In the first of a two-part briefing chief executive Nigel Clibbens brings us up to date with recent events:
League Two clubs held their last video conference meeting on 9 June to approve new rules to be applied in the event that a division did not complete its season. We supported the Stevenage proposal for no relegation from League Two and, when that failed, we backed the Board’s proposed rules. We didn’t support the other club proposals. We then voted to support the ending of the 2019/20 League Two season.
Clubs moved on to discuss the huge possible testing costs for 2020/21 (which are unaffordable now) and the impact of lost income from Behind Closed Doors (BCD) games. The EFL clearly understands the problem heading towards its clubs in 20/21, but there is no solution at present.
We can all see clubs are starting to take the decisions they can and need to, when they are able to, in order to self-help. The biggest opportunity comes now with the expiry of player contracts and loans. Ongoing contracts in football are not easily renegotiated and clubs have high fixed costs and cash requirements. Reducing these costs is not an easy or quick process and that is a real problem when income falls and other costs begin to emerge even faster - especially when most clubs are already fragile.
As a result, we continue to hear a steady stream of owners and experts predicting large scale club insolvencies (interesting that many of these predictions come from new owners).
CV19 has created a unique and uncertain time, but also a very volatile one – things are changing, but importantly also quickly and markedly too. The position now is very different to a month ago, and from what it was in April. Estimates, forecasts and predictions in this context offer little insight, especially if you draw conclusions about all clubs from the circumstances of a few, or your own. Every club is very different.
Those headline grabbing prophecies have been coming since March, but in reality it’s all guesswork. It is far better to reflect the uncertainty and its consequences in decision making rather than attempt to get better at forecasting, and waste time predicting.
With our 19/20 season League Two resolved from a playing point of view, we can look ahead to the 20/21 season on the pitch and consider the uncertainties we still face. At this point we still know very little about what next season looks like, and that impacts heavily on what we are doing and what we can do.
On the field, normally at this time during the closed season, the top priority would be squad development. We have seven senior players on contract. With Chris Beech facing his first summer transfer window, that always carries added importance. Additionally, we are now also facing very significant changes to player spending rules (see SCMP below) which will affect recruitment.
Put that together with CV19 and you can see it’s a very high-risk time for all clubs, and for making decisions.
Here are some of the unknowns, how they come together and how they are impacting on the club just now …
- At the League Two meeting, I asked the EFL when relegation from our division would be confirmed, but no date was given. A week later we are still uncertain as to who is to be relegated, but there has been clarification on who will be promoted from the National League, in terms of Barrow (pending ratification from the authorities). It is still unclear how many teams League Two will have next year.
- Fixture start date - this determines pre-season start, end of player and football staff furlough, and pre-start preparations. Furlough support impacts on losses, and on our funding needs and spending plans. Normally fixtures are releases mid-June. A couple of weeks ago the feeling was that playing games in October was probable, now there is talk of games being played in August. Will League Two start before the other divisions, bearing in mind it will finish earlier?
- Fixture schedule – what will be the mix and number of cup and league games in the Behind Closed Doors (BCD) period – this affects match income lost.
- Behind Closed Doors period – impacts on stadium safety work and timing, ticket and commercial income lost, and funding needs. Confirmation affects the selling of season tickets and commercial activity and cash flow.
- EFL and PL funding for 20/21 - this constitutes a third of our income. Central commercial deals affected by CV19 will eventually be felt by clubs through lower distributions.
- Opening of transfer window (closing of transfer window) – impacts on recruitment timing, which affects cash flows and strategy – ability to wait and see or respond to events.
- Spending cap limit on players, any squad size caps, funding rules – impacts directly on our recruitment and spending and funding, and on the whole player market.
- Arrangements for iFollow live streaming of games – possible income gain but unknown, but will be important to offset lost match income.
- Testing costs and regime (£20k-£25k per week currently quoted) – impacts on our spending and funding, and therefore ability to recruit.
- Academy start date for games programme – impacts on furlough of staff, preparation and training.
- The operational requirements of BCD and training are changing almost daily. The practical impact of the changes is again very significant.
These are all very big issues. They can change either income or costs, and therefore the cash we need to run the club. Because things remain uncertain and volatile, it makes the cash we might need very uncertain and volatile too.
The financial impact of each one can be very large - so big, in fact, that they can change our decisions.
Put them together and the range of outcomes we could be facing is still very wide. This makes prediction and forecasting not very helpful, except to give a general overall view.
For example, testing costs have been quoted at £80k-£100k per month now (£125k-£140k to finish League Two, which is a key reason it was curtailed). Every month of BCD also risks £150k of lost income, so the period of BCD games is crucial.
Do we reduce our costs now for 20/21 to possibly absorb that potential testing cost and loss of match income? How long for? Three months … or four, or five? How much do we target to save? Will £200k a month saved be enough? Can we possibly save four months’ worth of losses – say £800k (saving a third off our entire payroll cost, or 20% over everything we spend).
If we start now, by the time we get to August the testing regime and costs could be very different, as could BCD rules and impact on income. The remedial action taken may have proved unnecessary. Or by delaying, the costs have gone up even more. That is the balance to weigh.
On the official website on Friday afternoon chief executive Nigel Clibbens will talk about salary capping, and the current position Carlisle United are taking as planning for the 20/21 season continues.