The contrast was stark, like a particularly uncompetitive episode of the BBC’s Bargain Hunt (you can tell I don’t have a proper day job), magnified a million times. Bolton Wanderers’ parent company Burnden Leisure Plc lost £35.4m, partly because they picked up manager Owen Coyle. Burnley Football Club made record profits of £14.4m, despite losing manager Owen Coyle. On-field experiences didn’t contrast so greatly. But the consequence of Burnley’s 18th place to Bolton’s 14th widened the financial gap to the proverbial Grand Canyon. But that’s for future accounts to reflect. For now, Burnley and Bolton seem like football finance good and evil – the difference being £50m at today’s exchange rates. Burnley have been generally lauded for their fiscal responsibility in recent years. And it is generally accepted that, as a result, they will be able to cope with relegation rather better than, say, Hull City, who were relegated with them last spring.
Bolton, meanwhile, could be done for if they ever go down, with their heavy reliance on the “benefactor model” of football business and the “blow the broadcast rights money on players’ wages model” of football business – both popular models in the modern game. So, what did Burnley do right? And what did Bolton do wrong? Well, Burnley beat Sheffield United 1-0 in the 2008/2009 Football League Championship play-off final, which qualified them for a Premier League place and the £60m riches reportedly attached to it – (£90m when Blackpool won this year). And… erm… “Promotion came at a cost in the financial year” wrote Clarets chairman Barry Kilby in the report to shareholders covering 2008/09. He was understating nicely. Their “wages-to-turnover” ratio, the most common short-hand measurement of financial prudence, was a whopping 115%, where the recommended level is 70%.
In simpler terms, after they’d paid the wages for the year they were left with…“zip… diddly” (copyright – Mick McCarthy). In fact, they still had TWO…AND… A… QUARTER… MILLION… POUNDS… to find. “Make that man chancellor!” was not a mantra among Burnley fans. They found them in the Premier League. But Burnley’s finances were messy throughout the decade, so they’ll have to find it again. Major shareholder Brendan Flood said in 2009 that the Premier League “would guarantee the club ten good years financially.” It hasn’t, as the ten previous years were not “good years financially” at all.
In the aftermath of ITV Digital’s collapse in 2002, Football League clubs seemed to be divided into two camps – those who went into administration and those who nearly did. Many clubs, especially those one promotion away from the gold-paved streets of the Premiership, “went for it” with promised ITV money which never arrived. Burnley, however, were among the “small clubs”, as Kilby regularly insisted. Forget the 1960s, when the Clarets were among English football’s elite. In 1987 they spurned the chance to join non-league football’s elite by avoiding relegation from the Football League on the last day of the season.
This “small club” mentality was drummed into Burnley-ites with a vigour rarely seen outside Blackburn Rovers Supporters Clubs. In 2007 Kilby described Burnley as “one of the smaller clubs” in the Championship. In 2006, their place in the Championship’s top six was “punching above their weight in light of the club’s financial limitations,” – which handily excused the collapse of that promotion bid. And in 2005, Kilby said that, in order to “have a fighting chance to compete with the much-larger Championship clubs,” Burnley would have to sell its famous Turf Moor ground to…Barry Kilby.
In truth, such a desperate measure was understandable if, equally understandably, upsetting for fans. Kilby said that “hopefully when the club is stronger, it can trigger the buy-back clause, and resume ownership.”, and the £3m “sale and leaseback” arrangement did rid the club of “external” debt. But Kilby’s assessment in November 2005 – “we are debt-free, other than directors’ loans” – simply meant Burnley were debt-free…apart from their debts. These directors’ loans were considerable. Kilby, for instance, loaned Burnley FC £5m, without tangible sign of repayment, let alone reward, since becoming chairman in 1999. And things could have been worse than having a genuine life-long Claret like Kilby as a major shareholder in Turf Moor’s owners.
When Chief Executive Dave Edmundson said in December 2004 that “we’ve mortgaged our house to our parents… it’s being looked after by the father of the club,” you sort of knew what he meant, once you’d vomited. Yet despite continuing public claims that size mattered, the sale triggered a sea change in the club’s attitude to spending, which was accelerated with the arrival of “property mogul” Brendan Flood on the board in December 2006. Naturally, the appearance of a “property mogul” on the board a mere six months after the club chairman bought the ground might have led some cynics to look beyond the realms of co-incidence. But… well… no buts, actually.
In 2007, Burnley were a ‘small club’ no more, certainly not in Flood’s mind. Audacious plans to redevelop Turf Moor to the tune of £20m were drawn up. And while Kilby gave the Lancashire Telegraph the ‘small club’ schtick, Flood was “discussing our ambitions with the Arabian press (to) make sure that Burnley is a forward-thinking club and a viable option for strategic investors.” By now, though, this “forward-thinking” was costing 106% of turnover in players’ wages – even before the promotion season, and the recession was on. Kilby was talking about “not betting the ranch” on promotion, but if there’d been any ranchland in Lancashire…
Buoyed by Carling Cup success with the emergence of Coyle as manager, they were ‘betting’ more than they were earning, wages having risen from £7.1m in 2006/07 to £13.42m in 2008/09. But Burnley were rising as Flood was falling, as a whole list of his companies – mostly called Modus – went into administration. Matt Scott wrote in the Guardian newspaper on 30 May 2009: “Burnley’s promotion to the Premier League did not come a moment too soon.” Burnley had spent a number of years telling people not to panic about losses of £1.8m, then £4.3m and, in the promotion season, a ‘record’ £11.7m. And, eventually, they didn’t have to.
But the club’s ‘record’ profits of £14.4m haven’t re-energised talk of £20m ground redevelopments, buy-back clauses and good financial results until 2020. Directors’ loans became repayable on promotion and administrators nabbed £5m from the club to help pay Flood’s business debts. Kilby said this month, that “financially, the future is secure.” But this security has come against a backdrop of a wages to turnover ratio still in three figures (wage costs which had nearly doubled in two years have more than trebled in three, to £22.47m). And the £16m payment from the Premier League, designed to parachute them down to a Football League landing, has to be set against the £40m difference in broadcast revenues between their promotion and Premier League seasons. £14.4m will be a club record profit for a while yet.
So, what did Burnley do right? They beat Sheffield United. Had they not…
In 1995, Bolton beat Reading in their Wembley promotion play-off final. And in 2003, locally-born multi-millionaire Eddie Davies became owner of 94.5% of the club’s parent company, Burnden Leisure Plc. The former got Bolton to the Premiership. The latter – and only the latter – has kept them there. Bolton’s chairman Phil Gartside responded to the news that Burnden Leisure was indebted to the tune of (here comes the “f***, that’s a lot of money” caps lock again)… NINETY-FIVE… MILLION… POUNDS with a line they must teach at Premier League chairman school. ”We are in a fortunate position in that a small percentage of our debt is owed to the bank,” he told the Bolton News on November 11th. “That puts us in a strong position.” And owing only £2m to the bank is a pretty strong position for a football club…except when that “small percentage” is £2m.
Gartside continued at some length about how Davies “remains fully committed to bankrolling the club,” which at least was slightly more honest language than some contemporaries might have used. And he added that Davies was “still” enjoying the games, which suggested he enjoyed the games when Sam Allardyce and Gary Megson were in the Reebok hotseat…full commitment indeed. But this meant that Gartside didn’t have the room that I’m sure he would have liked to detail the costs of these loans from Davies. “Benefactors”, we must keep reminding ourselves, are not the “givers” the word sometimes implies. And Davies certainly hasn’t, as Gartside did say, “given us a huge amount of money.”
The £23m his ‘Moonshift Investments” company loaned Burnden Leisure last year came at a recession-busting 10%, the resultant £2.3m being “in respect of arrangement and guarantee fees and interest”, which suggested his expenses were well covered, while the other, cheaper, loans still allow Davies to live in the manner to which he is accustomed. Neither Gartside nor Burnden Leisure’s accounts play down Davies’ importance not only to the success of the club but to its very survival. Gartside acknowledges that Bolton fans, or at least some of them, “would be watching a very different standard of football,” to the crowd-pleasing and effective football with which Coyle’s side have surprised so many. And the accounts contain its variant on the theme of “material uncertainty” as to Bolton’s “ability to continue as a going concern,” noting that they need “further borrowings to provide adequate working capital facilities.”
Down the years, the club has attempted to portray itself as a stable, well-run, local business, with great play made of Davies having been born and schooled in Bolton, but less emphasis on the speed with which he left – he now lives on the Isle of Man. They have emphasised the commercial and non-football side of the business. Some rare profits came from an Osmonds concert, which seems an inordinate price to pay for Premier League stability. But there’s no escaping the fact that the club is run on broadcast revenue and Davies’ loans. In the midst of that, credit is due to Coyle and his team. Wages may be an uncomfortably high 86% of turnover, but Bolton’s wage bill is strictly lower half of the Premier League, which makes their current top-six status highly commendable.
However, even those figures tell a tale of turnover woe. Broadcast revenue outstrips gate receipts by more than seven-to-one, which emphasises the necessity of avoiding relegation – even a £16m parachute payment isn’t going to soften Bolton’s landing in the Championship at those ratios. And while there are, to quote Gartside again, “no indications whatsoever” that Davies “wants to exit the club,” there are equally no indications as to what might happen should he do so. And unless the interest payments have helped fund a successful search for eternal life, Davies will “exit” one day.
“Sustainability” is the key quality by which to judge debt, we’re told. Size, comparatively, doesn’t matter. And Bolton’s debts are only as sustainable as Davies himself. Bolton are not alone in that. But even Chelsea, for example, are running at lower losses by the minute – the biggest regular expense being crackpot sackings by the benefactor himself. Burnden Leisure’s debts are growing. Bolton’s fat £35.4m loss will or be a club record for long unless they can somehow sneak fourth place in the Premier League, and then get past the Champions League final qualifying round.
The Europa League won’t be good enough. It certainly wasn’t for the last “unfashionable”, “small” and “provincial” side to qualify for the competition with a lovely brand of football under a highly-thought of manager. The gap between being two goals up at home to Milan and financial meltdown was not a big one at Portsmouth. And although the snappily-titled “Bolton Wanderers Eddie Davies Football Academy” will potentially help Bolton nurture rather than purchase new players soon, the only scope for present financial benefit would appear to be in very necessary naming rights. Bolton’s Plan A cannot physically work forever. But there is no Plan B. And that is what Bolton did, and are doing, wrong.
I am indebted to an article on Bolton this week by the excellent football finance blogger “the Swiss Rambler”. His piece should be read in conjunction with mine (trans: It’s a damn sight better than mine…)