A Tale of Two Cities (19^th August to September 3^rd 2012)

To trot out the old cliché – A week in football is a long time. Never has there been a truer statement when it comes to the trials and tribulations of the remains of Portsmouth FC on and off the field. I’ve been somewhat pre-occupied with other projects of late since the last Tale of Two Cities blog published on August 18^th 2012 so I will try recapping all the latest going’s on both here and down the M27 as neighbours Southampton continue their season in the upper echelons of the English footballing world.

The opening two games of the NPower League One Season had seen Pompey record two straight draws at home to AFC Bournemouth and away to Colchester United whilst Southampton had seen a 2-1 lead slip away at the home of current Premier League Champions Manchester City to eventually lose the game 3-2. We pick up the tale as Pompey travelled away to Brunton Park to take on Carlisle United and Southampton hosted Wigan Athletic in their first home game of the season.

Carlisle United 4 Portsmouth 2

Pompey’s unbeaten start to the season came apart in spectacular fashion thanks in part to some kamikaze defending which saw them leave empty handed from Brunton Park on the wrong side of a 4-2 score line. Trailing 2-0 going into the 90^th minute with only ten men following the second half dismissal of Kevin Long, substitute Ashley Harris scored his first league goal for Pompey with a short range header before Michael Appleton saw his side concede for a third time in the game. Fellow substitute Conor Clifford (on loan from Chelsea) calmly slotted the ball home to make it 3-2 before Pompey again came unstuck at the back and the fourth injury time goal was registered.

Pompey: Andersen, Dumbuya, Harley, Long, Connolly, Webster (Obita), Walker, Howard, McLeod (Clifford), Rodgers (Harris), Compton. Subs Not Used: Eastwood

Southampton 0 Wigan Athletic 2

The game saw manager Nigel Adkins restore Rickie Lambert to the starting line up as Southampton looked to secure their first home win in the Premier League for seven seasons as they took on a Roberto Martinez side who had lost their opening game of the season to Chelsea and were without the influential Victor Moses who had been sold to Roberto Di Matteo’s men. Saints fans were surely expecting their side to begin their home campaign with all three points following their performance the week before which had stunned the Etihad faithful into silence having come from 1-0 down to take the lead.

A somewhat lifeless first half saw the sides go in at half time 0-0. The best chance fell to Lallana whose 25 yard drive was tipped onto the bar by Ali Al Habsi. Southampton started the brighter in the second half and Lambert went close with a header before Wigan opened the scoring a minute later through a Di Santo shot which beat Kelvin Davis from a tight angle. Chasing the game in the final minutes Southampton came undone when Fonte hesitated just in front of the half way line and was disposed by Kone who ran on with the ball and slotted past keeper Davis to make the final score 2-0.

Saints: K Davis, Clyne, Hooiveld, Fonte, Fox, Schneiderlin, S Davis (Ward-Prowse), Rodriguez (Sharp), Lallana, Guly, Lambert. Subs Not Used: Gazzaniga, Richardson, Shaw, Seaborne, Puncheon

Stevenage Borough 1 Southampton 4

The first ever meeting between the two sides took place in the Carling Cup second round as Adkin’s men finished comfortable victors in a 4-1 win which saw him change his complete starting line up from the side that lost 2-0 to Wigan at the weekend. Despite holding their Premiership visitors 0-0 at half time the League One outfit went 3-0 down to goals from Lee, Sharpe and Puncheon before substitute Thalassitis's 20-yard effort pulled one back for the home side. Reeve completed the scoring for the visitors to earn his side a place in Round Three against Dave Jones’ Sheffield Wednesday at home.

Saints: Gazzaniga, Richardson, Shaw, Seaborne, Butterfield, Hammond (Chambers), Ward-Prowse, Chaplow (Reeves), Puncheon, Sharp (Moore), Lee. Subs Not used: K Davis, Stephens, Hoskins, Sinclair.

Portsmouth 0 Oldham Athletic 1

A crowd of 12,635 saw Michael Appleton’s Pompey side slip to their second successive defeat in the space of a week and finish the game with ten men again as the young Reading loanee Jonathan Obita saw red in the second half along with Oldham’s Cliff Bryne for violent conduct. Pompey had started the game without the suspended Kevin Long who was serving a one match ban following his dismissal away to Carlisle United the previous weekend. A Jonathan Grounds shot was deflected past Andersen in the Pompey goal by debutant Ertl just before the hour mark for the only goal of the game. The result see’s Pompey drop into the relegation places for the first time this season laying fourth bottom in the league.

Pompey: Andersen, Harley, Connolly, Obita, Russell, Dumbuya, Walker (Harris), Howard, McLeod, Compton, Ertl (Rodgers). Subs Not Used: Eastwood, Webster, Clifford

Southampton 2 Manchester United 3

Nigel Adkins men found that there is no room for rest bite in the Premier League following their 4-1 mid week cup victory away to Stevenage Borough as they took on last season’s Premier League Runners Up Manchester United in Sir Alex Ferguson’s 1,000^th game in charge of the Red Devils. The Saints opened the scoring from who else but Rickie Lambert when he headed in from close range in the 16^th minute. United levelled the scoring through £24 million signing Robin Van Persie who scored his second goal in two games with a sublime volley which Davis could do little about from the left edge of the penalty area. Davis however would get the better of RVP as he turned the Dutchman’s spot kick around the post to keep the score at 1-1 before the Saints regained the lead through a Morgan Schneiderlin header.

Looking to protect his side’s lead in the closing third of the game Adkin’s took off Lallana and Lambert whilst Fergie brought on Scholes, Nani and Hernandez as his side pressed on looking for a share of the points. Van Persie made amends for his earlier penalty miss as he levelled the scores in the 87^th minute before claiming his 100^th Premier League goal and the match ball with his hat trick in injury time to condemn Nigel Adkin’s side to their third straight Premier League defeat leaving them bottom of the league with 0 points.

Saints: K Davis, Clyne, Hooiveld, Fonte, Fox, Schneiderlin, S Davis, Ward-Prowse, Lallana (Rodriguez), Puncheon (Mayuka), Lambert (Guly). Subs Not Used: Gazzaniga, Richardson, Seaborne, Lee.

Michael Appleton’s men face AFC Bournemouth at home in the First Round of the Johnstone’s Paint Trophy tonight before travelling away to Crawley Town in their next league fixture. Nigel Adkins men face another big test when they take on Arsene Wenger’s Arsenal side away at the Emirates who’ve so far haven’t conceded a league goal in their opening three games of the season and beat Brendan Rodger’s Liverpool 2-0 at Anfield in their last game.

Tales of the Two Cities – Off The Field

Pompey’s squad saw two new faces as Ex-Sheffield United midfielder Johnny Ertl and the ex-Norwich City player Darel Russell joined Appleton’s squad on one month deals alongside Josh Thompson who also signs having appeared for the club in pre-season. Kieran Djilali was let go by mutual consent and youngster Sam Magri signed for Premier League Queen’s Park Rangers having been told he wasn’t part of the club’s long term plans.

Mustapha Dumbuya has been named in the Sierra Leone squad for their Africa Cup of Nations game with Tunisia on Saturday September 8^th which means he will miss the away game with Crawley Town the following day.

Pompey administrator Trevor Birch has given both the Portsmouth Supporter’s Trust and Balram Chanrai’s Portpin a fortnight to finalise their bids for the club.

Southampton have brought in Zambia forward Emmanuel Mayua from Young Boys Berne on a five year deal; Japanese defender Maya Yoshida from Dutch side VVV-Venlo for a fee reportedly worth £2 million; American goal keeper Cody Cropper who had been training with the club having been released by Ipswich Town and the club record signing of Uruguayan international midfielder Gaston Ramirez from Bologna in a deal set to be worth in the region of £12 million. Dean Hammond has rejoined former club Brighton and Hove Albion and Billy Sharp has signed for Nottingham Forest both on season long loans.

Glory or Gory future awaiting United

For years the words “Glory, Glory Man United,” have been sung home and away by the Red Army but as we fast approach the 2012/2013 season is it not a case that the L has slipped and it’s now more of a case of ‘Gory, Gory Man United’?

Since the Glazier family took over the running of Manchester United they have saddled a once debt free organisation with millions of pounds of debt to the annoyance of the clubs following. This summer they plan to raise more money through an IPO with the New York Stock exchange giving up ten per cent of the equity in the club with share price muted to be between $16 and $20 a share. For a club with true global appeal this would seem a great opportunity to get involved as a fan but what exactly will you be getting for your money? Well not a lot it seems.

10% equity isn’t a massive amount to give away in a business. Ask any entrepreneur entering the Dragons Den and they will tell you that the Dragons are always as potential investors looking for more return on their money and a larger share of the pot. The shares are issued in two ways; Via Class A shares and Class B shares. Class A shares come with one vote per share, Class B shares come with ten votes per share. Of the 19,166,667 shares can you guess which option of half the shares the Glazier family will take up? Yes you’ve guessed it the Class B shares meaning that despite giving away 10% equity in their company they will only be giving away just a mere 2% of the voting rights meaning they retain the right to run their company how they choose even if the so called other 10% doesn’t actually agree.

So why have the Glazier family chosen to float on the New York Stock Exchange? They previously looked at launching IPO’s in both the Singapore and Hong Kong markets but plumped for NY because it enables them to have a business structure in terms of voting rights which wouldn’t be allowed in the UK markets. It’s as simple as that yet more complicated with other factors included but I’ll leave that side to someone far more qualified than I to explain.

Just like the debt of the club which see’s all the attachment to the company and not the Glazier family, all the costs of the IPO are being born by the clubs coffers as they attempt to raise $330 million from the share issue. However some of that money will be going direct to the Glazier money and not to the club and if the issue is successful it will mean that the clubs debt is only reduced from £425 million to around £350 million which will save the club around £5 million a year in interest which by today’s standards doesn’t buy you very much in English Premier League terms.

Manager Sir Alex Ferguson one of the most vocal men in football has always backed his owners despite the fury of some fans and this may be in part because as part of senior management he will be entitled to share part of the 16,000,000 million shares on offer to them worth $288 million. At £13 a share the value of Manchester United stands at around £2 billion which in theory looks incredibly impressive to any investor but profits at the club actually fell 15% last season as they faded badly in European Competition. The real worrying figure is the cash balance of a club which is supposed to be valued at £2 billion which has fallen significantly since 2009. The cash balance is the pool of money that is used for acquisitions of new players. In 2009 the audited balance stood at £150,530,000. In 2010 that figure rose to £163,833,000 before falling again in 2011 back down to just over the 2009 mark at £150,645,000. The unaudited figure for March 2012 puts the cash balance way, way down from any of these figures at £25,576,000 a total of £138,257,000 from its four year peak of 2010.

So what exactly would potential investors be getting for their money exactly? It’s hard to see really offer than being able to say they own a small part of one of the world’s most iconic teams. There are no dividends paid on the shares annually, they come with no real voting power, the clubs profits are falling and the total raised will largely go to the Glazier families pockets and see just £75 million written off the clubs debts in total. With falling cash reserves it’s hard to see what serious investors would actually gain from investing in a club who are trying to compete against rivals like Chelsea and Manchester City who are owned by billionaires who can push United out of the transfer stakes for players they would have only a few seasons ago been in a poll position to attract as they bid to compete in domestic and European competitions.

It remains to be seen if the lure of investing in the name of Manchester United will be enough for the Glazier families IPO to succeed. Buying into a big brand name comes with no guarantee’s and the serious investors will I’m sure have seen the warning signs after this year’s Facebook IPO which has seen share prices drop 45% since their issue from $38 a share when they were issued on May 18^th. The IPO instead of improving the company’s reputation has actually seen its brand damaged a lot and worse is set to come for investors when August 16^th comes along. The date will see insiders such as company officers, directors and employees being able to sell 268 million shares of stock after the 91 day rule has passed. Between 91 and 181 days after the IPO insiders can sell an additional 137 million shares. With investors braced for an influx of insider shares into the market it’s expected that the share value will be hit once more.

I think given what’s happened with Facebook low level investors will be put off and any serious investors will have weighed up how little potential there is to see a return on any investment. Maybe the Glaziers will have chosen the best market to launch their IPO or maybe their non UK allowed structure will significantly back fire on them. I guess only time will tell.

Glory, Glory or Gory, Gory?

Counting the cost of the beautiful game

There is an expression that in life there are some things so precious that you cannot attribute a price to them, seeing you child take their first steps in life for example, precious and treasured memories that will live in our hearts and minds forever and a day. Reality dictates that everywhere else in our lives there are costs involved and none more so than in the game of football.

In the week that Scottish Premier League clubs voted against allowing the Rangers newco entry in the top tier of Scottish Football, Stenhousemuir FC of the Irn-Bru Scottish Football League Championship Second Division outlined in a statement the impact on their club financially and on the part of Scottish football as a whole if Rangers were to find themselves playing in the bottom tier of Scottish football.

The following contracts total £15.7 million per season in the Scottish Leagues and all include termination contracts should either of the Old Firm clubs not be involved in the SPL.

Loss of Sky broadcasting payments of circa £10 million per season.

Loss of ESPN broadcasting payments of circa £5 million per season.

Loss of Sportfive broadcasting payments of £2.7 million per season (overseas broadcasters)

Loss of Sponsorship of £1 million per season.

Additional new broadcasting deal with income of £3 million per season.

The inclusion of Rangers into the lowest tier would see Stenhousemuir lose the SFL central payment aligned to the SPL settlement payment which would total £50,000 per season. Whilst that figure might pale into comparison to the sums in the leagues south of the border, for a club of their size it will have a real detrimental effect and as such costs would have to be cut accordingly to make savings. The demise of one football club will it seems have as detrimental effect on the leagues as losing the ITV contract did several season previously south of the border.

In the statement the clubs outlines that having already made commitments to the playing staff for the season significant savings would have to be found in other areas such as having to scrap the youth system entirely. Some of the staff who oversee their community programme would have to be made redundant. This won’t be an isolated case in Scottish football either. Many clubs I am sure will have to follow suit and scrap their youth systems to and in the very worst cases of some small Scottish sides, the threat of administration will be a very real threat indeed.

The loss of revenues into the Scottish game and the culling of youth training will see the standard of the game diminish which will in turn have a future impact on TV contracts and sponsorship with companies not wishing to invest in a market further reduced of quality.

In a tough worldwide economy the supporters of other clubs are finding themselves punished for the actions of just one club that they have never themselves ever supported. Why should the fans of a club like Stenhousemuir FC be punished for what did they do wrong or the sets of fans from any other teams who will equally be effected? Why should hundreds of youngsters be denied of the chance to be able to turn professional because of the conduct of one football club who flew too close to the sun and got their fingers burned? The grass roots game in Scotland will be praying for rain in the forthcoming weeks and the seasons that follow if some sense of normality is to be resumed but how many people will be left counting the costs of others mistakes and just how many teams will be left cometh the hour when the decision what league the newco Rangers will be allowed to play in this season?

Football is now more than ever a game of the haves and the have not’s.

The irony at the demise of one club in Scotland and it’s not impact across the board can be summed up south of the border where the English Premier League has just tied up another record breaking broadcasting rights package which will see Sky TV and BT pay a joint total of £3.018 billion for the privilege. Now compare that to the poultry sums of £15.7 million set to be lost in the Scottish game or the loss of just £50,000 and the effect it will have on Stenhousemuir. It’s hard to believe the land of Scotland and England joins together the two countries Premier Leagues are so far apart.

But whilst the English Premier League on paper seems to continue to thrive underneath the surface the levels of debt do not dwindle as clubs spend beyond their means and above their levels of income. Lessons are still not being learned and we remain in danger of the threat of teams being forced into administration or out of very existence despite record levels of money coming into the game at the very top level.

This week saw the news that Manchester United, the largest football club anywhere in the world, were once again seeking fresh investment to pay off some of their estimated £423 worth of debt by filing for an initial public offering of shares in the US.

The club claims to boast a worldwide following of a staggering 659 million fans. With another huge cash injection from broadcasting revenue and sponsorship deals with worldwide firms including DHL pouring into the clubs coffers how may you ask did the club see its cash and cash equivalents on its balance sheet drop to £25.6 million as of March 31^st this year down from £150.6 on June 30^th, 2011.

Since the bitter takeover of United by Malcolm Glazer and his six sons in 2005 fans have cited that the family has saddled the club with too much debt and left them unable to compete against rivals or be able to compete to buy or retain the world’s top players. The shift in financial power and the league title to city neighbours Manchester City will only add fuel to the fire and the anger of the fans.

Further anger will be shown after the filing in the US showed that not only has the family borrowed from the club, something they are legally entitled to do, but that at least one of the Glaziers son’s also brought the clubs debt which earned him a higher rate of return on the money than the family was paying on its borrowings; All legal and above board.

Whilst it remains unclear why the family borrowed the money from United back in 2008 or what the funds were used for, the filing shows that at the height of the global financial crisis in December 2008, the six sons were given £10 million in loans for at least five years from the club for ‘general personal purposes,’ to be repaid at an interest of 5.5% At that time commercial banks were charging on average an interest rate of 11.44% for a two year personal loan in comparison according to the US Federal Reserve. Furthermore between October 2010 and January 2011 Kevin Glazier, members of his immediate family and a Glazer family company bought $10.6 million of Manchester United senior secured notes in the open market that they placed an 8.375% interest charge on. In April 2012 the Glaziers were paid a dividend of £10 million which I’m sure you won’t be surprised to read and discover was subsequently used to pay back the original loan that had been made to the family.

What should remain paramount to this entire network of interest rates, borrowing, lending and debt levels is that prior to the £790 million takeover of the club by the Glazers in 2005 is that Manchester United were entirely debt free yet the league ratified a deal to allow the Glazers to saddle the club with the burden of debt, not themselves but the club itself having been totally debt free. Let us not forget that the club had seen a move by Australian media mogul Rupert Murdoch’s Sky TV to buy the club some years before in 1998 which would have seen him pay 875p a share for the club which has been rubber stamped by the board in September of 1998. The deal however was rejected the following April by the Monopolies and Mergers Commission and the DTI.

In the case of Manchester United moves are being made to raise funding to pay off the debts however in the case of Portsmouth FC who now find themselves in the 3^rd tier of English football having been relegated last season following a ten point deduction the agreement in principle to a new CVA to take them out of administration will mean that the club have legitimately been able to shed £107.3 million worth of debts in two seasons without having to even paid a penny on them according to the administrator from their first administration Andrew Andronikou with up to £40.1 million being owed to the HMRC. The club found itself back in administration after the arrest of club owner Vladimir Antonov on charges of fraud and embezzlement lead to the clubs parent company CSI going into administration before the club itself subsequently again went back in administration.

Under the terms of the new CVA non-football creditors will be paid just 2p in the pound on monies owed whilst footballing creditors i.e. the players, agent’s et al will be due all monies owed to them by the club. However the deal is dependent on the club being able to remove the large earners off the clubs wage bill before anything is finalised and Pompey boss Michael Appleton heads into pre-season with just ten senior pro’s set to return to training and no goal keeper in place having released first choice GK Jamie Ashdown as well as Matt Gledhill and Daniel Nizic.

Once again those most affected by the actions of a few remain the fans and local businesses as well as the UK tax payer though unlike in the case of Rangers FC the fall of Portsmouth FC won’t have such a disastrous knock on effect to other clubs as it is about to north of the border.

The question remains what is being done to stop a possible meltdown of the highest order in English football. Whilst UEFA’s Financial Fair Play system will see attempts made to stop clubs living beyond their means and getting into debt, this will only affect the clubs playing in Europe each season and won’t stop the problem which has seen clubs like West Ham and Bolton build up levels of debt of over £100 million each. Wigan Athletic chairman Dave Whelan has called for a wage cap to be introduced and was joined this past week by West Ham Co-Owner David Sullivan who expressed his opinion that a cap should be introduced. The high levels of revenue being poured into the English Premier League haven’t seen debt levels decrease, but increase further as clubs wage bills continue to rise and money going out of the game in the form of fee’s being paid to agents. These levels of debt can only be sustained for so long as we have seen in the case of Portsmouth FC and it’s surely only a matter of time before we start to see some of the middle size clubs being caught out which will start to have a ripple effect through the leagues.

Sadly as always I fear it will be at the point of no return for some when things are finally ever changed.