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Club News

UPDATE: Challenges we face and key issues addressed

Chief executive Nigel Clibbens discusses a wide range of issues

12 December 2017

As 2017 draws to a close, Chief Executive Nigel Clibbens provides an update on some recent events at the club, covering some of the challenges we face and also addressing the issues and hot topics raised by supporters as we head into what we hope will be a successful second half of the season.

Over the next few days this will look at all aspects including academy, business matters, community initiatives, football and the wider club. 

Kicking off with club matters ...

The Stadium

As we all know, the stadium is in a high-risk area for flooding and most areas of the buildings are well over 50-years old. The facilities are now, more than ever before, struggling to keep up with the passage of time, the expectations of supporters and the ever-growing regulations of all authorities we come into contact with. Over the course of the last 18-months we have fought to recover from the December 2015 flood and undertaken some modest improvements where we can (such as the Sunset Suite and hospitality areas) but the task is becoming more challenging by the week.

It is clear the stadium issue is one which is a top priority to make progress on. CUOSC and all other shareholders and directors share this view. Having seen first-hand what can be achieved by a joined-up community approach in other towns and cities, it’s clear other clubs have successfully dealt with far more difficult circumstances than those which we face. 

We are starting by considering what we realistically need, then looking at what that will cost and how it may be funded. Early steps have been taken and we will update fans as matters develop.

AGM and Accounts

The independent audit of the club’s accounts for the year ended 30 June 2017 has been completed and we expect those accounts to be approved by the directors before the end of the year. The AGM will then be scheduled for 2018 and publicised for shareholders to attend as usual.

Rather than wait, I thought it would be worth sharing some headlines.

Underlying turnover increased, costs increased were held, and the amount the businesses of the club (like retail, ticketing and commercial) earned went up. This improved our ability to pay for our football costs (such as players and coaches, etc), which is all good news. 

It’s the extra from unpredictable ‘football fortune’ like cups and player sales and other one-offs, that then makes the big difference. In recent years we have done very well, which has given us an ability to have a football budget much higher than is ‘normal.’

To recap, in 2014/15 the club made a profit of £339,000 after the benefit of a £1m external debt right off. Without that it would have lost nearly £700,000.

In 2015/16 the club made a profit of £40,000 after the one-off benefit of £1.2m of ‘football fortune’.  That comprised £0.7m from cups and £0.5m from player sales. The windfall was again spent on player wages.

In 2016/17 the ‘football fortune’ reduced by £0.7m. Keeping everything else unchanged in 2016/17 we would therefore have expected to generate a loss of £0.5m, unless football spending was cut.

The audited accounts will show the total spending on football activities last season (players, football staff, medical, sports science, travel, etc), actually significantly increased again, as the club supported the push for promotion. Business income in 2016/17 also increased encouragingly, to help mitigate the underlying loss from the increase in football spending. 

Nevertheless, the club resisted a reduction in the player budget in 2016/17 (despite the large fall in football fortune) and instead increased it further, especially after January 2017. As budgeted and reported in the radio fans’ forum, the loss for 2016/17 will inevitably return to the underlying historic levels we saw when we had no one-off windfalls.

Debt

As in prior years, this increased football spending and loss was funded by additional new loans. Initially in the first half of 2016/17 these came from further loans from the chairman, and then through external secured funding towards the year end, following our commercial funding facility arrangement with EWM. The club has no right to expect to call on this support, but we are obviously very grateful for the financial backing from our financial funders. 

The funding arrangements we have in place are far stronger than this time last year, and the concerns fans had that the funding burden rested with the chairman have been dealt with by the arrangements we put in place with EWM last spring.

As we discussed in the radio phone-in [14 September 2017] the restructuring of the club’s debt has been completed. This reduces the historic long-standing shareholder debt in the club, which has been a concern in terms of being a barrier to new investment, and for some fans as a source of ill-feeling. We have recognised that and, as was stated in the past, we undertook to deal with it.  

As at 30 June 2017, £480,000 of loans due to shareholders, for cash put into the club in the past, has been exchanged for non-voting shares. No cash has been repaid. This is a change many fans called for.  In reality, there has never been any expectation of repayment, but this draws a line under any concerns.

This obviously means that the club is also released from the burden of theoretical future repayments. Unless someone wishes to pay for shares (which carry no voting power) they have no financial value.

Of the shareholders, only Andrew Jenkins is now owed money and his debt is reduced. It remains unsecured, has no repayment date, and does not gather any interest.

Again, this is consistent with commitments made by the shareholders in the past. At the same time, CUOSC voting rights are not diluted, which is important in terms of maintaining the strong voice and rights it already has.

At 30 June 2017 the total club debt was unchanged at £2m, with the additional new loans to fund last year’s loss being offset by the impact of the debt restructuring. As well as the fall in shareholder debt, the amounts of bank loans, overdrafts and lease obligations all also reduced.  The amount due to Pioneer fell by nearly 20%. These debt reductions were balanced by funding under the facility from EWM.

The full detail of the results will be presented in the New Year, but hopefully fans now have a better understanding of how the club stands financially.

Manager’s Contract

As supporters may be aware, Keith Curle’s contract has a fixed-term with an end date of 30 June 2018. As that date moves closer, it’s inevitable that there is speculation about renewal. In our case that started coming from the media before a ball had been kicked in the pre-season radio press conference.

As I said back in July, we will be looking at this particular issue towards the end of the calendar year. There is a normal half-season football review process in place at this stage every year, and this will form part of that review. If there is any change flowing from that we will inform you immediately.

Whatever the detail of the contract end-date, the board and shareholders continue to support the manager, his staff and team as we aim for success this season. I know that Keith is completely focussed on that as his primary objective. It’s very much business as usual.

In practice, that means looking towards the January transfer window with a view to improving the squad. Discussions are already taking place with clubs to extend the loans of Jack Bonham, James Brown and Shamal George. As soon as the outcome of those talks is confirmed we will provide you with an update. 

Clint Hill has committed to stay to the season end, which we are delighted about. The manager is working on his targets for January and we will see where that takes us – hopefully the FA Cup will strengthen our hand.

In terms of players out of contract at the season end, and as Keith said last week, he will address that with the individuals at the appropriate time. We all agree the focus at the moment has to be on winning games and picking up results through the second half of the campaign. Everything else will follow on naturally from that.

EWM

I am acutely aware the arrangements with EWM are a legitimate source of questions for some fans.

With this being a very important issue for the club, it is totally natural for fans to want to know what is going on. I can assure you that we want to share as much information as we possibly can.

The commercial agreement we put in place last year remains completely unchanged from what has been outlined before. That gives a funding facility to draw upon if required, essentially a loan with security.  Since it started, we have paid no interest and made no repayments.

Both parties are comfortable with the way things are going with an open dialogue in place.  We believe the relationships are strong and developing in the right direction. In terms of detail, which is what fans often ask, there is no day-to-day involvement in the club at all, but the major plans and direction of the club are openly discussed as required. Key decisions of the club are shared, but there is no direct involvement. For example, in the summer the headline recruitment plans were shared and discussed with the chairman and EWM. Our next discussions will be about shirts, with EWM on the front for next season. It’s all part of a normal business relationship. I don’t think that will change in the near future - this season. 

The shareholder debt restructuring simplifies matters financially and stops us being overburdened with debt which we all agree is desirable and we all support.

Tackling one question head on; Are EWM looking to take over, as rumoured? The answer to that is – no. No discussions have ever been held on that and none are taking place now. I have tried to be careful in making this clear in the past, but I am happy to reiterate it again to avoid any doubt.

If things do change, we will be the first to inform fans and, with CUOSC on the board, the fans are well served as having a place at the table in any ownership discussion. 

It’s also worth remembering this arrangement has not been in place for a year. Football is a business where we are conditioned to demand everything today, and I am aware some fans may see no news on that front as a worry. It shouldn’t be.

EWM keeps its business confidential and we respect that, it’s fair enough. What it does mean is that we can’t share some of the detail with fans – like how much the facility is for and how much is drawn from it – and we apologise for that, but we completely respect EWM and their position on this. For me the proof is in the pudding and EWM has delivered on everything it said it would do so far. 

We are delighted to have their support, and their backing has been fantastic and is making a direct difference to what we are able to do as club, and that’s what counts. That is a real, actual impact and is progress, and has to be welcomed in my view. 

At this point, our priority is to improve and run the club on a sound footing, and that will stand us in good stead and make us well placed for anything that develops. 

In future instalments I will cover other topics, including football budget and wage capping, as well as the other aspects of the club.

Part two of this review will be on the official website on Thursday morning.


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