will cost £14m to build. That’s before the price of the pitches we’re building. So let’s say that’s £26m. If we sold Boundary Park today we’d get £12m. It’s no wonder I don’t sleep at nights”  (10).  Given that the price tag on the Failsworth scheme is said to be £20m, that’s hardly surprising. Perhaps he would sleep more easily if he recognised that he is having a recurring nightmare, not a dream.

And is the club well positioned financially to fund a £20m scheme, which, incidentally, faces formidable local opposition and hence additional costs? today the club reported interim results for last year (11 and 12).  Highlights include the following:

  • Creditors are owed £3.1m, up from £2.7m last year;
  • Debts due after more than one year climbed 148 per cent from £145,000 to £359,000.
  • Although net losses are down from £537,000 last year, they are now still £414,000

Most worrying of all is this statement which is included in the accounts: “The company is dependant on its shareholders for financial support, which the directors are confident will continue for a period of at least another 12 months. The shareholders have indicated their present intention to provide adequate finance to enable the company to continue in operational existence”  No doubt intended to reassure, it might have done so if a period of prudence was being planned.  With a £20m plan being pushed hard, it has the opposite effect, not least because the figure of ‘at least 12 months’ is well short of the time required for a new stadium at Failsworth to be completed.

Still, there’s no harm in nightmaring dreaming is there?

And Spurs?  Well, they too have a grandiose scheme for a new 56,000-seat stadium, one which they would have no difficulty in filling (13).  They too announced their financial result today – record profits of £33.4m (14).

The differences between Oldham and Spurs have less to do with financial disparity up and down the football pyramid, and rather more to do with differences in financial health and in the sustainability of the clubs’ business models.

Posted in Benefactors, Insolvency, Stadium | Tagged: , , | Leave a Comment »

The continuing Southend saga

Posted by John Beech on November 9, 2009

Having brought the club to the verge of Administration and a ten points deduction over debts of over £2 million, and failed to pay players on time for the fourth month in a row, the club issued the following statement on its website this afternoon:

For completeness we can confirm that all action by HMRC was dismissed at this morning’s hearing following the release of funds by the Club’s Chairman over the weekend.

This brings the matter to a close.” (1)

Wishful thinking I fear.  Too many questions have been brushed aside unanswered.

Perhaps the most important one is “On what basis has ‘the Chairman released funds’?”  Are we to assume that one £2.1m debt has simply been replaced by another?  Is the new one a ‘soft debt’ from another Ron Martin company?  Is it actually likely to remain ‘soft’?

Almost as important is the question of future business strategy.  No change in strategic direction will leave the club heading back to the abyss same time next year.  So how would a new direction be different?  Will the seemingly unstoppable pursuit of Fossetts Farm carry on regardless, with sunk costs of already £1.9m?  This seems likely as Ron Martin and his immediate family are the beneficial owners of the Fossetts Farm development (2).

The gainers have been HMRC – they got their money, for which all taxpayers should be happy – and inevitably the lawyers.  As for the club, it just seems to back where it was a fortnight ago but without a winding-up order hanging over it.  That is a step in the right direction, but if there is still a debt of £2.1m it’s only a very small step.

I just don’t see how the board can see the matter as closed if they are to be seen as having any credibility at all. The brinkmanship of the last few days had already seriously eroded that in any case.

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

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