If it’s late November, it must be time for the annual AFCW PLC accounts.
Like last year, SW19 asked Nick of Woking again to give a run-over of the things that really make AFCW tick throughout the year. His conclusions for the last year are below, and mine follow afterwards.
Take it away, Nick…
(important note: there are a lot of figures quoted in this article, and there may be the odd minor error that has sneaked in. While I’ve checked all figures god knows how many times, things can slip through the net. Just don’t waste your effort pointing them out…)
How did we do financially last year?
The most unusual thing about the accounts is that, in a year where we gained promotion to the League, there really isn’t very much unusual about them.
The PLC again reported a small loss (Â£73k) but this was more than offset by the flow of additional funds coming from the Dons Trust (presumably mainly representing fundraising activity).
In effect, the PLC received an additional Â£211k in cash from the DT (essentially via them buying more shares in the club) so the overall net assets of the club increased by nearly Â£150k.Â What this really demonstrates is that the model by which the club operates is to spend on player wages up to (but not beyond) our available income.
The wage bill last year was Â£1,195k, which was a 30% rise compared with 2010 but the ratio of wages to income (which we know is a key measure for football clubs) was 54% and was actually slightly down on the 55% for 2010.
Obviously this was helped by the huge increase in revenue for the year, up by 34% vs 2010 – the big rise here was in match receipts and prize money (reflecting the FAC run and the play-off semi) but it was also notable that sponsorship and advertising income rose 43%, so it does seem that the club is getting its act together pretty well there too.
Income also includes “donations” (basically cash given by supporters) which rose from Â£147k to Â£195k -Â whileÂ we are quiteÂ dependent on (and grateful for) that,Â it wasn’t a massive source of funding for the promotion push.
One thing that is worth noting is that underlying running costs were up only 15%, so we certainly don’t seem to be spending much on overheads.Â Notably, we had almost nothing on transfer fees – just Â£10k in (possibly some sort of follow-on payment from the Hussey transfer) and Â£8k out (which possibly was for Kaid Mohammed though that’s not stated anywhere)Â for the whole year.
All in allÂ a very sound set of results for a year when we achieved so much on the pitch without going mad with spending.Â I suspect that certain other clubs’ accounts would look very different.
How soundly are we placed now?
As last year, the best insight here comes from looking at the consolidated balance sheet (reflecting what we had and what we owed at 30 June).Â Overall this shows that AFCW had net assets (ie assets over and above what we owed) of some Â£2.0m (vs Â£1.8m last year).Â The make-up of this sum can be summarised as:
The amount owing to the Dons Trust is owed to another part of the â€œClubâ€, however part of this does include the amount raised by the Dons Trust Bonds, which was lentÂ to the PLC by the DTÂ but ultimately is â€œowedâ€ by the Club as a whole â€“ though the underlying bondholders are generally supporters and so would be unlikely to demand repayment in a way which would endanger the Club
No breakdown of accruals and deferred income is provided but much of it will represent season ticket money received in advance (the accounts are drawn up at 30 June so a lot of the season ticket money for 2010/11 would have been received, as well as the cash received for 5 year season tickets) so the increase in this and in the cash on hand compared with last year will reflect the high level of season ticket sales in June this year.
This â€œincome received in advanceâ€ doesnâ€™t actually need to be repaid so the only substantial external debt that we had was the bank loan, which is shown as an amount of Â£704k, of which Â£53k was repayable in the next year, and the DT bonds.Â The bank loan was up a bit vs last year, as it was drawn down to fund additional work on the stadium
The accounts also show our short term assets exceeded amounts due in the short term by some Â£82k (last year short term debts exceeded assets by Â£197k).Â Given that some Â£94k of these short term debts are to the Dons Trust and Â£500k is made up of Accruals and deferred income, much of which will just be cash received for season tickets, the short-term position seems very reasonably sound.
Overall, how does this look?
Broadly, I think that you can say that last year’s accounts were strong – we managed to more than break even (after the DT money) even without any transfer fee income. Even without any donations we would have been broadly on an even keel.
We are in a sound position and our debts seem manageable.
Great though that all seems, league salary expectations and other costs are a whole different level so next year’s accounts will again make interesting reading, but I suspect that there are few clubs in the league, or out of it, that are more prudently managed as ours, which does make what we have achieved on the pitch all the greater an achievement
That said, the next challenge is clearly the funding of the KRE rebuilding scheduled for next Summer.Â It is clear that there is no more cash to come from the Barclays loan so any funding of that work will either have to come from grants, commercial sponsorship/ naming rights or another appeal to the supporters.
While I suspect that such an appeal would work – if only because the alternative would be being thrown out of the league – it seems equally certain that trying the same trick to fund a (much bigger) rebuilding of the John Smiths stand is an altogether bigger challenge and unlikely to be feasible for some years.
To some extent we are on a treadmill of constant building and fundraising and really the only way to resolve that for any length of time (short of selling out to a sugar daddy figure) is the fabled “new ground”
Once again, thanks to Nick for this.
Last season might have been one of those rare times when everything hit a perfect equilibrium. Things finally went right on the field, and they seemed to do pretty well off it too. Never underestimate the power of promotion, especially a high profile one.
Here’s a list of where we get the money in, with comparisons to last year’s accounts:
As usual, the bulk of what we get in comes through matchday activity. While we’ll never properly find out what we got off Premier Sports, if anything, the substantial increase in match receipts and prize money really does prove that success breeds success. Time will tell whether we’ll get that every year, and whether being in the Carling Cup, the JPT and automatic entry into the first round proper of the FA Cup will see this figure being de rigeur from now on.
The JPT might not be a particularly massive moneyspinner, but the other two are just a couple of good wins away from the mouthwatering moneyspinning ties. At the time of writing this, we’ve already made Â£18k from the FA Cup, although we’d need to beat Bradford to have a good chance of beating the Â£200k plus we made last season. These days, however, we no longer have to pray we don’t become a cropper in the 4QR against Basingstoke.
It’s interesting that sponsorship has had the biggest jump, and that’s likely to become a highly significant source of income in the next few years and beyond. The club this past August signed a deal with five corporate partners, and that’s not going to include the spin-offs from nPower and, eventually, FLi with the website.
Anyone paying attention may have noticed that at DTB level, there’s some discussion about getting in a major sponsor. What terms these will fall under, and whether it will actually happen this upcoming year remains unclear, but the realisation is that some new capital needs to be brought in.
The current economic climate may mean that we end up having to get three smaller sponsorships rather than one big one for the same money (and with luck SI are paying us a decent wedge for showing our shirts on their current FM adverts), although that should reduce the fallout should one pull out at relatively short notice. It might be better for the club to build up a portfolio of “partners” for now, therefore increasing the ability to have a major sponsor without relying on one (and also a good way of demonstrating to a major sponsor how good we are to deal with).
If sponsorship is likely to suffer a bit, so too will donationsÂ – although there’s a big spike of them this time round, they didn’t reach 2009 levels (Â£199, 795 for anyone asking). Barring the stereotypical lottery winner turning up out of the blue, donations are likely to fall as individual money worries take hold, and/or our current big benefactors don’t need to put so much in as sponsorship takes the pressure off.
Fortunately for the club, while the DT bonds (Â£250k worth) were due to be paid back starting in July, it does have ten years to do so. It should be remembered though that the DT bond issue was done in a period of relatively immense prosperity, and as such it shouldn’t expect people not to want some of their investment back.
The gap between donations and sponsorship effectively doubled in the space of one year, and the long term trend suggests that this gap will continue to get wider. For information purposes, this is how sponsorship and donations have weighed up against each other since 2005:
One does have to wonder when Mike Richardson and co started to put their own money in.
It also appears KM has reached somewhat of a glass ceiling, in terms of contributing to turnover. In the absence of any formal corporate facilities (ie executive boxes), the money from the bar and catering isn’t likely to be much further wringed out of fans’ pockets. This is especially interesting in the case of the carvery – yes, we’ve added around Â£40k since it was brought in, but would it have jumped the same if it was still the back bar?
Given the amount of advertising given over to it, has the carvery been a success? And if so, is it just a qualified one? Admittedly, I know precious little about how profitable the restaurant industry is, especially something as relatively low level as one at a football club at our level. Although the amount of times a takeaway/local restaurant seems to change hands suggests it’s quite a difficult one to trade in.
Without fuller figures available on it, it appears to be more of a service than anything substantially money making.
One thing that is clear from reading these accounts, the club is very, very mindful of what being in the Football League means. This is especially evident in its approach and attitude towards the youth policy. To quote:
In last yearâ€™s Directorsâ€™ report we stated our objective to fulfil the criteria necessary to establish a Centre of Excellence (CoE) within one year of the first teamâ€™s promotion to the Football League. Due to the hard work of the senior management team, particularly Mark Robinson and Jeremy Sauer, and preparations made during the year, we achieved that goal ahead of target and we now have squads from Under-9 to Under-18 in the Football League CoE system. This has made significant funding available to us to enable us to invest and expand our youth programme further.
We are never satisfied with consolidation, and the youth section now faces the challenge of applying for Academy Category status under the new Premier League Elite Player Performance Programme. The objective will be to achieve Category 3 status, and we have started work on that already.
We would never have been able to plan for this in the Conference, and in all likelyhood we would end up having to jettison much if not most of this if relegation became an issue (and something for those who think that it will be fine heading back to the BSP “as long as we still own the club” to bear in mind).
These things will take time to develop, of course. It’s arguable that currently most of the youngsters one sees in Senior Cup and Development games won’t make the first team, as they were most probably taken on with half an eye on them being ready for the Conference. That the level is now League Two isn’t their fault, but it’s likely for a good few years yet, we will continue to be a net importer of players and very few youngsters will make the grade.
Which conveniently leads us onto wages. Here’s the breakdown of what they are and what they’ve been:
It seems almost inevitable that as the players go to 52 weeks paid, it will rise up beyond Â£1.2m for next year’s accounts, which is similar to what Grimsby were paying before they went down to the Conference. It is also speculated that Stockport were shelling out Â£800k on wages too last season, while Cheltenham Town have reduced theirs from Â£1.47m to Â£844k.
Barring some miscalculations or anything unforseen, the increased money from the Football League and related sponsorship should keep theÂ ratio of wages-to-turnover below 60%. Being on telly once already this season and again on Boxing Day will help us a bit (again, success breeding success), and while it’s not a habit the club wants to repeat too often, selling Danny Kedwell and Steven Gregory will ensure we don’t get a big shortfall.
Of course, last year was us going full time, and with the “Live At Home With Mum” approach. Whether we’re still doing that will be apparent in a year or two, although we would be utterly crazy to get into the situation WFC was in 98/99 when wages reached 78% of turnover…
With the Football League status comes extra pressure. As some games this season have demonstrated, we are going to need to get in some players of League Two standard, probably in January. While some will inevitably move on, our wage bill is going to go up simply by remaining in the Football League. That’s natural enough, and while it may be taboo to mention this, Crawley did at least illustrate that if you spend money on decent players your chance of success (and therefore paying it back) are greatly increased.
But what stands out is that we have two full time “football staff” (one being Terry Brown, so who is the other?). That will increase significantly as the 52-week contracts starts to kick in, but the likes of Stuart Cash, Simon Bassey and Marcus Gayle are part time. It is unlikely that should personnel change, we will be able to keep them on reduced hours and therefore wages.
Admin has gone from four in 2010 to seven in 2011. That will also increase in 2012 as we add at least one more office staff and the Comms Executive role to the payroll. While the accounts make great mention of unpaid volunteers, burnout of them could start becoming an expensive problem, in more ways than one.
We’ve already seen this with the club advertising for paid turnstile operators, simply to fulfil the requirement of having a gate open until half time. Something that volunteers can’t (or won’t) do. Mid-term, we will need to consider replacing Erik Samuelson as CEO, and you can replace him on the cheap but in all likelyhood get somebody of far less ability.
Of course, there could be another figure like him willing to do it gratis, but we shouldn’t plan for that. No sensible organisation should. In addition, will we see a full time commercial director within the next couple of years?
Still, providing it’s sensible the club can still handle that. But as Nick pointed out in the last paragraph of his analysis, there’s the small issue of the ground…
Unfortunately, it’s not particularly clear how much the KRE is going to cost us, and how much we’ve already secured in the shape of Barclays extending the loan and of grants (and by god, we need both). What is clear is that we’re going to have to do a fair bit of belt tightening as a result of building it, at least if we adhere to the current financial model.
Stereotypical lottery winner aside, it looks increasingly unlikely that the club is going to be ableÂ – or have the appetiteÂ – to redevelop the JS. While the club itself admits the view is awful, it doesn’t need to do it. A new ground being in its current embryonic stages was always likely to scupper it being a priority anyway, and it’s something that may simply be too much upheaval (both in cost and in reduced capacity) for too little reward.
Indeed, while the accounts suggest that we’re on a pretty even keel, I’m not convinced that right now, we can handle having to make a big investment when we don’t need to. I don’t doubt that the KRE will be eventually paid for, but if it comes down to asking the fans to dip into their pockets (yet) again, it will dry up the supporters’ well for a long while to come.
(Ironically, a new stadium may be easier to fund, as we then start getting in the realms of enabling development, which isn’t an option for us at KM. And with luck, we might be starting to see that featuring on future balance sheets…)
It’s also unlikely that we’re going to be able to start concentrating on hammering down what we owe to Barclays beyond what we currently pay. The club – on and off the field – is still developing, and as has been the case for much of the last decade, it’s needed to put that as a priority. While the holy grail of an FA Cup tie at Old Trafford would help a fair bit, it would be unlikely to clear all the debts in one hit.
And despite the perfectly winnable tie at Bradford still to come, nor is it something that should be planned for.
Still, things seem stable, which is not a bad place to be in right now. We’re fortunate that we started with a clean financial slate just under a decade ago, and we’ve been able to do things more or less on our own terms. There are challenges ahead, and it’s possible that it may be as good as it gets for a long while.
But to semi-bastardise the bottom of page three of the accounts, all of this is a price well worth paying.