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 August, 2010

The Portsmouth Soap: Episode 94

Posted by John Beech on August 29, 2010

In what seems to be now a tradition, my being abroad for a week coincided with yet again a bizarre development at Fratton Park.  On Tuesday The Sun revealed that “Lever’s Pomped up for buyout. PORTSMOUTH are wanted by whizkid tycoon Thomas Lever. The 21-year-old Lamborghini-driving son of a wealthy Manchester businessman and local councillor is in advanced talks to buy the Championship crisis club” (1).

On Thursday The Knutsford Guardian had a slightly different spin on the story: “THE son of a bankrupt former Knutsford councillor has put together a £25m takeover bid for Portsmouth Football Club…  His father David was made bankrupt on July 5 at Manchester County Court” (2).  It would not appear that father David is necessarily down to his last bawby though.  According to a report of 14 July in the same newspaper, the bankruptcy arose as a result of a dispute over payment for the framing of 100 pieces of memorabilia by an international art services company (3).  David Lever had paid the company £10,000, but had not subsequently paid a further £3,500 although ordered to do so by a County Court judge in March, prompting the art services company to raise bankruptcy proceedings.

I don’t know why, but I get just a hint of déjà-vu about this in the Pompey context.  Presumably David Lever is free to leave Knutsford without fear of arrest on gun-running charges though.

The pressure is no doubt on Administrator Andrew Andronikou to find a buyer.  His CVA is based on a business model that presumes Portsmouth will stay in the Championship for the next five years, but the thread-bare squad have faced a dismall start to the season, with the club lying joint bottom of the Championship (with, by coincidence, Milan Mandric’s Leicester) after four games.  But will this lead to an ‘any port in a storm’ approach?  In my opinion, having the 21-year-old Lamborghini-driving son of a wealthy (but legally bankrupt) businessman as the club’s new owner would be (let’s be polite) a sub-optimal outcome.  But the actions of previous owners have led the club into this present position, where simply selling to the one potential purchaser is the only option for an Administrator.

There is of course the new toughened-up Owners & Directors test, which replaced the old Fit & Proper Person test, that would have to be passed.  This case would certainly show whether or not the new test has any more teeth than the old one.  It would be interesting to know the thoughts of David Lampitt on the proposal – he is of course Portsmouth’s recently installed Chief Executive, but was formerly the FA’s Head of Financial Regulation.

Surely a time for new script writers of this particular soap, and a re-think of the plot.  The club does not need a re-run of a previous story line, especially one which led to the shambles the club now finds itself in.  Mind you, I’m not holding my breath.


Portsmouth did not get their golden share from the Football League yesterday because of incomplete paperwork (A).  David Lampitt explained that the end of the transfer window had made this problematic.  He expects this to be done within the next week.

The delay may have implications – it gives Tom Lever extra time to put his bid for the club together.


Thomas Lever is reported as falling out with Chris Dailly of Jumbo Bridging with whom he had been in talks about funding (B).  ‘Soap’ is definitely the right word for the Pompey saga.

Posted in Benefactors, Ethics, Fit and Proper Person tests, Football League, Governance, Insolvency, Ownership | Tagged: , , , , , , | 4 Comments »

The Woking way: Trumping at the Cards

Posted by John Beech on August 24, 2010

Some news from Woking that made even a jaded old observer such as myself sit up in his chair.  It wasn’t the fact that Chairman Shahid Azeem had quit (1) among concerns over the Cards’ losses (reported as £200,000 for last season), or that ‘benefactor’ Chris Ingram had stepped in again (2) to save the club.  These, after all, are not entirely unfamiliar stories at far too many clubs.  But first, a little background.

Woking joined the Conference in 1992, after a little floating around the divisions of the Isthmian League.  This led to a fine series of seasons on the Nineties, with regular appearances in the FA Trophy, which they won three times.

Their first appearance on my radar screen came in February 2002, when they faced a serious financial crisis (3).  Debts were reported thus “Woking’s trading company showed a deficit of £230,000 up to July 31 last year, added to a £325,000 loss already visible on the balance sheet. More crippling losses totalling £204,00 are understood to have been made so far in the current financial year.”  The club issued 1,000 shares for £255,000, Ingram acquiring 510 of them.  Ingram, a life-long fan, had recently sold his company Tempus for more than £400million.  He commented at the time “As I got closer I realised the club needed more business nous. There is a shortage of that at this level, not just here.  I’m going to try to make it a sustainable business so if I’m not here it can still work as that and resist pressure that supporters sometimes put on you to just spend, spend.   There will be much tighter purse strings. The authority to spend money will be narrowed down hugely.”  Again, not a particularly uncommon state of affairs, except perhaps the scale of his personal fortune.

In November that year the club went full-time, the ninth Conference club to do so (4).

In September 2007 the club got the go-ahead for the redevelopment of their stadium.  Ingram promised he would “provide a stadium worthy of our fans, community and town” (5).  In November the same year there was a structural re-organisation – Ingram  stepped back a bit, becoming Chairman of Woking Football Club (Holdings) Limited, while David Taylor became Chairman of the club (6).

Taylor adopted a hard line, sacking manager Frank Gray and his assistant Gerry Murphy (7), and announcing that “nothing will stop me being the chairman that takes this club into the football league” (8).  Furthermore he declared “I place on record, if the next man doesn’t deliver I will go as well” (9).

The following month Kim Grant was appointed manager (10), with Taylor upping the ante thus: “I will go if we do not get promoted in three seasons”.  Grant found himself sacked in September after seven games of the new season (11) after a disappointing start.  Taylor at this point offered to resign, a move rejected by the board (12).

Shortly afterwards Ingram really started to try and distance himself.  He was reported to be underwriting the club to the tune of £350,000 per season, but said that he intended to stop carrying on with his support from May 2009 (13).  Property developers, banks and the recession were to blame for the lack of progress with the stadium redevelopment.

In November, new Commercial Manager Geoff Chapple ‘rubbished plans’ for the club to revert to a part-time employment basis (14).  A share offer was placed via the Supporters Trust (15).  The following month spoke out in favour of regionalisation at the Conference level, commenting that (16).

January saw a slight change in financial strategy.  In an interview Taylor said “The decision we’ve taken is not to go fully part-time but, instead, to focus on getting the best set of players we can within the playing budget, regardless of whether they are full-time or part-time” (17).

By March last year there was talk of local businessman Shahid Azeem becoming involved in the club in some as yet unspecified way (18), although it would probably be at board level.  Shortly afterwards Taylor turned his attention back to the footballing side, sacking the latest manager, Phil Gilchrist (19).  He explained “The team weren’t even sweating [at half time].  That’s not what I want from a club, players who play for Woking will play with pride and give everything.  I got my fellow directors together and asked them their opinion, and as a board we made the decision at the end of the game”.  Ah, the old sweat factor as the determinant of whether to sack someone else.

Less than a fortnight later Taylor announced his intention of sacking himself, as soon as the club’s long-term future was clarified at the end of the season: “It was always my intention at some stage to stand down once the Kim decision happened.  I’ll stay on until something firm is place for this club.” (20).  It had always been his intention to resign after sacking Kim Grant apparently.  He offered three reasons for his decision: “One is that I made a mistake, I have to pay for that mistake and I have paid for that mistake every moment of every day for the whole of the season if anyone is in any doubt about that.  Secondly I can sit and complain or I can actually get up and do something and I am now making sure the future of this club is a lot brighter than it has been for the last 12 years.  I’ve been involved overseas and in this country speaking to potential purchasers and other shareholders.  The third reason is I do have to have some sanity back. I cannot wait to be either just a director or just going back on the terraces.”  The club meantime was moving towards relegation.

Ingram then announced that he was ‘giving the club back to the fans’ (21), a simple matter of him relinquishing his shares and fans buying them.  A current major shareholder, Peter Jordan, who had also helped bankroll the club in the past, offered an interesting insight into how ‘benefactors’ see themselves – “I do it as a hobby. I don’t drink, I don’t smoke, this is how I spend my money. There are lots of people out there who want to put money into the club”.

In June 2009, Taylor finally did stand down, and Shahid Azeem was appointed Chairman (22).

Ingram appears to have carried out his threat of withdrawing funding, as in August it was reported that striker  Craig Watkins had to pay his own transfer fee when joining the club (23).

A year on, and once again the club is in deep financial difficulty.  This year’s loss is reported to be around £200,000, which Ingram has had to step in and underwrite (24).  Azeem, who had put his own money into the club during the past season, had however lost the faith of the board and has gone (25).  He defends himself nonetheless, saying the club is now in a better financial position than when he came in (26).

Perhaps Woking is in no particular way untypical of football clubs.  It certainly shows characteristics that are far from unknown:

  • a ‘sugar-daddy’ whose commitment varies over time;
  • a Chairman who prevaricates over the right choice of manager, but seemingly does know eventually who doesn’t want;
  • a club losing money.

What then prompted me to sit in my chair.  Well, it was a matter-of-fact statement by Azeem in defending himself.  Tucked way in his comments was the following “The club has not made a profit since 1991”.  Let me just run that past you again, with some melodramatic emphasis: “The   club   has   not   made   a   profit   since   1991”, 1991 being a year before promotion to the Conference.

My access to football clubs at Woking’s level is patchy, and certainly doesn’t go back twenty years.  Is Woking, I wonder, unique in its inability to break even, or is it some kind of unfortunate record breaker?  It certainly is addicted to financial doping.  Not in a Pete Docherty wild excess kind of way; more in the way of someone who has become addicted to soft drugs over time and just can’t stop.

Is there any vestige of ‘financial fair play’ when a situation like this just rolls on and on and on?  How can the decision to remain full-time be reasonable if any sense of fair competitive balance is to be maintained?  How much longer can we hear that mantra that ambition leads to promotion, which in turn leads to prosperity?  Why does nobody seem to be too bothered with this situation?

Posted in Benefactors, Ethics, Insolvency, Ownership, Pyramid movement | Tagged: , , , , | 3 Comments »

The inevitable tension surfacing…

Posted by John Beech on August 20, 2010

Although there is always a tension between, on the one hand, the needs of a club from a footballing perspective, exemplified perhaps by the views of the manager, and, on the other hand, the needs of a club from a business perspective, it is inevitable that the tension will be greatest when a) clubs are facing financial pressures and b) the end of the transfer window is beckoning.

In the last week or so, the tension has been manifest at some clubs (in alphabetical order):

Aston Villa
Although Chairman Randy Lerner, a ‘good benefactor’ in my book, has been guarded in his comments on why Martin O’Neill has left, he has said “I can say only that we no longer shared a common view as to how to move forward. To deal in greater detail would do little but cause additional distraction for the club as it faces imminent games and the clear priority of hiring a permanent manager.  Finally, there have been no changes in our approach to building the club, aiming always to be as competitive as possible given our size and resources” (1).  I’m sure I’m not alone in thinking that the clue lies in the last phrase – an expression of ‘cutting our cloth’.

Cardiff City
Given the transfer embargoes, it’s hardly surprising that manager Dave Jones should be anxious to add to his squad (2).  It’s equally unsurprising that, with the massive Langston debt, the board take a more constrained view.  Even allowing for the clearance by the Football League of the Bellamy deal, additions have tended to feature loan deals.

Hartlepool United
Yesterday Chris Turner quit as Director of Sport (3).  He is quoted as saying “You don’t have to be a rocket scientist to work out what could happen if we haven’t improved much from the squad that only just stayed up last season and other teams have strengthened… Whether we will be able to get any more people in, you will have to ask the owners” (4).

Manager John Beck is today reported as leaving ‘beleagured’ Histon (5).  Chairman Russell Hands explained “It was a difference of opinion.  We couldn’t give him what he needed to do the job. Because of the financial restrictions we’re under he found it very, very difficult…In the end John felt that he had got as far as he could and in the interests of both parties we decided to go our own ways“.

Ipswich Town
Here, Roy Keane said today “We’re doing a lot of talking but supporters don’t want to hear that, they want to see players coming in.  We’ve been close but getting close to signing a player is no good… You’ve got to get the deals done.  We’ve been in talks and more talks and more talks. We’ve had players lined up 12 weeks ago who wanted to sign for Ipswich and they weren’t done” (6).  In spite of the backing of Marcus Evans, it would seem that there are constraints on spending.

There are certainly others that could be added to the list; please feel free to contribute other examples.

What is noticeable, apart from the general theme of frustrated ambition for the club, is the range of levels of the clubs, and the varying degrees of financial troubles they face.

It will be interesting to see how quickly O’Neill and Beck take to reappear.  They should be respected for having the conviction to vote with their feet, but their ambition may prove an impediment when facing the owners of a different club across the interview table.  O’Neill in particular has undoubted talents as a manager, but has he revealed his Achilles heel to an employer?  There are still clubs out there apparently committed to financial doping, at least while funds last and the Financial Fair Play protocol remains unaddressed, but increasingly owners seem to be opting for realism over ambition.

Posted in Costs, Organisational culture | Tagged: , | 3 Comments »

HMRC v. Welling United

Posted by John Beech on August 19, 2010

Welling United of the Conference South are the latest club to attract the attentions of HMRC’s legal department.  Due in court on 25th August, the winding-up petition is related to a debt of £85,000 (1).

For once the ownership history of the club is very straight forward.  Stuart Fuller of The Ball is Round sums it up neatly in the course of an evocative report thus:

The club were actually formed [in 1963] essentially by a Sugar Daddy.  Syd Hobbins, ex-Charlton Athletic goalkeeper formed a club for his son’s Graham and Barrie who have gone on to form a true one family dynasty.  Barrie Hobbins is still at the club today, fulfilling the role of Kit Manager, Head Groundsman and Club Secretary as well as being a general miserable chap, wandering around the ground as if he had all of the cares in the world.

The club climbed steadily through the Spartan League, the Athenian League and the Southern League, to enjoy over a decade in what is now the Conference National, before slipping down one level in 2000.

In October 2009 manager Andy Ford resigned, saying “I have resigned for a combination of reasons, but primarily because I do not feel that my ambition of achieving a play-off place is achievable within the constraints that are put upon this football club” (2).  I’m guessing that Barrie Hobbins must have taken this to heart, as a tax bill of £85,000 does rather suggest the spending constraints had been eased.

With a certain irony, probably unintended, Hobbins suggests that the club’s present predicament is the price to be paid for failing in the play-offs last year.  With refreshing honesty he admits “We had a fairly high budget under Andy Ford and we looked at the time in his first season after Christmas that we could be on our way to the play-offs.  With that in mind our hearts probably ruled our heads in that we kept the budget the same when we were losing money because we didn’t want to be accused of not wanting to go up or not being ambitious.  We were losing money and probably could have shut it off there and then by reducing the budget we had, something we didn’t do.  In the last three months of that season we were losing money and didn’t make the play-offs.  On top of that we lost our sponsors and the league lost the Setanta money, both of which cost us £15,000 for each.  That’s £30,000 we’ve lost straight away and then the recession kicks in” (3).  A textbook case for performance-related bonuses rather than higher basic salaries.

£30,000 of the debt has already been paid off (4), and the club hope to pay off a further £15,000 this week (5).  The case will then depend on whether the club can put a viable business plan forward to convince the court that the club is sufficiently solvent to keep to any repayment schedule HMRC might agree to.  On the plus side, seven players have agreed to take a wages cut (6), but worryingly the club has debts of £150,000 (it’s not clear to me if this includes the HMRC debt) and an overdraft of £15,000.

An alternative strategy would of course be the sale of the club to a new ‘sugar-daddy’.  A mystery bidder is apparently in discussions with Hobbins (6), but it all seems very tentative.

One only has to think of other clubs at this level who have been in financial difficulty recently to see why Welling fans should be concerned.

UPDATE – 16 September 2010

Welling have been deducted 5 points by the Football Conference and fined £5,000, the latter thankfully being suspended (A).  Barrie Hobbins accepted that Welling had given the Conference income predictions which they could not deliver.

Club response here.

Posted in Debts, HMRC, Insolvency | Tagged: , , | 4 Comments »

Thin ice at Cardiff?

Posted by John Beech on August 18, 2010

The news of Craig Bellamy’s loan to Cardiff City, coming as it does on top of five other signings (Koumas, Heaton, Drinkwater, Oloinjana, and John), will have done much to lift the spirits of Bluebirds fans, and to offer them hope that this year they will make it to the Premier League following their recent disappointment.  Excitement in Cardiff has “seldom been so tangible” (1).  In the broader picture, the club now has the backing of Malaysian investor Dato Chan Tien Ghee (aka TG) too of course.

But is all as well with the club as might at first glance seem?

The recruitment of Bellamy has provoked a furious reaction North of the border, in Motherwell to be precise.  The background to this is the transfer of Paul Quinn from Motherwell to Cardiff last July for an estimated fee of £300,000 (2).  At the time Motherwell were in a CVA, having previously been in Administration.  Having turned small profits since agreeing the CVA in 2004, for 2008/09 the club had made a loss.

As is often the case, payment was agreed to be over a period of time.  Motherwell were due a payment of £100,000 last January and a further £75,000 this summer.  Neither payment has been made, and Motherwell are now claiming interest additionally.

Cardiff meanwhile have of course been through a traumatic period (see postings passim), appearing regularly in court to ward off winding-up petitions from HMRC.  On the other hand, there has been the much vaunted arrival of TG with a £6m investment at the end of May (3).  Not that the club’s woes immediately disappeared – they were last in court against HMRC just over a week ago (4), and the transfer embargo was only lifted the week before (5).  It was the subsequent spree of signings that have prompted Motherwell’s actions, although almost a month ago they had made clear their dissatisfaction with the fact that the Quinn debt was outstanding (6), declaring then “We have made clear to the board of Cardiff that we are left with no option but to pursue every possible avenue of recourse to secure our own club’s interests“.  Cardiff Chief Executive Gethin Jenkins responded by saying “We are fully aware of the debt owed to Motherwell and we are working to resolve the issue as soon as possible“.  Not quite hard enough it would seem.

On Friday Motherwell issued a writ against Cardiff City (7), with no-one from Cardiff City apparently attending the hearing at Hamilton Sheriff Court.  They did however offer to pay the money by installments – erm, isn’t that precisely what they have failed to do so far?  Motherwell Chairman John Boyle said “We’ve followed every football and legal regulation and we’ve been messed around. The bailiffs are coming towards Cardiff; be afraid. We will use every legal means at our disposal.”  Jenkins’ rather low-key response? “I see they jumped in ahead of us.  Our lawyers have been in communication with them and it will be resolved within the next seven days“.  Cardiff manager Dave Jones was reported this morning on BBC Radio Wales as suggesting dismissively that Motherwell were seeking “an opportunity to get on television“.

Motherwell are thus presenting themselves as the ‘David’ of the pairing, against ‘Goliath’ Cardiff, who barely seem to acknowledge that there is any problem.  By failing to score in the first half of the public relations game, Cardiff are in serious danger of giving the impression that they either can’t pay or won’t pay – either still on shaky financial grounds or cavalier in their attitude to paying for a player whose service they have had for a year.  Either way, it’s hardly an impression I imagine they would want to give.  It will not help them when they next dabble in the loan or transfer markets, and it gives easy ammunition to HMRC should they face each other again in court.  Not a smart move, as I would imagine that Cardiff’s scalp is up there with Portsmouth’s and Southend United’s as one they would dearly like to claim.

As a final thought, I am wondering what role, if any, Peter Ridsdale has played in the summer spending spree that kick-started Motherwell into action – when he stood down as Chairman in May, it was reported that he was “set to have a big hand in the Bluebirds’ transfer dealings this summer” (8).

UPDATE – 18 August 2010

Cardiff’s acquisition has attracted the attention of the Football League (A).  The club has been asked to prove they have the means to fund Bellamy’s loan move.  Without these assurances the League may refuse to register Bellamy.

Good to see this move.  As FL Chairman Greg Clarke says “Our job is to make sure there is an integrity of competition, that people don’t take on liabilities they cannot meet“.  Heaven forfend.

With an almost Risdalesque sense of self-rectitude, the club complains of Clarke “We are disappointed that he’s chosen to discuss these matters in public and will be in contact with the Football League on Thursday morning“.  No sense of having created the situation themselves then.  But at least slightly more sense of urgency than they have shown in dealing with Motherwell.

Posted in Debts, Public relations | Tagged: , | 4 Comments »

Setting up own goals

Posted by John Beech on August 17, 2010

I’m not one given to railing against foreign owners in principle, providing that is that they are not absentee owners.  Lately though we seem to be finding foreign owners attracted to English clubs who just do not seem to have an appreciation of what is going on English football, and unaware of the obvious mistakes that can be made.  And no, I’m not just thinking Sulaiman Al Fahim and Ali Al Faraj.

At Leicester City, we have new Thai owners (1).  The head of the incoming consortium (although it is his father’s money that is at stake), 25 year-old Aiyawatt Raksriaksorn (apparently known as ‘Top’) has announced that “I believe the club have the opportunity to compete in the Championship and go to the Premier League next season“.  Oh dear, the dreaded A-word – ambition.  His father has said ‘they did not want to make money out of the club, but provide the cash to ensure they got into and stayed in the top tier of English football’ according to the report.  In another report (2), he is “committed to funding new players to get the club into the Premier League”, without raising ticket prices.  Surely at least a whiff of financial doping there, and either an ignorance of, or a refusal to comply with, the incoming UEFA Financial Fair Play protocol

Meanwhile at Blackburn, Ahsan Ali Syed,through his company Western Gulf Advisory, is making his pitch to buy the club from the Trustees of the late Jack Walker.  He claims “he does not want to buy the club for its business potential but to fuel his “passion” for football” (3).  He is reported as saying ‘he wanted to give manager Sam Allardyce a transfer kitty of up to £100million‘.  Irrespective of the ambiguous term ‘give’, this is blatant financial doping, and again the intent is flout the Financial Fair Play protocol.

This kind of action is not going to do the game any good.  Same old, same old ‘benefaction’, but on a larger scale.  If either press on regardless, there will be tears before bedtime, although no doubt having managed to get the respective fans greatly over-excited on the way.

What the new Owners & Directors Test needs is a section testing wannabe owners on the provisions and timescale of the Financial Fair Play protocol.  It would avoid an awful lot of false hope.

Posted in Benefactors, Ethics, Fit and Proper Person tests, Ownership | Tagged: , , , | Leave a Comment »

Blogging stuff

Posted by John Beech on August 16, 2010

WordPress, who provide the platform for this blog, have recently offered two new options which I have activated:

  • A ‘Tweet’ button at the end of each posting, which allows those of you who use Twitter to share the posting directly.
  • A Facebook-style ‘Like’ option, again at the end of each posting

Please feel free to use either button, or not, as the case may be!

Posted in Uncategorized | Leave a Comment »

The ‘return’ of Balram Chainrai

Posted by John Beech on August 14, 2010

The news that Balram Chainrai is set to return as owner of Portsmouth (1) has resulted in surprisingly little comment so far, although once the final impediments are removed this is likely to change.  At the moment all that is awaited is approval by the Football League and the transfer of the golden share.  This cannot however happen until the League’s next board meeting, which is not until 9 September.

Inevitably there will be comparisons with the coming out of Administration of Leeds United.  I think there are differences, but they hinge mainly on the motivations of the individuals concerned, a distinctly opaque topic, and the extent to which the outcomes were intended – a highly subjective and speculative distinction.  In pushing the distinction, a commentator is likely to face the accusation of being a Pompey apologist.

There is a worrying inevitability in all of this.  With the way the structure of the club’s debts have evolved, any other purchaser is disadvantaged compared to Balram Chainrai because of the fact that Chainrai had lent the club money, and acquired it in the first place through a default on that loan.  The accusation that will be made – and it holds considerable water – is that Chainrai will have minimised his losses at the expense of the unsecured creditors.  In effect, his decision to make what must with retrospect have been an unwise business decision – to lend money to a football club that was rapidly becoming a financial basket case – has been mitigated in its impact on him, thanks to the UK’s inadequate laws of insolvency.  If he had made any attempt to assess the club’s credit rating before he made the loan, the outcome would surely have been ‘you cannot be serious’.

To me, it seems that the critical point at which events took a turn was the making of the loan to the club, with the club itself as surety against the loan.  If ever there was a need for regulation, it is surely to prevent this happening – a club mortgaging itself to an outside party who has never been subjected to what was then the Foot & Proper Persons test.  I’m not suggesting that Chainrai would have failed, or that he will not pass the replacement Owners & Directors test, but I would suggest that clubs should not be allowed to put themselves in a position where ownership is put at risk without some independent review of the potential implications.

For the Fratton faithful, there may well be a sigh of relief that the club is moving forward again, albeit under the ownership of someone who this time last year had probably never heard of Portsmouth FC, and whose committment is even now less than unequivocal. But there may be a further factor which cause the saga to drag on and on.  The new arrangements are expected to see the formation of a new company and the liquidation of the existing company, thereby facilitating a much-needed investigation into the affairs of the old company.  With Chainrai having a foot in both camps, the potential for the investigation getting bogged down is higher than if there had been a clean break with a new owner.

The dog’s breakfast that Portsmouth’s financial affairs have descended to may thus take some time to return to an acceptable normality.  The one ray of sunshine in all of this is the club’s new Chief Executive, Davis Lampitt, formerly the Football Association’s Head of Football Integrity, a quality which had been in short supply at Fratton Park.  He is a man I have a great deal of respect for, and I find it hard to imagine a better person to see the club through the ongoing fiasco.  He commented “I’ve had a conversation with [Mr. Chainrai] and realistically he does want to realise the money he put in to the club. But in the short term the only way he can do that is to get the club back on its feet.  I think the interests of the club and the interests of Mr Chainrai are aligned at the moment.”  From the narrow perspective of Pompey’s CEO I would tend to agree with his last point, but it is still a sub-optimal situation, and one which should never have been allowed to happen.

Be all that as it may, the return of Balram Chainrai as Portsmouth’s owner is going to leave a bad taste in the mouths of many observers for some time to come.

UPDATE – 16 August 2010

Some early indications from Balram Chainrai here.

LATEST – 19 August 2010

Administrator Andrew Andronikou is planning for the club to come out of Administration on September 15th (A), assuming all goes well at the Football League meeting on September 9th.  Fortunately or unfortunately, depending on whether you view things from a finance or a football perspective, this is beyond the transfer window.

Posted in Ethics, Governance, Insolvency, Ownership | Tagged: , , , | 5 Comments »

In the High Court today

Posted by John Beech on August 11, 2010

Surely a sign of the times – three League clubs faced winding-up petitions in the High Court today:

  • Cardiff City
    The HMRC petition was dismissed – the club has paid the debt of £1.3m (1).  Court papers suggest that the club has had to borrow money to pay its summer debts (2).
  • Sheffield Wednesday
    A 28-day extension to the HMRC petition over a debt of £550,000 has been granted (3), the club having already made a “substantial repayment”, but further sums are now due. The attempts to sell the club are ongoing (4).
  • Southend United
    As predicted by Chairman Ron Martin, the debt of £140,000 has been paid to Charterhouse Commercial Finance, and the winding-up petition has therefore been dismissed (5).  This follows the paying off of a debt to HMRC for £340,000 just over a week ago which had also been the subject of a winding-up petition (6).
    These moves have been made possible as a result of what Chairman Ron describes as a partnership with Sainsburys (7). The Southend Echo offers a different take on the relationship with Sainsburys (8).  It reveals that court documents indicate that Sainsburys were prepared to lend up to £5m to the club, and that, of this, only £1.8m has not already been borrowed.

For all three clubs then the immediate danger of Administration has been fought off.  What is disturbing is that none of the three have managed to pay off their debts from internal resources, such as through the sale of assets. The mileage in a strategy of borrowing from Peter to pay Paul is limited, and none of the three clubs can really breathe freely.

CARDIFF CITY UPDATE – 17 August 2010

The news that Craig Bellamy has joinedthe club on loan (A) has not been met with universal enthusiasm.  With reports that Bellamy will be on a wage of £45,000 per week, Motherwell are not surprisingly aggrieved that they are still owed £175,000 for the transfer of Paul Quinn just over a year ago (B), and are considering a winding-up petition against Cardiff.  At the time, Motherwell’s finances were far from healthy, in a CVA and with Equifax rating them insolvent (C).

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

The trouble with new stadiums 4 (and final)

Posted by John Beech on August 10, 2010

[See also The trouble with new stadiums 1, which looked at the argument that “We’re a club with ambition and we need more seats to reflect that ambition“, The trouble with new stadiums 2, which looked at the argument that “We’ve got the wrong sort of stadium.  We need one better suited to maximising our revenue streams.”, and The trouble with new stadiums 3 which looked at the argument “There’s this amazing property deal we can do. We’ll sell the old stadium for redevelopment and there’ll be loads of money to build the new one.“.]

This final posting in the series looks at whether there are cases where a new stadium can be justified, and begins with a look at Premier League clubs, for it is at this level one might expect to find any evidence that a new stadium has been a successful strategy – it is these clubs which have the highest revenues and which should thus be in the strongest financial position to finance a new stadium.

First, the big 4.  Of these, only Arsenal have opted for a new stadium, Chelsea and Manchester United having opted for stadium redevelopment, and in Manchester United’s case considerable expansion of seating capacity.  Arsenal have made a reasonable success of the new stadium, the only significant qualification being the downturn in the property market which has hindered the redevelopment of the old Highbury site.  Liverpool have opted for a new stadium policy – they could certainly justify an expansion of capacity – but their financial situation, with debts of £350m, doesn’t augur well for the timing of such a strategy.

Three of the big 4 have particular local rivals.  Manchester City are a rare example of “If it seems too good to be true, it may actually still be true“.  The financial deal that Manchester Council offered them was definitely a very attractive one, and they would have been fools not to have accepted.  Everton are in a similar situation to Liverpool – the sound business case for a new stadium is rather weakened by the debt level they try to go forward from.  Tottenham’s plans for a new stadium next door to the current one have got bogged down in the planning process – the government’s advisor on architecture, urban design and public space, the Commission for Architecture and the Built Environment, have objected that “an overall masterplan for the site is not evident: the three components – the stadium, supermarket, and housing – feel like very separate projects without convincing spatial relationships between them” (2).

Overall the situation in the Premier League

  • The clubs with new stadiums: Arsenal, Bolton Wanderers, Manchester City, Stoke City, Sunderland and Wigan Athletic, a total of six.  Of these, only Wigan has ‘shown ambition’, built a new stadium, and risen up the pyramid.  Notwithstanding the professed objection of their Chairman, Dave Whelan, to a ‘debt culture’ (3), the club has only once turned a profit in the last eleven years, and in its most recent accounts has long-term liabilities of just under £48m – it’s dependent on its benefactor for its continued existence.
  • Those with new stadium plans of varying seriousness and immediacy: Birmingham City, Everton, Liverpool, Tottenham Hotspur and West Ham United, a total of five.  West Ham would have fallen into the next group but for the exceptional possibility of ‘doing a Manchester City’ at the 2012 stadium.
  • The rest, who have in varying degrees redeveloped or plan to redevelop their existing stadiums: Aston Villa, Blackburn Rovers,  Blackpool, Chelsea, Everton, Manchester United, Newcastle United, West Bromwich Albion and Wolverhampton Wanderers, a total of nine.

    The evidence that building a new stadium is a sensible strategy is thus not strong even where you might expect to find it.

    In the Championship, Cardiff City, Coventry City, Hull and Preston North End have all paid a high price in opting for a new stadium.  Middlesbrough and Reading have survived a new stadium through the benefaction of Steve Gibson and John Madejski respectively.

    The decision to opt for a new stadium rather than redevelopment is of course a leap, with no in-between option.  The scale of cost does however vary.  From my own data, I estimate that the cost per seat can vary by a factor of over 10, so there may be some scope for restraint at the planning stage in order to make a planned new stadium more viable.

    Now, most fans will be tempted to put a case that their club is an exception.  “The current stadium is particularly awful/inappropriate/decrepit” (remember, I’m a Pompey fan) is a frequent lament.  I would argue that only in one group of clubs are there exceptional circumstances – clubs in exile or with a lease which cannot be renewed – but even in this case the danger is that optimism overrides realism.  It would be mean-spirited to do other than wish, for example, Brighton and Hove Albion well in the new Falmer Stadium when it opens next year, but the project does carry with it the assumption that Tony Bloom’s benefaction and committment are long-term.  I’m certainly not suggesting that there is any reason to think otherwise, merely pointing out that there is a risk associated with the development.

    There may even be a case for a very small group of clubs who may reasonably expect to be on a longer-term ascendancy through the pyramid AFC Wimbledon and FC United of Manchester are the obvious ones that spring to mind.  Even at the lower levels of the pyramid there is no reason in principle why a club on the ascendancy should not develop a realistic model to develop a new stadium.  A club to watch in this context is Runcorn Linnets, who offer a different approach to building a stadium by virtue of the fact that they are owned and operated by a Supporters Trust.  Perhaps it is the case that fans are only really realistic when they have chosen not to follow the broken benefactor model of ownership.

    Posted in Assets, Costs, Debts, Stadium | Tagged: , , , | 13 Comments »

    On the embargo front

    Posted by John Beech on August 8, 2010

    A quick look at clubs and embargoes, not exhaustive, and needing qualification for the particular circumstances of each club, and obviously subject to changing reactions to the lifting of an embargo.  It does however suggest that the impact of a transfer embargo varies enormously, making it a rather blunt instrument as a sanction.

    Accrington Stanley
    The club has finally lodged its accounts for 2008/09, showing a loss of £300,000 and debts of just over £1m (1).  The embargo, which had been reimposed at the end of June (2) has been lifted, and two defenders have been signed (3).

    Cardiff City
    The embargo has just been lifted (4) and manager Dave Jones has two signings lined up (5).  He obviously hopes for a ‘flurry of signings’ but it seems unlikely that the club’s finances will allow a great deal of activity.

    The for yesterday’s match against Coventry City gave the squad thus [click on image to enlarge]:

    By the time of kick-off there had been some updates.  Ashdown had been cleared to re-sign, and the actual bench had but four possible substitutes.  Boateng, who did not appear at the Ricoh, is up for sale, as is Utaka, but on yesterday’s performance it is hard to see the latter fetching a decent figure. Kanu is yet to agree new terms.  Don’t hold your breath for a ‘flurry of activity.  It’s still very much a case of ‘Pray Up Pompey:

    Pray Up Pompey

    Preston North End
    The transfer embargo was lifted at the end of June (6).  Trading has been constrained.

    Sheffield Wednesday
    The embargo has just been lifted (7), but again a ‘flurry of activity’ is not expected.

    Southend United
    The embargo has just been lifted (8).  Seventeen (yes, that’s seventeen) players have been signed by the newly-relegated club, which was repeatedly in court last season regarding HMRC debts, and which struggled to pay its players on time.  Double Nectar points all round then.

    Posted in Sanctions, Transfer embargo, Transfers | Tagged: , , | 2 Comments »

    The Portsmouth verdict…

    Posted by John Beech on August 6, 2010

    … or the Great Escape thanks to an own goal.

    As a Pompey fan, not surprisingly my first reaction to the verdict of Mr Justice Mann was one of relief, a feeling no doubt shared by all Pompey fans, and especially by those members of the club’s non-playing staff for whom the threat of further redundancies will have been eased.  Creditors, I would argue, should at least been not displeased with the result, as the real threat of liquidation would have left them with even less.

    The judgment was based, of course, on narrow but precise points of law, the full details of which have yet to be published.  Matt Slater, who was in court, provides an excellent account of the proceedings on the final day here.  He writes of Mr Justice Mann’s pronouncement:

    So HMRC’s arguments about the iniquity of football’s millionaires-first repayment rules, the general iffiness of clubs making “tax efficient” image rights payments to players with dubious “brand value” and the serial nature of Pompey’s antics were irrelevant. This case, in Mann’s opinion, boiled down to one key question.

    Was the vote to decide how Pompey get out of this mess (with an agreement to pay creditors a reduced amount of the monies they are owed) organised correctly?

    The judgement was an unequivocal ‘Yes’.  Mr Justice Mann found that “none of the five heads of attack by HMRC amount to unfair prejudice nor have they been materially affected.  In my view, HMRC will not be worse off by the situation left by the CVA bearing in mind what the alternatives could be for the club… There is no worthwhile way of money coming into the club other than by the CVA (1).  The reasons for his ruling were “This case turned on commercial validity and not the football creditors rule. This is not the right place to decide whether creditors rules are fair or not. There is no way in which any worthwhile solvency can flow into the club other than the CVA” (2).

    One way of viewing this is that HMRC’s fight to get the Football Creditors Rule overthrown scored an own goal yesterday.  I had argued a few weeks ago (3) that HMRC were making a tactical mistake in pursuing this line, but it gives me little pleasure to see them beaten.  The Football Creditors Rule is an absurdity.  If I had a pound for every occasion over the last couple of weeks that I’ve been asked to explain it to non-football followers, well, I wouldn’t have been able to make any impact on Pompey’s tax bill, but I could dine out modestly.  Invariably the reaction has been one of shock, disgust and almost disbelief.  ‘Why should football clubs and players not have to pay their taxes like any other business and its employees?’ is the inevitable question that follows.

    The argument the leagues put up, and it is of course their rule, not Portsmouth’s, is that without it the integrity of the transfer market could not be sustained.  Without it, it is suggested that the financial collapse of Portsmouth might have brought down Watford.  I have to say that I just do not think this argument stands up to scrutiny.  It is tantamount to saying that as a club you should be guaranteed payment for a when selling a player whether your customer, the club buying your player,  can afford it or not, that the simple expediency of checking credit ratings is not for you.  What it allows is an unnaturally high level of transfer fee, and this at the expense of HMRC.  Of course normal taxpayers can’t see the sense in this!  As for the ‘Watford argument’, I would argue that, had they collapsed as a result of Portsmouth’s collapse, there would have been significant other factors contributing to that collapse.

    There is too the issue of image rights, which now have added legitimisation as a means of tax avoidance,  i.e. within the law, as opposed to illegal tax evasion.  Hardly a good result for HMRC.  (Incidentally, an interesting story on image rights here.)

    In a nutshell, a good result for Portsmouth, and a bad result for HMRC.  Hurray and boo respectively!  It was, in the bigger football picture, also a bad result for football.  There seems to a creeping myopia that the specificity of sport should somehow place its participants in a special category which avoids paying the taxes which everyone else pays.  Sam Allardyce’s call yesterday, “If Cameron is listening, drop the tax bracket will you? Then we can get the best players in the world to play in the best league in the world.” (x) seems to me to be singularly ill-timed and out of step with public opinion.

    The leagues are beginning to address the reform agenda, but I fear it is ‘too little, too late’.  Given that a consultation process is taking place about the collection of taxes from companies (see Bubbling away in the background), and in the context of the ‘Great Deficit’, the leagues are moving towards their last chance to scrap the Football Creditors Rule before they too face HMRC in court.  Let’s hope they have not been buoyed in their intransigence by yesterday’s ruling.

    Posted in Debts, Football League, Governance, HMRC, Insolvency, Law, Premier League | Tagged: , , , , , , | 9 Comments »

    In another High Court move, ‘Watford v. Gillingham’

    Posted by John Beech on August 4, 2010

    I’m currently on leave, but huddled over my laptop following HMRC v. Portsmouth, courtesy of Portsmouth Evening News and Dan Roan on Twitter.  Latest news is that the court has adjourned for the day, and at least an executive summary of Mr Justice Mann’s judgement can be expected later on tomorrow afternoon.

    In the fairly lengthy gaps between anything happening which is interesting enough to transmit, I came across this rather intriguing story (1).  It seems that Valley Grown Foods, a company owned by the Russo brothers, who were directors of Watford, is suing Paul Scally, chairman of Gillingham, over the non-repayment of a loan of £250,000, made in December 2007 (the second such commercial loan).

    The Russo brothers have a history of play-making.  In December 2008 during a fairly turbulent period of the club’s history, the Russo brothers placed a motion of no confidence at a Watford EGM.  One outcome of the meeting was the resignation of Chairman Graham Simpson.  Shortly afterwards Chief Executive Mark Ashton resigned (2), to be replaced by Graham Taylor (3).  In March Jimmy Russo succeeded Graham Simpson as Chairman (4), and a few weeks later Sir Elton John returned as Honorary Life President (5).

    In May 2009 Jimmy Russo was reported to own 30% of the shares (6) of the financially stretched club.  In November it was reported that Valley Grown Foods had, by then, lent the club a total of £3.7m (7), and by the end of the month they had lent the club a further £1m (8) as the club faced severe and immediate cashflow problems.  These loans were secured against Vicarage Road (9).  On 15 December the Russo brothers and one other director resigned from the board (10), seeking the return of the various loans (11).  Jimmy Russo refused to defer repayment and threatened to put the club into Administration (12).  Lord Ashcroft stepped forward to save the club, but on terms unacceptable to the Russo brothers (13).  However, fortunately for the club, a deal was thrashed out (14), but not before Graham Taylor had called Jimmy Russo a ‘bad man’ (15).

    None of this can make for terribly comfortable reading for Paul Scally then.

    The timing of the loan – 5 December 2007 according to the writ – to Scally is particularly interesting.  The day before (4th), the BBC website reported that Scally was proposing to sell Gillingham’s Priestfield stadium and lease it back, in order to ease the club’s debt (16).  The day after (6th), they reported “Scally reveals Gills stadium plan:  Gillingham FC’s chairman has proposed selling the Priestfield Stadium to a company of which he would be sole owner – and then leasing it back to the club” (17).

    UPDATE – 8 August 2010

    Paul Scally has assured Gillingham fans that the debt dispute has nothing to do with the club (A).  With respect to any connection with the purchase of the stadium by Prestfield Developments Ltd. he said “It’s completely unconnected. I don’t know what the timing of it was and I don’t know where that’s come from. It’s got absolutely nothing to do with Priestfield Developments.

    UPDATE – 1 March 2011

    Jimmy Russo has won the court case (B).  It was revealed that Gillingham are now £13.5m ‘in the red’.

    Posted in Debts, Ownership, Stadium | Tagged: , , | 1 Comment »

    JB’s awards for Season 2009/10

    Posted by John Beech on August 2, 2010

    Yes, silly season again, at least, until the Glorious Seventh!

    Some noble efforts this year, but there was no-one in quite the same league as Portsmouth.  As if four owners, Administration and HMRC challenging the CVA in court wasn’t enough, they managed to carry on ‘soaping’ over the summer break, with a farcical series of events during their summer tour of North America (1).  As a Pompey fan, what worries me is that they may well be in the running for next season’s award.

    Lots of competition here, but the award goes to Sulaiman Al Fahim for his efforts at Portsmouth, most notably for offering the Supporters Trust his shares in what at first appeared to be a gift, but turned out to be for purchase at a price they couldn’t afford.  (Mind you, Ali Al Faraj the Mirage made it a close call.)

    This year’s award goes to the Football Conference for their use of Appendix E.

    Top marks to Portsmouth’s Administrator, Andrew Andronykou, but he hasn’t lost yet, so he can’t be considered.  Another candidate must be Fabio Cappello, but that is a tad harsh.  Raymond Domenech would certainly have been in contention, but awards are restricted to English football.
    So, no award this year I’m afraid.

    This goes to Southend United’s Ron Martin for “We have moved mountains to get where we are” (2), which, after 12 years of planning to move to Fossetts Farm, is still Roots Hall.

    There’ve been plenty of statements of optimism in an increasingly troubled season, but rather fewer acts of optimism.  The award goes to Dato’ Chan Tien Ghee (TG) for investing in Cardiff City while the Langston debt still hung over the club.

    Last year I wrote of new kids on the block:

    Lots of nominations in this category, but the award goes to a very late entrant, Arab-backed high-rollers Munto Finance. Notts County Supporters Trust members were persuaded to sell up to this company in the hope of becoming another Manchester City, or at least Notts Forest. Munto’s first move was a striker from League 2 rivals Chesterfield – a bid of £50,000, which was rejected as inadequate (8).

    This year ex-kids on the block Munto Finance win it again, for their total failure to be ‘Arab-backed high rollers’.

    A clear winner here – Bournemouth – thanks to the sterling efforts of manager Eddie Howe.

    This goes to Trevor Hemmings whose 5p per share offer to shareholders of Preston North End valued the club at less than £165,000, and who is reported to have “threatened to withdraw all financial support for the club if the offer wasn’t accepted by enough of Preston’s shareholders” (3).

    This year we have moved on from last year’s winner ‘on the brink’ to the even more worrying ‘meltdown‘.

    And  three new awards this year:

    For me this came when I clicked on the link here.  Almost as surreal had been this statement four weeks previously.

    The winner is this little gem from Leeds United on the ownership of the club.

    and, for something completely different, a new serious one!

    A lot of really good work has been done this year by a number of Trusts, and to some extent it is invidious to pick one out, but this year I feel the deserved winner is City Fans United of Chester, who, against all the odds, managed to resurrect the club.

    Posted in Uncategorized | 2 Comments »

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