Fan’s View 2019/20 – No.2 – Pre-season pt2

Article by Paul Beasley Saturday, July 27th, 2019  

ANOTHER PRE-SEASON FAN’S VIEW

Often when a season is about to begin or has just started there are fans who take to social media telling that they have not got into it all yet and can’t muster up any enthusiasm for what’s ahead. It may be that they’re into cricket or some other summer activity or just lost the bug. My reaction to this has been “what’s wrong with you?”

As we move to the end of July though my feelings this time around are rather different.

Before I go any further I feel obliged to say I bought my season ticket almost immediately they became available.

I always welcome the close season break which provides a period of much needed relief from the intensity of following OUFC home and away but until now have come back to it all with vigour fully rekindled.

Not this time though; I’m clouded in pessimism. After Ibrox I’ve not been to any further pre-season friendlies nor feel the slightest inclination to do so. Other than Checkatrade games I’ve been to every game home and away now for quite a few seasons in a row.  What has broken previous fairly long running sequences in the past has mainly been weddings and then I’ve felt a bit on edge having not been in attendance. This year I’ve committed to at least one wedding which will mean a Saturday away game will be sacrificed and weirdly it feels like a relief of sorts.

After that Rangers game I wrote “on that showing and with the squad currently at the club a relegation battle is on the cards” but added “I’m expecting more signings, the team structure to come together and optimism to rise.”

Over two weeks on and we’re no further forward. No signings, although there’s often a heading in the local paper like “Oxford United boss Karl Robinson hopeful of new face for Fulham clash”.  In that article there’s reference to a series of dashed hopes since signing Tariqe Fosu three weeks ago. Apart from Alex Gorrin he is the only other player we’ve added to our first team squad. No centre-half; no centre-forward; no full-back, although the still under contract Tony McMahon is back with us.

Whilst it still almost goes without saying we will get more bodies in before the transfer window shuts at 5:00pm on Monday 2nd September, even if they were to arrive now that doesn’t give anywhere near enough time for us to have a team that knows each other let alone has gelled properly before we run out at the Stadium of Light a month earlier.

Who’s to blame for this sad state of affairs? Karl Robinson? The owners? Whoever is tasked with negotiating deals with agents and players? Or is it a case of no-one, that’s just the way it is?

Given that our supposed top eight playing budget from last season has been slightly reduced, all things being equal we should have been in a position to have assembled a squad for 19/20 that could finish in mid table.

Now though we must be well behind the curve of L1 team building. Starting at the top of our list of priorities we must by now have crossed many names off in all positions we’re seeking to strengthen. Settling for second best may now well be a ship that has sailed to some rival. Or could it be that we are holding out for a key piece of the jigsaw puzzle that equals a successful team as we did with Sam Smith a year ago? (Still can’t get my head round this. Five league starts for us, nine appearances as sub and no goals. Tellingly, and thankfully, for the second half of the season he was on loan at Shrewsbury, a team that were just two points better off than relegated Plymouth. SS didn’t start a game for the Shrews). Please don’t get it this wrong again.

In all this it is still imperative to remember that throwing money willy nilly (could be our next signing the way things are going) at the challenge ahead is a high risk strategy.  There is also the financial fair play regulations meaning that League One clubs are restricted to spending a maximum of 60% of their turnover on wages.

Which brings me on to money. Last Friday a soggy envelope was pushed through my front door by our local postie. It was notice of a General Meeting for OUFC shareholders on 9th August. With this were the accounts (Annual Report and Financial Statement) for years ending 30 June 2017 and 30 June 2018. I assume it is not billed as an AGM as there are two periods to be covered. The former have been in the public domain since 5 April 2018 but I’d not bothered to seek them out nor take any notice of any reporting thereon in the local press. I fear it may have been a case of head in the sand.

I’ve found it useful to have a hard copy of each side by side to compare. It makes pretty horrific reading and raises many questions, the answers of which may be out there but may have to wait until the 9 August when, as a shareholder, I may attend the GM. I do though potentially have another appointment which may clash and that is quite appealing.

Where to start? (If you are bored with this sort of stuff and it may send many to sleep in an instant, step away now)

YEAR 2018 2017 2016
Turnover £5,589,591 £6,987,288 £5,148,655
Cost of Sales (£6,576,112) (£5,780,098) (£4,759,712)
Gross (loss) / profit (£986,521) £1,207,190 £388,943
Admin Expenses (£3,261,094) (£2,728,601) (£2,203,339)
Operating (loss) / profit (£4,247,615) (£1,521,411) (£1,814,396)
Profit on disposal of player contracts £3,436,362 £3,400,000 £10,000
Amortisation of player contracts (£357,471) (£410,698) (£47,469)
Payment in respect of player contracts (£694,740) (£802,00) NIL
Profit on ordinary activities before interest (£1,863,464) £665,891 (£1,851,865)
Interest payable & similar expenses (£160,819) (£15,907) (£18,439)
Profit / (Loss) before and after tax (£2,024,283) £649,984 (£1,870,304)

 

Turnover is made up of season tickets, gate receipts, football league income, sponsorship and advertising, retail sales, other game receipts, programme sales, grant income and in previous years management receipt. I don’t even know what some of this stuff is.

Football league income provides the largest of these amounts at £1.52m. That’s down on previous years (£1.77m in 2016 and £2.67m in 2017). Presumably that’s because we failed to make it to the Checkatrade final. Season ticket income and game receipts have increased over this three year period but the jump from 2016 to 2017 was way more spectacular than from 2017 to 2018 which saw £1.26m and £1.11m respectively being paid by fans.  Retail sales dropped from £682k in 2017 to £385k.

The big figure in cost of sales is obviously “wages and salaries” (excluding admin staff). That was £4.3m in 2018 up from £3.6m the year before and £2.78m the year before that. That’s not a small amount. I picked a couple of clubs at random from our league to see how they compared with us over the same period. Interesting the Integer Generator threw up AFC Wimbledon £3.4m and MK Dons £4.7m. By the way we finished above both in the 2017/18 season with the latter being relegated.

There’s a long list of admin expenses that make up the total but the standouts are rent re operating leases and stadium service charges and over heads, i.e. what the football club pay Firoka. In 2016 this was £485k and £281k, in 2017 £492k and £317k and in 2018 £433k and whooping £810k, meaning an increase in nearly £400k in the service charges & overheads. If that wasn’t bad enough we’re paying for repairs and maintenance too. Why the **ck the contract allowed for that only the dickhead who signed it on OUFC’s behalf will be able to answer. This amount was £92k in 2016, £183k in 2017 and another significant increase in 2018 to £246k. Yes, we are being well and truly shafted. Oh, and let’s remember that the club paid £170k to have the pitch replaced in 2016.

Legal and professional fees have jumped from £89k in 2016 to £315k in 2018. This all really adds up and ends up in the debt figure dragging our football club down. I guess most of that figure is incurred in legal battles with FK, battles I doubt can ever be won.

We provided for bad and doubtful debts amounts of £336k in 2017 and £128k in 2018. Curious to know what that relates to.

The cost of youth development in these latest accounts is £469k. That’s a good thing isn’t it? This is supposedly something that we are doing right and will provide huge benefit someway down the line but at present we don’t have a group of youngsters anywhere near ready to take the first team and L1 by storm let alone be anywhere near competitive at that level, nor should we or anyone expect it.

Amortisation of players’ contracts is the spread of a transfer fee over the period of that contract on an annual basis with appropriate adjustments being made if a player leaves before seeing out the whole of the contract. Payment in respect of player contracts will be transfer fees paid. As an amateur who is fumbling there’s a bit of guesswork here. A qualified accountant should be able to confirm or otherwise.

Suffice to say though we are a football club that is losing money on an almost annual basis at an alarming rate and will continue to do so. Even with transfer income of nearly £3.4m in both 2017 and 2018 we still made a loss in 2018 of £2m and a profit of just £650k in 2017.

To break even we need to do really well in cup competitions and sell two or three players for good money in each period. This was when Calum O’Dowda, Kemar Roofe, John Lundstram, Marvin Johnson, Ryan Ledson and Joe Rothwell left us.

We then had a model that when anyone departed they were replaced, or at least kind of. (Roofe was never going to be properly replaced though was he?) That supply line has dried up meaning we’re unlikely to have the talent turning out to take us on these lucrative cup runs nor to be sold on for a few million. Also if we were to lose any valuable asset we now have the impact on the side could be catastrophic given their rarity in these parts.

(I’m writing this bit by bit. The above was written before the Fulham game and the signing of Chris Cadden. Getting another body in is obviously a good thing and it looks like he may well be looked upon as the first choice right back with the potential to play elsewhere as he is “versatile”. However as we lost out to Columbus Crew in the battle to sign him permanently he’s only here on loan and could be gone in January. Still waiting on a centre half and centre forward. What is it they say about the importance of the spine of a team? It’s getting desperate.)

As year on year losses mount up the debt the club is saddled with naturally grows. A vital question is then, where does that debt sit, how is it being funded and is the owner of that debt in a position to bring the football club down?

In the 2018 accounts the auditors tell us that “a material uncertainty exists that may cast doubt on the company’s ability to continue as a going concern. The company has £10,855,864 more liabilities than assets”.  Deep breath, but anyone following closely what has been happening should not be surprised in the least. The auditors add that “the financial statements have been prepared on a going concern basis, based upon the continued support of the company’s ultimate controlling party”.  So we have Tiger and his men to thank for small mercies I suppose.

We probably don’t need to go much further than a paragraph under “events after the reporting date” in the 2017 accounts, “In February 2018, Ensco 1070 Ltd was granted a fixed and floating charge over all the assets of the company in respect of monies owed to it”.

That charge was created as part of the deal that saw Tiger buy the club from Ensco on 21 February 2018 and is lodged in the terms of a debenture at Companies House. Since Frank Waterhouse resigned on 31 March 2016 Ensco 1070 has had just one Director, Darryl Charles Eales. NB: Mark Ashton resigned from that company on 18 December.

This debenture (long-term security yielding a fixed rate of interest, issued by a company and secured against assets) is 22 pages long. The devil is in the detail. Legal experts out there will know exactly what this means but wearing my novice hat I’ll pick out a few things.

The default interest rate is 10% per annum.

The secured loan note is for £4,275,708.

Listed under “Permitted security” is a debenture date 11 January 2009 in favour of Barclays Bank plc. The amount secured by this charge is “all indebtedness now or in the future due, owing or incurred (before or after demand) to the bank in any manner by the Chargor (Oxford United Football Club Ltd) and all other Companies, including in each case all interest, commission, fees, costs and expenses which the Bank may charge in the course of its business. The interest will be calculated and compounded in accordance with the Bank’s usual practice before and also after any demand or judgement”.

Schedule one – “Material contracts” lists the financial agreements of various dates between Oxford United and Sheffield United, Bristol City, Leeds United and Middlesbrough relating to the transfer of John Lundstram, Callum Joshua Ryan O’Dowda, Kemar Roofe and Marvin Nicholas Nathan Jonson respectively.

Material evidence that DE would be getting the money that came/comes in for these guys. This supports those who back then were having a go at our former owner saying the transfer money would go to him. Whilst not totally ignoring this I in a way overlooked it because there was more outright abuse and bad language than clear argument and reference to this debenture.

At this point it has to be asked yet again whether OUFC would be in a better state if Mr Eales had sold out to Stuart Donald / Charlie Methven / Sartori and why he didn’t. I don’t really know. It’s easy to say the grass would be a lot greener now with genuine “supporters” who understand the place holding the rudder and I tend to that view. But Sunderland, SD & CMs’ current project, only finished 5th in L1 last season and that probably constitutes a much bigger under achievement than our 12th when money thrown at it and size is considered.

Tiger and our current board have shown nothing other than keeping us ticking along and slowly drowning in debt. I’m still none the wiser what any of his board members have brought to the party. In fact their profile is so low that I’ve just about forgotten who they are. All this talk about exploiting the name Oxford because it is known around the world to increase the OUFC brand and make us a success so far has just been talk. What actually has been done on this front? F**k all from where I’m sitting. Come on we can’t even get a tiny shop in the Covered Market right, can we?

And as for “sustainability”, again please tell me exactly what. Facts not bullshit. (That was kind of rhetorical but if anyone really can enlighten and give cause for hope please feel free).

Can’t blame DE for getting the best deal (for himself) I suppose. That’s the way business men including owners of football clubs operate. We’re at the mercy of each and every one of them when they are in charge and thereafter. It seems mess after mess is created yet somehow we struggle on. But for how long? Do Tiger and his men have a workable plan of any description or is it all Walter Mitty fantasy? Meanwhile I’d argue that Firoz Kassam, Daryl Eales and Barclays bank have OUFC by the short and curlies. That’s bloody painful.

Where’s the money going to come from to pay the creditors? In the 2018 accounts amounts falling due within a year totalled £13.1m made up of trade creditor £1.9m, amounts due to group undertakings £2.2m, other tax and social security £342k, and other creditors £8.7m. Included in this latter amount is £2.4m due to Ensco in respect of the loan notes. On the other side of the coin there was £2.7m of debts due to come into the football club.

A going concern? I have to say I’m concerned on an on-going basis. Very concerned. I see no light at the end of the tunnel.

Yet we keep going. We’re now in late July 2019. That means there’s another set of accounts, the contents of which we will not know until March/April 2020 and two months on top of that towards the set after that. I shudder to think how we did financially in the period to June 2019.

Last season we got nearly 12,000 in against Manchester City for the third round tie in the Carabao Cup but our cup runs weren’t such as to bring in huge amounts nor were we selected for a nice slice of TV money anywhere along the way as far as I can remember.

Our average home league gate was 7,315 which seems to be roughly the norm now. We recorded very similar figures in 2017/18 and 2015/16. Our first season back in tier 3 was an exception with another 1,000 on top of that figure. Those extra bodies bring in nearly an extra half a million quid.

This season if we start like we did last time and if we have not plugged those glaring holes in the squad I can see a dip below the 7k mark.

Season ticket sales have just passed 4,000. At the end of 2018/19 we had about 4.500 holders of such pieces of plastic.

I don’t think we sold anyone for an amount worth mentioning in the financial year ending 30 June 2019, Ryan Ledson and Joe Rothwell’s “undisclosed fees” just falling into the previous period.

If it counts as a saving grace there are plenty of other clubs in fairly similar situations and worse.

Bury are newly promoted to L1. On 18th July the EFL announced that they would start the season with a 12 point deduction after entering a company voluntary arrangement. They’d had a winding-up petition over unpaid debts adjourned at the high court in June and entered this arrangement to secure their future with the CVA.

When the current owner of Bury, Steve Dale, took over in December 2018 he did not go through any part of the Football League’s “fit and proper” process which is designed to ensure that he has enough money, from a legitimate source, to fund the club.

The EFL had given Dale a deadline of Thursday 25th July to provide full financial details and had issued a statement saying if he failed consideration would be given to issuing a 14 day notice to withdraw Bury’s membership.

There but for the grace of God? Presumably Tiger passed and the EFL know things we don’t.

Then there’s Bolton, also new to L1 but coming from above not below. Their last filed accounts are for y/e June 2017. The following year’s are overdue. The latest available show an operating loss of £12.9m.

From these accounts: “On 30 June 2017 the company formally wrote off £197,873,242 in respect of amounts owed to the parent company Burnden Leisure Limited.” I have got that figure right but please feel free to check it out.

BWFC beat Bury by a couple of months to become the first league side since Aldershot in 2013 to go into administration. Wanderers had failed to pay a £1.2m tax bill. They too have had a 12 point penalty imposed by the EFL.

Where will it all end?

I started this piece nearly a week ago and OUFC are now a few minutes into a friendly at Solihull Moors, the club DE currently owns. I’m not there even though it’s probably only about an hour away if that. I had a moment of slight temptation but then thought, nah.

I now want to say, “keep the faith” but given what I’ve put down here that’s pushing it a bit. That said I’m sure that come 3 o’clock on 3rd August in the Stadium of Light I’ll be all tensed up ready to go again and looking forward to it even though I’m expecting to get beaten.

I want to sign off by reminding myself that we do have some good players and others with great potential. If to those we add two or three quality additions in the right positions we could be okay. Is okay acceptable? Well for me at the moment very much so.

Phew!

 

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