Post by QPR Report on Jan 7, 2009 16:52:53 GMT
From a post on the dot.org
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Charlton Official Site
www.cafc.co.uk/newsview.ink?nid=33556
Chappell's annual report
Charlton plc chairman Derek Chappell has revealed the Adthingys made a net loss of £11.5m during the last financial year.
Making his first annual report - covering the 12 months up to the end of June 2008 - since stepping up to his position in March, he revealed life in the Championship, and the failure to return to the Premier League at the first attempt, had understandably had a big financial impact on the club.
Despite a significant reduction in operating overheads, plus profit from player sales of £3.4m, the company had an overall operating loss of £8.6m.
And as part of his statement, Chappell reiterated that the club's main objective at present is to secure Championship football.
"As your new chairman I am pleased to present the company's annual report for the year ended June 30th, 2008.
The presentation of this report and accounts allows me the opportunity to introduce myself to shareholders and other readers of these accounts since my appointment as chairman in March 2008.
My key responsibilities are to oversee the strategic direction of the company and to manage the executive board that, in turn, manages the day-to-day running of the football club. I shall also channel my energies into lifting our football club back to the top flight of English football once again.
Adapting to life in the Championship and the marked difference in the financial environment has certainly been very challenging for the company and its operations, being the first time the football team has been in the second tier of English football since becoming Football League champions in 1999/2000.
The immediate challenge following relegation in May 2007 was to develop through the summer period a squad that would be capable of being competitive in the Championship, while at the same time raising funds through player sales.
A programme of player disposals raised nearly £24m within this period, including the revenues from the sale of Darren Bent to Tottenham Hotspur that was completed on the last day of June 2007. Meanwhile, £12m was paid out during this period for new players for the 2007/08 season.
Your board set a clear target for the season, which was to gain immediate promotion back to the Premier League. In the event, despite early promise, the team's performances were not good enough and the team finished the season in 11th place.
The football club progressed to the third round of the Carling Cup, losing to Luton Town, and in the FA Cup, the club lost in the third round to West Bromwich Albion following a replay at The Hawthorns.
In parallel, the financial challenge was to reduce the company's overheads in anticipation of significantly lower revenues. We were able to reduce overheads by nearly 30 per cent but in the context of lower revenues, the company made an EBITDA (earnings before interest, taxation, depreciation and amortisation) operating loss of £5m before income from the sale of players. Overall, the company made net losses of £11.5m for this period.
There was a positive inflow of working capital during the financial year of £7.8m following large outflows during financial year 2006/07. This mainly came from further support from certain directors and shareholders who subscribed to a convertible corporate bond issue in March 2008 that raised £14.7m to repay short-term loans and to provide working capital for the business.
In this respect, I wish to thank Sir Maurice Hatter, Richard Murray, David Sumners, Steven Ward and Robert Whitehand who, with me, invested in this corporate bond issue and who, with the exception of Steven Ward, had beforehand made available to the company short-term loan funding.
Financial report
This financial year recorded turnover of £26.7m which is an overall reduction of approximately 25 per cent (2007: £35.9m) from the previous year in the Premier League.
The company receives parachute payments from the Premier League for two years following relegation, which are derived from a share of the United Kingdom and overseas broadcasts rights and the Barclays title sponsorship. The results for this year incorporate the first parachute payments, however overall income from broadcast revenues still fell by 33 per cent to £13.5m.
This demonstrates starkly the gulf between the Premier League and the Championship in financial terms due to the different levels of broadcast income and the attraction that the Premier League brand has for major sponsors. In addition, aggregate matchday revenues in this first season in the Championship were 25 per cent lower than the previous season due to lower attendances and overall lower ticket and hospitality pricing.
Financial highlights
2008 2007
Turnover £26.7m £35.9m
Operating overheads (£33.0m) (£47.7m)
Operating loss before amortisation and player trading (£6.3m) (£11.8m)
Amortisation of player costs (£5.8m) (£8.5m)
Profit on player disposals £3.4m £11.3m
Operating loss (£8.6m) (£9.1m)
Net interest charges (£2.9m) (£0.8m)
Net loss for period (£11.5m) (£9.9m)
As the first-team squad prepared for the season, it became apparent that our club sponsor, Llanera, had financial problems and in October 2007 its businesses were placed into administration. The company was protected financially under the terms of the sponsorship agreement with Llanera for this financial period and was also able to retain the use of the sponsor's branding on the playing shirts, in the stadium and on our retail stock for the remainder of the season.
The executive management team worked hard to reduce overheads within all areas of the business and sadly this meant there were staff reductions through the football, commercial and administrative sections. Overall, staff numbers were reduced and the employee overheads, including player costs, for this period were cut by more than 30 per cent to £23.7m.
The operating overheads relating to the football section, matchday activities at The Valley and the operation of the business were reduced significantly, giving savings of £3.8m, and I will take this opportunity to thank all the staff who contributed to this effort. It was regrettable that some long-serving employees had to leave during this process, and we thank them for their past efforts on behalf of the football club.
Net interest payable in this financial year includes £1.6m of discounting costs associated with the acceleration of transfer fees that were due on a deferred basis following the sale of players during the summer. In addition, the company during this period had drawn down further short-term loan funding to support its working capital requirements, and these loans had risen from £6m in June 2007 to £11m by March 2008. This loan facility was eventually repaid from funds raised from the corporate bond issue.
Commercial operations
The Football League makes structured payments to its member clubs from the revenues earned through its central broadcast contracts and sponsorship agreements, including the title sponsorships. There are also payments made to clubs for matches shown live on Sky television as compensation for the potentially lower gates at these matches.
It is widely known that the level of these distributions is very much lower when compared with the central distributions from the Premier League, so the business is now more reliant on its matchday revenues and other sources of income.
It was very important that season-ticket sales remained high following relegation, as this income is a significant part of matchday revenues. As has already been reported to shareholders, the club made an offer of a free season ticket for season 2008/09 to all existing season-ticket holders who renewed before the end of April 2007 if Charlton Athletic gained immediate promotion to the Premier League. In all, 16,800 season tickets were sold (2007: 17,188), a magnificent gesture of support given the manner in which the previous season finished.
We reviewed the pricing structure within the stadium itself, and then by category, and changed a number of ticket prices. In addition, we introduced a season ticket for those below 11 years of age costing only £99. These changes resulted in a lower average income per season ticket and an overall fall in ticket revenues.
During season 2007/08, the average attendance for the Championship matches calculated by reference to tickets sold and issued was 23,159, a stadium capacity utilisation rate of 85 per cent and a reduction of nearly 12 per cent from the previous season in the Premier League (2007: 26,197). However, this was the fifth highest in that division for that year. The recorded average for all Championship clubs for season 2007/08 was 17,027.
The effect of this reduction in attendance when combined with a lower standard pricing structure resulted in significantly reduced matchday ticket revenues. Encouragingly, non-ticket revenues for matchday activities were comparable with the previous season.
The pricing for the 2008/09 season tickets was kept at similar rates as 2007/08, and the offer of a free season ticket extended to cover season 2009/10 if the club was successful in gaining promotion. Currently, nearly 15,000 season tickets have been issued and the average cost per season ticket has remained broadly in line with last season.
Our Valley Express travel service to The Valley on matchdays continues to transport our supporters from Kent and the surrounding counties and during last season the average number using the service was in excess of 1,100, demonstrating the popularity of the service.
Commercial sponsorship revenues were supported by what was to become the final year of the Llanera sponsorship and the second year of the new kit supply sponsorship with Joma. New agreements were completed with both Greenwich Council, which extended the existing community partner sponsorship for a further year, and BBC LONDON 94.9, which expressed its confidence in the club by signing a new three-year content and branding agreement.
Our thanks extend to our many sponsors and partners who continued with their support for Charlton Athletic during the year, notably Andrews Sykes, Axis Europe plc, Bates Office, Greenwich Community College, Greenwich Leisure Limited, Kent on Sunday, Kentish Times, Kent Messenger, Ladbrokes, MBNA, News Shopper, OMM Sport, Paddy Power, Regular Cleaning and Scottish & Newcastle.
We also thank our partners that supported us through The Football League central agreements, notably Coca-Cola, which sponsors the Championship, and also EA Sports, E.ON, Mitre, Panini and Sporting ID. The introduction of a new Joma blue and denim away kit proved highly popular with our supporters and, following its launch in July 2007, became one of the more successful away shirts of recent times. Retail revenues were maintained at similar levels to the previous year but margins were adversely affected by the problems with the Llanera sponsorship prematurely terminating.
The extension of the ticketing system to the Bexleyheath retail outlet allowed tickets for all matches to be sold away from the commercial centre at The Valley. A further development to the commercial infrastructure was completed in March 2008 when the fully integrated online ticketing service was launched, greatly speeding up the processing of internet ticket sales.
The conference and banqueting business continues to provide a valuable contribution to our revenues and The Valley has a loyal customer base with high levels of repeat business due to the excellence of the service, the commitment of our staff and the quality of the facilities on offer. It is recognised that The Valley offers a unique location to its customers and has convenient transport links and ample car parking facilities.
The Valley continues to be an attractive venue for a range of non-matchday activities, most particularly conferences, weddings and corporate and social events. Greenwich Community College is currently developing the area in the west stand that was formerly used by Greenwich Leisure Limited as a health and fitness centre. This will become a croupier college with a casino that will train local people for employment in this sector.
As part of this change, the club will have greater use of the excellent north-stand lounge facilities and as this accommodation is very flexible, this gives a wider range of facilities for the company to market. I expect that our conference and banqueting income will significantly increase in future years.
Valley Gold was launched in August 1989 and, as a lottery and fundraising scheme, its purpose was to raise funds to support the relocation of the football club from Selhurst Park back to The Valley, which was achieved in December 1992. Its current focus is to support youth development at the Charlton Athletic academy and Valley Gold will celebrate its 20th birthday in 2009.
Since its inception, Valley Gold has contributed millions of pounds to the football club and last year saw record annual donations from the scheme of £250,000, making a substantial contribution towards the overall youth academy budget.
We are very pleased to welcome JD Sports plc as our shirt sponsors for 2008/09. In what is a very challenging corporate sponsorship market, it is a credit to the football club and our commercial team that we are able to attract such a well known national brand. Through this sponsorship, JD Sports is displaying its Carbrini sportswear brand on the playing shirt and team training wear. Carbrini is JD Sports' urban youth sport and leisurewear range. This sponsorship is initially for one year and there is an option to extend this at the end of the season.
Management and staff
Your board undertook a review of the corporate structure of the company as part of the process of raising working capital through the issuing of convertible corporate bonds in March 2008. It was decided that certain structural changes would be required going forward, most particularly the separation of the supervision of the overall group of companies from the running of the football club subsidiary and the management of the football budgets.
As part of these changes, I accepted the role of chairman of the company, with Richard Murray becoming chairman of the football club. Richard served as chairman of this company for 13 years, providing invaluable leadership through a period of expansion and development. Martin Simons has become deputy chairman of the football club, having served as its chairman since 1995. He will continue to focus on Charlton Athletic community activities, having for some time been closely involved in community projects and particularly the Charlton Athletic Race Equality partnership with Greenwich Council. Richard and Martin both continue as directors of this company and on behalf of your board I extend our thanks to them for their commitment and achievements through their years of service.
Robert Whitehand remains as deputy chairman of the company with a new responsibility for the financial management of the group and we thank him for his support since he joined the company in 1997. Gideon Franklin, Sir Maurice Hatter, Michael Grade, Mike Stevens and David Sumners also serve on the board of the company and we are grateful for their continuing efforts and their support over many years.
In February 2008, our chief executive Peter Varney informed the board that it was his intention to leave and take a well-earned break after more than 10 years at the helm. Much of the success during this time must be attributed to his dedication and expertise during a period of dramatic change, and he leaves a much improved and developed football club. By the following May, Steve Waggott was appointed as Peter's replacement and he took sole responsibility as chief executive in July after a detailed handover process. Nigel Capelin continues as deputy chief executive, providing continuity at the executive level of management.
There was a further change in October 2008 when Stephen Kavanagh moved from his position as finance director to the new role of managing director. Steve Sutherland remains our commercial director, Mick Everett our operations director and Chris Parkes as our long serving football secretary.
Steve Waggott has been closely involved with the football club for a number of years, having previously served as the chief executive of the Charlton Athletic Community Trust and having been closely involved in a number of joint initiatives with the football club. We are pleased to have obtained the services of such an experienced executive and we are confident that he will be a strong driving force behind the future development of the business.
In October 2007 Greg Bone left the football club's board having been a director of Charlton Athletic since 1994. He served on the executive board of the football club for a number of years and was also a director of this company until January 2007, playing a key role in the successful admission to the London Stock Exchange in 1997. Ben Hayes finished his two-year term as the last elected supporters' director in September 2008 and was instrumental in developing the concept of the new fans' forum, which we believe will improve the communication between supporters and the football club. We extend our thanks to both Greg and Ben for their dedication and support.
Finally, I wish to thank all of the management and employees of Charlton Athletic for their hard work and support through what has been a difficult and uncertain year. There will be challenges ahead as we go through a further period of change and I am confident that I can rely on everybody's continuing support. Running a football club effectively is an extremely complex task and I recognise that most of the hard work behind the scenes can go largely unheralded.
Football report
We started 2007/08 with great optimism that we would be one of the more competitive teams in the Championship and that we had a very good chance of promotion at the end of season. Your board provided significant sums to allow the development of a squad of players capable of achieving promotion at the first attempt.
We sold certain players to raise working capital for the business and we also released a number of players that were at the end of their contracts. While there was a significant reduction in the overall first-team budget, it was still one of the highest in the Championship. The preparation of the first-team squad and the detail of the playing season are presented in the review of the year, but despite some early promise our promotion challenge fell away and the team finished in a disappointing 11th position.
Promotion to the Premier League was set as our primary goal for season 2008/09 but unfortunately the team has not able to compete on the field with any consistency and a poor run of results has, at the date of this report, left the team at the foot of the table and with a very real risk of relegation. However, some restructuring of the squad is planned for the January 2009 transfer window with the aim of at least maintaining our Championship status through more consistent performances and better results during the second half of the season.
In November Alan Pardew left the football club and Phil Parkinson stepped up from first-team coach to act as caretaker manager. Changing the football manager is always one of the more difficult decisions a board has to make. A manager is appointed with an expectation that he will bring success to the club and when success does not materialise it is important to take whatever actions are considered to be in the best interests of the football club.
Charlton Athletic Community Trust
I am proud of the continuing development of the Charlton Athletic Community Trust, which has been operating in the Greenwich and Bexley boroughs and through the Kent regions for nearly five years. It is one of the largest of its type in Europe and is the envy of most other football clubs.
The Football in the Community scheme, which is now incorporated into the community trust, was set up originally in 1992 as a joint venture between the Professional Footballers' Association and the football club. The Football in the Community scheme originally focused on providing professional coaching in schools and through school holiday courses. As part of the community trust, and renamed Charlton Community Scheme Solutions, it has widened the scope of its activities.
In particular, the community trust uses the universal language and appeal of football and sport in general to play a significant role in assisting local and central government with their four main targets: reducing crime, improving health, raising educational attainment and increasing the pathway to employment. The community trust now employs 29 full-time members of staff and utilises nearly 200 casual coaches to deliver its programmes, and it is estimated that approximately 340,000 children and young people participated in the various projects last year. The work of the community trust within our communities will continue to grow next year through the development of its collaboration agreements with Kent County Council and Bexley and Greenwich Councils.
As previously reported, a FieldTurf facility was opened at the football club's training facilities at New Eltham in July 2006, funded by Barclays Spaces for Sport and the Football Foundation. This facility is a full-size, all-weather, floodlit, multi-purpose pitch based on the latest surface technology and is suitable for both football and hockey. This has now developed into a very popular community facility and is used regularly by schools, local football teams of all ages, pupil referral units, estates soccer leagues, disability groups and hockey teams.
The community trust continued to gain national recognition during 2008 through the award of the Community Initiative of the Year by The Football League for its work throughout Kent and has also recently secured the prestigious Investors in People award.
The type of initiatives undertaken by Charlton Athletic sets our club apart from other football clubs and the launch of the groundbreaking educational campaign Street Violence Ruins Lives, was one of the highlights of 2008. This initiative is designed to use the power of football to raise awareness of the growing culture of street violence in the United Kingdom and was a direct response to the tragic death of one of our young supporters, Rob Knox, who was stabbed in Sidcup. We expressed our deepest sympathies to his family at the time and our thoughts remain with them.
Overseas partners
A further aspect of Charlton Athletic that differentiates us as a football club is the development of our overseas partnerships, which provide an international awareness of both the football club and its extensive community activities. These relationships also provide opportunities to identify talented footballers within these partner clubs.
Most prominent is the agreement with ASEC Mimosas of the Ivory Coast where the football club makes an annual payment to sponsor the ASEC academy in return for first call on its youth players. The ASEC academy has in the past produced a number of players who went on to play for the national side and a number who currently play with clubs in the Premier League.
This year we have signed two 18-year-old players from ASEC Mimosas, and these players have been loaned to clubs in France to continue their development, as current United Kingdom employment regulations prevent them from immediately joining the playing staff of our football club. In total, there are four young players from ASEC Mimosas playing in Europe on loan with other clubs where Charlton Athletic has obtained their registrations and there are a further three players who will complete their registrations in the near future.
Our overseas development projects in South Africa were started in 2002 in the Alexandra townships in Johannesburg and were extended to Cape Town in 2005 and Durban in 2008. This initiative aims to divert children away from crime and disorder while providing education on topics such as citizenship and health. The project delivers coaching courses for children and provides training for teachers and community volunteers to attain the Football Association's Level One coaching standard. This leaves a permanent legacy in the townships where these activities take place. These projects are delivered in partnership with the community Trust, the Metropolitan Police, British Airways and the Foreign and Commonwealth Office. It is our intention to extend these activities to other parts of South Africa.
Those involved have all reported that this has been the most rewarding and emotional work that they have undertaken. There are also links with football clubs in Belgium, China, Denmark, Finland and Spain.
Youth academy
The continuing development of our FA youth academy will be a major element in the future success of Charlton Athletic by developing players that will become regular members of the first-team squad. Since its inception in 1998, many young players have fulfilled their dreams by graduating from our academy to become professional footballers.
Even before the formal registration of the academy in 1998, our football club was rightly recognised for its policy of giving its young players first-team opportunities. Academy director, Steve Gritt, is ably supported by his management and coaching team comprising Steve Avory, Dave Chatwin and Damian Mathew, with Dave Regis fulfilling the role of academy education and welfare officer. The academy runs teams through the age groups from 9 to 16 with a senior side of players up to the age of 18. There is regular assessment of the progress and development of every player by their coaches and a formal reporting process twice a year.
In July 2007 professional contracts were awarded to five academy players and since then a further three players have become professional footballers, demonstrating the quality of our current academy players. Of these players, Harry Arter, Grant Basey and Scott Wagstaff made their senior debuts during the season and another former academy player, Rob Elliot, also made his debut during the match at Plymouth Argyle. In the 2007/08 FA Youth Cup, the senior academy team produced a good cup run before narrowly losing to Sunderland in the quarter-finals.
A true highlight of the season came in April 2008 when an academy player, Jonjo Shelvey, became Charlton Athletic's youngest first-team debutant since Paul Konchesky, when he took the field against Coventry City at the age of 16 years and 59 days.
Future prospects
Adjacent to The Valley, the Greenwich Peninsular has been transformed in recent years by a number of large infrastructure projects with the O2, the former Millennium Dome, rapidly becoming recognised as one of the best music arenas in Europe.
With the Greenwich Borough hosting nine of the Olympic events, the peninsular will also be an Olympic 2012 venue and, with Charlton Athletic now officially selected as a pre-Olympic training venue, we will be developing a range of commercial opportunities through the Destination Greenwich concept, an initiative launched by the London Borough of Greenwich.
The development of this concept will see all of the visitor attractions in Greenwich working together on leisure packages combining music, sport and culture. We continue to promote The Valley stadium as a potential site for Olympic 2012 competitions through our extensive network of contacts with local, regional and central government.
I am also delighted that we are once again leading the way off the pitch by becoming the only football club to be invited to join the 2009 London Leaders programme. This will result in Charlton Athletic working closely with the office of the Mayor of London, providing an excellent platform to promote the football club in London and to highlight the extensive community work carried out across the region.
We regularly meet with representatives of all of the agencies involved in the future development of the region, Europe's biggest regeneration project, including the Thames Gateway Strategic Partnership, to ensure that we are fully informed of future developments in respect of housing and transport. Our links with Business in the Community and the local chambers of commerce are maintained to allow the football club to network across the wide range of businesses in our catchment area.
As reported in previous statements, we have in place detailed planning consents to expand the capacity at The Valley, initially through the development of the east stand. We will consider this project further when there is a commercial case for doing so. We reported to shareholders on October 10th, 2008 that the company had received an indicative cash offer from Zabeel Investments, a Dubai-based diversified investment company. Zabeel Investments had been looking at the opportunity to invest in an English football club and had chosen Charlton Athletic as that club.
Zabeel Investments declared that it was making a strategic long-term investment and stated its aim was to get Charlton Athletic back to the Premier League. In the event, no firm bid was received as Zabeel Investments decided to focus on domestic opportunities in Dubai. Your board declared at the time that it believed that a successful outcome of this would have been beneficial to shareholders, employees and fans of the club and the local community. We shall therefore consider fully future opportunities for investments which are deemed to be in the best interests of the company.
Conclusion
Last season, and again this season so far, our football performances have simply not been at an acceptable level and this must change. Your board fully recognises the seriousness of our current league position. Our main task now is to secure our place in the Championship through improved performances and success on the playing field during the remainder of this season.
Everyone connected with the football club remains determined to achieve this. We require full support for the team and its management and a united approach both on and off the pitch. Football clubs revolve around success on the pitch and ultimately this is essential for the continuing development of this football club.
I remain proud that Charlton Athletic continues to uphold its core values and its commitment to the communities from which we draw our support and I am confident that as performances on the pitch improve we can continue the development of our football club."
Derek Chappell - December 9th, 2008
To download a pdf file of the full 2008 annual report, click here.
www.qprdot.org/viewtopic.php?t=33625
Charlton Official Site
www.cafc.co.uk/newsview.ink?nid=33556
Chappell's annual report
Charlton plc chairman Derek Chappell has revealed the Adthingys made a net loss of £11.5m during the last financial year.
Making his first annual report - covering the 12 months up to the end of June 2008 - since stepping up to his position in March, he revealed life in the Championship, and the failure to return to the Premier League at the first attempt, had understandably had a big financial impact on the club.
Despite a significant reduction in operating overheads, plus profit from player sales of £3.4m, the company had an overall operating loss of £8.6m.
And as part of his statement, Chappell reiterated that the club's main objective at present is to secure Championship football.
"As your new chairman I am pleased to present the company's annual report for the year ended June 30th, 2008.
The presentation of this report and accounts allows me the opportunity to introduce myself to shareholders and other readers of these accounts since my appointment as chairman in March 2008.
My key responsibilities are to oversee the strategic direction of the company and to manage the executive board that, in turn, manages the day-to-day running of the football club. I shall also channel my energies into lifting our football club back to the top flight of English football once again.
Adapting to life in the Championship and the marked difference in the financial environment has certainly been very challenging for the company and its operations, being the first time the football team has been in the second tier of English football since becoming Football League champions in 1999/2000.
The immediate challenge following relegation in May 2007 was to develop through the summer period a squad that would be capable of being competitive in the Championship, while at the same time raising funds through player sales.
A programme of player disposals raised nearly £24m within this period, including the revenues from the sale of Darren Bent to Tottenham Hotspur that was completed on the last day of June 2007. Meanwhile, £12m was paid out during this period for new players for the 2007/08 season.
Your board set a clear target for the season, which was to gain immediate promotion back to the Premier League. In the event, despite early promise, the team's performances were not good enough and the team finished the season in 11th place.
The football club progressed to the third round of the Carling Cup, losing to Luton Town, and in the FA Cup, the club lost in the third round to West Bromwich Albion following a replay at The Hawthorns.
In parallel, the financial challenge was to reduce the company's overheads in anticipation of significantly lower revenues. We were able to reduce overheads by nearly 30 per cent but in the context of lower revenues, the company made an EBITDA (earnings before interest, taxation, depreciation and amortisation) operating loss of £5m before income from the sale of players. Overall, the company made net losses of £11.5m for this period.
There was a positive inflow of working capital during the financial year of £7.8m following large outflows during financial year 2006/07. This mainly came from further support from certain directors and shareholders who subscribed to a convertible corporate bond issue in March 2008 that raised £14.7m to repay short-term loans and to provide working capital for the business.
In this respect, I wish to thank Sir Maurice Hatter, Richard Murray, David Sumners, Steven Ward and Robert Whitehand who, with me, invested in this corporate bond issue and who, with the exception of Steven Ward, had beforehand made available to the company short-term loan funding.
Financial report
This financial year recorded turnover of £26.7m which is an overall reduction of approximately 25 per cent (2007: £35.9m) from the previous year in the Premier League.
The company receives parachute payments from the Premier League for two years following relegation, which are derived from a share of the United Kingdom and overseas broadcasts rights and the Barclays title sponsorship. The results for this year incorporate the first parachute payments, however overall income from broadcast revenues still fell by 33 per cent to £13.5m.
This demonstrates starkly the gulf between the Premier League and the Championship in financial terms due to the different levels of broadcast income and the attraction that the Premier League brand has for major sponsors. In addition, aggregate matchday revenues in this first season in the Championship were 25 per cent lower than the previous season due to lower attendances and overall lower ticket and hospitality pricing.
Financial highlights
2008 2007
Turnover £26.7m £35.9m
Operating overheads (£33.0m) (£47.7m)
Operating loss before amortisation and player trading (£6.3m) (£11.8m)
Amortisation of player costs (£5.8m) (£8.5m)
Profit on player disposals £3.4m £11.3m
Operating loss (£8.6m) (£9.1m)
Net interest charges (£2.9m) (£0.8m)
Net loss for period (£11.5m) (£9.9m)
As the first-team squad prepared for the season, it became apparent that our club sponsor, Llanera, had financial problems and in October 2007 its businesses were placed into administration. The company was protected financially under the terms of the sponsorship agreement with Llanera for this financial period and was also able to retain the use of the sponsor's branding on the playing shirts, in the stadium and on our retail stock for the remainder of the season.
The executive management team worked hard to reduce overheads within all areas of the business and sadly this meant there were staff reductions through the football, commercial and administrative sections. Overall, staff numbers were reduced and the employee overheads, including player costs, for this period were cut by more than 30 per cent to £23.7m.
The operating overheads relating to the football section, matchday activities at The Valley and the operation of the business were reduced significantly, giving savings of £3.8m, and I will take this opportunity to thank all the staff who contributed to this effort. It was regrettable that some long-serving employees had to leave during this process, and we thank them for their past efforts on behalf of the football club.
Net interest payable in this financial year includes £1.6m of discounting costs associated with the acceleration of transfer fees that were due on a deferred basis following the sale of players during the summer. In addition, the company during this period had drawn down further short-term loan funding to support its working capital requirements, and these loans had risen from £6m in June 2007 to £11m by March 2008. This loan facility was eventually repaid from funds raised from the corporate bond issue.
Commercial operations
The Football League makes structured payments to its member clubs from the revenues earned through its central broadcast contracts and sponsorship agreements, including the title sponsorships. There are also payments made to clubs for matches shown live on Sky television as compensation for the potentially lower gates at these matches.
It is widely known that the level of these distributions is very much lower when compared with the central distributions from the Premier League, so the business is now more reliant on its matchday revenues and other sources of income.
It was very important that season-ticket sales remained high following relegation, as this income is a significant part of matchday revenues. As has already been reported to shareholders, the club made an offer of a free season ticket for season 2008/09 to all existing season-ticket holders who renewed before the end of April 2007 if Charlton Athletic gained immediate promotion to the Premier League. In all, 16,800 season tickets were sold (2007: 17,188), a magnificent gesture of support given the manner in which the previous season finished.
We reviewed the pricing structure within the stadium itself, and then by category, and changed a number of ticket prices. In addition, we introduced a season ticket for those below 11 years of age costing only £99. These changes resulted in a lower average income per season ticket and an overall fall in ticket revenues.
During season 2007/08, the average attendance for the Championship matches calculated by reference to tickets sold and issued was 23,159, a stadium capacity utilisation rate of 85 per cent and a reduction of nearly 12 per cent from the previous season in the Premier League (2007: 26,197). However, this was the fifth highest in that division for that year. The recorded average for all Championship clubs for season 2007/08 was 17,027.
The effect of this reduction in attendance when combined with a lower standard pricing structure resulted in significantly reduced matchday ticket revenues. Encouragingly, non-ticket revenues for matchday activities were comparable with the previous season.
The pricing for the 2008/09 season tickets was kept at similar rates as 2007/08, and the offer of a free season ticket extended to cover season 2009/10 if the club was successful in gaining promotion. Currently, nearly 15,000 season tickets have been issued and the average cost per season ticket has remained broadly in line with last season.
Our Valley Express travel service to The Valley on matchdays continues to transport our supporters from Kent and the surrounding counties and during last season the average number using the service was in excess of 1,100, demonstrating the popularity of the service.
Commercial sponsorship revenues were supported by what was to become the final year of the Llanera sponsorship and the second year of the new kit supply sponsorship with Joma. New agreements were completed with both Greenwich Council, which extended the existing community partner sponsorship for a further year, and BBC LONDON 94.9, which expressed its confidence in the club by signing a new three-year content and branding agreement.
Our thanks extend to our many sponsors and partners who continued with their support for Charlton Athletic during the year, notably Andrews Sykes, Axis Europe plc, Bates Office, Greenwich Community College, Greenwich Leisure Limited, Kent on Sunday, Kentish Times, Kent Messenger, Ladbrokes, MBNA, News Shopper, OMM Sport, Paddy Power, Regular Cleaning and Scottish & Newcastle.
We also thank our partners that supported us through The Football League central agreements, notably Coca-Cola, which sponsors the Championship, and also EA Sports, E.ON, Mitre, Panini and Sporting ID. The introduction of a new Joma blue and denim away kit proved highly popular with our supporters and, following its launch in July 2007, became one of the more successful away shirts of recent times. Retail revenues were maintained at similar levels to the previous year but margins were adversely affected by the problems with the Llanera sponsorship prematurely terminating.
The extension of the ticketing system to the Bexleyheath retail outlet allowed tickets for all matches to be sold away from the commercial centre at The Valley. A further development to the commercial infrastructure was completed in March 2008 when the fully integrated online ticketing service was launched, greatly speeding up the processing of internet ticket sales.
The conference and banqueting business continues to provide a valuable contribution to our revenues and The Valley has a loyal customer base with high levels of repeat business due to the excellence of the service, the commitment of our staff and the quality of the facilities on offer. It is recognised that The Valley offers a unique location to its customers and has convenient transport links and ample car parking facilities.
The Valley continues to be an attractive venue for a range of non-matchday activities, most particularly conferences, weddings and corporate and social events. Greenwich Community College is currently developing the area in the west stand that was formerly used by Greenwich Leisure Limited as a health and fitness centre. This will become a croupier college with a casino that will train local people for employment in this sector.
As part of this change, the club will have greater use of the excellent north-stand lounge facilities and as this accommodation is very flexible, this gives a wider range of facilities for the company to market. I expect that our conference and banqueting income will significantly increase in future years.
Valley Gold was launched in August 1989 and, as a lottery and fundraising scheme, its purpose was to raise funds to support the relocation of the football club from Selhurst Park back to The Valley, which was achieved in December 1992. Its current focus is to support youth development at the Charlton Athletic academy and Valley Gold will celebrate its 20th birthday in 2009.
Since its inception, Valley Gold has contributed millions of pounds to the football club and last year saw record annual donations from the scheme of £250,000, making a substantial contribution towards the overall youth academy budget.
We are very pleased to welcome JD Sports plc as our shirt sponsors for 2008/09. In what is a very challenging corporate sponsorship market, it is a credit to the football club and our commercial team that we are able to attract such a well known national brand. Through this sponsorship, JD Sports is displaying its Carbrini sportswear brand on the playing shirt and team training wear. Carbrini is JD Sports' urban youth sport and leisurewear range. This sponsorship is initially for one year and there is an option to extend this at the end of the season.
Management and staff
Your board undertook a review of the corporate structure of the company as part of the process of raising working capital through the issuing of convertible corporate bonds in March 2008. It was decided that certain structural changes would be required going forward, most particularly the separation of the supervision of the overall group of companies from the running of the football club subsidiary and the management of the football budgets.
As part of these changes, I accepted the role of chairman of the company, with Richard Murray becoming chairman of the football club. Richard served as chairman of this company for 13 years, providing invaluable leadership through a period of expansion and development. Martin Simons has become deputy chairman of the football club, having served as its chairman since 1995. He will continue to focus on Charlton Athletic community activities, having for some time been closely involved in community projects and particularly the Charlton Athletic Race Equality partnership with Greenwich Council. Richard and Martin both continue as directors of this company and on behalf of your board I extend our thanks to them for their commitment and achievements through their years of service.
Robert Whitehand remains as deputy chairman of the company with a new responsibility for the financial management of the group and we thank him for his support since he joined the company in 1997. Gideon Franklin, Sir Maurice Hatter, Michael Grade, Mike Stevens and David Sumners also serve on the board of the company and we are grateful for their continuing efforts and their support over many years.
In February 2008, our chief executive Peter Varney informed the board that it was his intention to leave and take a well-earned break after more than 10 years at the helm. Much of the success during this time must be attributed to his dedication and expertise during a period of dramatic change, and he leaves a much improved and developed football club. By the following May, Steve Waggott was appointed as Peter's replacement and he took sole responsibility as chief executive in July after a detailed handover process. Nigel Capelin continues as deputy chief executive, providing continuity at the executive level of management.
There was a further change in October 2008 when Stephen Kavanagh moved from his position as finance director to the new role of managing director. Steve Sutherland remains our commercial director, Mick Everett our operations director and Chris Parkes as our long serving football secretary.
Steve Waggott has been closely involved with the football club for a number of years, having previously served as the chief executive of the Charlton Athletic Community Trust and having been closely involved in a number of joint initiatives with the football club. We are pleased to have obtained the services of such an experienced executive and we are confident that he will be a strong driving force behind the future development of the business.
In October 2007 Greg Bone left the football club's board having been a director of Charlton Athletic since 1994. He served on the executive board of the football club for a number of years and was also a director of this company until January 2007, playing a key role in the successful admission to the London Stock Exchange in 1997. Ben Hayes finished his two-year term as the last elected supporters' director in September 2008 and was instrumental in developing the concept of the new fans' forum, which we believe will improve the communication between supporters and the football club. We extend our thanks to both Greg and Ben for their dedication and support.
Finally, I wish to thank all of the management and employees of Charlton Athletic for their hard work and support through what has been a difficult and uncertain year. There will be challenges ahead as we go through a further period of change and I am confident that I can rely on everybody's continuing support. Running a football club effectively is an extremely complex task and I recognise that most of the hard work behind the scenes can go largely unheralded.
Football report
We started 2007/08 with great optimism that we would be one of the more competitive teams in the Championship and that we had a very good chance of promotion at the end of season. Your board provided significant sums to allow the development of a squad of players capable of achieving promotion at the first attempt.
We sold certain players to raise working capital for the business and we also released a number of players that were at the end of their contracts. While there was a significant reduction in the overall first-team budget, it was still one of the highest in the Championship. The preparation of the first-team squad and the detail of the playing season are presented in the review of the year, but despite some early promise our promotion challenge fell away and the team finished in a disappointing 11th position.
Promotion to the Premier League was set as our primary goal for season 2008/09 but unfortunately the team has not able to compete on the field with any consistency and a poor run of results has, at the date of this report, left the team at the foot of the table and with a very real risk of relegation. However, some restructuring of the squad is planned for the January 2009 transfer window with the aim of at least maintaining our Championship status through more consistent performances and better results during the second half of the season.
In November Alan Pardew left the football club and Phil Parkinson stepped up from first-team coach to act as caretaker manager. Changing the football manager is always one of the more difficult decisions a board has to make. A manager is appointed with an expectation that he will bring success to the club and when success does not materialise it is important to take whatever actions are considered to be in the best interests of the football club.
Charlton Athletic Community Trust
I am proud of the continuing development of the Charlton Athletic Community Trust, which has been operating in the Greenwich and Bexley boroughs and through the Kent regions for nearly five years. It is one of the largest of its type in Europe and is the envy of most other football clubs.
The Football in the Community scheme, which is now incorporated into the community trust, was set up originally in 1992 as a joint venture between the Professional Footballers' Association and the football club. The Football in the Community scheme originally focused on providing professional coaching in schools and through school holiday courses. As part of the community trust, and renamed Charlton Community Scheme Solutions, it has widened the scope of its activities.
In particular, the community trust uses the universal language and appeal of football and sport in general to play a significant role in assisting local and central government with their four main targets: reducing crime, improving health, raising educational attainment and increasing the pathway to employment. The community trust now employs 29 full-time members of staff and utilises nearly 200 casual coaches to deliver its programmes, and it is estimated that approximately 340,000 children and young people participated in the various projects last year. The work of the community trust within our communities will continue to grow next year through the development of its collaboration agreements with Kent County Council and Bexley and Greenwich Councils.
As previously reported, a FieldTurf facility was opened at the football club's training facilities at New Eltham in July 2006, funded by Barclays Spaces for Sport and the Football Foundation. This facility is a full-size, all-weather, floodlit, multi-purpose pitch based on the latest surface technology and is suitable for both football and hockey. This has now developed into a very popular community facility and is used regularly by schools, local football teams of all ages, pupil referral units, estates soccer leagues, disability groups and hockey teams.
The community trust continued to gain national recognition during 2008 through the award of the Community Initiative of the Year by The Football League for its work throughout Kent and has also recently secured the prestigious Investors in People award.
The type of initiatives undertaken by Charlton Athletic sets our club apart from other football clubs and the launch of the groundbreaking educational campaign Street Violence Ruins Lives, was one of the highlights of 2008. This initiative is designed to use the power of football to raise awareness of the growing culture of street violence in the United Kingdom and was a direct response to the tragic death of one of our young supporters, Rob Knox, who was stabbed in Sidcup. We expressed our deepest sympathies to his family at the time and our thoughts remain with them.
Overseas partners
A further aspect of Charlton Athletic that differentiates us as a football club is the development of our overseas partnerships, which provide an international awareness of both the football club and its extensive community activities. These relationships also provide opportunities to identify talented footballers within these partner clubs.
Most prominent is the agreement with ASEC Mimosas of the Ivory Coast where the football club makes an annual payment to sponsor the ASEC academy in return for first call on its youth players. The ASEC academy has in the past produced a number of players who went on to play for the national side and a number who currently play with clubs in the Premier League.
This year we have signed two 18-year-old players from ASEC Mimosas, and these players have been loaned to clubs in France to continue their development, as current United Kingdom employment regulations prevent them from immediately joining the playing staff of our football club. In total, there are four young players from ASEC Mimosas playing in Europe on loan with other clubs where Charlton Athletic has obtained their registrations and there are a further three players who will complete their registrations in the near future.
Our overseas development projects in South Africa were started in 2002 in the Alexandra townships in Johannesburg and were extended to Cape Town in 2005 and Durban in 2008. This initiative aims to divert children away from crime and disorder while providing education on topics such as citizenship and health. The project delivers coaching courses for children and provides training for teachers and community volunteers to attain the Football Association's Level One coaching standard. This leaves a permanent legacy in the townships where these activities take place. These projects are delivered in partnership with the community Trust, the Metropolitan Police, British Airways and the Foreign and Commonwealth Office. It is our intention to extend these activities to other parts of South Africa.
Those involved have all reported that this has been the most rewarding and emotional work that they have undertaken. There are also links with football clubs in Belgium, China, Denmark, Finland and Spain.
Youth academy
The continuing development of our FA youth academy will be a major element in the future success of Charlton Athletic by developing players that will become regular members of the first-team squad. Since its inception in 1998, many young players have fulfilled their dreams by graduating from our academy to become professional footballers.
Even before the formal registration of the academy in 1998, our football club was rightly recognised for its policy of giving its young players first-team opportunities. Academy director, Steve Gritt, is ably supported by his management and coaching team comprising Steve Avory, Dave Chatwin and Damian Mathew, with Dave Regis fulfilling the role of academy education and welfare officer. The academy runs teams through the age groups from 9 to 16 with a senior side of players up to the age of 18. There is regular assessment of the progress and development of every player by their coaches and a formal reporting process twice a year.
In July 2007 professional contracts were awarded to five academy players and since then a further three players have become professional footballers, demonstrating the quality of our current academy players. Of these players, Harry Arter, Grant Basey and Scott Wagstaff made their senior debuts during the season and another former academy player, Rob Elliot, also made his debut during the match at Plymouth Argyle. In the 2007/08 FA Youth Cup, the senior academy team produced a good cup run before narrowly losing to Sunderland in the quarter-finals.
A true highlight of the season came in April 2008 when an academy player, Jonjo Shelvey, became Charlton Athletic's youngest first-team debutant since Paul Konchesky, when he took the field against Coventry City at the age of 16 years and 59 days.
Future prospects
Adjacent to The Valley, the Greenwich Peninsular has been transformed in recent years by a number of large infrastructure projects with the O2, the former Millennium Dome, rapidly becoming recognised as one of the best music arenas in Europe.
With the Greenwich Borough hosting nine of the Olympic events, the peninsular will also be an Olympic 2012 venue and, with Charlton Athletic now officially selected as a pre-Olympic training venue, we will be developing a range of commercial opportunities through the Destination Greenwich concept, an initiative launched by the London Borough of Greenwich.
The development of this concept will see all of the visitor attractions in Greenwich working together on leisure packages combining music, sport and culture. We continue to promote The Valley stadium as a potential site for Olympic 2012 competitions through our extensive network of contacts with local, regional and central government.
I am also delighted that we are once again leading the way off the pitch by becoming the only football club to be invited to join the 2009 London Leaders programme. This will result in Charlton Athletic working closely with the office of the Mayor of London, providing an excellent platform to promote the football club in London and to highlight the extensive community work carried out across the region.
We regularly meet with representatives of all of the agencies involved in the future development of the region, Europe's biggest regeneration project, including the Thames Gateway Strategic Partnership, to ensure that we are fully informed of future developments in respect of housing and transport. Our links with Business in the Community and the local chambers of commerce are maintained to allow the football club to network across the wide range of businesses in our catchment area.
As reported in previous statements, we have in place detailed planning consents to expand the capacity at The Valley, initially through the development of the east stand. We will consider this project further when there is a commercial case for doing so. We reported to shareholders on October 10th, 2008 that the company had received an indicative cash offer from Zabeel Investments, a Dubai-based diversified investment company. Zabeel Investments had been looking at the opportunity to invest in an English football club and had chosen Charlton Athletic as that club.
Zabeel Investments declared that it was making a strategic long-term investment and stated its aim was to get Charlton Athletic back to the Premier League. In the event, no firm bid was received as Zabeel Investments decided to focus on domestic opportunities in Dubai. Your board declared at the time that it believed that a successful outcome of this would have been beneficial to shareholders, employees and fans of the club and the local community. We shall therefore consider fully future opportunities for investments which are deemed to be in the best interests of the company.
Conclusion
Last season, and again this season so far, our football performances have simply not been at an acceptable level and this must change. Your board fully recognises the seriousness of our current league position. Our main task now is to secure our place in the Championship through improved performances and success on the playing field during the remainder of this season.
Everyone connected with the football club remains determined to achieve this. We require full support for the team and its management and a united approach both on and off the pitch. Football clubs revolve around success on the pitch and ultimately this is essential for the continuing development of this football club.
I remain proud that Charlton Athletic continues to uphold its core values and its commitment to the communities from which we draw our support and I am confident that as performances on the pitch improve we can continue the development of our football club."
Derek Chappell - December 9th, 2008
To download a pdf file of the full 2008 annual report, click here.