martedì 7 luglio 2015

Blackpool Supporters' Trust (BST) have launched a £16m bid to buy club from the Oyston family

(Source: Supporters Trust has prepared what it deems to be a fair and reasonable bid, which in the current climate deserves serious consideration. There is a range of serious challenges currently facing the club and a change in ownership is a logical step to help resolve the issues for all parties.

BST believes that, under the current ownership, the club cannot return to its former glories and that a more likely scenario is ongoing poor performance on the football pitch, leading to a knock-on impact on financial performance.

While the financial standing of the club is relatively strong compared to other clubs at the moment, BST expects that the level of disaffection in the supporter base will lead to reduced attendances and an ever diminishing financial position. The value of the club from this point on can only decrease without drastic changes and investment.

Eliminate risk of future losses

Following relegation from the Championship, the club is facing an uncertain future. It is stated in the Segesta Limited accounts for the financial year ending 31 May 2013 that “remaining in the Championship is not considered a considerable risk to the company, as turnover will still be assisted by guaranteed parachute payments from the Premier League”. Clearly, now that the football club finds itself competing at a lower level in League One without the safety net of parachute payments, it is a logical assumption that the risk to the company is somewhat elevated.

Even while still in the Championship, revenues have been dropping year on year in a worrying trend, as the figures below from the Blackpool Football Club Limited accounts show:

Class of business                                         2012              2013             2014
Gate receipts                                            £2,796,124     £1,151,779     £1,061,788
Season ticket receipts                                £2,562,579     £2,607,490     £1,708,623
Football League and Premier League Pools  £19,195,022    £14,255,893   £12,002,289
Radio/TV Fees                                          £655,850        £276,590        £338,000
Development Association Donation             £344,355        £226,700         £224,400
Sponsorship and advertising                      £371,643         £298,956        £359,864
Programme Sales                                     £77,988          £57,272          £46,629
Bar and food sales                                   £700,821         £569,562        £553,171
Souvenir shop                                          £901,372         £643,064        £626,743
Sundry income and donations                   £1,201,290       £1,920,394     £1,283,022

TOTAL                                                   £28,807,044      £22,007,700   £18,204,529

Given the challenging campaign in 2014/15 which resulted in relegation by a huge margin against a backdrop of a disillusioned fanbase, it is not unreasonable to predict that the accounts for the year ending 31 May 2015 will show another fall in revenue. Furthermore, a fall in revenue for the coming 2015/16 while in League One is a certainty. With turnover continuing to fall and a largely disengaged customer base, the club faces a challenging financial environment where simply breaking even could be a struggle, and losses a stark possibility.

The most recently available figures for clubs in League One paint a grim picture, as the table below illustrates:

Club                 Turnover         Pre-Tax Profit (Loss)
Wolves             £32,555,000    £10,093,000
Brentford          £3,285,965     (£8,747,777)
Leyton Orient    £3,230,782      (£1,362,179)
Rotherham       N/A*               N/A*
Preston            £4,689,000      (£1,310,000)
Peterborough   £6,342,400       £1,769,997
Sheffield Utd    £10,504,403     (£4,454,415)
Swindon          N/A**              N/A**
Port Vale         N/A***            N/A***
MK Dons         £4,376,384       (£1,699,953)
Bradford         N/A**               N/A**
Bristol City      £4,513,283        (£7,999,795)
Walsall           £5,298,000        £19,000
Crawley          N/A**               N/A**
Oldham          N/A**                N/A**
Colchester      £3,219,124         (£1,877,248)
Gillingham      £5,532,671         £11,206
Coventry         £3,750,000        (£6,870,000)
Crewe            £4,351,885        (£378,686)
Notts County   N/A**                N/A**
Tranmere       £3,045,212        (£181,357)
Carlisle           £3,546,799        (£369,440)
Shrewsbury    £3,767,664         (£285,253)
Stevenage      £4,529,081         (£219,791)

* Rotherham United’s financial year end is December and therefore out of sync with the football season and would not be a like-for-like comparison
** These clubs filed abbreviated accounts under a small company exemption - turnover and profit figures not available
*** Port Vale underwent a change in company structure and the figures are not available

The figures for clubs in League One during the 2013/14 season show that out of the 17 available, only four clubs did not post a loss. One of those, Wolverhampton Wanderers, was still in receipt of parachute payments while Gillingham and Walsall only just broke even. The trend for football clubs in League One is clear - the majority are loss-making concerns. This is a pattern that continues further down the football pyramid.

It could be argued of course that Blackpool FC has form for bucking the trend, being one of the few Championship clubs in recent years to consistently post profits, although this has been due in no small part to the significant parachute payments from the Premier League. Furthermore, the current atmosphere around the club would suggest that ever more supporters are turning their backs on the club, which is likely to result in difficult trading conditions due to lower attendances, merchandise sold, reduced sponsorship revenues, etc.

The current trajectory of the club is a seemingly downward spiral, and it is entirely possible that the club could suffer yet another relegation to League Two in the near future. This would only exacerbate many of the issues outlined above and increase the likelihood of financial losses. Therefore, parting ways with the club before it enters a possible loss-making phase in its history would be a sensible business decision for the current owners.

SCMP regulations in League One and League Two

Teams in League One and Two are subject to strict financial fair play measures known as the Salary Cost Management Protocol. In League One, this means that clubs are restricted to spending just 60% of their turnover on the playing budget. Given that there is a strong correlation between wage bill and league position, the prospect of Blackpool FC returning to the Championship - and the financial benefits that come with playing at that level to avoid being loss-making - is only likely with one of the higher wage budgets in the division.

Unfortunately, according to BST forecasts, it is more likely that Blackpool’s turnover, and thus wage bill, will be towards the lower end. The majority of season ticket holders will be benefitting from the second year of a greatly reduced season ticket compared to Blackpool’s divisional rivals. Furthermore, the ongoing fractious relationship between club and fans means that the number of non-season ticket holders attending matches will be minimal. These two things combined, as well as the knock-on effect on complementary sales such as sponsorship, merchandise, catering, programme sales, etc. will mean that turnover will be negatively impacted.

The only way around the SCMP regulations, to allow for a competitive wage budget capable of restoring Blackpool FC to the second tier and the financial rewards that brings, would be for external monies to be invested into the club as a gift or as equity. Both of those scenarios require extra financial support from the Oyston family with no guarantee of success or future returns, but BST believes it would be necessary to give the club a chance of success bearing in mind the blank canvas of a playing staff it currently possesses.

Therefore, if the Oyston family want to avoid ploughing further investment into Blackpool FC, but wish to avoid the potential financial losses that would come with continued poor on-pitch performances, which seems likely in the current environment, then a decision to depart by selling the club at the height of its financial situation is the optimal solution.

Breakdown of relationship with minority shareholder Valeri Belokon 

The current boardroom situation within the Blackpool Football Club Limited company is clearly cause for concern given the public arguments between the Oyston family and Valeri Belokon which have escalated in the past 12 months. Valeri Belokon, a key figure in funding the football club’s promotion to the Championship in 2007 and the Premier League in 2010, wrote a concerned letter in July 2014 outlining fears that the running of the club was threatening its future.

Despite the public rebuttal from the football club, insisting that “the club is in the best possible hands”, performances of the team in the last few years have been not good enough and led to a humiliating relegation, equalling the record low points tally for a Championship club. It would seem Mr. Belokon’s concerns were well-founded. Since the open letters from both sides last July, there have been further public spats and the most recent has seen Mr. Belokon being blamed for being unable to enter into discussions over the sale of the club to an unnamed third party.

A club statement released on 27 May 2015 stated that “as a result of the failure to engage in meaningful discussions and gain the support of all directors and shareholders, the Board has come to the view that it would be impractical to continue any further negotiations with the third party bidder.” Segesta Limited, owned 97% by the Oyston family, owns 76.3% of the share capital of Blackpool Football Club Limited which would suggest that Mr. Belokon’s approval to sell Segesta Limited’s shares is not required.

However, the club statement said that “This makes it exceptionally difficult for the Board to engage in any collective decision making, as demonstrated by the inability of the Board to progress this third party offer.” With this in mind, it is concerning that the club is not in a position to be able to take decisions with disagreements in the boardroom. If the Oyston family are unable to establish a healthy working relationship with Mr. Belokon, then it would perhaps be best for all concerned for them to move aside and allow someone else to work with Mr. Belokon for the good of the club.

Strong return on investment

The form of the bid represents a strong return on investment for the Oyston family from the initial purchase price and amount of prior loans converted to equity. On top of the bid value in excess of £16m, the Oyston family have also benefitted from an £11m sum paid to their company Zabaxe Limited in 2010-11.

Given the likelihood of future losses without additional investment, the ability to exit the business at this point in time with such a cash positive outcome despite the company’s poor future prospects offers the Oyston family a big opportunity. Delaying any sale is only likely to diminish the potential returns and so a sale to BST presents a logical exit strategy.


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