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Interviews

FINANCES: Interview - part two

28 February 2013

Second part of our in-depth interview

TV coverage appears to be a double-edged sword, we need it because of the revenue but it's almost killing us off as well? I'm not actually sure we'll ever get back to the audience levels we had before. I have said, reluctantly, that we might just have to accept that somewhere around 4,500 is what we're going to get. That could dwindle or rise, depending on results, but at this level it could be that we have to adjust how we deliver the product. What we need to do is have better stadiums, which are family-friendly, and we've almost got to go to the American idea of the whole experience being a day out. I think we'll probably get to a point where we let people in for next to nothing and try and make the money from what they purchase inside the ground. I don't think it's being realistic to think we'll ever get the 8,000 fans back in here, unless we get promoted. If we were at the top end of the Championship we would see good crowds, but if we tailed off it would start to dip again. That's why we need to think about how football is going to go in the future. 

The commercial deals done at Football League level are vital to us all but they go through a natural process where they tail off and change. Are we in a strong position on that side of things at Football League level? I think the Football League is stronger now with the deals they’ve been doing. They've had great success with the Capital One Cup this year and I think the fairytale with Bradford has helped with that. We know npower is disappearing and they're talking to a couple of companies about taking that on. I think over the last 12-18 months there has been a bit of a change. The product is good and big companies want to be involved. Ironically that's probably down to TV as more and more companies are associated with sponsoring TV shows rather than doing direct adverts. I think that started with Cadburys sponsoring Coronation Street and it seems to be moving that way. 

Closer to home, we announced the operating loss and the reduction in turnover at the AGM. What were the main contributing factors to that? Virtually 100% of the reduction in turnover was down to cup income. The reduction in turnover that we'll get this year will be down to attendances, even though our cup income from this year is up by about £100,000. We averaged a crowd of 5,247, which was the same as the year before, so it was totally down to cup income. Our commercial income suffered slightly, but that was during the recession and we almost expected that. With us having two years in the JPT Final it really hurts when you don't have one. 

Those figures are key in how we set the bar with the 60% Financial Fair Play ruling that we're under next season? Absolutely. This season’s attendances will form the basis of it. We have to put our estimates forward in July, which is long before the season starts, so it has to be based on the evidence from this season. If our gates are down by 1,000, which currently looks very possible, then the basis of our budget which the Football League will allow us to spend on player wages next year will be 60% of that. This year it's 65%, but it goes down to 60% next year and the bar starts to rattle at 55%. Last week, when we brought in Jordan Mustoe, and earlier  with Sean O'Hanlon, I had to justify us being between 60-65%. That isn't because our costs have gone up, but because our income has gone down. We're right on the edge of having enough income to support having those players at the club. 

If we perform better next year can we readjust it so that the allowable figure goes up? Yes. You go back into it in October and resubmit a new forecast in November. By then you know how you’re doing in the JPT and the Capital One Cup, and you might have got through the first round of the FA Cup. Hopefully you are playing well and gates are up. Once that gets submitted that becomes your bar for the second half of the season. If for some reason we perform better than we thought in November, then I can justify why I go over the top of the bar. We have a Salary Cost Management Protocol so I can go through and justify any further moves we make. It’s all based on facts so they don’t allow you to be overly optimistic. That’s why people coming to the games is vital for us. The attendance figures form a huge part of our calculation. 

When you looked at the finances for your last review you immediately started to implement some cost reduction measures. What exactly happened with that? We've done a number of things. We cut the travelling costs, and the overnight costs have been reduced by using fewer rooms and by doubling up more. We now have two less scouts than we had, which means some of the coaching staff are covering that sort of thing. We've cut back on the hours the shop is open, so it's closed for one weekday now. We've cut back on our reception with that being done via the ticket office. We've also cut back in the commercial department and in the media department. All the bits we could cut back on have been actioned. Having said that, the one area we couldn't cut back on, because of contracts and because we thought it was the wrong thing to do, was the playing side of the business. It’s inevitable that we’ll have to look at that soon because we can’t sustain what we’re doing on this level of support. I think the only area of the playing side we did look at was when Paddy Madden left. He simply wasn’t replaced. Up to this point we've always replaced players who have moved out, but when Paddy went it was seen as a cost reduction method. We took that risk because we had a good number of forwards in the squad due to the return of Rory Loy. 
 
Are you comfortable the measures taken are going to help? They will help, but we probably haven't finished the cycle yet. We're the same as every club in League One, apart from Crewe who are going to the JPT Final and who will have an unbelievable set of figures. Tranmere can't believe they're up at the top of the league, even though their bubble has probably burst since we beat them, but apart from those two or three teams we will all find it very difficult to get through to May. We are working closely with each other and with our accountants to make sure we do get there. 

Are we in any danger of going into administration? No. You can never say never, but we've got plans in line to make sure we've got the funding in place to keep us going the way we have been this season. I think it's inevitable that we won't make a profit this season, but we've taken real steps to look after ourselves with the cost reductions. 

Do the players understand where football is at the moment or do they still hold the trump cards? I think they have a deeper understanding but I don't think they hold the trump cards. Every player will go out and get as much money as they can. I think some of the players in our squad last season who walked away, with one very notable example, have all started to realise there is a lot less money out there. That means we're starting to get deals put together which are a lot more realistic. As long as the solidarity and parachute payments go in at the top end there's always that carrot for them, but we’ve found that paying more wages doesn’t necessarily get you better players. It just means they cost you more. 

For clubs like us, who have gone below the 5,000 attendance mark, are we genuinely still in a position to compete? I think we are because the market place is changing. The Salary Cost Management Protocol is biting a lot of clubs. It gave us a rattle after two years of success in the JPT. It has made sure that we have to look at things in a different way. It is difficult but we know how to handle it now. 

You said we don't necessarily get a £10,000 a week player just because that amount is paid, but are we still going to be able to attract the players we need? I'm quite confident that we are. We’re already talking to two more Premier League players about next season. I think we have to carry on doing what we're doing, which is trying to bring players in that make us stronger and better than we already are. We've got to do that within what we can afford but our aspiration remains to get into the Championship. 

What can we do to get people back to Brunton Park? The ticket office have done a huge amount of work in trying to attract families to come to games. We've realigned the ticket structure for next year and we've got a system in place that can tell us when people are coming in, and when they aren't. We can ring people and ask them why they aren't coming here any more. There are all sorts of competitions running, which season ticket holders get the priority on every time. In addition to that, I don't think we can carry on in an 18,000 capacity stadium that's got unsheltered areas, outside toilets and holes in the roof. It was an acceptable experience not that long ago but people want more now. I'm convinced we need to find a way to build a new stadium, at the right size and which is family friendly and available for different things. I'm convinced we need to do that just to survive. 

Click HERE for part one of this interview.

Click HERE for part three of this interview.

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