Untold Arsenal: Arsenal News. Supporting the Lord Wenger in all he does » 2010 » April » 04

The story doing the rounds  is that Manchester IOU will see a significant drop in revenue over the next two years, now that they have decided not to put up the cost of season tickets again.  Figures of around 11% decline a year are being talked about.

The figures come from a JP Morgan paper which shows the match income to be £109m last year.  It is expected to be £98m this season and £96m in 2010/2011 going back to £101m in 2011/12.

The heart of the problem is the selling of executive boxes, which many clubs have faced.  Arsenal, having the most luxurious stadium in London, and being the only one where the boxes were built into the plan, rather than tagged on later, have far less of a problem.   And London clubs in general have less of a problem, as they have a bigger choice of top businesses to pitch to.

However in Manchester even JP Morgan think that the situation could get even worse for the most indebted football club on the planet, saying, “We note that the coming two quarters will be important to gauge demand for 2010-11 season tickets and executive hospitality seating in light of the negative MUST PR campaign.”

That is interesting, since it is one of the first overt statements about the effect that the anti-Glazer campaign is having on the willingness of the top brass to be seen to be associated with a club so out of favour with its natural supporters base in Slough, Inverness, Chelmsford and Penzance.

So what difference will this decline make?  More debt to add to the debt?  Actually it is worse than that, because here we are dealing with cash – the real live money used to pay into the players’ bank accounts.   Manchester IOU can survive for a few more years because the bonds have given them that amount of time before repayment is needed.   But what they still need is cash to pay for real things like VAT.   And that is what they lose if a box is sold at half price.  Or less.

Cash flow is something that has not been speculated upon that much because cash flow is more technical and boring than the big numbers of bonds and bank repayments.  And yet if you look at business in general, cash flow is what drags companies that go into administration, down most of the time.  They simply run out of money to pay the staff.

So if we combine the issue of cash flow drops due to the recession (the first thing you cut when your firm goes bust is all the jollies) with a need to distance oneself from the greatest PR disaster in the history of football since Peter Ridsdale starting talking about living the dream at Leeds, there’s a whole new area of problem for Manchester IOU that we have not contemplated before.

And not just Manchester. Liverpool Insolvency (also known as Liverpool Weetabix, since one of the owners of Liverpool pulled the same tactic when he owned Weetabix) have the same problem multiplied by the speed of money.

Liverpool need to pay huge amounts of money to the bank each year to reduce their borrowings.  Additionally they need to cover their losses – since they do indeed lose money each year.   These are the things that we have focussed on.

Additionally they have people like the Spirit of Shankly making a noise about not wanting RBS to lend the American crooks any more money, and people like me writing to RBS reminding them that they have made it difficult for my company to borrow money, and anyway I own RBS as do you, if you live in the UK… all of which makes it another PR disaster.

So bring in the issue of cash flow, and the same problem arises.  Liverpool is a buying club, so each year it invests in new players, and that means that a historic debt builds up as the money spent has to be paid in cash terms over a five year period in most cases.  And there’s that pesky Mr Revenue and Customs always wanting his money too.

Add in to that the fact that Liverpool lost out on Champs money this year, and will probably lose out again next year, and you have a hole in the accounts equal to Bank repayment, Player cost repayment and decline in revenue.

Now I don’t know how the big money directors box revenue goes in Liverpool, but it is reasonable to assume a decline there too.  (I mean the club is in a rather unattractive part of town).   Put all that together and you have not only a problem of finding money for the longer term (to keep RBS happy) but also money in the short term.

It is thus possible that what will happen next is not another administration as Woolwich Arsenal suffered 100 years ago because the sponsor has had enough, but something far more difficult to deal with: a cash flow crisis.

Of course cash flow problems can lead into administration – and that is exactly what happened at Portsmouth, although there is the underlying thought that someone somewhere has stolen a lot of money from the club.

So overall, cash flow could well be a problem for some of these clubs.  Man U can hardly go back and raise more bond money for cash flow, any more than Liverpool can ask RBS for a bigger overdraft.  This could be the next stage in the fiasco that is English Premier League football.

Tony Attwood

There’s an index of other articles at www.blog.emiratesstadium.info Some of it is quite amusing.

And if it is a radically different form of writing that you want, which has you howling with laughter, and then howling at the moon, try this.