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 September, 2010

More unexpected ‘benefactor’ behaviour

Posted by John Beech on September 17, 2010

Following my last posting, two stories have caught my eye – at Altrincham and at Accrington Stanley.

For those not familiar with Altrincham’s business model, it would only be fair to provide some context.  In July 2002 Geoff Goodwin became the Chairman.  This followed  a period of considerable instability – an ex-director had threatened to serve a winding up petition, for example – and rising debt, said to have reached a level of £500,000.  Goodwin became the majority shareholder in April 2005; however, in January 2007 he announced that he would relinquish the post in May 2008, but by the end of season 2007/08 he had decided to carry on (1).

Apart from that wobble, Goodwin had held firm in bringing Altrincham into a period of relative stability, managing to turn a small profit most years.  Certainly he had been under pressure over the period he had been in charge, notably with three consecutive ‘great escapes’ from relegation.  There have been indications of increasing pressure of late – in July there was a call for fresh backers to come forward (2), and at the beginning of this month there was at least a possibility that the squad might need rationalisation (3).

So, it was not completely unexpected when Goodwin announced that he would be standing down as both Chairman and as a director (4).   He gave two reasons for his decision.  First, the fairly standard reason that ‘benefactors’ offer, that of ‘mounting pressures at work‘.  This is all too often the case as ‘benefactors’ do have higher priorities associated with their day jobs (an inherent weakness of the benefactor model is that the club cannot be their number one priority; you can’t after all seriously expect them to ignore their day job).

What was unexpected, at least to me, was his second reason: ‘his involvement with his son’s karting activities‘.  His 13-year old son is beginning to make a bit of a name for himself in karting circles apparently, and like any parent he wants to be supportive.  But on the other hand, he was a self-appointed benefactor of a football club.  The fact that his son’s karting comes first is perhaps understandable at a human level, but it makes a mockery of any notion that ‘benefaction’ offers a sustainable business model.  If your club is run by a ‘benefactor’, you will always be worried that his son is suddenly going to divert your interest and time through the discovery of some unusual talent.

The other announcement that , again to me, was unexpected was over at Accrington (see postings passim).  The club had almost been wound-up last year, and had only been saved by a dramatic last-minute accommodation between the intransigent old guard and wannabe owner Ilyas Khan.  Khan has made a great deal of being pro-Supporters Trust in his battle to gain control, but, as Ian King of TwoHundredPerCent pointed out at the time (5), “The white knight on the horizon at Stanley continues to be the Accrington Stanley Supporters Fund, which was recently formed by a group of fans and backed by Stanley shareholder Ilyas Khan. Khan has been trying to wrest control of the club for some considerable time now, and is said to have put £250,000 into the Fund, although the club is unlikely to see very much of this money unless Khan takes control of the club, a situation which the current owners are loathe to to agree to. Despite the name, ASSF is not a Supporters Trust, rather a vehicle for Mr Khan to take control of the club. Whether this is a completely desirable or not may not be known until he takes control of the club, if he takes control of it but, for most supporters, this seems like their only option.

In fact Khan seemed to back away from the Supporters Trust once he had got his feet under the boardroom table.  But wait!  Battle seems to have been resumed, according to a report yesterday: “Chief executive Rob Heys has called for an end to the war of words raging behind the scenes at Accrington Stanley FC. Non-executive chairman Ilyas Khan and managing director David O’Neill have had a long-running difference of opinion on how the club should be run, following the £308,000 tax debts last November that almost forced the club to be wound up.” (6)  The report also tells us that Khan “is now in talks with the Accrington Stanley fans to set up a Community Trust to run the club.”  What can this all mean?  Is this a regression to Plan A? There are more details of his new attempts to woo the fans here.

Apparently the club’s spin on events is “Following the recent public discussions involving Accrington Stanley Football Club Ltd, the club are now looking to internally resolve the many issues that have arisen over the past couple of weeks.  It is the club’s full intention to issue a detailed press release outlining the situation in its entirety, as soon as all outstanding matters have been legally resolved. During this time, Robert Heys will continue in his role as chief executive officer while continuing to work alongside managing director David O’Neill who will concentrate on the legal matters that have arisen.  The club has been instructed by its shareholders to call an AGM as early as possible in October and will announce this to all shareholders once the date is set.”  No doubt all will become clear in the fullness of time, but if any Accrington activists can cast some light in the meantime I would be pleased to hear from them.

What becomes ever clearer in the bigger picture is that the supporter-based co-operative model not only wins over the benefactor model because the committment to the club is ever-so-sustainable, but also because it avoids focussing all the power in the hands of just one individual.

Posted in Benefactors, Ownership, Trusts | Tagged: , , | Leave a Comment »

The increasingly irrational world of football club owners

Posted by John Beech on September 10, 2010

My blood boils far too easily these days.  Perhaps it’s an age thing.  Or perhaps the wacky world of football finance really is going insane. Three stories in the last few days have had me reaching for my gun. I’ll deal with them alphabetically by club, but Mansfield Town fans and Nottingham Forest fans can be assured that I cite their clubs merely as examples of what is wrong – it could have been so many other clubs that I could have used to make the point.  I’m not having a go at their club; I’m having go at their directors, and directors at other clubs who make similar comments. In short, I’m making a general point, which happens to be triggered by comments made by their directors.

First a bizarre quote from the Ilkeston Town saga.  Former owner Chek Whyte is quoted as saying “From the point I took over we had got it up to the next league and the league above that, which is the highest the club has ever been.  The only reason we let the club go was because the new owner could take it to the next level, but he has not done that” (1).  So we are asked to believe that his decision to sell the club was entirely as a selfless move to make sure that the greater interests of the club were respected.  Erm, nothing whatsoever to do with the fact that his debts had risen to £32m (2) then.  But Whyte is known for his interesting explanations – he had been banned from being a company director in 1999, which he told the Salford Advertiser was because he was dyslexic.

Meanwhile, over at Mansfield Town, the club is up for sale (3).  ‘Why?’, you ask.  Well, according to the club website, “The Board believe they have taken the club as far as they can and now is the ideal time for someone new to takeover the helm and move the club to the next level“.  Two of the most irritating clichés in football ownership: ‘taken the club as far as they can‘ and ‘move the club to the next level.

What on earth does ‘taken the club as far as they can‘ mean?  In another announcement the same day on the club website it becomes clearer: “Chairman Andrew Saunders has admitted that both he and his fellow board members cannot continue to make any further ‘major financial commitments’ towards the football club” (4).  He and fellow directors had been ‘investing’  approximately £10,000 a week to sustain the club.

At the very least, this is an admission of poor business practices.  They are directors of a company which is losing over half a million pounds a year.  From a different perspective, they haven’t recognised that a true benefactor, in the traditional mould of Jack Hayward or Jack Walker, has deep enough pockets to keep on benefactin’.  Perhaps they were simply naive when taking on the club.

Over at Nottingham Forest, where chairman Nigel Doughty, who has invested more than £60m in shares and loans during the last decade, may curtail his investment in the wake of recent criticism from fans, some gems from Chief Executive Mark Arthur: “Nigel has regularly put in over £5m over the last few years. Last year his commitment was £13.4m which is double the amount we received from season-ticket revenue and match-day ticket revenue” (5).  When you are committing financial doping on such a blatant scale, you might expect more success than Forest have achieved.  This has resulted in criticism from fans.  Now Doughty hints darkly at stopping his ‘investment’ unless the fans are nicer to him.  Again, he hasn’t understood what a ‘benefactor’ really is.  And he seems to think that everyone must like because he owns the club.  He doesn’t appreciate that buying the club (i.e. the company) doesn’t mean he has bought what fans see as the club (i.e. the social construct).

A true benefactor accepts that he is on a hiding to nothing and throws money at a club, without a hint of complaint, in a deliberate attempt to upset the competitive balance of the league the club plays in.  Increasingly, today’s ‘benefactors’ insist on ‘investing’ with soft loans, which they then get the wobbles over as the money flows straight the club and out again even though they should have some control over it as directors.

Concentrating so much power in the hands of so few people, often new-comers to both the club and the football business, so often leads to clubs struggling hard to survive.  The benefactor model has clearly had its day.  Members of Parliament of all hues agree, as the recent debate showed (6; well worth reading if you haven’t already done so).  Supporters Trusts, and other co-operative/community-involved variants, are the only way forward.

Posted in Benefactors, Insolvency, Ownership | Tagged: , , | 1 Comment »

HMRC in court today

Posted by John Beech on September 8, 2010

The battle continues, with two clubs due to face winding-up petitions:

  • Ilkeston Town
    Ilkeston Town have been wound-up (1) over a tax debt of £50,000.  The club had argued that it could make a payment of £20,000 shortly as the result of the sale of a player and offered to clear the outstanding debt at £1,000 per month.  The hearing lasted all of two minutes, and Registrar Derrett concluded that “the company is plainly insolvent and I therefore make the final compulsory order“.
    Chairman Gary Hodder had been talking to two prospective buyers (2), so all may not be lost.
    The club has struggled since the withdrawal of ‘benefactor’ Chet Whyte last year following the collapse of his building empire (3).
  • Sheffield Wednesday
    The day before they were due in court it was reported that they had avoided Administration thanks to the Co-operative Bank (4), and as a result HMRC today agreed to dismiss the petitions (5).  Frankly, it’s hard to see why the Bank chose to extend credit even further to the club.
    The club had previously managed to extract a 28-day extension on the basis hat a “substantial” amount had been repaid to HMRC, and talks with prospective new owners were “ongoing” (6).
    The present situation is that the club has at the last minute managed to “broker a deal with the Co-operative Bank to secure their immediate future“.  Specifically, the Bank agreed “to fund a payment of £780,000 to HM Revenue and Customs (HMRC) – the amount sought under the winding-up petition – to buy more time to find a longer-term answer to crippling debts which now total around £30m” (7).  Moreover, “The Owls cannot meet current outgoings and one month’s tax bill of around £300,000 is already overdue“.  The only rationale upon which the Bank could have continued to support the club is the prospect of new owners.
    A number of suitors have been in the frame, including Club 9 Sports (8), former West Ham chairman Eggert Magnusson (9), and a Scandinavian consortium fronted by firmer manager Chris Turner (10).
    Who will succeed is of course a vital question on which we must await an answer, but increasingly ‘when’ is becoming the key issue.  The club will be lucky to get any further help from the Co-operative Bank, and HMRC are unlikely to hold back should ongoing tax payments fail to be made.

HMRC must be feeling reasonably satisfied with the outcomes.  Yet again, today’s proceedings are an indictment of the benefactor model.

ILKESTON TOWN UPDATE – 8 September 2010

The club is reported to have lodged an appeal (A).

ILKESTON TOWN UPDATE – 17 September 2010

The club has been formally expelled from the Conference North (B), meaning that any resurrection club will have to seek a place in the pyramid elsewhere (i.e. lower down) for season 2010/11 at the earliest.

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

Croydon’s crisis

Posted by John Beech on September 7, 2010

Croydon Athletic are in serious danger of disappearing, as a result of issues surrounding their owner, Mazhar Majeed, who, it is reported, has been arrested by customs officers over claims that he has laundered tens of millions of pounds through Isthmian League Croydon Athletic (1).  Majeed has only been involved with the club since 2008.

In a fast-breaking story which is not well covered by the bigger papers, it appear s that manager Tim O’Shea and his assistant Neil Smith have resigned (2), Martin Eede has changed his mind about taking on the vacant role of Chief Executive (3), players wages have not been paid (4), HMRC officials have paid a visit (5), and matches are now being cancelled (6).  A deeply worrying position for the fans to find the club in.

Whether Majeed is innocent or guilty, and the matter is of course sub judice so I’ll refrain for commenting, it needs to be pointed out that over a year ago there were dire warnings that football clubs were particularly vulnerable to being used as vehicles for money laundering.  In July 2009 I blogged on a report (7) by FATF, an intergovernmental body (8), which drew attention to a number of cases of money laundering which had taken place in the football industry.

Just how slack is financial regulation in the football sector?  Can we really press on without some serious tightening up?

CROYDON UPDATE – 23 September 2010

Croydon Athletic have won the first major survival battle – the Isthmian League is allowing the club to resume playing ‘subject to certain conditions, to which the Club have agreed‘ (A).

Posted in Benefactors, Corruption, Governance, Ownership | Tagged: , , , | 4 Comments »

Transfer torpor

Posted by John Beech on September 7, 2010

The transfer window just isn’t what it used to be.  I found myself habitually clicking to find the latest news from the BBC website and checking Twitter, but there just wasn’t much happening.  Even on the final day, there wasn’t much action to follow, unless you are a Stoke City, Spurs or Sunderland fan.

As luck would have it, I’m in the middle of moving my office across campus (hence the paucity of postings in the last week), and in the general turning out I happened across a printout from the BBC dated 22 Jan 2008 (the online version is here).  “January transfers set new record” it proclaimed.  £93m had been spent, with Chelsea the biggest spenders – £15m on Anelka and £9m on Ivanovic.  On the last day of that particular window Portsmouth signed Defoe from Spurs, and Middlesbrough splashed out £12m on Alves (1).  It all seems a long time ago.

Quite simply, this transfer window there were fewer transfers, with a propensity for not disclosing the value of the transfer fee, but many more loans.

USA Today declared that “Football’s transfer windows are a bore” (2), but was perhaps a little tongue in cheek as the report also advised “Rule No.1 of the transfer window: Believe little or nothing of what you read in the newspapers.”  As Bloomberg pointed out, England was not alone with its inactivity – in France, Germany and Spain gross spending during the transfer window was down by about 40 percent on last season (3).

I would suggest there are three causes for this downturn: the general economic downturn, an imposed discipline as we approach the Financial Fair Play protocol (although Manchester City don’t seem too worried by this) and the enforced reduction in squad size.  It is the latter that has triggered the growth in loans, with everyone a winner, unless the loanee is suddenly recalled.  The market for loan players is certainly becoming highly competitive, and there is at least a suggestion that competitive balance is being distorted by the influx of Premier League players into the Championship, the loan of Craig Bellamy to Cardiff City attracting particular comment – Burnley Chief Executive Paul Fletcher has called for a review by the Football League into loan movements between Premier League and Championship clubs (4).  The strange rule that which allows English clubs to borrow only two players from within the UK, but an unlimited number from abroad, has come under criticism from West Ham’s David Sullivan (5).

The basic argument for having transfer windows holds good – a way of ensuring some stability in a squad without the constant fear of players being lured away – so I can’t see a return to the bad old days.  For the immediate future though, it looks set to be much less exciting than it used to be.

Posted in Transfers | Tagged: | Leave a Comment »

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