Posted by John Beech on December 16, 2009
As I write, the danger of having to seek Administration is imminent.
The immediate cause of this possibility lies with the resignation of Jimmy and Vince Russo, together with Robin Williams, from the board of the parent company, Watford Leisure (1). As a result, trading of shares on the AIM has been suspended, a precaution that was inevitable once the Russo brothers demanded immediate repayment of a £4.8m loan made by their company Valley Green Salads. This company had additionally subbed Watford Leisure £1m as recently as 26 November, barely three weeks ago (2), with the warning that the loan “will only be sufficient to cover the company’s cash requirements until 22 December 2009“.
Watford is interesting and unusual example of the unsustainability of the benefactor model. As well as the Russo brothers, major shareholders included Lord Ashcroft, the controversial Belizian who thinks he is British (or is that the other way round?) and Graham Simpson, former Chairman. And of course there is Elton John, who returned as Honorary Life President in March (3), having previously resigned in November, shortly before Simpson’s departure as Chairman. With all these potential benefactors around, plus Graham Taylor on the board, it’s surprising that the club should be in such dire financial straights. I sense boardroom disputes which might be likened to Chelsea’s era with Ken Bates and Matthew Harding.
Financially things had been looking reasonable. In 2006/07 the club had recorded a profit of almost eight million pounds. Most recent results however had recorded a loss of £5.1m for 2007/08. The crucial wages/revenues ratio had risen to a very worrying 81%. Gates have fallen following demotion from the Premier League, and the club does not seem to have adjusted their budget to cope with this. There had been redundancies in April (4), but they proved too little to late. Maintaining the playing squad was unsustainable if the benefactors were unable and/or unwilling to ‘carry on benefacting’.
Apart from the obvious and immediate concern of Administration, there is the fact that Vicarage Road is security for the £4.8m loan. The separation of stadium from club casts a long shadow, as Rotherham and Leeds, for example, can vouch, and would make any recovery very problematic.