At The Sharp End… Dispatches From Southend, Cardiff, Watford, Preston & Portsmouth
One of the most useful research tools for football finance writing is the “Football Management” site run by Dr. John Beech of Coventry University. Dr. Beech took ten days off recently, and came back to an in-tray” of HMRC-related football fun which would have blocked out the light from his office windows. Indeed, any hopes that any of us had of football’s financial woes holding themselves in abeyance while the world’s finest – and John Terry – were strutting their South African stuff were short-lived in the extreme. Instead, it’s almost as if certain clubs regarded the World Cup as a time to bury bad news. The worst news has come from Southend-on-Sea where the extent of the football club’s reliance on Sainsbury’s (Sainsbury’s!!) for survival has been laid bare. The local Echo newspaper has over recent months run numerous stories in its sports, business and general news pages about the funding issues surrounding Southend’s stadium project at Fossett’s Farm.
Last month, they joined the dots in an impressive resume of the football club bills Sainsbury’s have recently paid, i.e. pretty much all of the major ones. To cut a very long story short, Sainsbury’s could soon be in control of Southend United if Martin puts them any more in hock to “the supermarket giants.” And while they were joining these dots, another two appeared; yet another winding-up petition from HMRC, for £200,000 unpaid April and May taxes, and yet another winding-up petition still, for an undisclosed amount from “loan company” Charterhouse Commercial Finance Ltd. And they added an overview of Southend chairman Ron Martin’s business portfolio which exposed him as the modern-day Robert Maxwell Southend fans, and others, have long suspected him of being, with his various UK companies owing a collective £22m. Not to mention the £60,000 owed to supporters’ organisation Shrimpers’ Trust since last year – a huge amount for such an organisation.
Meanwhile, a string of first-team players have left the club, all citing the financial situation, to varying extents, as among the reasons for their departures – including Southend-born former captain Adam Barrett. Southend can’t even raise a team for their planned pre-season opener against Ipswich. Martin continues to categorise Southend’s money woes as a “blip.” It is, however, a multi-million pound blip. His explanation of the new tax debt was another of his now famed masterclasses in disingenuousness. He noted that HMRC are “quick off the mark” with football clubs, these days (especially, you may think, with clubs who are “slow off the mark” in paying their taxes). Martin added that “it was agreed on 22 June to settle (the debt) but within a day, proceedings were started by HMRC against the club,” clearly trying to create the impression that Southend had merely been “a day” late with these payments, and clearly delusional if he thinks anyone still falls for this crap. And there’s plenty more. All of it bad. The words “chickens” and “roost” spring to mind.
Attempts by former Cardiff City chairman Peter Ridsdale to categorise his tenure in South Wales as “job done” have met with predictable snags since the club lost out on the chance to paper over it’s financial cracks with Premier League broadcast monies. The club were saved from their most recent “last-ever” HMRC winding-up petition by the much-vaunted “£6m investment” from new majority owners, Malaysian businessmen (Dato Chen Tien Ghee and Vincent Tan – frontman and moneyman respectively. However, this £6m had been earmarked for the Bluebirds’ future. So for it to be long since spent is a serious worry, given the increasing number of creditors emerging since the Malaysian takeover was approved by shareholders in May. Cardiff are in danger of “more comebacks than Frank Sinatra” at the High Court, at which they are due to appear again on August 11th thanks to another late PAYE payment, which has attracted another Football League transfer embargo. And with June’s player and staff salaries being paid late, Cardiff have the full “club in crisis” set.
The late salaries payment was explained away as a problem with “international currency transfers,” exposing the club’s continued reliance on Malaysian investment. Season-ticket income usually provides a necessary boost, but millions of that was (in)famously spent paying December and January tax bills. And Bluebirds people must be hoping against hope that there are no more lurking debts, such as the estimated £2.5m borrowed by Ridsdale from Cayman Islands-registered firm “Player Finance Fund,” reportedly without the knowledge of the rest of the board. In fact, Ridsdale borrowed more, but the “Fund” agreed to reduce the debt in return for becoming a secured creditor, which doesn’t scream faith in Cardiff’s repayment abilities. To add to the fun, former chairman Sam Hammam says he wants to get involved again. And although his many deluded supporters have been active in the local press, the club have been quick to say that any meetings between them and Hammam were solely linked to City’s long-term debt to the Langston Corporation. On top of all this, leading player Joe Ledley has been considering a move to Celtic. Which needs no further comment.
Watford have broken their cycle of borrowing from “substantial” shareholders with a “Secured Bonds issue,” which was accepted by shareholders in the club’s parent company Watford Leisure plc in April. Substantial shareholders, including ex-combatants such as Lord Michael Ashcroft and the Russo brothers, Jimmy and Vince, have agreed to transfer the monies they are owed into 364-day Secured Bonds, effectively buying Watford those 364 days to find “new investment” to pay their debts. Ashcroft’s company, Fordwat – Watford Leisure’s largest shareholder – had loaned the club £5.99m, but Fordwat/Ashcroft agreed to underwrite the bond issue to the tune of £7.5m. Thus, out of this valuable, if belated, show of shareholder unity has come an extra £1.51m to “assist with the working capital requirements of the business.” Watford’s chief executive Julian Winter has been a particular cheerleader for the scheme, and for Ashcroft in general. And former chairman Sir Elton John also raised an estimated £600,000 for “player acquisitions” through a one-off fundraising concert at Watford’s Vicarage Road stadium (the first such “one-off” fundraiser since 2005).
So Winter confidently proclaimed last month that the club was “getting our house in order…I think we are ahead of the game in many ways (and) we are doing something quite progressive in football” He warned that wage bill cuts and player trading profits would still be necessary, and noted that the £1.5m working capital “is to cover us to the end of June 2010.” But, in a June 12th interview with the Watford Observer newspaper, he insisted that the club would pay their post-June bills by being “made sustainable…through season tickets, matchday tickets and the rest of all our revenues and player trading.” The board, he stated, no longer plan to rely on directors’ loans to pay the bills. On June 28th, it was announced that Fordwat had “advanced a further £0.5m” to the club “to assist with the working capital requirements of the business.” Which needs, etc…
Preston North End have come to a definitive solution to their immediate, and severe, financial problems. “Property and Leisure entrepreneur” Trevor Hemmings has been bailing “his” club out, via his company Guild Ventures, at least as often as anyone at Watford. And the solution is to make the club actually “his.” Shareholders of “Alternative Investment Market-listed parent company Preston North End plc have/had until July 7th to accept a ”gun-to-the-head” offer from Hemmings’ company “Deepdale Preston North End Holdings” of 5p per share or, effectively, the club gets it. North End’s sums simply didn’t, don’t and won’t add up without regular cash injections from Hemmings. So Hemmings is getting the club on the very dirt cheap – shares traded at 95p before they were suspended in May after the inevitable HMRC winding-up petition (and there’s been another one since). But Guild have loaned the club £13.33m over not that many years. And 5p-per-share would be nearly 5p-per-share more than shareholders might get if North End went south. So £164,784 can be deemed a “fair and reasonable price” with a straight face.
A massive PR exercise has been undertaken to ensure that shareholders do the right thing. The enormity of the club’s situation probably rendered such efforts un-necessary. And all the substantial shareholders have irrevocably undertaken to sell. But newly-appointed chairman Maurice Lindsay has ensured that the local branch of “rent-a-quote” won’t be going out of business in this recession with his pleas to Preston fans to prepare for the “rocky road” ahead. “Preston has been ill and I’ve come to help the patient get well again,” noted Dr. Lindsay, prescribing a course of “rude awakenings,” “we’re all in this together,” “the gravy train has stopped” and “we must make football the people’s game,” in “a new dawn of realism.” This love of frugality and football from Lindsay may shock those who remember his hostile attitude to both when he was running Wigan’s all-conquering Rugby League sides in the 1980s. But the message is right. And Preston might just have got it in the nick of time.
Meanwhile, back at Portsmouth, the aftermath of their successful (pending appeal) CVA has, shock, thrown up more questions. A surprisingly and disturbingly biased article in the Portsmouth News strongly implied that HMRC’s partly-rejected claim for £37m was specifically designed to fail the CVA rather than be a genuine claim for taxation of image rights payments. The article also suggested that the much-heralded investigation into Portsmouth’s financial mess might be scrapped on cost grounds. And tucked away in paragraph 94, we were casually informed that the £6m cost of the administration (SIX MILLION!!!) had been covered by “mystery money…given to the club under no obligation for it to be repaid.” Joint administrator Andrew Andronikou is in high-profile (naturally) discussions with a number of potential bidders for the club, including afore-mentioned Ukrainians and, reportedly, long-time interested party Rob Lloyd.
Meanwhile, more Portsmouth staff were laid off recently, including the training staff who were famously reprieved in the spring by donations from players. Fellow joint administrator Michael Kiely had to do this dirty work as, amazingly, Andronikou, shunned this particular photo and publicity opportunity. What-bag? So much for things being quiet during the World Cup. Yet, as Dr. Beech noted on his web-site after his break, “rather worryingly, it doesn’t seem to have been a particularly untypical ten days.” Sadly, he’s right.