On our new world of debt and hyperbole. Interesting stuff.

[BlyBlyBabes 0]

http://www.guardian.co.uk/sport

OTBC

[Buncey 1]

http://www.guardian.co.uk/football/2011/may/19/premier-league-finances-black-holehttp://image.guardian.co.uk/sys-files/Guardian/documents/2011/05/18/sportscribddoc.pdf  (note it is a pdf and you need adobe reader to view)The frightening reality of the modern game.

[T 190]

That is indeed interesting and frighening. It means that apart from the big financial 4 of ManU, Arsenal, Spurs and Liverpool the other clubs are subsidised to the tune of 30m each every year and with UEFA financial fair play it will be reduced to 15m. No doubt the figures are skewed by the likes of Chelsea and Man City but given our bottom 5 attendances amd relatively low ticket prices then it is going to be very difficult for us to compete financially especially when you look at clubs with similar or lower attendances like Stoke and Bolton who are substantially subsidised by owners/benefactors. Bolton for instance are reported to have racked up 60m of loans from benefactors. Assuming, Blackpool are relegated and Reading are promoted we will be the poorest club in the Premier League. Unless owners and benefactors are no longer allowed to subsidise clubs it will be extremely difficult for NCFC to remain in the premier league.

[blahblahblah 2]

" Assuming, Blackpool are relegated and Reading are promoted we will be

the poorest club in the Premier League. Unless owners and benefactors

are no longer allowed to subsidise clubs it will be extremely difficult

for NCFC to remain in the premier league."All the more important to have the right manager in charge, as the right manager can save millions.  Within the context of the future income at stake, Lambert is worth every inch of 1.6 million pounds to NCFC the business, and probably a fair bit more.  Whether or not we could afford to give him more is the problem I guess.

[Buncey 1]

[quote user="T"]That is indeed interesting and frighening. It means that apart from the big financial 4 of ManU, Arsenal, Spurs and Liverpool the other clubs are subsidised to the tune of 30m each every year and with UEFA financial fair play it will be reduced to 15m. No doubt the figures are skewed by the likes of Chelsea and Man City but given our bottom 5 attendances amd relatively low ticket prices then it is going to be very difficult for us to compete financially especially when you look at clubs with similar or lower attendances like Stoke and Bolton who are substantially subsidised by owners/benefactors. Bolton for instance are reported to have racked up 60m of loans from benefactors. Assuming, Blackpool are relegated and Reading are promoted we will be the poorest club in the Premier League. Unless owners and benefactors are no longer allowed to subsidise clubs it will be extremely difficult for NCFC to remain in the premier league.[/quote]Hardly fair is it. It''s like having a boxing match where one guy is wearing brass knuckles. It''s clear that there is a top 4/5 in terms of revenue and spending power, a few teams in relative wealth and the best can only hope to not be relegated. The huge emphasise put on the Premier League TV money has meant that these clubs are not viable once that revenue dries up due to relegation and require benefactors to keep them in that top flight. Without parachute payments these clubs would go out of business when relegated. What is most sad is it punishes teams that use financial pragmatism. Anything other than Blackpool being relegated is a near miracle and the same goes for Aston Villa, Everton and the rest of the pack ever achieving anything higher than 5th place. The reality is, unless you hit the jackpot and get an awesome manager, you will forever be outspent and beaten on the pitch, and the best Norwich can ever hope for it season-to-season survival in the Premier League.

[T 190]

Thank you for the pdf Fellas. Just had another look. It should be required reading before anyone comments on the league position of NCFC. Lambert will have to outperform again to keep us up and it shows that Worthington did well just to keep us in contention to stay up.

[SwindonCanary 455]

Players wages !   Is the football world mad ?

[Tangible Fixed Assets anyone? 0]

The issue of the smaller clubs (in terms of resources) coming into the Premiership versus the giants (e.g., Chelsea, Man City, Man Utd) and their ability (the smaller clubs) to spend more over a period of time to establish themselves is already under consideration by the football authorities.

[Jonnyboy 0]

I don''t understand the whole Man U thing? Am I right in thinking that they got a loan to buy the club, now they are getting the club to pay the interest charges??

How is this allowed to happen?

so they are getting more and more in debt every year and paying higher interest rates each year, surely they are going bust soon?

Also what do the Glazers get out of it? they can''t surely be allowed to take any money out of the club as it''s £500m in debt?

What happens if they sell it? do they sell the debt and make nothing?

I don''t get why they have bought the club?

Am I missing something??

[Robert N. LiM 4,226]

Everyone should read this.

Apart from anything else, it rather blows a hole in this idea that we''re going to pay off our debt by being in the Premier League. We could, but we would be relegated as a result.

Those UEFA rules can''t come soon enough, and we need to cut our cloth according to them next season.

[T 190]

[quote user="Jonnyboy"]I don''t understand the whole Man U thing? Am I right in thinking that they got a loan to buy the club, now they are getting the club to pay the interest charges?? How is this allowed to happen? so they are getting more and more in debt every year and paying higher interest rates each year, surely they are going bust soon? Also what do the Glazers get out of it? they can''t surely be allowed to take any money out of the club as it''s £500m in debt? What happens if they sell it? do they sell the debt and make nothing? I don''t get why they have bought the club? Am I missing something??[/quote]

This is basically how the whole private equity industry works. Using substantial amount of debt to buy a business. Might help to think of it as buying a house to rent using a buy to let mortgage. You use the rent to pay off the mortgage and then profit from any rise in rents or the value of the property. In ManU''s case the Glazers have been increasing the commercial revenue to increase the value of the business and make a profit for themselves. This only works for the likes of MAnU, Spurs and Aresenal and Liverpool who have high value brands to generate substantial commercial revenue. The rest of the Premiership is subsidised by wealthy benefactors.

[Jacko 0]

Wolves are the model for us to base ourselves on. I remember reading an article the other day where the Wolves chairman was interviewed. In every players deal they insist upon a reduction in wages should the club be relegated. He admitted they have lost a couple of players due to this but he isnt going to screw the club

[GMF 735]

The other critical thing about the Man Utd situation is that after they purchased the Club they were subsequently able to acquire sufficent shares to take them above the critical 90% ownership threshold. When this happens, the remaining shareholders had to sell their shares to the Glazers thereby taking the company private.

 

That''s when the real "fun" can start, as they can then pay themselves "dividends" as they please, assuming the business generates sufficent cash surpluses. I recall this was the cause of such outcry when MUFC recently refinanced their PIK loans, as the funding document revealed just how much they were entitled to draw in dividends in certain circumstance in the future.

[T 190]

Yes totally agree, clubs get into financial difficulty if they enter into long term player contracts and then get relegated so all player contracts should be subject to the division we are playing in. All football clubs should agree to this and financial fair play of breaking even. The current situation is utter madness as the administrators of Portmouth pointed out. Anyone who goes on about backing the manager or prudence over ambition is ignoring the most basic business and financial commonsense. The directors have a legal obligation to make sure the club can meet its financial obligations ie pay the tax man and repay the loans. That does not mean we can not afford to spend the extra 40m on players next season but that the contracts should be structured such that the wages reduce to reflect the revenue if we do get relegated. I don''t believe the NCFC directors will do anything to jeoparise the club''s financial position but playing sensible when other clubs aren''t is difficult. The football club and players getting priority on administration should be stopped for a start as this would force the League to make sure that football clubs were managed sensible.

[PurpleCanary 5,553]

To be read from behind the sofa, I think. All sorts of frightening figures. Debt, for example, and losses, and the amounts put in by owners much richer than Smith and Jones.

 

If you exclude the false profit made by Arsenal then three Premier League clubs were in profit last year - totalling £9.6m. As Conn says, the overall loss was nearly half a billion.

 

One group of figures, relevant to Norwich and the next season and the prudence versus ambition argument, stood out. That being wages, and wages as a percentage of turnover. Effectively the living within your means index. The lowest figure for wages was £13m for Blackpool, but that was in the season they were getting promoted, so not a PL wage bill, although I gather wages were kept very low (below some Championship clubs) for this season.

 

For clubs that were in the PL last season the lowest wage bill is £30m (Wolves) followed by £38m (Birmingham).  The highest ones just don''t bear thinking about. Of course the wage bill has to be seen in the context of turnover. With Wolves the percentage was a sensible 49 per cent. The lowest apart from Man Utd.

 

And Norwich? Bear in mind the latest figures are for our season in League One. The club gives the player wage versus turnover figure at a low 40 per cent. That would put player wages that season at £4.8m.

 

However, unless I have misunderstood (and I am checking), the Guardian''s figures are based on the overall wage bill versus turnover and not just player wages. Then our wage (£12.1m) to turnover (£17.01m) figure rises to 71.5 per cent. That overall wage bill of just over £12m in League One certainly makes sense in terms of Blackpool''s £13m Championship figure. What our figures were for this season will be revealed when the next accounts are published, at the end of the year.

 

Conclusions? To survive in the PL you effectively need two teams. Take Birmingham. Only one recent season outside the top flight and so, you would have thought, would have built up a squad that was good and big enough to survive. And this season it was able to field a team capable of winning the Carling Cup. Yet now, with a few injuries and some loss of form, it could be relegated. That, for clubs of our size, is where the tricky decisions lie. Even if we don''t up our highest individual wages to stratospheric levels, can we afford to pay two dozen sets of even relatively modest PL wages?

[PurpleCanary 5,553]

[quote user="PurpleCanary"]

 

 

 

However, unless I have misunderstood (and I am checking), the Guardian''s figures are based on the overall wage bill versus turnover and not just player wages. Then our wage (£12.1m) to turnover (£17.01m) figure rises to 71.5 per cent. That overall wage bill of just over £12m in League One certainly makes sense in terms of Blackpool''s £13m Championship figure. What our figures were for this season will be revealed when the next accounts are published, at the end of the year.

 

 

[/quote]

 

Just to confirm, from the horse''s mouth, all those Guardian figures ARE for a club''s overall wage bill versus turnover. So the correct comparison for Norwich is with the 71.5 per cent figure rather than the 40 per cent purely player wage versus turnover figure given by the club.

 

[T 190]

The usual recommended maximum is 70% to allow coverage of the other operating costs. the average in the Prem is a reasonable 64% but this is distorted by ManU and Arsenal without which it is an unsustainable 77%

[blahblahblah 2]

I''m guessing the majority shareholders hadn''t seen this when they stood up at City Hall and announced that the club "is now financially secure".  We''re just on a bigger roller-coaster than the previous one.

[T 190]

We are now financially secure providing that we don''t enter into manager/player contracts that we can''t afford if we are relegated. Hopefully Lambert understands and accepts this. The Midlands clubs of Birmingham, Wolves and WBA all seem to be run on a sensible break even basis although according to the Guardian Birmingham have serious debt repayment problems if they get relegated. 

[Buncey 1]

[quote user="PurpleCanary"]

 

For clubs that were in the PL last season the lowest wage bill is £30m (Wolves) followed by £38m (Birmingham).  The highest ones just don''t bear thinking about. Of course the wage bill has to be seen in the context of turnover. With Wolves the percentage was a sensible 49 per cent. The lowest apart from Man Utd.

[/quote]And Birmingham are in serious financial distress! They have severely overachieved in terms of wage expenditure (although their transfer dealings have been quite substantial). They owe a lot of money (some £8m or so I believe) to football creditors due this year and in total liabilities that amount to around £25 million in the coming years. Yeung is either unwilling or simply unable to foot the entire bill and repayment of the money owed is solely reliant on survival in the Premier League. Although we won''t be so heavily reliant on TV money (Birmingham relies on TV money for around 70+% of revenue) it is clear that even relatively prudent clubs are susceptible to financial problems.The simple fact is, unless you spend significant money (through borrowing or a generous benefactor), have an extremely well run club or get very lucky with a great footballing set-up (manager, scouting etc.) you carry a big risk of relegation and/or the financial problems associated with it.The reality is, as a club with gates lower than 30,000, with limited market appeal to foreign and business class patrons (hospitality rakes it in!) and without a super-rich bankroller we are going to have to rely heavily on McNally''s cunning and Lambert and co. supreme competence to compete!

[BlyBlyBabes 0]

Blah

I''m guessing the majority shareholders hadn''t seen this when they stood up at City Hall and announced that the club "is now financially secure". We''re just on a bigger roller-coaster than the previous one.

If so this would suggest perhaps that

(a) they didn''t read the 7 year plan, or

(b) they didn''t understand the 7 year plan, or

(c) the 7 year plan (was) defective ; or

(d) emotion ruled the head in the joy of the moment

One hopes that it was (d)

OTBC

[PurpleCanary 5,553]

[quote user="BlyBlyBabes"]Blah I''m guessing the majority shareholders hadn''t seen this when they stood up at City Hall and announced that the club "is now financially secure". We''re just on a bigger roller-coaster than the previous one. If so this would suggest perhaps that (a) they didn''t read the 7 year plan, or (b) they didn''t understand the 7 year plan, or (c) the 7 year plan (was) defective ; or (d) emotion ruled the head in the joy of the moment One hopes that it was (d) OTBC[/quote]

 

---

 

I have my own doubts about the seven year plan. Particularly the bit that assumes immediate promotion back after an immediate relegation. History tells us that is by no means a given.

 

But in terms of the plan''s ultimate aim (becoming an established PL club) two things to bear in mind. Firstly, Bowkett has that might well need richer owners than Smith and Jones. Secondly the fair play rules supposed (note the "supposed") to level the playing field will be in effect.

 

Anyway, in any event, I think there is an e) answer. Namely that Smith knows perfectly well there is a seven-year plan, and understands it, and would like it to work. In an ideal world. But, whatever board members might say in public, while she and Jones are in charge (and its their money that is being spent) she won''t place that plan (if it entails risking the club) above financial stability. That is what she means.