Once again I have taken the liberty of deleting “ums”,
unnecessary “ands” and various false starts when the deletions do not change
the meaning.
GR: All of the cash
that we have received from players in the past two years has gone back into
reinvestment into the squad be it through wages for existing players, wages of
new players, transfer fees, deal costs.
All of that money has been spent but you end up with this strange
accounting way in the way that it happens in football club accounts. All of the profit you make on a player gets
registered in the year that that sale took place whereas the cost of reinvesting
in a new player is spread out over the life of the contract evenly so you don’t
get an even spread between what profit you make and what cash you actually have
in to spend and therefore, you see large profits, but it is not necessarily a
reflection of the cash that sits within the business.
BA: So the net spend
that people see in newspapers and everything, this is the club 16th net spend
or bottom and then the wages. People
will go where has all the broadcast money gone?
Where is all the Sky money? Where has all that gone? What is the answer
to that question?
GR: It goes into the
squad. It goes into developing what we
do as a football club—our long term sustainability. You can see we can have, as a business, it is
underlying profitability of 8 million pounds.
And that is there to make sure that we can function as a business; be
able to reinvest in the facilities that we have; be able to reinvest in our
staff in order to keep the business moving forward. But fundamentally it is all mostly invested
in the football operations of the business.
BA: Ok, so you are
carrying this debt that we spoke about last year which you inherited as a board
as it were. Where are we with that? What is the level of debt that the club is
carrying and why still? It is all
historic?
GR: So we said when
we spoke in March when we put the last of the accounts out and we brought them
out a little earlier this year than we have done in previous years through good
governance et cetera and we said that that level of debt was going to increase
and it has done and it now sits at the year end at 62.1 million and that is
mainly to the shareholder or to institutions that are backed by the
shareholder. We are comfortable with
that. We have a long term plan to reduce
that and it’s now what we believe is at its peak. Therefore, moving forward that will be seen
to reduce over time but as you rightly say it is the result of historical
transactions that the club has entered into and we believe we’re at the point
where most of these have washed through at this point so we are in a position
to try and reduce that ongoing.
BA: So that is not a
figure, of course, separating debt from turnover profit and everything
else? That is not something fans should
worry about?
GR: No, no, no. It is not a figure that we as board want to
carry at that level over the long term.
Where, as I said, we have a plan to try and reduce that but absolutely
[unintelligible but sounds like “function that worry about”] where the majority
is to the shareholder. And we want to
try and reduce those debts over time so that isn’t a burden on the club.
BA: Does that impact on
what you can do with the money you get in though? Will it stop impacting that? When it goes will it free you up to spend
more money potentially?
GR: We all know, if
you go back to where the club was six or seven years ago, it was in financial
dire straits and one of the massive lessons that was learned out of that that
there must be a balance stuck between off field stability and on field success
and we never take our eyes off either of those and, therefore, we will make
sure that the on field success and the ability to create on field success (and
what that success is defined by) is still there whilst at the same time making
sure that the long term stability of the club is never put at risk.
BA: Ralph Krueger
came out with a great phrase with me a few months ago when we talked about
summer business and what happened and Schneiderlin and Clyne going and he said
“we know who we are” and I thought it was a really telling phrase about the
management of the club and I thought, I thought that is fine but can you state
ambitions to be in Europe and still have to lag behind the big clubs who are
all competing in it with far bigger bases and far bigger financial clout than
you have.
GR: We have
aspirations as a club that we want to play in Europe. Of course we went out of Europe this year
earlier than we wanted to, but the whole focus of the club now is how do we get
back there? We believe it can be
achieved. What we said many times it can
be achieved and that is our aspiration.
Our aspiration is to finish as high as we can in the Premier League, to
play European Football on a regular basis and that is what we want to achieve
over the next four or five years.
BA: And that can be
done as far as your strategy is concerned that can be done and you can punch
above your weight as it were.
GR: We believe so. We believe so. It’s sport.
Anything can happen. That is the
world of sport. You would not want to
sit here and predict that this will or this won’t happen but we absolutely have
the aspiration to try and make it happen and everyone here is focused every day
on doing everything they can to try and make that happen.
BA: Now your revenue
has increased. Your commercial revenue
continues to grow year on year as well.
Against that you’ve had to obviously take a bit of a hit with the wages
to turnover and your group wages to turnover not just player wages and the
costs. So how is that from your point of
view? Is that something that’s expected,
in control? Or what is it?
GR: There are two
aspects of that, Adam. Firstly, the
underlying wages have grown from 55.2 million last year as a total group to
just over 62 this year. The majority of
that is player’s wages and that demonstrates the comment I was making earlier
that it hasn’t just gone into transfer fees and deal costs. There has been a significant investment in
wages.
BA: You’ve got a
stronger squad is what you are saying?
GR: Yes. Absolutely. We definitely have a stronger
squad we believe. There has also been,
which is a second part, a one off hit in the year which actually takes the
total wages up to 70.8 million but they are 8 million of one off costs in there
which has to do with onerous contracts, one off payments in order to ….
BA: Players leaving
that sort of thing.
GR: Those sorts of
things. I am not going into the
individual amounts and who they are but there is an amount there in order to
cancel contracts, to bring some future contracts into this year, in order to
try and clean up the account and take the hit in one year.
BA: Just finally
then, we got the level of debt you are obviously happy with. The squad is stronger. You are confident with the profitability base
of the business. Where does the owner
sit in all this? And I have to ask you
this because she’s obviously part of that debt is money she’s lent the
club. When the TV money goes up could
she not just rightly take some money out for herself? I mean how does it work? Has she done that? Or is it still sitting
there? Is that debt?
GR: I think the
answer lies in the historical past behavior.
As you can see there has been over 80 million pounds in sales for the
past two years and I have just described to you all of that has been reinvested
so I think that gives you the answer you are looking for. As I said earlier, we are looking to reduce
that debt over a period of time so the club isn’t exposed. But that isn’t about
the owner looking to extract money out for the sake of extracting money
out. It is about us as a board of
directors saying we do not want that exposure of the business to our owner
going forward.
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