The state we’re in – off the pitch

As is customary at this time of year, it’s time to pick apart the comings and goings of the season. To kick things off, as a rare end of season treat, Myles Francis has gone where many fear to tread and trawled through the latest set of accounts to find out, off the pitch, the state we’re in.

Well, the Oxford United’s accounts for the year ended 30 June 2012 landed with a thump a couple of weeks ago announcing a headline grabbing £1m loss. But what do they tell us about the state of the club’s finances, and do they give us any clues as to the likelihood of Chris Wilder being at the club beyond the end of this season.

Let’s start with that headline figure. A loss on the year of £1,017,504. That’s 58 and a half discounted Rolexs from Alexander Dubel. Whichever way you look at it, that’s a huge figure for a business with a turnover of just £3.2m, and a third higher than Ian Lenegan said at the last fans forum was to be expected.

The media reports have compared this to the previous year’s loss of £295k. Actually, the increase is worse than that. What has been largely overlooked is that the accounts for June 2011 included an “exceptional item” relating to service charge arrears on the KasStad of £297,697. Without this, the club would’ve made a small profit of approximately £55k. So in one season we have swung from being nominally profitable to losing £1m. Ouch.

But what has caused this? Turnover remained near enough identical to the previous year, so the hit has come in increased outgoings. The biggest increase is a £700k uplift in “Direct operating costs”. The Directors’ report which prefaces the accounts puts this down to increased player related costs resulting from “a terrible sequence of injuries”, and the consequent need to bolster the squad. Clearly, the ten players brought in during the course of the season would have added a fair amount. However, the wage cap in League Two limits wages to 60% of turnover. In our case, that means roughly £1.92m per year. The received wisdom is that we have been operating fairly close to the wage cap over the past couple of years, which does raise the question of, if so, how could we increase the amount spent by £700k? Without the figures for the wage bill (which used to be in the accounts a couple of years ago) it’s hard to probe this further. There is reason to believe that the club’s explanation is largely correct, and I’ll come on to this again shortly.

A further £315k increase in costs comes under the heading of “Administrative expenses”. £150k of that can be explained by the transfer of the youth development set-up back into the club from the stand alone Youth and Community Trust.

So, how are these losses being covered? Well, the club had an overdraft of £45k when there was none the previous year. But the most significant figure is that the loan from Woodstock Partners Ltd increased from £3.3m to £4.5m. Fortunately, this is a “soft” loan and interest is not being charged.

And where does this leave the club? At 30th June 2012, the club was effectively carrying a debt of £6m, and comments made by Ian Lenagan this season would suggest that figure will be even bigger by June 2013. Without doubt, carrying a debt which is roughly equivalent to two years’ turnover is a worry. On the positive side, there is no indication from the Lenagans that they are seeking to pull out. At least in the short term. Suffice to say, the club simply cannot continue to make these sort of losses. Stating the bleeding obvious, it’s not sustainable without an owner willing to burn a lot of cash. It’s fairly safe to say that Ian Lenegan isn’t that sort of owner and is seeking to take the club upwards to maximise income and make the club sustainable.

Which brings us on nicely to the manager’s position. As well as the failure to make the play-offs for a second successive season, the board will have to look very closely at the resources which have been provided to Chris Wilder and what he has done with those. Players such as Peter Leven, Michael Duberry, and Tom Craddock will be on very good salaries for League Two, but what have they contributed? Injuries and fitness issues have seen relatively little return on the investment made in them. In Duberry’s favour is that his experience provides a great opportunity to our young players to learn from, and he is said to be very good at sharing this. I’d also give Craddock a little slack as he has been largely played out of position (in exactly the same way Jack Midson was), but some of his body language has hardly shown a player chomping at the bit to prove himself of worth.

Then there is the lack of opportunity given to our emerging youth talent. The perception is that Wilder would rather bring in a journeyman loan player than promote from the youth team, thereby spending more money. Considering the success of the U18s this season, with the emergence of players such as Marsh, Roberts, and Crocombe, this would not have gone unnoticed by the board.

So, we have a manager who significantly overspent last season and failed to make the play-offs, has been provided with a solid budget for this season and failed to make the play-offs, and failed to utilise the young assets already at the club in favour of loan signings such as Sean McGinty, Daniel Boateng, Andy Howarth, and Danny Philliskirk. Are the board going to ignore all that? I doubt it. And just in case they have any doubts, Jim Rosenthal has come out in support of Wilder….

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Oxblogger is a blog about Oxford United.

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