Wednesday, 16 December 2009

Enjoying It? Not Likely

I’ve heard a fair bit recently from others saying they are enjoying this season more than any other for some years, including the last few in the Premiership. Personally I can’t go along with them; in fact I think they’re barking. It’s not about airs and graces, thinking we are in any way too good for the third flight (although I still tend to feel that – Leeds, Norwich and Southampton excepted – when we win we’ve beaten rubbish and when we don’t what on earth went wrong to lose to that lot?). Nor is it about entertainment value, or the quality of the football. Being a simple sort of soul I’ve never felt bad about a Charlton win and never better than resigned after some defeats. It's not even about getting less media coverage than even Scottish football for crying out loud (and I preferred the Sunday morning highlights show rather than being treated as a necessary afterthought following Match Of The Day).

For me it’s all about just how bloody important for us getting promoted is. We all know how crucial each of the last three seasons has been. One bad season in the Premiership was enough to change our world, with hindsight we had one decent shot at going back up (and blew it), and getting relegated from the Championship turned a financial crisis into a full-blown disaster. We’ve now got one real shot at going back up and if we fail to take it we pretty much know the consequences. If we go up, next season, as Richard Murray indicated at the recent Q&A, is hardly going to be a cakewalk. It seems we’d have a decent chance of keeping much of the current squad and on that basis of being able to compete, but – barring takeover of course – there’s going to be no thought of anything more and no suggestion of money to spend (hardly surprising given the current plight of Watford, Palace etc). Fail to go up and I would imagine most of those out of contract will be encouraged to walk and everyone else moves up a rank. It will of necessity be a long-term recovery plan based around home-grown talent.

I’ve started and built a couple of (small) businesses. But I’ve never had to deal with the consequences of running a company which has seen its turnover drop from £41.9m to £23.6m in three years, with the prospect of a fall to around £10-11m in the current year (largely through the loss of the Premiership parachute payment). I can’t think of another industry where this would not result in one of bankruptcy, takeover by another company in the same business (for next to nothing), or of course a state bail-out (I’m ready to take on anyone who might suggest that Charlton is not systemically important). In these circumstances it can look truly astonishing, and laudable, that there have been decisions taken (the academy, offers for players) which have involved not selling anything that could be moved.

Of course, there is common interest in going for broke (sorry, promotion) this year, given the alternative. There was a price to pay and the directors have stumped up; hopefully the decision pays off, in terms of the value of the asset at least. In the early years of my main business I became accustomed to the accountant’s notes to accompany the annual accounts. Usually something along the lines of justifying treating the company as a going concern even though the balance sheet and P&L looked like Dubai on a good day (in relative terms). Not surprisingly the Charlton Athletic plc annual report for 2006 contained no note about being a going concern. That for 2007 saw the inclusion of a note to the effect that additional working capital, player disposals and “facilities” from the group’s bankers “in the opinion of directors allow the group to continue its normal day to day activities for the foreseeable future”, justifying the ongoing concern approach. The note was repeated almost verbatim in the 2008 accounts. For 2009 we have an assessment that “ongoing support from directors and banks that in conjunction with the potential to raise funds through future player sales” allows the accounts to be prepared on a going concern basis, which sounds a little like a pledge to sell.

Basically we are at present only different from Chelsea and Man City in terms of the size of the bankrolling of the club by directors (and of course their ability to continue to provide the readies). I still have a slight query over why the fresh investment by the directors was in the form of loans rather than equity. This isn't to suggest that the equity has any value in the event of a takeover (clearly it doesn't), but unless there are practical considerations against issuing new shares the only good reasons for making it debt would seem to be the remote possibility that at some stage in the future the interest would be paid and to possibly ring-fence the money and get something back in the event of a takeover. Corporate bonds held by directors and related companies are secured against the group's assets - ie The Valley - as are bank loans and overdrafts (we may say the club owns the ground but in truth effectively the directors as individuals and the bank do). Bottom line is if they do good luck to them, they've earnt it.

The figures for the year to end-June 2009 underline that if we get promotion turnover next season could amount to perhaps £11-13m against say £9-10m if we don’t (assuming another drop in season ticket sales and matchday revenues, plus some difference in TV money in the Championship). Might not sound like much of a difference, but clearly the closer proximity to the promised land (the Premiership) increases the value of the club, would probably ease relations with the bank, and would make achieving a breakeven position significantly easier. Let’s not forget that Murray indicated at the start of last season that running a breakeven position was pretty much the goal – and we ended up with a net loss of £8m. In addition to probably not being able to cut running costs sufficiently I would imagine that the influx of loan players – in the desperate bid to avoid relegation – plus Pardew’s severance costs contributed to the overspend.

I can’t imagine that even with all the cuts made we will avoid a material loss this year (that is after all the message from the fresh investment by the directors) and I would doubt if there’s the stomach for another significant cash injection from the current board if we fail to get promoted. Of course player sales can alter the figures, most obviously Shelvey (especially if he is unable to carve out a role in the current favoured 4-4-2 formation); so can cup runs, but we’ll gloss over that possibility at least until next season. But surely it is a case of promotion and we can just about manage; failure to go up and it really is time to cut our cloth accordingly.

Given this backdrop, I don’t mind admitting I’m really struggling to actually enjoy games this season. Time enough for that when we are on an even keel. I love it when we knock in a couple and would love it more if we added a further couple, as this would mean the points in the bag long before the final whistle. And I don’t give a monkey’s if we grind out 1-0 wins every game to the end of the campaign (or at least until we are promoted). Curbs attracted far too much criticism from some for placing little weight on entertainment value. There’s going to be none from me this season at least every time we get points – especially on Saturday.


Anonymous said...

Superb blog thanks.

Without investment we're in for a tough time for the forseeable future irrespective of whether we get promoted or not.

I'm not sure that PP is the right manager for the Championship. However anyone else we're likely to attract is also going to be a gamble. Our squad will certain mean a relegation scrap in the Championship- it's simply not strong enough.

If we don't go up then we'll probably find ourselves in the same position as Southend, Millwall, Gillingham etc. Not pretty.

The Directors are in a tough place. Sell and make a loss. Don't sell and see your investment lose even more of its value.

I guess there are dozens of clubs in a worse position than us and they have survived....

Valley Mick

sm said...

Apart from about 6 clubs in the Premiership it is possible have much in the way of long term aspirations unless you have a sugar daddy who is prepared to invest millions. Aren't there now about 30 clubs looking for new owners.

Something has to be done to spread stop the vast sums that are now in the game being gobbled up by the top clubs and over inflated players wages (which in many cases make those of bankers look fair and reasonable). The top clubs, Sky and the administrators clearly don't care - surely the politicians now need to do something if our national game isn't to collapse. Perhaps once we have 5 or 6 teams a division with 10 point deductions someone will realise there is a problem.

I don't think that the honesty and decency of the Addicks board can be understated - one can even forgive their appointments of Dowie and Pardew.

StoneMuse said...

I take your point BA and next year will be bloody awful if we don't go up ... but ... I really am enjoying this season :-)

... and hopefully even more so after tomorrow!