Are we avoiding administration BECAUSE we're a football club and not a retailer?

[trousers]

Almost every day now on the news we hear about the latest high street retailer going into administration - Woolies, MFI, Whittards, Zavvi and now Adams childrensware.

 

Which got me thinking....does this mean SFC's books are in better shape than all these retailers that have folded, or about to fold (another dozen 'big names' predicted to disappear from the high street in January) ?

 

Or.....are we surviving simply because we are a football club and banks are not as keen to instigate the wind up of football clubs due to the fact that football is a more emotive and community based 'industry' and banks don't want to be seen to be the ones who bring such an institution down, whereas a retailer doesn't have the same emotionally attached customer base.

 

Are there any economists out there in TSW land who can compare and contrast the financial straits that caused the above retailers to go into admin with the financial straits of SFC/SLH to back up my hunch that Barclays are holding SFC's head above water for longer than they would do if we were 'just another high street retailer'?

[fareham saint phil]

BECAUSE!! and you gave the reason exactly right (smiley face thingy which i dont know how to do)

[SaintRobbie]

We are avoiding adminitration as it does not benefit the shareholders who voted 95% to keep in Lowe for exactly this reason.

 

The real debate is whether it benefits the Club to avoid administration. Answer is probably not but given Lowe's slide toward League 2... yes League 2... I suspect that when one examines the Leeds example Saints could recover faster if we were to go into administration (AND BE TAKEN OVER BY SOMEONE NEW).

 

Personally - I would hope we avoided it. But, it will happen at some stage on our way into League 2.

[RobM]

A very interesting point really, as we are still a business at the end of the day.

 

The other big difference is the assumption that if we go into administration we will immediately bounce out of it unscathed.

 

Football clubs are a horrendous black hole for money, so you have to be incredibly wealthy or incredibly stupid to invest your money into one even during the good times. Businesses like the shops listed above are all about making money.

 

Yet when we talk about a business like those listed above going into Administration, it's more often than not the last we will ever see of them. Who would have thought Woolworths and MFI would disappear completely? Yet as soon as Administration is mentioned it's game over, cheerio, goodbye.

 

But when we talk about Saints going into Administration, we blindly assume that we will bounce straight back out of it stronger than before. Why? A troubled club with huge debts surely can't be a better investment than a highstreet shop with a household name?

 

It does all come down to emotions I guess. People have a passion for their club, but no passion for where they buy their DVD's or flat-pack furniture. This is a bigger influence to some than the potential money to be made from snapping up a failing highstreet shop and turning them around.

[Jackie@home]

As a supplier to retailers ourselves, you have to question the business model of some of these retailers that have gone bust after the economy has dipped for only a few months - they were so highly dependent on the banks that a 3% dip in turnover has sent them over the edge. Some of them will go bust in January and open up the next day with the same management in the same premises and the general public will often been unaware. Past Times are one of these that stuffed us for £12,000 last year.

 

However, in football, the authorities have quite rightly tried to make sure that administration is not the easy option it used to be - the actions of Leeds prompted this. When Ipswich, Leicester, etc. went bust they recovered pretty quickly, but the penalties inflicted on Luton, Bournemouth, Rotherham, etc. prove that this is the least palatable option nowadays.

The point is, with a retailer you can just close down and the people involved can start another business if they so wish. You can't just close down Saints and start up the next day in the Championship - it will be the Wessex league, if you are lucky.

[SaintRobbie]

A very interesting point really, as we are still a business at the end of the day.

 

The other big difference is the assumption that if we go into administration we will immediately bounce out of it unscathed.

 

Football clubs are a horrendous black hole for money, so you have to be incredibly wealthy or incredibly stupid to invest your money into one even during the good times. Businesses like the shops listed above are all about making money.

 

Yet when we talk about a business like those listed above going into Administration, it's more often than not the last we will ever see of them. Who would have thought Woolworths and MFI would disappear completely? Yet as soon as Administration is mentioned it's game over, cheerio, goodbye.

 

But when we talk about Saints going into Administration, we blindly assume that we will bounce straight back out of it stronger than before. Why? A troubled club with huge debts surely can't be a better investment than a highstreet shop with a household name?

 

It does all come down to emotions I guess. People have a passion for their club, but no passion for where they buy their DVD's or flat-pack furniture. This is a bigger influence to some than the potential money to be made from snapping up a failing highstreet shop and turning them around.

 

You are right - why invest in a business that sucks away money and rarely pays? Well people invest in football clubs for different reasons. Most reasons I suggest are on initial investigation intangible... but if you look a little deeper the answers are there.

 

Lowe loves the status it gives him - it makes him a somebody, no matter how hated he is. Although to suggest that the retirement home builder is investing is of course a joke.

 

Wilde is heavily connected in the South but comes from Liverpool - he would ordinarily be a nobody businessman based in the Channel Islands, but by owning a significant part of the local pride of the biggest city in the South he gains influence. Again, whilst failing to make anything out of Saints, becomes a name people know which reflects itself through the networking that he is thus able to do to support and expand his more successful businesses.

 

Chelski are run by a Russian seeking further business and financial influence in London.

 

The list goes on... with only a few exceptions who buy to sell on at profit eg Newcastle and he's struggling to do that at the moment.

 

So, forget that people seek influence at Clubs like ours as they love Southampton FC (Crouch may be a clumsy exception). People seek influence in Clubs like ours because - being plcs - it is easy for journeymen to cruise in and seize high profile opportunities like Saints to expand elsewhere. And once established - difficult to shift them....especially when the fans are so punchdrunk they start to roll over.

 

So - in a nutshell - forget that most investors do it for money. They do it for influence, usually elsewhere. That is why you takeover a football club.

 

.... and that is why I keep pushing for a rep from Southampton City Council to sit with sensible fans, legends, board members who care (Crouch) and Mike Wilde as principal shareholder to SELL this club. Extreme, but illustrative, example I know, but a rep from the council looking favourably on say a Paul Allen redevelopment and other business options (in addition to buying the Club), that sits in the international maritime gateway into the UK, has much bigger potential for such investors than a failing footballing plc.

 

One just has to look outside the box and onto a higher level ... build a team and then lobby. We can sell this Club.

Edited 29 December, 2008 by SaintRobbie

[Big Bad Bob]

We are avoiding adminitration as it does not benefit the shareholders who voted 95% to keep in Lowe for exactly this reason.

 

The real debate is whether it benefits the Club to avoid administration. Answer is probably not but given Lowe's slide toward League 2... yes League 2... I suspect that when one examines the Leeds example Saints could recover faster if we were to go into administration (AND BE TAKEN OVER BY SOMEONE NEW).

 

Personally - I would hope we avoided it. But, it will happen at some stage on our way into League 2.

 

What the hell has it got to do with the shareholders whether we go into Administration or not.

 

Surely it's down to the people who we owe money to and whether they want that money back or not!!

[Big Bad Bob]

We can sell this Club.

 

Robbie, since you started posting, here and on SaintsForever, about 18 months ago you've been pushing for the club to be sold.

 

I've got to start wondering what your agenda is.

 

You wanted the club sold when Crouch was in, you want it sold now.

 

Are you Fulthorpe in disguise??

 

And at the end of the day it's up to the Sahreholders NOT THE FANS whether they want to sell or not. Boycotts, protests etc etc ain't going to make anyone sell if they don't want to.

 

The only thing that will is COLD HARD CASH! Do YOU have any spare under you mattress?

[SaintRobbie]

Robbie, since you started posting, here and on SaintsForever, about 18 months ago you've been pushing for the club to be sold.

 

I've got to start wondering what your agenda is.

 

You wanted the club sold when Crouch was in, you want it sold now.

 

Are you Fulthorpe in disguise??

 

And at the end of the day it's up to the Sahreholders NOT THE FANS whether they want to sell or not. Boycotts, protests etc etc ain't going to make anyone sell if they don't want to.

 

The only thing that will is COLD HARD CASH! Do YOU have any spare under you mattress?

 

LOL ... no not Fulthorpe and yes it is up to the shareholders. And no money sadly. My preference would be for a US sugar daddy like Paul Allen rather than Fulthorpe - but needs must! New leadership and a new system of running this club has been needed for years. And yes I have tirelessly campaigned against the inevitability that has now started to really manifest itself. You're right I have been warning that all this would happen given the current set up and leadership for many years, in this forum and the last. But surely the majority knew this too. I TAKE NO PRIDE IN IT. I am as depressed as everyone else.

 

I am just a passionate fan, who has a brain, shoots from the hip too much when posting on here but who can visualise a big picture solution if enough people would club together to pull the club out of this mess.

 

The real problem is leadership and a board or forum to pull people together to sell this club. It is vast, has so many saleable points... yet we roll over and let Lowe, Wilde et al just use it for their own selfish, greedy aims.

 

I do believe in one thing. Fan pressure can oust and fix this club. But it needs a leader and united forum with limited aims to do it to stand a chance. Certainly not me .

 

Lowe and the other shareholders fear a fan backlash more than anything. Amongst other things it puts the local authorities on their backs to fix the problem, for them to pacify the fans or go.

 

I just hope when it comes and the fans awaken from their punchdrunk state that it is peaceful, constructive and sensible - in the manner I have mentioned above. Sell this club, delist and move on. Continue and we fall.

[Bourne Valley Saint]

Is our debt really that bad? Surely, when we built the stadium, we took out a mortgage over a period of time - 20 years? We still owe £25m apparently. The stadium is an asset. It's not as if we are Hull City who do not own their stadium but which is owned by the council. The stadium generates income through gate receipts. I know there is a break even figure of about 18000 which we are not making at present but surely that can be addressed at some not too distant date. If I were the creditor lending money to SFC, I wouldn't think we were too high a risk at present. Overheads have been dramatically reduced, crowd levels are not falling below 15000 (the last 2 games well above that - incentives aside) and we have the stadium as an asset. If the banks try and call in their debt now, they will lose a lot of money as we can't repay it and what value has a stadium except to a football club! Surely it is in the bank's interest for us to continue trading. I shall await the responses of our financial experts on here.

[Gorgiesaint]

Almost every day now on the news we hear about the latest high street retailer going into administration - Woolies, MFI, Whittards, Zavvi and now Adams childrensware.

 

Which got me thinking....does this mean SFC's books are in better shape than all these retailers that have folded, or about to fold (another dozen 'big names' predicted to disappear from the high street in January) ?

 

Or.....are we surviving simply because we are a football club and banks are not as keen to instigate the wind up of football clubs due to the fact that football is a more emotive and community based 'industry' and banks don't want to be seen to be the ones who bring such an institution down, whereas a retailer doesn't have the same emotionally attached customer base.

 

Are there any economists out there in TSW land who can compare and contrast the financial straits that caused the above retailers to go into admin with the financial straits of SFC/SLH to back up my hunch that Barclays are holding SFC's head above water for longer than they would do if we were 'just another high street retailer'?

 

In answer to the original question, you have to look at who would be in a position to put a business into administration ie its creditors.

 

Football is a very different business to retail, I believe that the majority of football clubs that have gone into administration have been forced in by the inland revenue, although they do badly in the resulting payout. In our case, as I understand, we appear to be up to date with our payments to the inland revenue. Other creditors such as the loan note holder who are secured on the stadium, would have priority but we appear at the moment to be up to date with our stadium payments.

 

The bank is an unsecured creditor so would have little direct effect - however if they were to withdraw the overdraft, this would have serious consequences regarding our ability to support payments to the revenue & the loan note holder, which could indirectly lead to administration (although it may take some months). As long as the overdraft is being controlled (ie not increasing) then Barclays are probably quite happy to allow us to keep going as that provides their best chance of payback.

 

Retailers, by the nature of their business, have a much greater reliance on the bank as a source of funds (if they've no money to buy stock then your business can't trade) so our more susceptable to the bank.

 

The comments made in the notes to the accounts suggest that whilst attempts are being made to re-negotiate the payments to the loan note holder, this will ease the pressure at the bank. One interesting question that should have been asked at the AGM, if all involved had not started acting like children in a playground, is where those negotiations are at, what benefits this will provide & what is the impact if negotiations fail? (I know that probably 3 questions!!) Given what happened, we'll now have to wait for tha half yearly statement to come out in June/July time.

[corky morris]

The size of our debt dwarfs the size of the issued share capital.

Debts £43m including £22m long term (stadium)

Market capitalisation £6.74m @24p

We are not beholden to the to the share holders - more to the short term debt owners (the banks).

Wolverhampton Wonderers was sold for a £1. Why on earth would someone pay £6.74m (at the very least) for the equity of the club & take on the £43m of debt?

I dont want us to go into administration, but the capital structure of the club is removing what little chance of anyone purchasing us we have IMHO.

And dont forget the £4.5m Lowe spent on immoral dividends & share buy backs! (I must have written that bit a thousand times - that is how much it annoys me!)

[EastleighSoulBoy]

We are avoiding adminitration as it does not benefit the shareholders who voted 95% to keep in Lowe for exactly this reason.

 

The real debate is whether it benefits the Club to avoid administration. Answer is probably not but given Lowe's slide toward League 2... yes League 2... I suspect that when one examines the Leeds example Saints could recover faster if we were to go into administration (AND BE TAKEN OVER BY SOMEONE NEW).

 

Personally - I would hope we avoided it. But, it will happen at some stage on our way into League 2.

 

Only 17 months till we find out if you're right then!

[OldNick]

The size of our debt dwarfs the size of the issued share capital.

Debts £43m including £22m long term (stadium)

Market capitalisation £6.74m @24p

We are not beholden to the to the share holders - more to the short term debt owners (the banks).

Wolverhampton Wonderers was sold for a £1. Why on earth would someone pay £6.74m (at the very least) for the equity of the club & take on the £43m of debt?

I dont want us to go into administration, but the capital structure of the club is removing what little chance of anyone purchasing us we have IMHO.

And dont forget the £4.5m Lowe spent on immoral dividends & share buy backs! (I must have written that bit a thousand times - that is how much it annoys me!)

Corky, are dividends immoral then?

Surely if you ask people to invest they expect a return.(may i add I have no shares)

If you think they should not get a return then perhaps you will give the club an interest free loan .

[corky morris]

Corky, are dividends immoral then?

Surely if you ask people to invest they expect a return.(may i add I have no shares)

If you think they should not get a return then perhaps you will give the club an interest free loan .

 

Dividends are not immoral.

They are for a football club whose prime objective prior to Lowe being around was football performance.

Which investors benefited the most from those divi's then Nick?

We have had this discussion before Andy Crossley who was the largest institutional share holder ran a small cap growth fund with a zero income requirement. He did not ask for the divi as Lowe suggested at the AGM 3 or 4 years ago.

Have you heard of a capital return NicK? You know where a share price goes up? Not all companies reward their share holders with dividends.

By the way what was the price of the company when Rupert listed it? .....£1...Great capital return from the much lauded Rupert Lowe.