Thursday, January 21, 2016

Emails Update

(This post is a parody - any similarity to actual events is purely coincidental.)

As regular readers of this blog will know, when the club is in crisis I like to use my stealth IT skills to hack into the club's emails to get a sense as to what is going on behind the scenes.

Unsurprisingly a picture of a dysfunctional club emerged - the story begins towards the end of last season:

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From: katrien@cafc.co.uk
To: marketing@cafc.co.uk
Subject: WTF!

I KNOW I SPEAK ENGLISH WITH AN ACCENT, BUT I SAID "SAX ON THE PITCH" YOU UTTER MORONS......

'SAX' AS IN LIVE JAZZ BEFORE THE BOURNEMOUTH GAME!

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From: roland@staprix.be
To: katrien@cafc.co.uk
Subject: Re: 2015/16 Budget

My dear Katrien

The budget generally looks fine - however I was shocked to see that the expenditure for names on first team  shirts has increased by 20%.

I presume this is mainly due to the imminent emergence of future Premiership starlets Ahearne-Grant, Charles-Cook and Holmes-Dennis.

Can we work within the agreed budget please?

Best

Roly

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From: katrien@cafc.co.uk
To: guy.luzon@cafc.co.uk
Subject: Re: Summer transfer targets

Shalom Guy!

Excuse my ignorance but what is a 'big lump up front'?

I thought that was the statue of Sam Bertrand outside the West Stand.

K

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From: katrien@cafc.co.uk
To: joe.gomez@cafc.co.uk
Subject: Re: Re: Re: Liverpool offer

Hey Joe!

We all accept your decision and wish you well.  The chance to spend several seasons working under Brendan Rodgers must be hard to resist.

Moreover although we believe our £15,000 per week offer was competitive, we understand your desire to move to Liverpool and get on the housing ladder.

You will always be welcome back at any time.

Regards

K

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From: phil.chapple@cafc.co.uk
To: katrien@cafc.co.uk
Subject: Re: FW: 2015/16 Budget

There's a lad at Sunderland called Ba.

Enthusiastic but not exactly the quickest.

Sorry it's the best I can do....

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From: roland@staprix.be
To: katrien@cafc.co.uk
Re: FW: DFS Summer Sale - up to 75% off!

My dear Katrien

You are hereby authorised to purchase the cream Italian leather sofa from the Azzurri range.

I agree the reception area needs freshening up and I do love a European bargain!

Best

Roly

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From: bexleyheath@marriott.co.uk
To: katrien@cafc.co.uk
Subject: Re: Re: Re: Re: Booking

Dear Ms Meire

That will be absolutely fine - we look forward to welcoming Mr. Bauer to the hotel.

We are pleased once again to offer a 30% discount for stays of over 16 weeks - however I'm sorry to confirm that Mr Lepoint's stay did not qualify.

Kind regards

Katarina Kasak
Reservations

Ps - with regard to your catering question, we regret to inform Mr Bauer that the breakfast sausages are actually from Lincolnshire.

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From: karel-mourinho@hotmail.be
To: phil.chapple@cafc.co.uk
Subject: Re: Re: Naby Sarr

Tall, commanding, cultured, confident....

From what I hear, he's everything you were as a centre half.  LOL!

Karel

Ps - any thoughts on those Bergdich videos?  He's 'top drawer' as Henry Redknapp would say (one of my all-time managerial heroes).

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From: katrien@cafc.co.uk
To: guy.luzon@cafc.co.uk
Subject: Re: Re: Re: Summer transfer targets

Ah I see!  Wires crossed again...

We entered your parameters into our proprietary network transfer database (BRAVO) and it has highlighted Mr Simon Makienok who is currently playing at Palermo.

Consider him signed....

K

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From: katrien@cafc.co.uk
To: johann.bg@cafc.co.uk
Subject: Re: Re: Contract offer

Such wonderful news JBG! We are pleased that you see Charlton as the springboard to meet your ambitious career goals.

Ps - no I'm sorry I don't know - what did Iceland used to be called?

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From: marketing@cafc.co.uk
To: katrien@cafc.co.uk
Subject: Re: Kids for a Quid spin off customer promotions?

OAPs for 1p?
People Called Rob for Only Ten Bob?

We're struggling to be honest - can we move away from gimmicks and build a coordinated ticketing strategy?

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From: katrien@cafc.co.uk
To: daniel.levy@spurs.co.uk
Subject: Re: Re: Christian Ceballos

Hi Daniel

Totally free? You mean you don't want to negotiate at all?!

Regards

K

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From: johann.bg@cafc.co.uk
To: katrien@cafc.co.uk
Subject: Re: Re: Re: Re: Contract offer

Bejam

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From: julian@sidcup-counselling.co.uk
To: nick.pope@cafc.co.uk
Subject: Low shots

Nick

Just a quick note to see if you are feeling ok after yesterday's session?

There was no need to feel embarrassed about the emotional outpouring - I've been doing this job for thirty years and there's no patient situation I'm not prepared for.

Keep working on those mental imagery exercises - really try to feel the ball sticking in your hands.

Kind regards

Julian

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From: katrien@cafc.co.uk
To: steve@greenwich-disco.com
Subject: Re: Re: Pre-game lounge music

Smooth soul and R&B is a bit too clichéd.

Do you perhaps have any hard heavy underground Belgian speed techno?

K

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From: katrien@cafc.co.uk
To: tony.watt@cafc.co.uk
Subject: Official warning

Tony

The club embraces and values your eccentric behaviour up to a point.

However we have had several complaints from parents that you advised some of the Academy U9 boys that Tennent's Super was a rehydrating energy drink.

As a result we must issue you with an official warning.

Regards

K

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From: julian@sidcup-counselling.co.uk
To: nick.pope@cafc.co.uk
Subject: Re: Hull setback

Nick

So sorry to hear what happened - I was watching Goals Express on Sky Sports News and really felt your pain, but at least the team got the late winner.

Please trust me that together we'll get through this - for example feel free to speak to Chris Solly whom I guided through an imaginary knee injury.

Kind regards

Julian

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From: dr.ashwin.patel@bupa.co.uk
To: katrien@cafc.co.uk
Subject: Re: Johnnie Jackson

Dear Katrien

Thank you for your enquiry.

I'm afraid there is no such medical condition known as 'legs are gone'.  Over time muscle fibres and joint mobility will begin to exhibit gradual signs of degradation, especially in elite athletes.

In short, there is no operation which will treat this naturally occurring condition.

Kind regards

Dr Ashwin Patel
Consultant

Ps - the nurses here have become rather fond of Mr Vetokele!

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From: katrien@cafc.co.uk
To: guy.luzon@cafc.co.uk
Subject: Re: We need more players!

Shalom Guy!

Before breaking the budget Roland agreed to, are you sure we've tried out everyone?

For example there's a work experience kid called Ademola who can volley an empty Coke can into a bin from 25 yards.

K

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From: rabbi.cohen@catford-synagogue.co.uk
To: guy.luzon@cafc.co.uk
Subject: Re: Can you help?

Dear Guy

I hope you and your family are well and let me wish you a hearty Mazel Tov on the occasion of the battling home draw versus Fulham.

With regard to your request for spiritual assistance, I will indeed ask members of the community to spare some prayers for the Addicks at this difficult time,

Best.

Rabbi Cohen

Ps - just a personal view (not from the Almighty), but have you tried going 4-5-1 with Gudmonsson in the hole?

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From: madame.diarra@yahoo.fr
To: alou.diarra@cafc.co.uk
Subject: Je veux rentrer a France

L'equipe Charlton est merde.

Il pleut toujours ici.

Nous avons beaucoup d'argent - on pourrait etre en St Tropez mais nous sommes en Orpington.

Ps - Je ne comprends pas le football mais comment est-ce que Morgan Fox est footballeur professionnel?
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From: karel-mourinho@hotmail.bl
To: katrien@cafc.co.uk
Subject: Re: Confidential approach

Katrien

I'm honoured that you would 'tap me up' with regard to the potential managerial vacancy at the club - of course I would consider moving up from my current role as Senior Vice President of the Continental Network of Unified Transfer Strategists (CNUTS).

With regard to your question on realistic goals, I think automatic promotion is a long shot at this point but play-offs are well within reach - suffice to say I would be honoured to lead this team out at Wembley.

Kind regards

Karel

Ps - not sure what you meant by providing contact details for some referees?  I once shook hands with Howard Webb but I can't claim to have his phone number.

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From: mikhail.kennedy@cafc.co.uk
To: guy.luzon@cafc.co.uk
Subject: Re: Re: Playing time

Obviously I'm not looking for cast iron guarantees but I just want to know if I can tell my mates and girlfriend whether I'm a professional footballer or not.

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From: katrien@cafc.co.uk
To: guy.luzon@cafc.co.uk
Subject: YOU'RE FIRED!

Sorry it didn't work out - your P45 is at reception.

Sweet dreams.

K.

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From: katrien@cafc.co.uk
To: roberto.martinez@evertonfc.co.uk
Subject: Conor McAleny

Hola Roberto!

When you said "on the cusp of the first team", can you confirm exactly what you meant by cusp?

Kind regards

K

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From: katrien@cafc.co.uk
To: roland@staprix.be
Subject: Birmingham - yet another great win!

Hi Roly

As we had both hoped and expected, Karel is proving to be a veritable managerial phenomenon - two wins on the spin including back-to-back goals for JJ (his legs may have gone but at least his head hasn't!).

Let's just wait for one more triumph before blitzing the media with news of his permanent appointment.

K

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From: katrien@cafc.co.uk
To: tony.watt@cafc.co.uk
Subject: Cardiff loan

Q: How do you get two whales in a Mini?
A: Straight down the M4.

(JJ's joke not mine...)

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From: katrien@cafc.co.uk
To: roland@staprix.be
Subject: Re: Brighton away

"Shut up shop?". It's simply not in his DNA.....

I've read many books about enigmatic geniuses and it rarely pays to tame their wild spirit.

K.

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From: dr.ashwin.patel@bupa.co.uk
To: katrien@cafc.co.uk
Subject: Re: Rhys Williams

Dear Katrien

Good to hear from you again - so pleased to hear the new NHS call centre is operating well.

Yes of course I know Rhys Williams; indeed he has a wing of the hospital named after him.

Sadly he'll never play professional football again but I believe he has the charisma and intelligence to carve out a bright career in coaching or management.

Dr. Ashwin Patel
Consultant

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From: katrien@cafc.co.uk
To: nigel.pearson7@btinternet.com; malkay.mckay@hotmail.com; garrymonk10@gmail.com
Subject: Applications

Thank you for your job applications.

Unfortunately we regret to inform you that we will not be pursuing them further as the position has already been filled after a lengthy search process.

We wish you the very best of luck in your future careers in top level football management.

Katrien Meire
CEO

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From: nurse.mary.oreilly@lewishamandgreenwich.nhs.uk
To: katrien@cafc.co.uk
Subject: Re: Xmas hospital visit

Hi Katrien

I'm aware the players hospital visit is an annual tradition, but given recent form on the pitch it may not have the desired impact - some of the patients are really very poorly.

Perhaps they could drop in to a local old folks home?

Kind regards

Nurse O'Reilly
Intensive Care Unit

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From: karel@cafc.co.uk
To: IT.help@cafc.co.uk
Subject: Email lists

Hi

Can you please merge the 'MIDFIELDERS@cafc.co.uk' mailing list into the existing list called 'FORWARDS@cafc.co.uk'?

Thanks

Karel

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From: scouting@cafc.co.uk
To: karel@cafc.co.uk
Subject: Colchester United - Scouting report

Hi Karel

Given limited departmental resources, a short form scouting report follows:

They're in League One.
They play in blue and white stripes, especially at home.
Their ground is on the outskirts of the town.
They're quite physical.
They'll pass it on the ground briefly and then hit it long.
They've a tricky black winger who creates and scores goals (but we understand he may not be available).
Their manager is keen.
Erm...
That's it.

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From: katrien@cafc.co.uk
To: johnnie.jackson@cafc.co.uk
Subject: Re: Huddersfield refunds

JJ

Lovely gesture but have you thought this through?  There were 2,000 at Watford last season and our lawyers believe they may be entitled to a retroactive claim.

Regards

K

Ps - LOL re: refunds for Hull away but I'm sure it won't come to that ;-)

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From: karel@cafc.co.uk
To: katrien@cafc.co.uk
Subject: Out of Office Reply - Re: Ground Control to Major Karel

I'm currently out of the office and not responding to media enquiries until further notice.

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From: chris.parkes@cafc.co.uk
To: reza@cafc.co,uk
Subject: Re: Sanctions

Unfortunately the imminent lifting of Iranian sanctions does not apply to your one game suspension.

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From: johnnie.jackson@cafc.co.uk
To: stephen.henderson@cafc.co.uk
Subject: Huddersfield whip round

Everyone is in for £200 except Kashi and Diarra who claim no responsibility.

Meanwhile I can't get hold of Ahearne-Grant at all - according to Katrien he's just gone on loan to Cambridge University.

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From: roland@staprix.be
To: jose.riga@gmail.com
Subject: Coffee?

This message has no content.

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From: jose.riga@cafc.co.uk
To: FIRST-TEAM@cafc.co.uk
Subject: Hello again!

With only 24 hours before the Hull game, I thought I'd just send a quick note saying how much I believe in you all.

However for now I've selected an eleven just to keep things nice and tight - we'll take a 0-0 and start properly versus Blackburn.

Jose

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From: julian@sidcup-counselling.co.uk
To: stephen.henderson@cafc.co.uk
Subject: Reaching out

Hi Stephen

Nick Pope gave me your details.

Please give me a call at your earliest convenience.

Kind regards

Julian Edwards
Counsellor

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THE END




Friday, February 20, 2015

Accountability


The audited accounts of the club (and its owner Baton 2010 Ltd) were published on the Companies House website earlier today.

The accounts to 30 Jun 2014 reflect the final six months of the Jimenez/Slater regime and the opening six months of the Duchatelet regime (or more specifically Staprix NV, a company owned 95% by Roland Duchatelet). 

This division makes it difficult to draw very strong conclusions about what has changed financially but nonetheless some interesting observations are outlined below , with some additional interpretations of my own.

As has been the case for several years, a review of the accounts is complicated by the addition of the Baton 2010 Ltd entity which is owned by Staprix and in turn owns the club.  My comments below relate to the club’s accounts unless stated otherwise:

-          The ‘strategic report’ at the front of the accounts make reference to the lack of investment in the squad during summer 2013 and the problems with the pitch (caused by collapsed drainage) ;

-          Average attendances fell from 18,480 to 16,130 but this still placed us in the top half of the Championship attendance table – the report additionally notes it is the ‘priority of the Board’ to grow attendances to 20,000 in the Championship ;

-          The club aspires to achieve ‘Category 1’ status for its Academy ‘as soon as possible’, but this will require significant development of the training facilities etc. ;

-          Turnover increased from £11.9m to £12.7m – this was explained by an increase in Premier League ‘solidarity’ payments and matchday revenue £0.7m higher than the previous season, explained entirely by the FA Cup run to the Sixth Round  - indeed without the additional Cup revenues, matchday revenue would understandably have been down (given lower average attendances) ;

-          Commercial income was moderately higher at £1.5m as the result of ‘new sponsorship and preferred supplier contracts’ ;

-          The club made an operating loss (before transfers) of £7.2m (2013 : £7.4m) – profit from the disposal of players (which is not the same as ‘transfer fees received’) was again £1.7m, the same as the prior year ;

-          Staff costs were down slightly at £11.5m (2013 : £12.0m), of which £10.4m was wages/salaries - moreover this includes £0.3m of ‘severance costs’ relating to former employees  - once severance costs are added back, this implies staff costs equal to 88% of turnover ;

-          The above staff costs were spread across 161 employees (2013 : 146), of which 101 are on the football side – a quick ‘back of the envelope’ calculation would suggest that 75% of staff costs are accounted for by the first-team squad (say 25 players) and a further say five key coaching staff – on this basis it implies these 30 key playing staff earn approx £5k per week, which seems about right for a Championship club with no legacy Premier League ‘overhang’ ;

-          Non-staff costs (which must be approx £7m) are not broken down in enormous detail, but £2.8m relates to ‘matchday costs’ (presumably policing, stewarding, and maybe costs of goods sold), £2.2m to ‘site costs’ (presumably rates, power, security etc.) and £1.4m to ‘administrative costs’ ;

-          Intangible assets on the balance sheet (ie. The non-amortised portion of the cost of player registrations) increased by £3.3m, reflecting particularly the acquisition of Igor Vetokele just before financial year-end ;

-          Directors fees of £112.5k were paid (2013 : £150k), all of which was paid to a single director – since £150k is equivalent to £12.5k per month and 9 x £12.5k is £112.5k, then I’d be inclined to assume that this was paid to Martin Prothero for his six months work (with a further three months notice ?) – however this begs the question how Katrien Meire is being paid  since no other directors’ remuneration is disclosed ;

-          There is a new item in the accounts called ‘Interest payable on loans from ultimate parent company’ (ie. Staprix NV) – in other words the ongoing operating losses are being funded (as they must somehow) by the owner(s), but not on an interest-free basis  but at 3% ;

-          Although it does not seem very ‘exceptional’, the £89k for ‘pitch cover costs’ are included in ‘exceptional items ‘ ;

-          One of the most interesting issues concerns player transfers, or as they’re known in accounting circles ‘intangible fixed assets’ – the amount spent in fees during the year is very clear (£4.4m), and this relates mainly to the purchases of Messrs. Vetokele, Parzyszek, Nego and Ghoochannejhad.  As has been well-documented, the latter two were ‘in network’ signings and thus any fee (which may of course have been nominal) is effectively an intercompany transfer, however the rumoured fee paid for Vetokele (and to a lesser extent Parzyszek) really do appear accurate.  Whilst fans may question the long-term plan for these players within the network, £4m+ is a meaningful outlay by a Championship club without a Premier League parachute ;

-          The club only received £194k in transfer fees during the year which seems exceptionally low given it includes Stephens, Kermorgant, Button and Smith – admittedly as noted below there may be contingent payments to follow, but the sale (particularly of Stephens/Kermorgant) really does seem to have been driven by wages and a desire to earn at least some fee, rather than just let their contracts expire in the summer ;

UPDATE #2: The above instinctively felt wrong as much as it was clear from the accounts that £194k was the sum received on the sale of intangible assets.  Moreover I couldn't reconcile this amount with the 'profit on disposal of players' of £1,718k.

A review of the 2013 accounts shows a consistency of accounting treatment whereby the amount of the fees which offset any unamortised carrying value of the players sold (£194k for the year to 30 Jun 2014) is shown as cash received on the 'sale of intangible fixed assets' (because it is effectively only a balance sheet transaction), but any excess is accounted for as 'profit on disposal of players' (£1,718k) within 'cash from operating activities'.

I would thus (now) state with some confidence that instead transfer fees received (including an add-on relating to Jonjo Shelvey) were £1,718k + £194k = £1,912k.   Moreover it is likely some of this remained outstanding at year-end given the relatively large 'trade debtors' balance of £906k.  

Apologies for any earlier confusion! (the treatment really is not especially clear).

-          Contingent assets on players sold (if certain hurdles are surpassed eg. appearances) increased significantly from £3.0m to £4.2m – it is easy to assume this relates to part of Diego Poyet’s move to West Ham, but this may have been infeasible (he was out of contract after all) and anyhow belong in the following year’s accounts – instead the difference as suggested above may simply relate to the aforementioned four in-contract players who were sold for a fee ;

-          Contingent liabilities on players purchased are however only £0.4m ;

-          Between 30 Jun 2014 and the date of the accounts, player sales generated a further £891k – this in my view is more likely to relate to Poyet and Michael Morrison ;

-          £755k was added to the value of tangible fixed assets (stadium, offices etc.) which presumably includes some combination of new seats, undersoil heating, training ground improvements etc. (dependent upon the date of the works) ;

-          Amounts owed in bank loans/overdraft fell from £4.8m to £2.7m which must be seen as a positive development  - Richard Murray continues to personally guarantee an overdraft up to £650k (it’s not clear why he is still obliged to do so) ;

-          However as expected this was more than offset by an increase in ‘amounts owed to parent company’ which increased by £12.9m during the year – if my maths is correct, this can be explained in terms of : Cash outflow from operations £4.8m, Net transfer fee outlay £4.2m, Purchase of tangible fixed assets £0.8m, Bank loan repayment £2.1m, Interest £0.6m, Other/Rounding £0.4m – who’d be a football club owner ?;

-          The legacy loans owed to former directors remain at £7m as per the previous year ;

-          Finally between 30 Jun 2013 and the date of the accounts, agents fees of £327k were paid on new signings (this would include the likes of Bikey, Gudmonsson, Henderson etc.).

 A very brief summary for the less financially literate would thus be as follows :


-          The club continues to generate substantial losses ;

-          These losses are being financed by low-interest parent company loans (with no fixed repayment schedule) ;

-          The amounts owed to the bank have been cut substantially;

-          The average first-team player earns approx £5k per week;

-          Substantial transfer fees have been paid out for new players (£4m+ in the last fiscal year, which does not include Gudmonsson and others) ;

-          Transfer fees received for Stephens, Kermorgant, Button and Smith (plus an add-on for Shelvey) amounted to just under £2m.


Thursday, April 03, 2014

Red Army



“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”

(Ernest Hemingway)


The audited financial statements of the club were finally posted to the Companies House website this week.

My summary follows with personal thoughts and interpretations in italics. 

All references are actually to the financial statements of Baton 2010 Ltd, the 100% owner of both Charlton Athletic Football Company Ltd ("the club") and Charlton Athletic Holdings Ltd ("the property investment subsidiary").

As a reminder the accounts are for the year ended 30 Jun 2013 and thus effectively comprise a summary of the first season back in the Championship.

  • The accounts were signed off by the auditors on 17 Jan 2014 - thus it seems the club waited until the last possible moment to file them  (31 Mar deadline) for reasons unclear.

  • The accounts confirm that Staprix NV acquired Baton 2010 Ltd (from CAFC Holdings Ltd) on 3 Jan 2014 - interestingly they note that Staprix NV is owned only 95% by Roland Duchatelet suggesting a 5% minority owner may exist (although it may well be a related party such as a family member or trust).  Nonetheless this is potentially a curious observation.

  • Turnover was 39.3% higher at £11.9m - this was explained as expected by a substantial 257% increase in 'central income' (ie. TV), even though the accounts additionally note that this was the first year of a new three year Sky deal which was valued 26% lower than the previous one.  Clearly the dwindling TV revenues in the Championship (as Premiership TV revenues skyrocket) provides a further challenge to any second-tier club seeking to break even.

  • Within turnover, matchday income was only 10% higher than the prior League One season - the average attendance was only 6% higher at 18,481 which must be a disappointment given the 9th place finish.  Indeed there seems a reasonable likelihood that matchday income in 2013/14 may be lower than the League One 2011/12 title season given current (lower) average attendances of only 16,248.

  • Within turnover, commercial income was 23% lower at £1.4m but this is explained by a change in the way the retail operation is managed (now outsourced to Just Sport), and is thus not meaningful.

  • The loss on ordinary activities was £6m, down slightly from £6.8m in 2011/12 - the failure to reduce the loss significantly in the Championship is simply explained by an increase in adminstrative expenses almost identical to the increase in turnover (both £3.3m).  The largest component of administrative expenses is of course staff costs which rose by £3.1m to £12.0m (including national insurance of £1.3m).  As a result, staff costs remain higher than turnover in 2012/13 just as they were in 2011/12 although the ratio has fallen slightly to 100.5% of turnover from 103.7%.  Either way this is a wholly unsustainable situation and perhaps pours some water on the idea that we were being run on a shoestring last season.  Moreover whilst promotion took us one step closer to the promised land of the Premiership, from a purely financial point of view promotion did not really improve the club's situation at all.

  • The average total number of employees (excluding temporary matchday staff) rose by 18 to 146 during the year, almost entirely on the playing, training and football management side (rising from 73 to 90) - the wage bill is not categorised separately between those on the playing side and those on the operational side, but if one assumes that those 90 playing staff (representing 62% of total staff) take a 80% share of total staff costs, then it implies average wages per individual of £95k although of course there will be considerable divergence between say the top ten or so best players/management and the rest.  A better interpretation may thus be as follows - to use some round numbers, if one assumes that there is a first-team squad of 15 'senior pros', 10 'junior pros' plus 5 key management personnel (Powell, Dyer, Hart etc.) and if one assumed that the 15 senior pros earn say £300k, the 10 junior pros earn say £100k and the 5 key management personnel earn an average of say £150k then these 30 earn a total of £6.25m.  If so this would leave £4.4m to be spread amongst the remaining 116 total staff (146 - 30) implying an average wage of £38k for the remainder.  Given this includes some well-paid operational staff like Martin Prothero, as well as a myriad of coaches, Academy pros, medical staff, commercial staff etc. (In addition to less well-paid admin staff) this doesn't appear an unreasonable set of 'guesstimates' to me.

  • The highest paid director was paid £150k - others have suggested this was Martin Prothero and I've no reason to disagree.

  • The interest burden on the club's debt was £360k, down slightly from £384k - the interest burden is not especially significant at just 3% of turnover but this is a little misleading given the vast majority of the debt is not interest-bearing (so-called 'friendly debt' owed to the holding company and former directors).

  • During the year £813k was paid to acquire player registrations - these would appear to largely relate to Lawrie Wilson and David Button, and almost certainly also promotion-related add-ons relating to transfers from the summer of 2011.

  • There was profit on players sold of £1.7m arising predominantly from contingent fees relating to Shelvey/Elliott/Jenkinson/Richardson/Hudson/McCarthy and Academy players, Palmer and Huddart (to Chelsea and Arsenal respectively) - it is frustrating to learn that Academy players that most fans wouldn't have heard of are being poached by the big clubs though with the likes of Poyet and Cousins making such a big and public impact at first-team level, hopefully this trend will slow.

  • Subsequent to year-end, the disposal of player registrations has generated income of £570k -  given the date the accounts were signed, this can't relate to Kermorgant, Stephens and Smith.  However it may include the likes of Button and some contingency payments on prior sales.
  • The carrying value of the club's tangible fixed assets (freehold and leasehold property) was revalued upwards following an independent review by £9.6m - this is probably an irrelevant fact (certainly not offering any cashflow benefit) reflecting rising property valuations across the region, although cynics will no doubt point out that this may be interesting news should the club be considering a move someday from The Valley.  The flipside of course is that the value of the land we might have to purchase or lease to build a new stadium will have increased too!

  • Short-term debts (due in less than 1 year) fell slightly as a result of the repayment of £250k due to Richard Murray (as noted in the previous year's accounts).  Bank loans and overdrafts remain at £2.2m of which Murray has guaranteed up to £800k.

  • Longer-term debts (due in more than 1 year) rose as expected by nearly £6m simply reflecting the need to finance the ongoing operational deficit above of exactly £6m.  Total debts due in >1 year now total a somewhat shocking £29.7m of which £2.5m are bank loans, £7.7m are former director loans, £15.4m are loans to the parent company ('owner loans') and £3.8m are grants received - the majority of long-term debt remains 'friendly' in nature but the figure will simply keep going up unless either the club breaks even or the new owners perhaps choose to inject equity rather than more debt (or convert one to the other).  I continue to remind fans however that the specific nature of the club's debts both now and in the recent past renders administration a highly unlikely possibility (why would owners and/or former directors push the club into administration thus almost guaranteeing a near worthless return?) - this fact is very clearly misunderstood by many fans.  On a different note it was good to see that £1.6m of the longer-term (and 'less friendly') bank loans were repaid during the year, reducing the total outstanding to £4.2m (paying a floating rate of LIBOR + 2.5 to 3%). 

  • In addition to the repayment of Murray's £250k short-term loan above, a further £880k of longer-term loans to Murray were also repaid - per the previous year's accounts, £1.55m of Murray's loans became repayable upon promotion to the Championship and it appears that over half of this amount due was indeed repaid.  If my calculations are correct therefore, Murray was repaid a total of £1.1m during the year and moreover in Jan 2014 was of course relieved of his 10% stake in CAFC Holdings Ltd, the previous ultimate parent company of the club.  In short the club's financial obligations to Murray remain significant but reduced, whilst Murray's quasi 'obligation to the club' (via his equity stake) has been removed as of January.
So in short despite promotion to the Championship, limited investment in new players and a respectable 9th place finish, the club's finances remain perilous with a £6m running annual loss and long-term debt of £30m. 

It is not surprising therefore that Duchatelet might wish to adopt an alternative approach, and it is one which we ought to cautiously welcome if only because the approaches that came before have patently failed to deliver stability. 

Clubs like ours can deliver footballing success with a degree of financial stability (think Brighton, Burnley, Swansea) or without it (think Portsmouth, Leeds, QPR). 

As a fan with hopefully many more decades of support in front of me, I'd personally rather wait longer for a shot at the former than recklessly target the latter. 

Early signs suggest Duchatelet feels the same way.

Wednesday, March 12, 2014

Chris P. Chilly Beef

Reading some of the emotional outpourings of grief from a meaningful majority of Charlton fans yesterday, one might initially have concluded Chris Powell must have died rather than merely lost a relatively well-paid job.

He departed as one of the ten longest-serving managers out of the 92 clubs, a fact both remarkable and ridiculous for a manager still rightly described as a ‘rookie’.

At the time of his appointment, I vociferously considered his success as a Charlton player and his all-round good character as being obviously true but irrelevant when assessing his suitability for the job. 

However it was precisely those qualities which persuaded Tony Jimenez to take a risk, and although I thought him crazy at the time, with the full benefit of hindsight it was an inspired move.

His familiarity helped rally the fans at a difficult time whilst his likeability was key to motivating a newly-built team in 2011/12 to win 30 out of 46 matches.

The following season was something of a conundrum – investment in the team was limited but then again the recently accumulated squad had masqueraded as a Championship team in League One.

Our campaign threatened to drift into a relegation scrap much as the current one has, but two pivotal wins (Cardiff and Bolton at home) reversed the momentum completely at vital moments.

Whether you put those turnarounds from two goals behind down to luck, opposition incompetence, managerial genius (or likely some combination thereof), their impact was undeniable.

Those two games plus the seven games that followed each generated a total of 33 points, more than half of our entire season’s total from sixteen games.

It is nonsense to suggest we ‘almost’ made the play-offs – we accumulated 18 points from our final eight games and still finished effectively four points short.  It was a virtual mathematical impossibility several weeks before the season ended.

Importantly however the general consensus that we had almost done so worked against Powell’s best interests, implying to the now cash-strapped (former) owners that the squad was stronger than it really was in reality last summer.

Whilst the squad clearly wasn’t strengthened last summer, it is hard to argue it was materially weakened either – the ageing Fuller (who started only 20 games) and the usually crocked Haynes replaced by Sordell and Church, with the remaining ins and outs largely being insignificant ‘noise’ around the edges.

If one was being harsh therefore, one might suggest Charlton’s poor form this season (at least until the takeover) was entirely consistent with last season’s ‘conundrum’ ie. we rode our luck then, and we have now been ‘found out’.

Unfortunately for Powell overachieving this way (whether by luck or otherwise) again somewhat paradoxically did not serve him well in the eyes of Duchatelet given how things have subsequently transpired this season.

With a wage bill firmly in the League’s bottom half, an accumulation of 55 points would have represented a reasonable enough return last season.

However looked at with a fresh pair of eyes like Duchatelet’s (unaware that our points total last season almost certainly flattered us), it would not be hard to see why he would immediately have grave concerns about Powell’s abilities, even before any conversation about his plans for player recruitment etc.

The new owner may have been told (politely knowing Powell’s way) that the ‘players aren’t good enough’ but he might have looked at last season’s table and the virtually unchanged squad, and simply have disagreed. 

Even worse when handed a half-dozen new players in January, Powell continued to largely prefer the incumbents.  It’s not hard to see why the relationship became untenable.

The agricultural football dished out on a regular basis would not have helped his cause either, even if The Valley pitch is suitable currently only for agriculture.

Indeed it seems unarguable that Powell produced teams which were functional rather than stylish, even during the record-breaking 2011/12 season. 

It is unclear whether this was an approach designed to fit the squad at his disposal (implying he could adopt a passing style with different players), or whether it is the only approach he is comfortable with.

Notably during the disastrous second half to 2010/11, he clearly tried to get his newly inherited team to get the ball down and play but it was quickly apparent they weren’t able to effectively.

He certainly seemed trapped at times in his naturally risk-averse straitjacket, an observation which if true would represent an obvious weakness.  The very best managers are flexibly-minded.

However as an inexperienced manager he should be judged less severely than more seasoned peers, and it’s possible (as many believe) that he will flourish into one of the very best over time.

Some fans care little about style and only about points but speaking personally, as I get older I find the former is just as important as the latter if not more so. 

With my free leisure time away from work and family responsibilities extremely limited, I value seeing good football significantly more than I used to. 

I think a Board will naturally be more patient with a struggling manager adopting a more attractive progressive playing style, because the ‘optics’ are better (in short they can see what the manager is trying to achieve more readily).

The fans were patient because they understood the limited resources and because it was well, Chris Powell.

Unfortunately when a more direct or conservatively set-up team plays poorly, you risk performances like Sunday’s which are almost impossible to defend in the circumstances.  Even some of the most ardent Powell supporters must have had their heads turned.

I’m conscious of course that I haven’t yet mentioned Duchatelet’s plans for player recruitment yet, particularly those borrowed or acquired (perhaps temporarily) from his own network of clubs.

It seems strange to fear becoming a feeder club when so far we have only been fed by Standard Liege.  If it’s a problem, I think it’s only one for the distant future.

It's worth remembering we’ve always been a ‘feeder’ club, just for different clubs not one (Liverpool, Arsenal, Chelsea......)

Intereference in team selection is clearly unworkable, but I have no problem with a manager having only very limited input into recruitment given how short their average tenure is. 

This is the much-feared but actually quite sensible ‘European model’.

At the other extreme, an absolute managerial veto on sales (for example in the case of Stephens or Kermorgant), or an effective open cheque book for purchases is likewise unworkable.

In short there is a huge misalignment of interests – when was the last time you heard any manager state that he was happy with his current squad?

It’s certainly possible that Powell was denied any say (let alone veto) whatsoever which he may be have considered intolerable, but conversely being told to get on with coaching, preparing and selecting from the squad he is given is surely not entirely unreasonable either, even if it’s uncommon?

Fans who demand differently seem detached from the financial reality of the club losing perhaps £5-6m in the Championship. 

Berating the person who is stepping up and funding the deficit whilst daring to try an alternative model surely deserves some respect (even perhaps from Powell, though we aren’t privy to the exact nature of their conversations).

The club tried the ‘wealthy fan model’ and it ultimately failed, and then we tried the ‘wealthy non-fan fronted up by a couple of iffy geezers model’ and that clearly failed too.

There’s no guarantee the ‘club network’ model will work either but I at least am prepared to give it a try.

It’s a shame Powell isn’t coming along for the ride but there’s two sides to every story and I suspect it didn’t have to be like this. 

The relationship was clearly chilly and each party had its beef. 

Some mutual compromise might have gone a long way.

Sunday, January 05, 2014

Cup Double

With Charlton having already played Oxford at home then Huddersfield away in the opening rounds (for us) of the Capital One Cup this season, what are the ex ante chances (see Note 1) of the exact same thing happening in the FA Cup? 

 

Well if my maths is right, it can be estimated as follows:

 

- probability of Oxford reaching the Third Round: 0.25 (see Note 2)

 

- probability of Charlton drawing Oxford at home in the Third Round: 0.008 (see Note 3)

 

- probability of Huddersfield reaching the Fourth Round: 0.4 (see Note 4)

 

- probability of Charlton reaching the Fourth Round (having been drawn at home to Oxford): 0.73 (see Note 5)

 

- probability of Charlton drawing Huddersfield away in the Fourth Round: 0.016 (see Note 6)

 

Therefore a reasonable approximation of the probability of playing Oxford at home then Huddersfield away in the first two rounds of the FA Cup after it has already occurred in the Capital One Cup is:

 

0.25 x 0.008 x 0.4 x 0.73 x 0.016 = 0.00000934 or 107,065/1

 

To put this in perspective this is less probable than tossing a coin 16 times and getting consecutive heads, or less probable than selecting seven random cards from a shuffled pack and each card being from the same suit.

 

Indeed whilst the probabilities will obviously be different for any given three club combination, I wonder if it has ever happened before?

 

Notes

1.       ‘Ex ante’ in this context means the estimated probability before the First Round of the FA Cup (featuring Oxford) had been drawn.

2.       Given Oxford United are riding high in League Two, before the First Round draw is made (see Note 1), I estimate the probability of them winning their First and Second Round ties to be 50% respectively, and thus 50% x 50% = 25% or 0.25.

3.       There are 63 other teams in the FA Cup Third Round draw, and an equal chance of being drawn home or away to any of them ie. 1/(63 x 2) = 0.008.

4.       As a midtable Championship side, this is a simple estimate of Huddersfield’s ex ante probability of reaching the Fourth Round in any given season – given they were given a relatively straightforward tie (Grimsby away), their actual probability increased significantly but this is not relevant for the calculation which considers the position ex ante (see Note 1).

5.       Current bookmakers odds of approx 4/6 imply a 60% probability (ie. 6/10) that Charlton win the tie at the first time of asking, whilst draw odds of 14/5 imply a 26% probability (ie. 5/19) that the tie needs a replay.  If a replay is required, I estimate the odds that Charlton still win the tie from that position (possibly after penalties of course) to be 50%.  Thus the estimated probability that Charlton reach the Fourth Round is 60% + (50% x 26%) = 73% or 0.73.

6.       There are 31 other teams in the FA Cup Fourth Round draw, and an equal chance of being drawn home or away to any of them ie. 1/(31 x 2) = 0.016.

Friday, January 03, 2014

I'll Be Your Friend, Roland

"I'll be your friend, Roland." (Janet St. Clair, Grange Hill - circa 1985)



Perhaps the longest drawn out negotiation since the Louisiana Purchase in 1803 has finally been concluded.


The euphoria is such that I've been persuaded to post my own musings here for the first time in nearly a year. 

There are several reasons for my lack of blogs (many unrelated to the club), but it's fair to say that the approach of the previous owners was relevant also. 

They threatened to drain the club of its soul in much the same way as a succession of poor managerial appointments had done in the post-Curbishley era. 

However it had initially promised so much. 

As I espoused in a lengthy post in Jun 2011 ("CAFC: The Movie"), I think there was a viable and genuine plan to develop the club (which I loosely termed the 'Moneyball' approach). 

This plan was evidenced by an excellent set of summer 2011 signings (generally young, hungry and with potential resale value) combined with a continued investment in the Academy. 

I considered the appointment of Powell to be reckless but importantly it got the fans onside, a not insignificant consideration given what had come before. 

However as I wrote at the time, "We assume that the funder’s expectation is that this investment will make money at some stage and that means in real hard cash, not merely on paper.

Even a fool would surely understand that (barring a miraculous double promotion), an investment in a League One club would be loss-making on at least a 3-year view. 

Meaningful operational losses even at Championship level appear structural (for reasons admittedly I don't understand), and as perhaps they didn't fully appreciate at the time, the clubs we compete with aren't exactly standing still either. 

It's unclear whether the apparent breakdown in the relationship between owners and 'the funder' rested upon falsely presented assumptions at the outset. 

Either way with hindsight the plan was fundamentally unstable and liable to fail long before completion.

Tony Jimenez et al thus ended up akin to a homeowner with grand plans to extend and renovate a property, but with no means to finance said development amidst crippling outgoings. 

Meanwhile the garden doesn't drain properly. 

The plan thus having become untenable, a sale to what I might cynically describe as a 'greater fool' became unavoidable. 

Meanwhile the ridiculous lack of boardroom communication remained inexcusable - in a social media-driven world that seemingly can't stop talking, the owners remarkably never found their voice. 

Regardless of the challenges behind the scenes, this was illogical.

With a vicious cycle well under way (lack of investment in the squad leading to poor results), time increasingly became of the essence rather than price. 

In short they were trapped in a hole of their own making.

Mere fans like me are not privy to any implicit or explicit financial agreements that may exist between the owners and 'the funder' but today's announcement may well not signal the end of this saga for them (happily it's no longer our problem). 

We will perhaps never know if they were ultimately 'made whole again' by the transaction, but our best hope of knowing lies in the 30 June 2014 accounts, unlikely to be filed before Q1 2015. 

Likewise we will have to wait to learn about other important issues, such as the treatment of the loans to the previous directors (who despite their position as 'fans', would have been well within their rights to play hardball regarding their debt seniority). 

As for Roland Duchatelet, we frankly don't know much about him but at least the source of his wealth seems clear whilst his political activism suggests someone unafraid of communication. 

Fans will be looking for evidence of his ambition in the January window yet with relegation a clear risk, he may well pull forward future investment, lulling us into a false sense of optimism.

 I can broadly identify four possible motives for the purchase: 

1. Ego or Fun:  He is probably too bright to do something crazy, but this potential motive is in my view the most dangerous scenario for the club. 

For every Tony Bloom or Steve Gibson, there's a Vincent Tan or an Assem Allam eager to create a different kind of legacy.

Premiership riches (and importantly the glamour) appear tantalisingly achievable yet we compete every year with similarly bankrolled clubs, some whose financial wheels are greased by parachute money.  

To give it some perspective Leicester City, Nottingham Forest and Sheffield Wednesday were last in the top flight 10, 14 and 13 seasons ago respectively. 

2. The 'multi-club' model: The concept isn't particularly new (for example ENIC owned stakes in multiple clubs), but it has been brought to the forefront again most notably by the Pozzo family which owns Watford, Udinese and Granada. 

The Watford experience would seem to suggest the potential use of effectively a large single pool of players, initially to benefit the 'junior' club in the arrangement (in this case Watford) for the longer-term benefit presumably of the two more senior clubs. 

Such an arrangement requires not only the judicious use of the loan system and 'fudged' permanent signings, but also a manager willing to agree to such an arrangement. 

In this sense Gianfranco Zola might have been considered a willing stooge (Powell might be less accommodating). 

However whether this model is preferable to utilising the existing loan/transfer system (albeit with a larger budget for fees and wages) is far from clear. 

Indeed it is notable that Udinese have fully 30 players out on loan, of which 24 are at 'non sister' clubs (including Matej Vydra now at WBA, having previously starred at Watford). 

In short maintaining such a large centralised squad is expensive, especially if some (like Vydra) are playing 'below their station' and demanding to be paid accordingly. 

Unfortunately for Charlton, with the exception of perhaps a few fringe Liege players, it's hard to imagine that any more of the players within Duchatelet's group would be playing 'below their station' at Charlton. 

Moreover the relative hierarchy of clubs within the club is by definition fluid - for example Watford get larger crowds than both Udinese and Granada, yet play in the second tier of its domestic league. 

The money available upon promotion however would dwarf both of their sister clubs. 

So the key therefore must be to understand the overall goal of the group owner - if it is to maximise group earnings then using the likes of Udinese/Granada/Liege to give Watford/Charlton a cheap way to be leapfrogged into the Premiership has some obvious merit. 

However what happens once they get there? A juggling act with each club's fans feeling entitled to special treatment no doubt. 

In terms of other potential synergies between group clubs, whilst I'm sure a management consultant would happily go wild with Powerpoint, in truth they are somewhat limited given cross-border complexity (despite the very high fixed costs of running a club). 

One might imagine the possibilities of say a centralised online operation for tickets/retail, or the benefits of a centralised scouting system for example. 

Negotiating power for commercial deals would be enhanced when representing several clubs, but it would hardly be formidable in the face of the type of global brands all owners crave. 

Yet if the owners wish to maintain the option to exit from any of the clubs if a suitable offer is received in short order, then does it make sense to make the clubs less independent operationally than they otherwise would be? 

3. Community: It is notable for example that Ujpest, Carl Zeiss Jena and now Charlton are clubs whose best days are in the past, yet they have a sufficiently proud history to tempt an old romantic like Duchatelet perhaps? 

His political activism and writings suggest he's a relatively cerebral type so perhaps he just loves football and will get a kick out of getting the respect from fans and the media for doing 'the right thing' (in this case putting each club on a stable footing in an inherently unstable industry). 

If so then this will most likely resemble the fondly remembered period roughly from the return to The Valley in 1992 to relegation from the Premiership in 2007, when Alwen/Murray/Simons et al pretty much did just that. 

This motive may be fanciful however - there are plenty more worthwhile causes for the philanthropic to support.

Then again children are demanding and stressful financial liabilities, yet it doesn't stop families from willingly accumulating several of them.  

4. A quick turnaround then sale: This was basically the Jimenez model until it was clear the promotion to the Premiership might take rather longer than expected. 

Given the 'structural' nature of the financial losses in the Championship, it is hard to see how even stabilising the club in midtable (which itself will require meaningful further investment), will suddenly make us an attractive proposition for the next potential buyer. 

The only way to engineer a profitable sale (ie. one in which the equity is valued materially above zero) is to achieve promotion but then immediately sell! 

As the extraordinary debts revealed at Bolton Wanderers demonstrate, being a supposedly well-run Premiership club for eleven consecutive seasons still rendered them a financial basket case. 

Richard Murray would probably concur (but he just never quite found the right moment to mention it).