Million in the hole

The club’s announcement that the last financial year saw us lose £1 million has suitably spooked some. In one sense this is a socking great number, but without the context of the club’s future strategy, it’s really difficult to know what it really means. 

There was a bit of Twitter fire around the announcement that the club lost £1 million last year. There’s limited information available, with a rather po-faced statement on the website that the accounts had been filed with Companies House in accordance with its rules. It’s difficult to know if we’re expected to applaud this, it doesn’t seem that impressive that the club has obeyed the same rules as every other company.

On the other hand, many companies fail to file their accounts on time, because of anything from poor management to corruption and deception. Well managed accounts are often seen by investors as the sign of a well-run business. Beyond the numbers, this is a good sign that there’s nothing remiss, but its not very inspiring.

The wobble about the £1 million loss is slightly less shocking when the club were already anticipating a £750k loss which turns out to be like-for-like £780k in reality. The other £250k includes £150k for Youth Development (previously a separate organisation) which you’d hope is considered an investment. Certainly the success of the youth team this year and in particular the appearance of Max Crocombe, Tyrone Marsh and recently Callum O’Dowda seems to suggest that the club is shifting towards a grow-your-own strategy.

There’s another £100k of “profit on players’ contracts” which has been put ‘below the line’ by the auditors. I can only speculate on what that actually means. Profits on players contracts suggests underpayments, perhaps on salaries and bonuses. Putting something below the line suggests that the auditors views this as an extraordinary payment. Some unremarkable accounting slight of hand, perhaps.

The increased cost base is attributed to higher player costs. Given that the period it covers is before the start of this injury ravaged season, this suggests that the worst is yet to come. We don’t know what the anticipated costs might have been, but last year we brought in Rendell, Johnson, Morgan, Montano, and a flurry of keepers in a bid to snatch a play-off place. This year we’ve been slightly less hasty bringing in reinforcements; McCormick, Parker, Davies were all free-agents and presumably comparatively cheap. Foster-Caskey and Cox wouldn’t have been cheap, but as they were brought in at the beginning of the season, we might assume they were in-budget.

The subsequent Yellows Forum hyperbole makes interesting reading. Some view it as proof that Chris Wilder has been backed by Ian Lenagan and failed to deliver, although some people seem to be  confusing last year’s figures with this year’s performance. I’m not convinced that he has been backed to the same degree this year.

What it suggests to me is that Wilder has struggled to outperform the budget he’s working to and the club has struggled to generate the revenue to provide him with greater funds. In other words, Wilder’s performance deteriorates with our financial performance. In the rush to get rid of Chris Wilder, we should be wary that outperforming our financial performance is not going to be easy.

£1 million is an big number and it’s clear the club can’t sustain that kind of loss year-on-year. Some of the chatter on the forum suggests we have £6 million of debt, but the statements don’t mention this. Something doesn’t add up there; that would suggest the club have lost £1million a year since Lenagan took over and that’s not right. I still believe Lenagan runs the club reasonably well within the constraints he’s working.

The most important thing is not so much what the statement says as what it communicates; which is to say not a lot. Which is where Lenagan is struggling. How the club is planning to get out of this situation remains wholly unclear. Our business model is out of date; we generate revenue every fortnight, with financial security dependent on promotions, cup runs and windfall player sales (a reason for the increasing focus on youth, perhaps). Modern football clubs are generating revenue daily with the non-footballing use of, yes, their stadium. And, while we argue about Wilder and Lenagan, that is probably the only statement you really need to know about the reason behind our current and future financial plight.

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Oxblogger is a blog about Oxford United.

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