Friday, 13 June 2008

An Audience with Richard Murray

Other bloggers have already posted their summary or comments of yesterday evening's meeting with the Football Club Chairman, and I have little to add to the content they have already provided. However, I may be in a good position to explore the major news story of the evening.

I have, you see, been involved in the running of three small businesses. I know that your first thought would be that Charlton Athletic Football Club is not a small business. The club has a turnover of millions (significantly higher that anything I have been involved with) but the basic concepts are the same.

The main one of these is the relationship between income and expenditure. This is, however, not the major enemy of small businesses, that title belongs to cash flow. I know this is a football blog and this is not an interesting subject, but please bear with me and I will explain why this is important. For reasons that were discussed last night, and will, I'm sure, be published elsewhere (I'm only not doing so as I do not remember the numbers accurately enough to be sure I will not mislead anyone) the club is currently in a less than fantastic financial position.

In order to do the best that was possible for the club - something that all fans want, and often demand - the football club spent more than it earned during our Premier League years. Some of this spending has clearly been used to redevelop The Valley into a magnificent stadium, but much of it went into the other things. These include player transfers, player's wages, subsidised travel and ticketing for many home games, and selected away games, the ladies team and community activities. This list is not exhaustive and I must stress has been complied by me, I am aware that the the community activities are now run by a separate trust, but I would imagine that the club fund it in some way. The list is, however, reasonably irrelevant and the major cost (excluding stadium redevelopments) would almost certainly be the running of the team. I would include the managers and coaches in that, but again although it is only my view the majority of that cost would have been player's acquisitions and wages.

So, on average the club spent more money each year than it earned. I know this would seem to be irresponsible, but the fans want success and many of them demand it. The club's future was not put at risk as the directors basically funded the shortfall. This was not just handouts from the directors who's names we all know, it was from the introduction of new directors, and loans (overdrafts) from financial institutions.

It is impossible to know what the outcome would have been had spending been reduced to the level of income, but we have to assume that our league position would have been affected and ultimately we might have been relegated sooner.

So this brings us to the relegation season. Dowie was appointed (something Richard Murray was happy and open to admit was a mistake and one that he made no attempt to pretend he was not involved in) and in an attempt to strengthen a squad that Richard Murray described as "Tired" was given £11m to spend, all of which was borrowed against future revenues. Dowie didn't work out and the rest of that season is basically history. There is a note I would like to add and that is that even after spending £11m the club sanctioned a couple of loan deals that would have cost wages even if no loan fee, and the spending of a further net £2m to give Pardew the best chance to keep us in the Premier League.

So far I think I have painted a picture of a group of 'fans' that had a shareholding in the club that demonstrated their commitment to the club was 100% even if they are human and occasionally make mistakes. Depending on the mood I'm in I can praise or criticise most people. Curbishley made some great signings. He brought in Clive Mendonca, Andy Hunt and Scott Parker to the club (the two former were unquestionably great players for Charlton, and Parker was a great player and left for £10m. Great! He also signed Francis Jeffers and Marcus Bent for a total in excess of £5m. Not so great. Richard Murray (et al) made a mistake by appointing Iain Dowie, no one is denying that but I would argue that giving him the money to spend was the right thing to do. The fact that the money was not invested terribly well doesn't make the decision to invest in the team wrong it just compounds the effects of the wrong appointment to Manager (First Team Coach) in the first place.

So we have a board that have by their own performance as directors (Managers of the Company) and their continued generous investments, been regarded by all fans as fantastic. Their decisions have rarely been questioned, even when they seemed a little strange the 'good will' they had built up from many years of success granted them licence to expect us (the fans) to trust what they were doing. All the time we were going from strength to strength and the club was growing there was little need to question what the board was doing.

Then relegation came.

There was no attempt by Richard to blame anyone else for this but the obvious consequences were going to be very hard to accept.

Firstly if you have an overdraft with your bank and you lose a large chunk of your income you suddenly find that your 'friendly' bank manager is in fact no friend at all and has little or no interest in helping you at this time of financial difficulty. Oh no, he wants the overdraft reduced, immediately.

Secondly with less income you find that all the things that you were able to pay for previously you cannot afford anymore. First thing you do is sell off anything very valuable that you can live without. When that money has gone you have to start selling everything you have or you have to literally stop spending money, or both.

This is where my small business experience is most relevant. I have had meetings with directors where we have had to discuss if and how we can afford to pay the staff salaries some months. There were always options to do so, but there was always the real possibility that there would come a time when there was not enough money and someone would have to be let go, or some assets would have to be sold, or both.

On relegation the banks clearly found that Charlton were a less secure risk. We lost the tv money and sold fewer season tickets. The expected 'stroll' to promotion didn't materialise and that left the clubs running costs way above it's income. The sale of Darren Bent, Luke Young, Souleyman Diwara and a few others raised significant sums of money to clear debt and sign new players as well as reducing the clubs running costs. Other players left that would have been on high wages too, and the club put together a budget that would enable Charlton to make a decent stab at promotion while not sacrificing the clubs future.

With last season failing to bring the so much desired promotion, and frankly not making us look like a very good bet this season it is time to start a gradual reduction in the clubs debts and running costs.

I have taken a long time to get to this point, but the truth is that the club need to raise some money and reduce the over all wage bill. There is no easy way to say that, and Richard's determined not to give our best players away, or sell those that Pardew believes have a great future at the club, but it is the intention for us to have 24 senior pros next season. On the bases that we played in excess of thirty players this season it becomes clear that there will be more players leaving than coming in. There will also be a profit on transfer activity. No names were discussed, but I (personally) can't help thinking that the free transfer of Hudson and the sale of McCarthy for £500k was part of that money raising exercise. This could just be down to Pardew thinking that Hudson has more to offer than McCarthy and/or he believes that McCarthy is not the sort of player that he wants to keep if he has to reduce the squad and/or raise money.

Richard did indicate that should there be a need for funds to be available in January to increase our chances of promotion they would be provided, but also that if we look too far away there may be further sales should good offers come in.

If I'm honest I expected this. The various things that I'd read in the last six months painted a very bleak picture of the financial situation we are in, and I for one would much sooner address these issues now than in twelve months when we need to sell everyone and literally face a relegation struggle like Southampton, Leicester and Coventry. Having said that should we fail to go up this coming season there will have to be more cuts next summer, but I believe that a conservative gamble on this season is much better than an all or nothing one.

As for those that expect the board put more money in or seek investors, the latter has been tried with no success and the former is just unrealistic and very selfish of those that demand it. I believed before I met Richard Murray that the current board the the safest custodians of the club and having spend a hour or two in his company I am more convinced than ever.

Thus I would put out a call to arms. I was as disappointed as anyone with some of the performances last season, and I have always believed that the fans have the right to show their displeasure, but right now the club needs us behind it. The fans need to understand why the club are doing what they are doing and support it even if they don't like it.

Most of all we need to make The Valley a difficult place for opposition teams to come. That means that our team need to be much more ferocious, and the atmosphere needs to be much more intimidating. I'm not talking about nastiness (despite the fact that there are times when that can be effective). I'm talking about the North Stand being so loud that away team's defenders hate having our boys coming at them with the fans behind them. I'm talking about the opposition strikers sensing how unwelcome they are when they attack the Covered End goal. The East and West stands are never going to be able to produce the same noise, but there needs to be that feeling that The Valley is a fortress again.

I personally believe that we are going to have a good season. I think that we will be in the chase for promotion right to the end and I am confident that we will all be getting a free season ticket in 2009. However, until that actually happens, I think we need to be prepared for some unpopular decisions and a long season ahead. Either way I have 100% faith in those running the club - including Pardew - and I would ask that anyone who wants what is best for our club do their best to believe it or at least behave like they do.

Up the Addicks!

3 comments:

Pedro45 said...

Well said KHA!

Dave Peeps said...

KHA - I think you have given a fuller and more detailed explanation of the situation than Richard managed in the time availble. Being "net sellers" isn't necessarily a bad thing particularly when the squad is so large. The trick will be to improve the quality at the expense of the quantity. I think we are taking some medicine at the moment that some clubs in similar positions have failed to do and paid the price.

Dad said...

Well said - cmon you Addicks