Post by QPR Report on Nov 11, 2009 8:01:06 GMT
Sure hope - but doubt - that QPR are learning from the experience/failures of others, financially.
David Conn/The Guardian
Alarm bells leave Hull seeking another miracle
The Premier League was a 'ridiculous ambition' for the Tigers, who now face tricky decisions to secure survival
When this column reported in September that Hull City's financial accounts for the year to July 2008 were significantly overdue, the club, run by its then chairman, Paul Duffen, responded with a statement on its website claiming that the article "contained a number of inaccuracies". Neither Duffen nor anybody else at the club specified what these inaccuracies were supposed to have been and, since he resigned shortly after the accounts finally came out at the end of last month, Duffen has not returned calls to discuss them.
The financial reports came eventually wrapped in an apparently alarming warning about the state of the club, and the romantic tale of the Tigers, promoted to the top flight for the first time in their history in 2008, has been replaced with agonies over their future. Duffen himself maintained until he left that the club were not in financial difficulties, and said the delay in filing the accounts for all four Hull City-related companies – two responsible for the club, two for the KC Stadium – was due to caution being shown by the auditors, Deloitte. They had to consider whether the club have enough cash to "continue as a going concern", and like all clubs, if relegated from the golden Premier League to the earth of the Championship, City would rely on selling players to balance the books.
Duffen said he was discussing the wording of the accounts with Deloitte, who he said were wary about accepting that sufficient money could be made from selling players, and, as it turned out, the auditors did insert a grim warning. They noted that in July 2007, just after the former chairman Adam Pearson sold the club to the Essex property investor Russell Bartlett, City had no loans or overdraft from any bank. A year later, the club had borrowings of £22m, and City faced: "The requirement to make full repayment of the current bank loans by July 2010."
That produced the stark view that even if City survive in the Premier League, they need to make a £16m surplus through "player trading, match day and commercial income and/or through additional finance raising". If the club are relegated, they need to make a daunting £23m surplus.
The accounts did include the doom-laden assessment Duffen had been keen to avoid, that the unpredictability of how much can be made from selling players, and whether City would be able to raise extra finance: "Represent a material uncertainty that may cast significant doubt over the company's ability to continue as a going concern."
Duffen argued that it would paint an unduly severe picture of a club which will report a £2m profit for the year to 31 July 2009, and neither he nor Bartlett said Duffen's resignation had anything to do with the club's financial position. Pointing to his part in City having achieved the "ridiculous ambition" of promotion to the Premier League, Duffen acknowledged that the team, with the signings made this summer, were struggling on the pitch and so he had to: "Take ultimate responsibility for the disappointments of 2009."
Pearson returning last week to the club whose rise he oversaw from administration and the bottom division in 2001, to the KC Stadium and the Championship, immediately instructed accountants to itemise City's current financial situation. They found the club's bank borrowings had been reduced to £9m, which supported Duffen's case that the finances were not running out of control. Pearson, though, has expressed alarm at the weight of an annual wage bill, for 41 players, which he says has grown to £36m, with a further £2m payable in appearances and bonuses, and £5.3m committed to be paid in agents' fees.
Pearson has acknowledged emphatically that the club are not facing collapse, but said they are struggling to meet day-to-day commitments; Bartlett, he said, has put in additional money, the payments to agents and the club's cash–flow need to be rescheduled and players will inevitably be sold in January.
"It is solvable and manageable, but it is a challenge," Pearson said. "We need to get the wage bill down, and a large part of my job is also to attract additional investment to the club."
Pearson added that Bartlett, who has kept a low profile since taking over, "continues to privately fund the club".
Bartlett and Duffen met when both were looking to buy West Ham before Bjorgolfur Gudmundsson, then a billionaire, now ruined, bought the London side – and they teamed up to acquire Hull City instead. The accounts show Bartlett provided £4m for the club to spend, in return for preference shares, after he took over, an investment which bore fruit when City won promotion.
A complicated series of loans then took place in the year to 31 July 2008 which suggests that, overall, some money went back to Bartlett. Personally, and via one of his companies, R3 Investment Group, he loaned £1.6m to Superstadium Holdings Limited, one of the KC Stadium management companies. That company in turn lent £2m to Tiger Holdings, the club's parent, which lent £2m back to Bartlett's company, R3. Those transactions make it appear that around £400,000 more was loaned out of the club than loaned in. Pearson said he could not confirm whether that is an accurate reading of the accounts, but he emphasised that Bartlett is "a very good owner", who has put his own money into the club and continues to do so.
The accounts for Bartlett's own main company, Fortis Property Investment, which he runs from his office in Shenfield, Essex, show that, as for all investors, these are not the best of economic times. The company's properties had been valued down slightly to £36.2m, and its bank borrowings were £28.6m, repayable by the end of next month. Bartlett has said his business is standing up well in the recession, although clearly he will not want to pour money in indefinitely to service Hull City's millionaire footballers' wage bills.
In January Bartlett and Pearson will have tricky decisions to make: how many of the club's 41 players need to be sold to ease the financial pressure, balanced against how many can be spared, from a struggling squad, to still leave City with the best chance of Premier League survival. An equally tight calculation hangs over Phil Brown – sacking a manager is football's ingrained too-easy option; there would be compensation to pay which would further burden these stretched finances, and no certainty that any replacement would fare better.
Hence Pearson's statement that he is working to support Brown in turning the team's fortunes round: "We genuinely want Phil to succeed and for him to be here for many years."
Negotiating the financial chasm between England's two separate professional leagues is a headache both ways. After promotion, clubs need to spend some of the television windfall on players who can compete in the top flight, but not so extravagantly that they risk collapse if they are relegated. Eighteen months after Hull City's finest hour, the club's late accounts for that 2007-08 season of glory have laid that dilemma bare.
www.guardian.co.uk/sport/david-conn-inside-sport-blog/2009/nov/11/hull-city-accounts-adam-pearson
David Conn/The Guardian
Alarm bells leave Hull seeking another miracle
The Premier League was a 'ridiculous ambition' for the Tigers, who now face tricky decisions to secure survival
When this column reported in September that Hull City's financial accounts for the year to July 2008 were significantly overdue, the club, run by its then chairman, Paul Duffen, responded with a statement on its website claiming that the article "contained a number of inaccuracies". Neither Duffen nor anybody else at the club specified what these inaccuracies were supposed to have been and, since he resigned shortly after the accounts finally came out at the end of last month, Duffen has not returned calls to discuss them.
The financial reports came eventually wrapped in an apparently alarming warning about the state of the club, and the romantic tale of the Tigers, promoted to the top flight for the first time in their history in 2008, has been replaced with agonies over their future. Duffen himself maintained until he left that the club were not in financial difficulties, and said the delay in filing the accounts for all four Hull City-related companies – two responsible for the club, two for the KC Stadium – was due to caution being shown by the auditors, Deloitte. They had to consider whether the club have enough cash to "continue as a going concern", and like all clubs, if relegated from the golden Premier League to the earth of the Championship, City would rely on selling players to balance the books.
Duffen said he was discussing the wording of the accounts with Deloitte, who he said were wary about accepting that sufficient money could be made from selling players, and, as it turned out, the auditors did insert a grim warning. They noted that in July 2007, just after the former chairman Adam Pearson sold the club to the Essex property investor Russell Bartlett, City had no loans or overdraft from any bank. A year later, the club had borrowings of £22m, and City faced: "The requirement to make full repayment of the current bank loans by July 2010."
That produced the stark view that even if City survive in the Premier League, they need to make a £16m surplus through "player trading, match day and commercial income and/or through additional finance raising". If the club are relegated, they need to make a daunting £23m surplus.
The accounts did include the doom-laden assessment Duffen had been keen to avoid, that the unpredictability of how much can be made from selling players, and whether City would be able to raise extra finance: "Represent a material uncertainty that may cast significant doubt over the company's ability to continue as a going concern."
Duffen argued that it would paint an unduly severe picture of a club which will report a £2m profit for the year to 31 July 2009, and neither he nor Bartlett said Duffen's resignation had anything to do with the club's financial position. Pointing to his part in City having achieved the "ridiculous ambition" of promotion to the Premier League, Duffen acknowledged that the team, with the signings made this summer, were struggling on the pitch and so he had to: "Take ultimate responsibility for the disappointments of 2009."
Pearson returning last week to the club whose rise he oversaw from administration and the bottom division in 2001, to the KC Stadium and the Championship, immediately instructed accountants to itemise City's current financial situation. They found the club's bank borrowings had been reduced to £9m, which supported Duffen's case that the finances were not running out of control. Pearson, though, has expressed alarm at the weight of an annual wage bill, for 41 players, which he says has grown to £36m, with a further £2m payable in appearances and bonuses, and £5.3m committed to be paid in agents' fees.
Pearson has acknowledged emphatically that the club are not facing collapse, but said they are struggling to meet day-to-day commitments; Bartlett, he said, has put in additional money, the payments to agents and the club's cash–flow need to be rescheduled and players will inevitably be sold in January.
"It is solvable and manageable, but it is a challenge," Pearson said. "We need to get the wage bill down, and a large part of my job is also to attract additional investment to the club."
Pearson added that Bartlett, who has kept a low profile since taking over, "continues to privately fund the club".
Bartlett and Duffen met when both were looking to buy West Ham before Bjorgolfur Gudmundsson, then a billionaire, now ruined, bought the London side – and they teamed up to acquire Hull City instead. The accounts show Bartlett provided £4m for the club to spend, in return for preference shares, after he took over, an investment which bore fruit when City won promotion.
A complicated series of loans then took place in the year to 31 July 2008 which suggests that, overall, some money went back to Bartlett. Personally, and via one of his companies, R3 Investment Group, he loaned £1.6m to Superstadium Holdings Limited, one of the KC Stadium management companies. That company in turn lent £2m to Tiger Holdings, the club's parent, which lent £2m back to Bartlett's company, R3. Those transactions make it appear that around £400,000 more was loaned out of the club than loaned in. Pearson said he could not confirm whether that is an accurate reading of the accounts, but he emphasised that Bartlett is "a very good owner", who has put his own money into the club and continues to do so.
The accounts for Bartlett's own main company, Fortis Property Investment, which he runs from his office in Shenfield, Essex, show that, as for all investors, these are not the best of economic times. The company's properties had been valued down slightly to £36.2m, and its bank borrowings were £28.6m, repayable by the end of next month. Bartlett has said his business is standing up well in the recession, although clearly he will not want to pour money in indefinitely to service Hull City's millionaire footballers' wage bills.
In January Bartlett and Pearson will have tricky decisions to make: how many of the club's 41 players need to be sold to ease the financial pressure, balanced against how many can be spared, from a struggling squad, to still leave City with the best chance of Premier League survival. An equally tight calculation hangs over Phil Brown – sacking a manager is football's ingrained too-easy option; there would be compensation to pay which would further burden these stretched finances, and no certainty that any replacement would fare better.
Hence Pearson's statement that he is working to support Brown in turning the team's fortunes round: "We genuinely want Phil to succeed and for him to be here for many years."
Negotiating the financial chasm between England's two separate professional leagues is a headache both ways. After promotion, clubs need to spend some of the television windfall on players who can compete in the top flight, but not so extravagantly that they risk collapse if they are relegated. Eighteen months after Hull City's finest hour, the club's late accounts for that 2007-08 season of glory have laid that dilemma bare.
www.guardian.co.uk/sport/david-conn-inside-sport-blog/2009/nov/11/hull-city-accounts-adam-pearson
