Hereford United & The Costs Of Relegation

By on Oct 18, 2012 in Finance, Latest, Non-League | 5 comments

The end of Hereford Uniteds last stay in the Football League didn’t come without a fight. A four game unbeaten at the end of the season run saw the club finish just two points from the safety zone in League Two at the end of last season, with a win on the final day against Torquay United in front of a crowd of over 5,000 people not being enough to help them over the finishing line thanks to results elsewhere. Less than six months on from that day, the costs of that underwhelming season are starting to become more than apparent, with chairman David Keyte, who has already issued several stark warnings this season, stating this week that his club is close to entering into administration unless it finds fresh investment in the very near future.

At the start of the season Keyte stated that the club had budgeted for average attendances of 2,400. This, on the surface of things, seemed like an optimistic figure. Herefords average attendance last season was 2,510, but this number was swollen by that large crowd on the final day of the season, amongst others. It is true to say that some supporters will be more likely to return after their club is relegated should it start winning matches at a lower level. It is also true, however, to say that there are some that will drift away with relegation and that the number of away supporters turning up for matches will also likely be lower in a lower division. In addition to this, dropping from the Football League will have an inevitable effect upon commercial revenues (the gap between the fourth and fifth divisions of English football may be slight on the pitch, but the stigma of being in the Blue Square Bet Premier rather than the Football League remains. Crowds at Edgar Street so far this season have averaged out at a little under 1,800 people and this, it is starting to become apparent, is not enough to keep the Bulls afloat.

The problem that Hereford United have had so far this season has been that, to put it bluntly, the team hasn’t been winning enough matches. The team has won just twice since the 25th of August, and has endured torrid defeats at the hands of newly-promoted Dartford (by four goals to nil) and Hyde (by five goals to two) during this period. At the time of writing, they sit in fourteenth place in the Blue Square Bet Premier table, four points above the relegation places. From a purely financial perspective, then, this weekends match against FC United of Manchester in the Fourth Qualifying Round of the FA Cup has a value at Edgar Street that goes far beyond mere pride and footballing achievement. The financial ramifications of getting a place in the First Round Proper of the competition takes on a different level of importance when a club is in financial trouble. There will be £12,500 on offer to the winners, plus the opportunity of more money for further wins and the possibility of much-needed television money as well. This is money that Hereford United now needs, but the question of whether the unsettling news of the last couple of weeks will leave the playing staff in the right frame of mind to perform under this sort of extra pressure is a valid one.

Keyte told a meeting of share-holders earlier this week that the club has an unpaid tax bill of £110,000 which could yet threaten its existence. This is made of up an outstanding £65,000 debt for PAYE which hasn’t been paid – of which £35,000 is already overdue – as well as a £45,000 bill for unpaid VAT which remains outstanding. Keyte also took the time to point out that the fixture calendar means that his club has only one home match guaranteed over the next six weeks, and for clubs at the level at which Hereford United finds itself this season match day revenue remains critical in providing liquidity to a clubs accounts. Keyte warned a couple of weeks ago that the team may have to turn part-time if its financial fortunes didn’t turn around, and there is little to suggest they have in the last fourteen days or so. On top of this, it has also been suggested that the club will also have to find an additional £240,000 by the end of November in order to keep the wolves from the door in the medium term.

We should point out at this juncture that there is little to suggest that, unlike at so many other clubs at this level or a little lower, there is nothing to suggest that David Keyte has, even if we can look at his break even crowd figure for this season with a degree of scepticism – been particularly derelict in his duties in relation to the club. He took the chairmanship of the club in 2010 in spite of only owning 16% of the shares in the club, and is believed to have put £350,000 of his own money into the club over the last two years. With the club losing around £8,000 per week at the moment, however, he has made it clear that he can no longer be expected to continue to pour money into the club, and in saying, as he did to the BBC earlier this week, “…to rely on four or five people to continue to put fingers in holes in the dyke is not sustainable,” he hits on a fundamental truth about lower division football in the twenty-first century.

At this point, it should also be added that entering into administration is a scenario that Blue Square Bet Premier clubs simply cannot allow themselves to fall into. According to 14b of the Football Conferences rules, automatic demotion follows if a club does not agree a CVA which pays all of its creditors – not just football creditors – in full within three years. If a club in this position is relegated at the end of the season, then it will be demoted by two divisions. In other words, a failure on the part of the club, its support and the city of Hereford in a wider sense to address this cash-flow problem now might even result in the club having to play in the Southern League Premier Division next season. It’s a dread scenario, and it’s one that the club cannot allow itself to fall into.

The amounts of money that Hereford United needs to keep itself afloat is achievable, but “investment” from share-holders shouldn’t have to be the answer for a club like this. Ultimately, the figures are clear. Keyte confirmed a break even figure for attendances if the club is to stay afloat and, now matter how misguided this figure might have been, it is now down to the people of the city itself to demonstrate that it wants to keep its football club. The sound of turnstiles clicking at Edgar Street will be the route to salvation for the club in the long-term, even if it is necessary for a different sound, that of collection buckets rattling, to keep the club from going into administration. As has been seen elsewhere on plenty of occasions in recent years, supporters of clubs at this level cannot depend upon the munificence of others in order to save them if they get into difficulties. The supporters themselves need to be at the forefront of all efforts to turn Hereford Uniteds fortunes around, and this of itself is a lesson that the directors of the club need to absorb as quickly as possible. The stakes are too high for further mistakes.

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    5 Comments

  1. I was very surprised to read that the club budgeted on an average crowd of 2400. Attendances drop every time a team drops a league in relegation, so it would’ve been far better had the people in charge at Hereford planned on a lower attendance.

    I have to say that this budget blowout shows up again the importance of intelligent and competent decision-makers at a club’s executive level.

    One Salient Oversight

    October 19, 2012

  2. Although there have been some catastrophic appointments and contractual gaffs the overall budgets that were set weren’t completely unrealistic. It’s only four years ago that we had gates of over 3000 fairly consistently so was it really too pie-in -the-sky to think that a fresh start might produce the same sort of figures. Even the previous relegation to the Conference had seen an average gate of over 2400 in the first season.

    Once you’ve set and committed to such a budget it’s virtually impossible to go back and change it at the drop of a hat. The judgments that were made have proved to be inaccurate but have not been helped by incidents largely beyond the Board’s control.

    Exlandlord

    October 19, 2012

  3. Then go part time.
    Tough.
    Borys

    Borys

    October 20, 2012

  4. Attendances can increase if a club gets relegated and start winning. Although slightly different circumstances, the average attendance for Shrewsbury in the old Division 3 was 3,600 in 2001/02 and 3,800 in 2002/03, but this increased to 4,100 in the conference. This was despite the much lower away followings. The key is if the club can start winning games and get the feelgood factor back.

    dannylad

    October 20, 2012

  5. hopefully hufc will contact all possible sponsorship avenues!!! how about famous people born in hereford!? anything!!!!! where theres a will theres surely a way right!? all i can say is up the whites!! just work hard and win hereford players!!!! score score score dont give up!!!!!!! hereford v shrewsbury……
    up the whites! hereford till ya die!!!!
    hereford bulls c’moooonnnnnnnn!!!!

    cyril

    October 21, 2012

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