bluestrust.org https://www.bluestrust.org Sat, 11 Jan 2020 12:52:56 +0000 en-GB hourly 1 https://www.bluestrust.org/wp-content/uploads/2015/09/cropped-logo-100x100.jpg bluestrust.org https://www.bluestrust.org 32 32 Sale and Leaseback: Good or Bad? https://www.bluestrust.org/2020/01/sale-leaseback-good-bad/ https://www.bluestrust.org/2020/01/sale-leaseback-good-bad/#comments Sat, 11 Jan 2020 12:48:14 +0000 https://www.bluestrust.org/?p=15610

Sale and Leaseback: Good or Bad?

​It seems St Andrews is now owned by another BSH company and not the football club. But even this simple statement is shrouded with doubt and queries that are outlined in our post titled St Andrews Ownership

However, assuming the sale of St Andrews has happened – is this a good thing? Well it depends on your point of view, your priorities and the detail of the deal. What follows is a bit technical but read on if you want some information to help you make your own mind up.

Read more……..

Overview

Often a business will see the possibility of sale and leaseback deal as a contingency to resolve a cash flow emergency (when a loan/increasing borrowing is not possible) or  a way of creating extra short term cash flow for an investment that will improve profitability. If the cash freed up is used to settle liabilities or invested in a way that increases income (or reduces debt payments) that is higher than the lease payment – wise decision for the long term.  If income is not increased or increased by less than the lease payment – poor decision for the long term and can be seen as just putting off the inevitable insolvency. Hence from a business point of view sometimes a good thing sometimes a bad thing – for it to be good it requires successful planning and delivery of a long term financial/business plan.

The position at Blues

This is not so simple, it is complicated because it is not about generating cash per se but about making the accounts of one subsidiary company, the football club, better. The other subsidiary company, the stadium owner, is not governed by the EFL rules so does not need to worry that its accounts are not so good. The holding company (BSH) does not really care which company holds the assets and where profit and loss is made within its subsidiaries because all the subsidiary companies accounts are grouped together for the BSH accounts and so will be the same regardless of moving profits and assets around its subsidiaries

Short Term

It is fairly obvious that having a set of accounts that comply with EFL profit and sustainability regulations is imperative to avoid sanctions and points deductions. The sale can be seen as an accounting exercise that achieves the goal of having compliant accounts for year ended June 2019, The current EFL rules do not preclude ground sale and leaseback but EFL will get involved if they think the valuation of the ground is inflated or if the timing of the transaction is suspected to be outside the period of time the accounts cover.

Therefore, if you are sat in the football club board room with a set of accounts that would not be compliant, and you can make them compliant, it seems a no brainer to carry out this accounting exercise to bring the accounts into compliance and avoid sanction by the EFL. This then is a good thing and in the interests of the club. True in that moment, however it is a short term, once only solution to what may be an ongoing business issue.

Longer Term

This simple paper exercise has longer term consequences to be taken into account. It sets up a liability for the football club to pay the annual lease amount (rumoured to be £1.25M) out of the club accounts for the next 25 years. This is fine if the business can create the extra income each year to cover these amounts. In a loss making situation where the rules say the loss cannot exceed £13M per annum, the effect in future years is that the maximum loss on normal business before breaking the rules is £11.75M. That is, there is greater restriction on the finances for the next 25 years. This could still be a good thing, a price worth paying for averting a crisis, so long as the business profitability improves significantly in the next few years.

It should be noted that the business profitability also needs to improve significantly to be in a position to clear the holding company (BSH) loans.  This is a lot of business/ profitability improvement (maybe only achievable through promotion to the premier league). If this business transformation is achieved – GOOD, if the business transformation is not achieved then the club is overstretched financially and facing insolvency – VERY BAD.

Whilst BSH supports its subsidiaries, covering the losses until the business transformation is achieved then having St Andrews in a different company should not be an issue. However if the losses become unsustainable and/or BSH wants to recoup its investment, then selling the companies separately is a possibility leaving a football club without a ground. Selling the ground on to an outside party is also easier now it is separate from the club or BSH could sell the club and keep the income generating stadium company. All risks that are BAD from the football club long term perspective. (clubs like Coventry City and Charlton Athletic demonstrate this risk can become a reality)

Insolvency of the football club is more likely because it has lost its property asset that can be used as security in difficult times and now has an extra  long term financial (lease) liability – BAD. Also any acquisition of the football club by new owners has had another level of complexity added to what would already be complex deal.

Making your mind up

If you have managed to get through this ramble, then it may help you make up your own mind whether the sale of St Andrews is a good or a bad thing. For it to be a good thing then we need exceptional board level development of the business that builds on successes, plans for the long term and brings all elements of the club together to pull in the same direction. Unfortunately, the current BCFC directors have already shown by their past decisions they are not experienced enough to be capable of delivering this.

Final Reflection

The sale and leaseback agreement may or may not be written in a way that favours and protects the football club. It could have clauses that revert the ownership back to the club if certain events happen – such as administration, particular financial triggers or change in ownership or clauses that restrict the new owner to only act in the best interests of BCFC.

If the BCFC directors had been open/ consulted with fans last May, when Blues Trust raised the issue with them and requested meetings to discuss the issue, then fans concerns could have been addressed within the sale and leaseback contract.  Leaving fans contented that the sale of St Andrews was necessary, had safeguards for the football club and it would not have been a surprise to be concerned about. In short, major issues affecting the club need good communication and sometimes consultation – not secrecy that creates suspicion as to competency and motives.

Blues Trust has regularly requested the directors at BCFC to discuss how Structured Dialogue and meaningful fan engagement can be good for the club and avoid conflict with its stakeholders – the fanbase. The offer remains open.

Blues Trust

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St Andrew’s Ownership https://www.bluestrust.org/2020/01/st-andrews-ownership/ Fri, 10 Jan 2020 11:54:30 +0000 https://www.bluestrust.org/?p=15591

St Andrew’s Ownership

The Blues Trust has carried out an enquiry with the Land Registry and has established that as of Wednesday 8 January 2020, the ownership of St Andrew’s rests with Birmingham City Football Club PLC.

However, the recently published accounts show the ground as having been sold by Birmingham City Football Club PLC before 30 June 2019 to another BSH subsidiary, which we assume is Birmingham City Stadium Ltd, a company incorporated on 25 May 2019.

There may be a reason for this apparent conflict. Assuming that the legal contract for sale to another subsidiary had been signed and completed before 30 June 2019 – as indicated in the accounts – the buying company has 2 months to then register the sale with the Land Registry. So the registration would not necessarily have to have been completed by the time the accounts were signed off and this scenario would enable the Auditors of the accounts to 30 June 2019 to legitimately sign off with the sale included.

During the Trust’s successful efforts to re-register the Asset of Community Value for St Andrew’s, we were regularly checking with the Land Registry that ownership still resided with Birmingham City Football Club PLC. At the 3 July 2019, this was certainly the case.

On 23 August 2019 we discovered that on 22 August 2019 that there was now a ‘pending application’. There was no information available on the portal as to the extent of the application save for that it was a ‘dealing.’ A dealing is usually an application to amend the title and can be a transfer of ownership, new lease or updating an entry on the title register. It now seems likely that this was the registration of change of ownership.

However, the Land Registry Search on 8 January 2020 referred to above shows that this has not yet been actioned by the Land Registry. This can be for a number of reasons, however the likely one is that the Land Registry did not complete the application as there may have been a question which the purchaser or their solicitor was unable to answer.

For information, the ACV was re-registered on 25 July 2019, the original application having been sent by Blues Trust to Birmingham City Council on 29 January 2019. There is now uncertainty about the effectiveness of this registration, since the original application indicated the ground was owned by Birmingham City Football Club PLC. However, by the date of registration of the ACV it may well be that ownership had changed although this could not have been ascertained from public records.

The failure of the Club to tell the fans that the ground had been sold, (if this turns out to be the case and with the facts as we know them at the moment, it seems likely) is a continuing example of the unwillingness of Directors to engage with supporters. We understand that the EFL had known for some time that the ground had been sold, but because the sale value does not appear to have been inflated, the EFL had no issues with it.  So why was this information withheld from Supporters by the club?

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Blues Trust: South China Morning Post https://www.bluestrust.org/2020/01/blues-trust-south-china-morning-post/ Thu, 09 Jan 2020 17:41:37 +0000 https://www.bluestrust.org/?p=15573

Blues Trust: South China Morning Post

Following our article “What is the Truth, what now and what next?” published yesterday (see this link), you may like to know that Blues Trust had a write-up in the South China Morning Post.

You can read their article at this link here.

Blues Trust

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What is the Truth, what now and what next? https://www.bluestrust.org/2020/01/what-truth-what-now-what-next/ Wed, 08 Jan 2020 09:57:28 +0000 https://www.bluestrust.org/?p=15549

What is the Truth, what now and what next?

​Yesterday’s announcement that the Club had been charged with a breach of EFL Regulations in relation to the expected business plan was certainly sudden. Having been led to believe that in 2018/19 we were operating to an EFL imposed business plan which should have protected us from additional sanctions, we now find that the truth is we appear to have been in breach of that plan.

Although the EFL are yet to comment it seems unlikely to be coincidence that this declaration coincides with another extremely concerning set of accounts, finally released yesterday.

However, what cannot be speculated is that, once again, the supporters have been misled, and once again treated with contempt by the Club.

It transpires that not only were the accounts alarming, they also concealed an important detail: that the Club have transferred ownership of the ground to another subsidiary.

This paper exercise – for which Derby and Sheffield Wednesday are currently under EFL investigation – moved £22.7m into the accounts, resulting in a small book profit. This enabled the Club to post a loss of only just over £8m in the accounts, below the £13m allowed by EFL Profit & Sustainability rules.

Furthermore, it appears that the English Football League have been aware of this concern investigating it for over six months, a process that in any other institution would be externally validated and publically visible.

As was recently reiterated by our colleague Daniel Ivery, on 7th November at the Fans Forum meeting the Trust put three questions to the board regarding the Club’s performance against the FFP targets for 2018-19. These were regarding the Birmingham Sports Holdings published accounts showing losses of £30m against the football club; regarding the sale of Adams and Jota against current 2019/20 losses; and how they planned to ensure compliance from the 2020/21 season onward should promotion and hence financial security not materialise.

Their answer was typically vague, but contained the following reassurance, the integrity of which is now in serious question:

“As a Club we cannot go into specifics, but we are mindful of EFL regulations and we continue to operate in a manner which reflects this but at the same time also helps to fire our ambitions.”

Today, Blues Trust wish to put three further questions to the Board, which require immediate and certain resolution:

  1. Has the internal transfer of the ground – in order to create a paper profit to avoid infringing FFP rules for 2018-19 – been approved by the EFL?
  2. f no, is that what they are investigating?
  3. If yes, in what way are the Club being accused of infringing the EFL imposed Business Plan for that year?

We will submit these in writing via official channels and keep supporters abreast of developments.

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BCFC Supporters’ Forum 7th November 2019 https://www.bluestrust.org/2019/11/bcfc-supporters-forum-7th-november-2019/ Thu, 14 Nov 2019 15:31:47 +0000 https://www.bluestrust.org/?p=15246

BCFC Supporters’ Forum 7th November 2019

Blues Trust attended the Supporters Forum at St. Andrews on Thursday, 7th November. The minutes produced by BCFC showing agenda and answers given can be seen by clicking here.

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If it is broken, fix it https://www.bluestrust.org/2019/10/if-it-is-broken-fix-it/ Tue, 08 Oct 2019 06:40:44 +0000 https://www.bluestrust.org/?p=14887

If it is broken, fix it

​For many football fans, their optimism or pessimism about the state of the game is influenced by the last game their team played. Following Birmingham City’s fantastic win on Friday evening, some may be thinking that everything is ok.  But it’s not.

This season we have seen Bury expelled from the League, which exemplified the inequalities in football. Some players in the nearby Manchester teams are paid in millions; the Bury players did not get paid at all when their club sank into its financial crisis. The “fit and proper persons test” for owners did not prevent their club having owners who ruined it. A Guardian article commented,

“Above all, it shows that there is no protection in this world for the social and cultural capital that football clubs exemplify, for the regulatory systems designed to protect them are broken. In these respects, Bury’s fate is just part of a wider set of global trends in football.”

Forever Bury is the supporters trust for the club. It was formed in 2002, when Bury FC was in administration, “with the very simple aim of trying to keep the club alive.”  It is now working to find a way to have a community-based club playing football at Gigg Lane and is raising money through GoFundMe.

I hope that Birmingham City supporters would react in a similar way if our club’s future was threatened. But how should we react to the misfortune of another club? I believe that there are two things we can do. Those of us who can afford to donate, can give to their fundraiser.  And we can support a call for a better regulatory system for football by signing the petition calling for the creation of an independent regulator for football.

Here is the wording of the petition:

We petition HMG to legislate for the creation of an independent regulator for football and subsequently to oversee the implementation of such a body.

We assert that the finances and administration of football are in crisis, that self-regulation has failed and that, without a new independent body, there is a serious risk that clubs will begin to fold.

A year on from the government’s refusal of an independent regulator, the situation for clubs has deteriorated to the extent that we believe the decision needs review.

Full information can be found at http://againstleague3.co.uk/2019/07/30/independent-regulator-epetition-supporting-submission/

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11 Games In https://www.bluestrust.org/2019/10/11-games-in/ Mon, 07 Oct 2019 14:37:29 +0000 https://www.bluestrust.org/?p=14910

11 Games In

Perhaps unsurprisingly, this piece was originally to be titled 10 Games In, received wisdom being that this represents the first chapter of a season before which it is foolish to draw any conclusions. However, given the proximity of our last two games, and how fickle football is to prevailing opinion, I thought it sensible to hold fire until after the Boro game. This turned out to be fortuitous – Friday night saw clearly our best performance of the season and, hopefully, some green shoots of progress.

The key now for Pep will be identifying what worked well – particularly in midfield, where we used the ball better than I’ve seen a Blues side for some time – and developing it.

Success leaves clues, as the saying goes, and the best managers can always be identified by their ability to recognise what they have done right. Managers who are able to transplant success from club to club usually share the ability to harness what they have at their disposal and use their tools judiciously. A common route to failure is to try and shoehorn a system around the players and expose players’ weaknesses by asking things of them that are simply not possible

It’s fair to say that performances in the first part of the season have mostly pointed toward that conclusion.

Although our points total is pleasingly healthy, displays have been generally tepid. Too often it has been difficult to see what the game plan is, difficult to see what might have been happening on the training ground and difficult to see where the clearly talented new players would fit in.

By contrast, our weaknesses have been easy to spot.

As much as it isn’t helpful to retread old ground, it is still worth reflecting on the positives of last season where Blues were functional and extremely effective. The manager correctly identified the players at his disposal and played to their strengths whilst trying to mitigate their weaknesses.

We not only scored more league goals (64) than we had since finishing 4th under Hughton (74), we also found the first player to hit more than 20 in a season for 24 years. We had one of the most productive strike partnerships and, according to Sky Sports, the most effective player in the whole league and probably the best header of the ball outside of the top flight.

There was a clear pattern of play, which, although not always aesthetic, was perfectly adapted to the resources we had at our disposal.

Fans were rightly concerned when, in the summer, it became apparent that major surgery was to be preferred to cosmetics. We removed 26 goals from our team with no obvious means of replacing them. We lost both first team wide players, nullifying our most effective threat, and were told to expect a side without wingers.

The pre-season promises of “a fresh and modern footballing philosophy” were starting to look absurd against the reality of a supposedly possession-based team who are not especially good at keeping the ball, and create neither good quality chances nor shots on goal.

The squad is still very much a work in progress and we are particularly light up front and at full back. We currently have four players who could conceivably argue their best position is number 10, no strikers who can run in behind (surely absolutely essential for our style) and one true wide player. It would not take an awful lot for us for us to suddenly be relying on square pegs in key areas: we have looked particularly weak when asking squad players to adapt to unfamiliar roles.

We must also not lose sight of the ten foot tall warning signs concerning the stewardship of the club.

There is the highly irregular situation at the training ground. There is uncertainty as to who is actually in charge of transfers in and out. There was the unusual acquisition of Bernard Sun, who has barely kicked a ball in the Spanish second tier. There are still many, many outstanding questions regarding our FFP status.

The intensity and purpose which characterised Friday night’s win is certainly something to build on. I think most of us would be happy with a season of relative stability in which our style gradually becomes more apparent, bolstered by some sensible additions in January. A few more performances like that will certainly help players and fans feel more confident that what we are trying to do is actually achievable.

Karim Adab

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Why a Supporters’ Trust is useful in a crisis https://www.bluestrust.org/2019/09/why-supporters-trust-useful-in-crisis/ Tue, 17 Sep 2019 09:57:15 +0000 https://www.bluestrust.org/?p=14851

Why a Supporters’ Trust is useful in a crisis

Portsmouth, Swansea City, AFC Wimbledon, Newport County, Exeter City, Leyton Orient, Northampton Town, Chesterfield, York City, Northwich Victoria, Airdrie, Dunfermline Athletic, Gretna 2008, Rushden & Diamonds, Enfield Town etc etc. What do all these clubs have in common? All owe their survival either wholly or in large part to their supporters’ trust. And I suspect there are many more not included on the list.

It must therefore come as no surprise that the organisation leading the way in attempting to resurrect Bury FC is ‘Forever Bury’, the Bury Supporters’ Trust.

So, why is it that supporters’ trusts are the organisations who step in when things go wrong?

First and foremost it is because, unlike most supporters’ organisations, trusts are legally constituted. To use a legal definition it ‘has a ‘Corporate personality’ meaning it is recognized as a legal entity distinct from its members. This means it is like a company and it can enter into contracts, negotiations, take out court cases, has to produce annual accounts and obey other rigorous legal provisions. It has to have a board and directors. Most other supporters’ groups are an affiliation of individuals that do not have a ‘Corporate personality’. This does not make trusts better or worse than other supporter groups but it does make them different.

Trusts have been recognised by both the Government and the Football Authorities as the only supporters’ organisations with a recognised entitlement to be consulted in the event of an insolvency. The following is a quote from the Government Expert Working Group Progress Report published by the Government in Feb 2017.

‘During the course of the group’s deliberations ……. The EFL amended its Insolvency Policy to ensure that in the event of any of its clubs falling into insolvency that the insolvency practitioner assigned will be required to meet with that club’s supporters’ trust, and the trust given the opportunity to bid for the club’. (My emphasis)

During the past few years it has occasionally felt that Birmingham City is a financial accident waiting to happen. As the supporters of clubs listed above have found, in a crisis it is vital to have a strong supporters’ trust that can step in when things go badly wrong. This is why we at Blues Trust passionately believe that we have a critical role to play, why we need the support of more members and why we especially need to recruit more board members.

Please get in touch with me or another board member if you are interested in standing for election and have questions about that.

Richard Stanley
richardstanley@bluestrust.org

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Board members qualifications https://www.bluestrust.org/2019/09/board-members-qualifications/ Fri, 13 Sep 2019 04:55:16 +0000 https://www.bluestrust.org/?p=14824

Board members qualifications

​We would like to have board members who possess a wide variety of qualifications and expertise in areas such as accounting, media, communication and legal matters. If our club ever ended up like Bury, facing expulsion from the League, board members would need expertise to know how to react effectively.

But professional expertise is not essential. What is essential is that board members are voting members of Blues Trust, have a desire to help and time available to make a contribution. I have undertaken several different jobs for Blues Trust (treasurer, chair and secretary) and my main qualification for each job was that there was nobody else to do it.

Please get in touch with me or another board member if you are interested in standing for election and have questions about that.

Margaret Decker

margaretdecker@bluestrust.org

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Blues Trust needs more board members https://www.bluestrust.org/2019/09/blues-trust-needs-more-board-members/ Fri, 06 Sep 2019 08:39:01 +0000 https://www.bluestrust.org/?p=14786

Blues Trust needs more board members

Before last year’s AGM, some board members spent time discussing what we’d like to do and how we could be better organised. We decided that it would be good to have nine board members. We didn’t get that many. We had five and we co-opted another one during the year.

The current board members have different backgrounds and abilities but one thing in common: we all have lives and other things to do besides Blues Trust work. If there were nine of us, we would have more people to share the work and we would be able to do more.  

In my letter giving advance notice of our AGM, I said that we would welcome some new board members, with ideas on what we should do and a willingness to help do it.  I really meant that; we do need help.    

Please get in touch with me or another board member if you are interested in standing for election and have questions about that.

Margaret Decker
margaretdecker@bluestrust.org

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